The Paris-based bank would be attracted to buying SocGen by the domestic growth in retail banking, the person said. On the other hand, BNP and SocGen's investment banks have a lot of overlap, and BNP is less enthused about that side of a tie-up, the source added.

BNP declined to comment.

SocGen stock rose over 10 per cent on Tuesday to 78.45 euros (S$165.61), bouncing back from a recent sharp decline, on renewed market talk that BNP could launch a bid. BNP shares rose 2.9 per cent.

Traders said they had heard talk that BNP could launch a 92 euros a share bid.

Internal discussions at BNP are at a preliminary stage, and any move is unlikely to be imminent, said the source, adding BNP was extremely unlikely to pounce without at least informal French government approval.

The bank could also wait and see how successful a planned SocGen rights issue is before deciding whether to pursue a bid.

Fund managers gave a lukewarm response to SocGen Chairman Daniel Bouton in London on Monday as he aimed to sell the planned 5.5 billion euro capital increase in a tough market.

The cash call will be used to shore up its finances after losses of 4.9 billion euros from the actions of junior trader Jerome Kerviel.

SocGen escaped a takeover bid by BNP Paribas in 1999, and since then there has been much speculation that the two might merge, though BNP has repeatedly played it down.

The declining share price at SocGen - it has more than halved since last spring - and a feeling that its current management may struggle to regain credibility after the scandal, is making BNP re-evaluate its position, said the source.

BNP is still at the stage of just weighing up the pros and cons and may decide not to proceed with an offer, said the person. -- REUTERS

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