Sept. 29 (Bloomberg) -- BNP Paribas SA, France’s largest bank, said it will raise 4.3 billion euros ($6.3 billion) in a rights offer to help repay government funds.

BNP Paribas is offering existing investors 107.6 million shares at 40 euros each, or 29 percent below yesterday’s closing price, the Paris-based bank said today. The company will repay 5.1 billion euros it received from the French state as well as 226 million euros of interest, it said.

BNP Paribas and Societe Generale SA, the country’s second- largest bank by market value, received a total 8.5 billion euros from the state to boost capital and sustain lending after Lehman Brothers Holdings Inc.’s failure shook markets last September. After paying back the government, BNP Paribas’s tier-one capital ratio, an indicator of financial strength, will be above 9 percent, the company said.

“This will put them in a stronger position and I certainly support this,” said Andy Lynch, who manages $1.8 billion at Schroders Investment Managers in London and holds BNP shares. “We are likely to see more of these moves throughout Europe.”

BNP Paribas rose as much as 4.1 percent in Paris trading, and was up 2.7 percent at 58.09 euros by 9:17 a.m. in Paris, valuing the bank 62.6 billion euros. The stock has risen 92 percent so far in 2009, outpacing the 53 percent gain of the 64-member Bloomberg Europe Banks and Financial Services Index.

‘Objectives’ Achieved

In return for the government funds, the banks agreed to increase the volume of outstanding loans to households and companies by at least 3 percent this year. BNP Paribas said it’s standing by commitments given to the French state.

The state assistance has “fully achieved its objectives,” the bank said in a statement. “Given the changing environment and the strong performance of BNP Paribas, this support is no longer required.”

BNP Paribas said results for the third quarter in each of its “three core businesses” should not differ significantly from the previous quarter, beyond the usual seasonal effects. Second-quarter profit rose 6.6 percent to 1.6 billion euros, helped by the acquisition of Fortis assets and higher investment-banking revenue, the bank said Aug. 4.

Axa SA, which holds about 5.2 percent of BNP Paribas’s shares, will subscribe to new stock “by exercising all of the preferential subscription rights it will be granted,” BNP said.

BNP Paribas will be offering investors one new share for every 10 they already hold. The transaction will “be 8.4 percent accretive” to earnings per share, based on analysts’ consensus estimates for 2010 net income, the bank said. The offer runs between Sept. 30 and Oct. 13.

The bank will also use about 750 million euros of equity from dividends paid in shares and about 260 million euros from a capital increase reserved for employees to help reimburse “all of the non-voting shares issued in March to Societe de Prise de Participation de l’Etat,” the state-run financing company, BNP Paribas said.

The offer will be managed by BNP Paribas and underwritten by a syndicate led by BNP Paribas, HSBC Holdings Plc and Calyon.

To contact the reporters on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.netDavid Whitehouse in Paris on dwhitehouse1@bloomberg.net

Last Updated: September 29, 2009 03:42 EDT