That investors in Credit Agricole are being offered the option of taking their €1.2 dividend in shares as well as cash underscores just how keen the French bank is to preserve its capital position.

Analysts at Keefe, Bruyette & Woods point out that if all of Agricole's shareholders take the option of receiving 80 per cent of the payout in shares, this will be the equivalent of a €1.5 billion capital raising for the bank.

There is no suggestion that France's number-one retail bank is struggling for money, but only a foolish institution would give away hard-earned cash unnecessarily in the current climate.

Agricole will be cursing the credit crunch with renewed vigour, though, as more recent issues around US monoline insurers has left the bank with $7.1 billion of exposure, having written down €800 million.

Its exposures, such as to ACA to Ixis, are painstakingly worked through in a presentation that sees the net exposure to monolines pegged back to €2.1 billion after provisions, and presumably reinsurance contracts.

Like many of its peers, Credit Agricole would be in supercharge mode were it not for the antics of the capital markets.

As it states, net banking income would have surged 25.5 per cent absent the crisis and operating income would have risen nearly a third.

Agricole is a well-diversified European bank, with strong personal banking and asset management operations, as well as its investment banking expertise.

It has been looking at growth options in several countries, including the UK, in recent years. It is, after all, perenially tipped as a buyer of Alliance & Leicester.

That particular plan has been shelved indefinitely, although Agricole has left open the option that it may still engage in some domestic M&A via Societe Generale, its peer stricken by a €5 billion rogue trader.

Agricole will not embark on a solo bid for SocGen, which is under the keen protective eye of the French government. If the government does move to ensure a 'French solution' to SocGen, it is likely that Agricole would want to get involved in an asset carve-up.

In truth there is little option, for there is too much competitive ground to give up. But Agricole needs to put caution before boldness and make sure it does not end up with expensive unwanted assets in a year's time.

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