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September 30, 2009

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BNP acts to break free of state shackles

BNP Paribas, France's biggest bank by market value, tapped investors for 4.3 billion euros (US$6.3 billion) yesterday in the latest mammoth share issue by banks seeking to repair damage from the credit crunch.

What had been a trickle of deals and rumored rights issues threatens to become a flood, as banks rush to shore up finances and get free of the restrictions and high costs of state aid.

BNP said it needed the funds to repay the French government early.

The deal will free the bank from direct state shackles at a time when governments are seeking to impose restrictions such as on bonus payments.

Another reason for bank fundraising is to allow them to buy cut-price assets from under-pressure rivals. BNP's fundraising maneuver came as Dutch newspapers reported it was in talks to buy the commercial banking unit of nationalized Fortis Bank Nederland.

Switzerland's UBS AG also wants to cut government ties by buying its way out of a "bad bank" deal, its Chief Executive Oswald Gruebel told the Financial Times, but may not be able to do so until late 2010.

Gruebel also said its United States-based wealth management unit Paine Webber is not a core part of the bank's operations but will not be sold at present.

"We've had a lot of inquiries from potential buyers but it wouldn't make sense to sell at current valuations," Gruebel was quoted saying.

In Italy, UniCredit SpA is set to announce a 4 billion euros capital hike after a board meeting yesterday, turning down state aid and tapping the foundations that make up its core shareholding. The hike would be aimed at boosting the core Tier I capital ratio of Italy's biggest bank toward 8 percent.

UniCredit could be poised to take advantage of improving markets.


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