May 15 (Bloomberg) -- Credit Agricole SA, France's third- largest bank by market value, changed the head of its investment bank and plans to sell 5 billion euros ($7.8 billion) of assets after losses tied to the U.S. subprime mortgage market collapse.

Marc Litzler, 48, was replaced as chief executive officer of the Calyon securities unit by Patrick Valroff, 59, who headed Sofinco, the Paris-based bank's consumer-credit arm, CEO Georges Pauget told reporters on a conference call.

Credit Agricole, the French bank hardest hit by the subprime crisis, will sell the assets, which Pauget declined to identify, over the next 18 months. The bank also plans to cut fixed costs at Calyon this year by at least 150 million euros, or 10 percent, after a second straight quarterly loss at the unit.

``Downscaling Calyon is somehow abandoning their ambitions,'' said Pierre Flabbee, an analyst at Landsbanki Kepler in Paris who has a ``neutral'' rating on Credit Agricole. ``It opens an avenue for Societe Generale and BNP Paribas'' in areas such as equity derivatives and fixed income.

Credit Agricole fell 26 cents, or 1.3 percent, to 19.24 euros in Paris trading. The stock is down 17 percent this year, compared with a 14 percent decline in the 59-company Bloomberg Europe Banks and Financial Services Index.

Calyon Unprofitable

Flabbee said Credit Agricole may dispose of its stake in Milan-based Intesa Sanpaolo, Italy's second-largest bank. That holding amounted to 5.4 percent as of February, data compiled by Bloomberg show, and would be worth about 3.2 billion euros at current prices.

Pauget, speaking at a press conference, declined to comment on the Intesa stake. Chief Financial Officer Bertrand Badre said Credit Agricole has identified a group of possible assets for disposal, and declined to elaborate on them.

Credit Agricole booked a 1.5 billion-euro gain last year from selling a 3.6 percent stake in Intesa Sanpaolo to comply with a requirement by the Italian antitrust authority. In the first quarter, the bank had an 822 million-euro gain from selling its stake in French utility Suez SA.

``Refocusing is not retreating,'' Pauget said. Calyon ``will concentrate efforts on domains and activities where we have recognized international positions,'' he said.

Credit Agricole has announced about 5.5 billion euros of asset markdowns since the start of last year, more than French rivals BNP Paribas SA or Societe Generale SA. The bank said this week it will seek 5.9 billion euros in a rights offer to replenish capital after first-quarter profit fell 66 percent.

`Change of Paradigm'

``There is no catch, nothing hidden, we've got no acquisition in the pipeline,'' Badre said when asked the purpose of the fundraising. ``There is a change of paradigm for banks. We're moving in a world where capital is king.''

The world's biggest financial companies are seeking $249 billion from investors after the U.S. subprime mortgage collapse roiled credit markets, leading to $337 billion of markdowns.

Calyon, formed after Credit Agricole's 2003 acquisition of Credit Lyonnais, had a loss of 795 million euros in the first quarter, compared with a profit of 539 million euros a year earlier, the company said in a statement today. Leaving aside the impact of subprime, the unit was still unprofitable.

Pauget declined to say if Calyon will return to profit this year because of the ``uncertainties'' of assets related to the U.S. real estate market. ``Today you take the price of the three last homes sold in Nevada and that sort of sets global prices for financial assets,'' Pauget said. ``I'm unable to make an outlook for Nevada home prices.''

`Litzler, Valroff'

Litzler, who joined Credit Agricole in 2004 from Societe Generale and was named CEO of Calyon in July, failed to win the full backing of the bank's shareholders and board members after subprime-linked losses and a trading scandal last year.

At Societe Generale, Litzler held positions including global head of equity derivatives trading and co-head of the investment bank. He was recruited by former Calyon head Edouard Esparbes, who left after Litzler took over.

Valroff is inheriting a unit that gets more than two thirds of its revenue from international activities and has 13,000 employees in 58 countries. Valroff attended the Institut d'Etudes Politiques in Paris and the Ecole Nationale d'Administration.

``Valroff is a confirmed manager, who is used to negotiating with corporates,'' Pauget said.

Before joining Sofinco in 1991, he held jobs in public service and advised Jacques Chirac when he was prime minister. Valroff became CEO of Sofinco in 1996 and is a member of Credit Agricole's executive committee.

Credit Agricole, set up in 1894 to provide financing for farmers, is owned by a group of regional banks, ranging from lenders in the French Caribbean to Normandy in northern France.

To contact the reporters on this story: Jacqueline Simmons in Paris at jackiem@bloomberg.netFabio Benedetti-Valentini in Paris at fbenedettiva@bloomberg.net

Last Updated: May 15, 2008 12:44 EDT