Credit Agricole set to raise $1.8 bln from Suez stake

PARIS (Reuters) - French bank Credit Agricole said it would sell a 2.07 percent stake in utility Suez, a move that could raise around $1.8 billion to help shore up its capital position amid tough market conditions.

France's biggest retail bank said it would place the shares in the market with institutional investors.

The bank said it would sell 27,014,040 Suez shares. It will place an initial amount of 24,558,219 shares and there will then be an over-allotment option of further shares.

Shares in Suez, which is in the process of merging with Gaz de France <GAZ.PA, closed at 46.41 euros on Friday but market sources said the stake would be placed within a range of 43.75-45 euros. Calyon and Deutsche Bank are handling the sale.

A banking industry source later said the final price of the placement had been set at 45 euros -- the top of the range. At that price, the stake sale would raise around 1.2 billion euros ($1.78 billion) for Credit Agricole.

Suez shares at one point fell as much as 5 percent but the stock later recovered. The shares were down 0.6 percent in late afternoon trade at 46.15 euros.

Their fall also dragged down the shares of merger partner Gaz de France (GDF), which were down 1.2 percent and were among the main losers on France's benchmark CAC-40 index.

Credit Agricole shares were down 0.3 percent. The CAC-40 index was up 0.8 percent, while the DJ Stoxx European bank sector was up 0.5 percent.

TOUGH TIMES FOR BANKS

Oddo Securities estimated that Credit Agricole could net a capital gain of more than 500 million euros following the Suez stake sale. Oddo kept a "reduce" rating on Credit Agricole shares.

Stratege Finance fund manager Valerie Cazaban said that while the deal would bring in some cash for Credit Agricole, it appeared to have been done in a hurry.

"It's a mixed bag, it seems like a slightly rushed deal," she said.

Cazaban added that while she held some Suez shares, she did not hold any French banking shares for the time being due to writedowns in the global financial sector from losses in the credit market.

Losses related to subprime mortgages -- the riskiest type of home loan -- have hit banks around the world, including top Wall Street companies such as Citigroup and Merrill Lynch.

In December, Credit Agricole announced an estimated 2.5 billion euro writedown related to super-senior collateralised debt obligations (CDOs).

In November, the bank reported a 16.8 percent fall in third-quarter net profit following a trading loss at its Calyon investment banking arm.

Based on latest prices, Credit Agricole shares have fallen around 3 percent since the start of 2008.

The stock fell by around 26 percent in 2007, more than a 23 percent fall at French rival Societe Generale and a 10 percent fall at BNP Paribas.

(additional reporting by Nicolas Rialan)

(Reporting by Sudip Kar-Gupta; Editing by Elizabeth Fullerton and Andrew Callus)