BNP talk lifts SocGen as France warns predators

By Andrew Hurst and Mathieu Robbins

PARIS/LONDON (Reuters) - France warned foreign banks on Tuesday not to try to grab control of Societe Generale, as speculation of a takeover approach by rival BNP Paribas drove its shares more than 10 percent higher.

"The government is determined that Societe Generale remains a great French bank," Prime Minister Francois Fillon told parliament. "The government will not let Societe Generale be the object of hostile raids by other companies," he said earlier.

SocGen shares ended the day up 10.4 percent at 78.45 euros, spurred on by persistent rumors that France's biggest listed bank, BNP Paribas, might launch a bid following the rogue trading scandal which has engulfed SocGen.

BNP, which made a failed bid for SocGen in 1999, declined to comment on the market talk but a person familiar with the matter said it had not ruled out bidding for its rival.

The source said internal discussions at BNP were at a preliminary stage, and any move is unlikely to be imminent.

Analysts, however, were skeptical that a bid for SocGen was imminent because the bank had not been mortally wounded.

"SocGen has taken a hit, but it does not need to be more than a flesh wound," said Simon Maughan at MF Global.

SocGen said on January 24 it had uncovered massive unauthorised stock trading by one of its employees that led to 4.9 billion euros ($7.2 billion) of losses, the world's biggest rogue trading scandal.

Jerome Kerviel, a 31-year old junior trader, was placed under investigation for breach of trust and other misdeeds on Monday, but judges threw out the stronger accusation of fraud made by the bank and prosecutors freed him on bail.

Kerviel said in transcripts of interviews with police that his activities could not have gone undetected by SocGen.

"I cannot believe that my superiors did not realize the money I was committing (to the illicit trades). It was impossible to generate such profits with small positions," Kerviel said, according to the transcripts.

SocGen has been forced to launch a capital increase to raise 5.5 billion euros to cover the losses, as well as a 2.1 billion euro writedown resulting from the subprime crisis, but its balance sheet is otherwise strong.

The future of SocGen chairman Daniel Bouton has been left hanging by a thread as the government called for changes at the helm after the scandal.

CHAIRMAN'S FUTURE IN BALANCE

The bank's board is expected to meet on Wednesday, facing embarrassment over its failure to make a fraud accusation stick against Kerviel and with doubts cast over the bank's version of events.