WRAPUP 2-European bank profits dive as more tap state cash

* Commerzbank to take $10.5 bln in govt funds; shares up * HBOS ups writedowns to $8 bln, Lloyds eyes dividends restart * Austria takes over ailing Kommunalkredit * Barclays shares down on funding cost concerns * SocGen's Q3 profits down 84 pct

By Steve Slater and Nicola Leske

LONDON/FRANKFURT, Nov 3 (Reuters) - Europe's banks warned of more big writedowns and sharp profit falls as the credit crisis hits consumers and businesses, prompting more lenders to tap government funds or seek state rescues on Monday.

Austria stepped in to take over public sector lender Kommunalkredit [ID:nL36191], and German lenders sought emergency funds as a strain on capital showed little sign of easing.

Commerzbank (CBKG.DE) became the first commercial bank to turn to Berlin for help, taking an 8.2 billion euro ($10.5 billion) capital injection and guarantees for 15 billion euros to help secure funding.

The help for Germany's second-biggest bank comes with strings attached, including a ban on paying dividends for two years. [ID:nL3543865]

Bigger rival Deutsche Bank (DBKGn.DE) will not tap the rescue fund, chief executive Josef Ackermann told German public TV channel ZDF over the weekend.[ID:nL2392075]

"We have a very, very strong refinancing basis, so that we do not need to use the rescue package," he said.

The effects of the credit crisis are continuing to take a toll on banks across Europe, with asset values falling and bad debts spiralling higher.

Britain's biggest home lender HBOS Plc HBOS.L raised its estimated hit from the value of risky assets and bad loans to 5.2 billion pounds ($8 billion) and its takeover partner Lloyds TSB (LLOY.L) warned of a sharp profit fall. [nL3542383]

"Undoubtedly 2009 is going to be a complete horror story for all UK banks, with no exceptions," said James Hamilton, analyst at Numis Securities in London.

Lloyds said it planned to write down assets held by HBOS by up to 10 billion pounds. The takeover remains on track and Lloyds said it expected to resume dividend payments next year after repaying preference shares taken by the UK government.

HBOS shares rose 8 percent, partly because of a weekend report that Lloyds may face a rival bidder to its takeover plan. [ID:nL2041439]

PROFITS SAG Societe Generale (SOGN.PA) kicked off results from France's top banks with an 84 percent fall in third-quarter net profit, but said it was strong enough to weather the global financial crisis. [ID:nL2427993]

Net profit fell to 183 million euros, hit by a 244 million euro loss at its corporate and investment banking division.

By 1510 GMT the DJ Stoxx European bank index .SX7P was down 1.6 percent, though Commerzbank rose 4.5 percent, Deutsche Bank added 2.8 percent, and SocGen rose 1 percent.

But Lloyds dipped 1 percent, and Barclays (BARC.L) fell 5 percent, hit for a second day by concerns that its decision to raise capital without government help could prove expensive and dilutive. [ID:nN30266610]

Royal Bank of Scotland (RBS.L) lost 6 percent on concern it will follow HBOS and report a big jump in writedowns on Tuesday.

HBOS said writedowns and losses on bad debts for the first nine months of this year had risen to 5.2 billion pounds, up 2.7 billion pounds in the third quarter alone, partly as bad debts at its corporate lending arm jumped to 1.7 billion pounds.

Lloyds stepped in as bidder for HBOS in a government-brokered deal, and both took 17 billion pounds under a UK government rescue plan last month.

German banks have been less willing to step forward to take state funds due to the perceived stigma, while Chancellor Angela Merkel urged banks on Saturday to tap the 500 billion euro rescue package.

HSH Nordbank said it was also considering taking capital from the fund, and would ask for funding guarantees.

Commerzbank's decision to take state cash came alongside news it had swung to a net loss of 285 million euros in the third quarter from a profit of 339 million euros a year earlier. (Additional reporting by Eva Kuehnen, Myles Neligan, Paul Hoskins, Sudip Kar-Gupta and Lorraine Turner; Writing by Chris Wickham, editing by Will Waterman)