Crèdit Agricole, the French bank, yesterday formally initiated an agreed €19.5 billion bid for Crédit Lyonnais, its smaller rival, and promised to make the combined group already dominant in domestic retail banking a powerful force in Europe.

Mr René Carron, the newly-appointed Agricole chairman credited with persuading the bank's 45 autonomous caisses regionales, or regional operations, of the merits of the deal, said: "We have the will to make this new group an uncontested leader in French and European banking."

Mr Jean Peyrelevade, chairman of Lyonnais and Mr Carron's future deputy, said the new bank was a tool for "European conquest".

With a capitalisation of some €33 billion, it will vie with BNP Paribas, which had fought Agricole for control of Lyonnais over the past three weeks, as the biggest French listed bank.

Yesterday's announcement was the culmination of three years of desultory negotiations between Lyonnais and Agricole executives that took a new urgency when BNP began buying shares in November.

Analysts said Agricole was paying too much for the €760 million in annual cost savings it planned to achieve.

But bankers say the offer is pitched high enough to deter BNP Paribas from making a counterbid that would in any case be rejected as hostile by Lyonnais management and the central bank.

- (Financial Times Service)