Crédit Agricole, France's biggest retail bank, has confirmed it is planning to raise €5.9 billion (£4.7 billion) through a rights issue after taking a €1.2 billion sub-prime hit from its investment banking operations in the first quarter.

The bank is the latest financial institution looking to raise capital after being hit by the turmoil in credit markets.

It did not comment on speculation that Marc Litzler, chief executive of its investment banking unit Calyon, may be forced to resign.

Net income in the first quarter of this year is likely to be €892 million, down from €2.66 billion a year earlier and analyst estimates of €1.19 billion, after booking the €1.2 billion write-down.

The bank said that it is considering the rights issue to preserve its Tier One ratio, a key measure of the bank's strength.

"In an uncertain market environment the group sets the objective of a Tier One ratio of 8.5 per cent and of keeping this ratio between 8 and 8.5 per cent as long as the market conditions remain unchanged," it said in a statement.

"The rights issue planned for this purpose is €5.9 billion," the statement added.

Crédit Agricole also announced the launch of an action plan to refocus its corporate and investment banking operations on customers with a reduced risk profile, to decrease the proportion of capital allocated to these activities and to significantly reduce its fixed cost base.

It announced a €3.3 billion impairment charge from its investment banking arm due to the credit crunch at its annual results in March.

The bank's board will meet tomorrow to review the accounts for the first quarter 2008 and discuss the rights issue. It is due to release its first-quarter results on Thursday.

Crédit Agricole's shares fell more than 5 per cent following the news.

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