The French government could inject around €5 billion ($6.29 billion) and take a 15-20% stake in the mutual bank created by a merger of Banque Populaire and Caisses d’Epargne, a source close to the deal said on Sunday.
However, the state will not seek board representation, the source added on condition of anonymity, the same approach it took when it lent money to rival banks BNP Paribas and Societe Generale. The top management has not been finalized yet, the source said.
Governments in many countries have been bailing out banks by buying stakes or, in some cases, nationalizing them as the global financial crisis ravages their balance sheets.
Groupe Banque Populaire and Caisses d’Epargne announced plans to merge last year to help them weather the economic downturn. The merged bank would rank second in size in France to Credit Agricole.
The financial crisis has badly hit Natixis, the bank jointly controlled by Banque Populaire and Caisses d’Epargne through a combined 71% stake. Natixis has been propped up several times by Caisses d’Epargne and Banque Populaire and was forced last summer into a deeply discounted €3.7 billion-capital increase.
“The French state is to put in around €5 billion (to the merged mutual bank)” the source said, adding that it could take the form of preference and, or, convertible shares. “But the precise size of the stake cannot be determined yet as it will depend on the make-up and valuation of the new entity," the source added.
The real estate business such as Foncia, Credit Foncier and Internet business meilleurtaux.com would be excluded from the newly formed unit, the source said. Banque Populaire and Caisses d’Epargne declined to comment on Sunday.
The French President’s office said on Sunday no decision was taken on the mutual banks’ merger during a meeting on Saturday. The corporate governance of the new entity has not been decided yet, the source said, adding that the non-executive chairman of the newly combined business could be the head of Banque Populaire Philippe Dupont.
Another name mentioned by the French media is Steve Gentili, head of Banque Populaire BRED regional bank division. The source said the chief executive of the newly merged mutual bank could be Francois Perol, deputy chief of staff of French President Nicolas Sarkozy.
Perol could also become non-executive chairman of Natixis in preparation for the merger, two people with first-hand knowledge of the matter said. Natixis CEO Dominique Ferrero could take on the additional role of executive chairman of Natixis, they added.
Final details of the deal are expected to be unveiled when Banque Populaire, Caisses d’Epargne and Natixis publish their results on February 26. (Reuters)