Aug. 28 (Bloomberg) -- Credit Agricole SA, France's third- largest bank, rose the most in five months in Paris trading after quelling concern it might need to raise additional capital.

Credit Agricole gained 1.18 euros, or 8.9 percent, to 14.39 euros, the biggest gain since March 18. The stock has fallen 32 percent this year, cutting the lender's market value to 32 billion euros ($47 billion).

Chief Executive Officer Georges Pauget said today the bank is ``financially well-armed'' after lifting its Tier 1 capital ratio, a measure of financial strength, above its target at the end of the quarter. Net income at the company, which raised 5.9 billion euros in a rights offering in July, fell 94 percent to 76 million euros on markdowns linked to U.S. bond insurers.

``Investors are hanging onto the news about solvency,'' said Amandine Gerard, a fund manager at Richelieu Finance, which oversees $6.2 billion in Paris. ``The Tier 1 ratio has improved, that's the good news of the report.''

Credit Agricole, the hardest hit in France by the global credit collapse, has announced about 6.5 billion euros of pretax writedowns tied to the U.S. subprime mortgage crisis since the start of 2007 and in May replaced the head of its securities division. Calyon, the investment-banking division, posted a third straight quarterly loss in the three months ended June 30.

`Determined'

``Of course there's a financial crisis,'' Pauget said on a conference call. ``We better understand it today. We're determined to manage the situation.''

Banks and securities firms have raised about $350 billion in the past year after record writedowns and credit losses of more than $500 billion following the collapse of the U.S. subprime mortgage market.

Excluding the loss at Calyon, Credit Agricole's profit fell 19 percent, while earnings at the retail-banking regional network unit advanced 3.2 percent in the quarter. Net income at the bank's Credit Lyonnais branches almost tripled after it didn't repeat year-earlier reorganization costs.

Pauget, 61, is reorganizing Calyon and Credit Agricole increased the Tier 1 capital ratio to 8.9 percent as of June 30 from 8.1 percent at the end of 2007.

Rival Writedowns

The subprime crisis cost Societe Generale SA, France's second-largest bank, 4.9 billion euros of revenue writedowns since the beginning of 2007. BNP Paribas SA, France's biggest lender, had 2.6 billion euros of markdowns and provisions tied to the U.S. mortgage crisis so far.

BNP Paribas earlier this month reported second-quarter profit fell 34 percent to 1.51 billion euros, matching analysts' estimates. Societe Generale had its biggest gain in four months after the bank reported net income fell 63 percent, less than expected.

Credit Agricole's risky-loan provisions in the second quarter jumped to 365 million euros from 211 million euros a year earlier, beating analysts' estimates of 402 million euros.

Fitch Ratings on Aug. 8 cut Credit Agricole's long-term issuer default rating by one grade to AA- from AA, saying that the strategy change at the investment-banking unit Calyon weighs on Credit Agricole's profitability outlook.

Calyon Overhaul

Calyon on July 17 named new heads and a more detailed supervisory structure for its four main business units. Credit Agricole is set to provide more details on Calyon's reorganization on Sept. 10. The bank has pledged to trim the division's costs by at least 150 million euros this year and ``refocus'' the business on broking activities and fixed income.

Credit Agricole in May also said it plans to sell 5 billion euros of assets in the next 18 to 24 months.

The bank's board backed Pauget with ``full confidence'' last month after speculation he would resign after Calyon's losses.

``I'm completely committed with the team that I lead,'' Pauget said in an interview with Bloomberg Television today. ``The characteristic of a mutual bank is to be a democratic group with a rich and powerful debate.''

Credit Agricole named Patrick Valroff to head Calyon on May 15, replacing Marc Litzler, who had been appointed a year earlier. The lender hired Litzler from rival Societe Generale in 2004 to expand businesses such as equity derivatives and to turn around the unit after defections following the 16 billion-euro purchase of France's Credit Lyonnais in 2003.

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fbenedettiva@bloomberg.net.

Last Updated: August 28, 2008 13:19 EDT