Crédit Agricole insisted that international market turmoil was having a "limited impact" on its business, despite admitting that its investment bank was facing more than €670 million (£454 million) of potential losses on highly structured credit investments.

France's second-largest financial services group also recorded a further €100 million of indirect exposure to US sub-prime loans at its asset management arm. It said this was held through funds run by multiple managers.

But Georges Pauget, the group's chief executive, played down its exposure to the "US sub-prime loan crisis", which the bank said it first spotted in February and moved to deal with highly conservatively.

"The group reacted rapidly at the very first signs of the turmoil. It adjusted to the situation and it has taken a conservative approach in its accounts," he said.

The bank, once a potential suitor for Alliance & Leicester in the UK, said it had not structured any new financial products involving sub-prime US mortgages since February.

Crédit Agricole said its investment bank, Calyon, had a mark-to-market exposure to sub-prime loans of €586 million, held in a portfolio of asset-backed securities.

The bank said it was also marketing €280 million worth of mezzanine, or equity-like, debt instruments known as collateralised debt obligations. It said its mark-to-market exposure on tranches of these CDOs was €91 million.

The disclosures came as Crédit Agricole reported flat after-tax profits of €1.3 billion for the six months to the end of June, largely thanks to a €485 million charge for restructuring its domestic retail bank LCL.

Crédit Agricole said that, in spite of the exposure, its performance elsewhere in the capital markets had more than offset these difficulties.

The French bank played down its potential market losses as its rival BNP Paribas said two funds it reopened yesterday experienced "very limited" falls in the net value of their assets. The bank was forced at the beginning of the month to freeze three funds exposed to the sub-prime rout.

Last week, Christine Lagarde, France’s Finance Minister, told a Cabinet meeting that French banks had little exposure to the US sub-prime crisis. She described the nation's banking sector as "completely healthy" and urged banks not to tighten credit terms in the wake of the turmoil.

Earlier this month, BNP Paribas, France's largest listed bank, posted a 20 per cent increase in profits for the second quarter. Société Générale increased profits by a third over the same period.

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