Sept. 4 (Bloomberg) -- Natixis SA, France's fourth-largest bank, will sell shares for 61 percent less than its market value as it seeks 3.7 billion euros ($5.4 billion) to shore up capital after writedowns related to the U.S. subprime contagion.

The shares are on sale for 2.25 euros each, the Paris-based company said in an e-mailed statement today, compared with yesterday's closing price of 5.84 euros. Investors can order stock from Sept. 5 through Sept. 18.

Natixis needs to replenish capital after about 3 billion euros of subprime-related writedowns and provisions since the start of 2007. The French bank announced plans last week to reduce capital allocated to its investment bank, curb risk- taking at the unit and eliminate 450 more jobs.

``The capital increase was necessary,'' Chief Executive Officer Dominique Ferrero said during a conference call with reporters today. It will allow the company to ``benefit'' once the financial markets turn around, he said, adding that Natixis has a ``strong capacity to rebound.''

The French bank is turning to shareholders for more funds after investors balked at buying shares of U.K. lenders including HBOS Plc and Barclays Plc. Natixis shed 56 percent in Paris trading this year, valuing the bank at 7.4 billion euros.

Most of Bradford & Bingley Plc's investors last month spurned the rights offering of Britain's largest lender to landlords, while 92 percent of HBOS's shareholders in July passed on buying shares in the U.K.'s largest lender.

Higher Ratio

Groupe Banque Populaire and Groupe Caisse d'Epargne, the two mutual banks which created Natixis in 2006 by merging their investment-banking and asset-management units, own 34.9 percent each of Natixis and have agreed to guarantee the stock sale.

Natixis had a 1.02 billion-euro loss in the second quarter because of 1.51 billion euros of writedowns on debt backed by U.S. bond insurers.

The share sale will help Natixis lift its Tier 1 ratio, an indicator of financial strength, to about 9.3 percent from 8 percent at the end of March, the company said Aug. 28. The company said in July it targets a Tier 1 ratio between 8.5 percent and 9 percent.

Natixis, which cut about 95 jobs at its securities unit this year through August, has said it plans to eliminate another 450 employees. Most of the reductions will be made by the end of next year. The unit employed 5,660 at the end of 2007.

Less Risk

Natixis plans to reduce the portion of its capital allocated to the corporate and investment bank to 46 percent by 2010 from 52 percent last year. A ``sharp decrease'' in proprietary trading is planned, as well as a reduction of risk in real estate, leveraged buyouts and commodities.

The bank said today it will aim for average growth in net banking income, excluding the impact from the crisis, of 4 percent annually between 2007 and 2010. Revenue on that basis slid about 17 percent in the first half of 2008 from a year earlier. Natixis set a goal to lower its costs to 63 percent of income by 2010, and aims to raise return on equity, a measure of profitability, to 12 percent by 2010 and 14 percent over the ``medium term.''

David Einhorn, president of U.S. hedge fund Greenlight Capital Inc., urged Ferrero in an Aug. 18 letter to seek alternative means of raising capital, describing the rights offer as ``enormously destructive'' to shareholders' interests.

Natixis follows larger French rivals Societe Generale SA and Credit Agricole SA in tapping shareholders for new funds this year. Credit Agricole, France's third-largest bank, raised 5.9 billion euros in July. Societe Generale, France's second- largest lender, raised 5.5 billion euros in March to replenish reserves after subprime writedowns and a record trading loss because of unauthorized bets by Jerome Kerviel.

To contact the reporter on this story: Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net

Last Updated: September 4, 2008 02:26 EDT