French bank shares rocket after state capital plan

PARIS (Reuters) - Shares in France's top banks rose sharply on Tuesday after the French government said it would lend 10.5 billion euros ($14.12 billion) to boost their capital reserves which had been eroded away by the global credit crisis.

BNP Paribas , France's biggest bank by market capitalization, was up 5.9 percent in early morning trade.

Societe Generale , which at one stage on Monday fell 10 percent due to concerns over its capital position, rose 9.3 percent. Credit Agricole , France's top retail bank, rose 7.7 percent.

"It's a well received move by the government. It gives the banks a bit of oxygen," said GSD Gestion fund manager Christophe Gautier. Gautier holds Agricole, SocGen and BNP Paribas shares.

French Economy Minister Christine Lagarde said the government would lend the 10.5 billion euros to the banks before the year end. Lagarde said the French state was ready to lend the same amount to banks again in 2009.

The move comes a week after French President Nicolas Sarkozy said that France had earmarked 360 billion euros as part of an international effort to help banks survive the worst financial crisis since the Great Depression some 80 years ago.

France agreed to subscribe to subordinated debt issued by Credit Agricole for 3 billion euros; BNP Paribas for 2.55 billion; Societe Generale for 1.7 billion euros, and for 1.2 billion by Credit Mutuel.

It will also lend 1.1 billion to Caisse d'Epargne and 950 million to Caisse d'Epargne's merger partner Banque Populaire. The amounts are in line with the size of the banks.

The banks will issue junior debt to the French state.

The French capital injection follows similar moves by other governments around the world. On Sunday, the Dutch government gave a 10 billion euro cash injection to ING .

(Reporting by Sudip Kar-Gupta, editing by Marcel Michelson)