* Commodities financing business to be kept
* Possible bidders - VTB, China Construction, Wells Fargo
* LME stake and ring-dealing membership seen valuable
PARIS/LONDON, Feb 23 (Reuters) - French investment bank Natixis plans to "significantly reduce" its commodities market activities, its chief executive said on Thursday, as it scales back exposure to less profitable activities.
Natixis said in January in an internal presentation that it had received and was studying expressions of interest for its commodities unit, and the comments by Chief Executive Laurent Mignon are a sign that it may still be in play.
"I don't comment on market rumours, but it's clear that we'll significantly reduce our activities on the commodities market," Mignon told journalists in a conference call focused on results.
Natixis is one of several French banks that have been scaling back their commodities presence after dollar financing evaporated amid rising anxiety about the euro zone debt crisis.
Mignon, reiterating earlier statements in the internal document obtained by Reuters, described the commodities financing business as "extremely profitable and successful" and said would be spared.
"But in terms of hedging and the commodities market, we have too weak a critical mass to be profitable," he said.
The bank's Commodity Markets unit - the main candidate for sale - offers derivatives on a range of metals, fuels and commodities as well as currencies, while a separate unit within its Structured Finance business offers commodities trade finance.
Potential bidders for Commodity Markets include Russia's VTB , China Construction Bank and Wells Fargo & Co, market sources have said.
One high-level metals trading source with knowledge of Chinese banks questioned whether a unit of a European bank would be a good fit for a Chinese bank due to different regional attitudes toward risk. On the other hand, China Construction was more Western-oriented than some others, the source said.
"All the Chinese banks are trying to get into commodities, but Construction Bank is one of the ones more open to getting into the worldwide markets ... For Construction Bank, that (buying the Natixis commodity unit) would fast-track it to the same level as Bank of China," the source said.
Bank of China International is ahead of its peers in building up a commodities trading business and is due to join the London Metal Exchange (LME) in the coming months.
The source said Natixis may be hoping for rich proceeds after the sale of MF Global's membership in LME ring-dealing - or open outcry trading - and its LME shares attracted strong interest late last year.
JPMorgan paid 25 million pounds ($39 million) for MF Global's LME stake of 4.7 percent, sources familiar with the situation said. Natixis has a category 1 ring-dealing membership and 250,000 ordinary LME shares, which alone are worth 10.4 million pounds, based on the price JPMorgan paid.
"I guess for the ring members, they've suddenly got an idea that they've got a potential windfall on their hands if they could offload a ring 1 brokerage," the same source said.
"I just don't know how many people are queuing up to get involved, especially not knowing whether the floor will still exist if the sale (of the LME) goes through."
Since commodities is a dollar-based business, it would be no surprise to see a U.S. bidder such as Wells Fargo interested in Natixis, industry sources said.
Wells Fargo CEO John Stumpf has said the bank is actively exploring possible acquisitions as European banks look to shed loans and businesses.
On Tuesday, Wells Fargo said it was buying an energy lending business from BNP Paribas. BNP, the largest French bank, shut its Houston commodities office in November.
Among other Natixis rivals, Credit Agricole has said it plans to pull out of commodities trading, but like Natixis it expects to keep its presence in commodities trade financing.
Societe Generale in December moved to quit the North American physical power and gas markets.