AFP - Top French banks Caisse d'Epargne and Banque Populaire are expected to announce a merger to form the country's second biggest bank on February 26, a source close to the talks said Saturday.
"They should announce their merger on February 26," the source said, confirming a report in Le Figaro newspaper. "Not everything has been settled, but talks continue to progress."
Both banks refused to comment on the report Saturday.
Le Figaro said that French President Nicolas Sarkozy's administration had given the banks until February 26 -- when they are due to announce their annual results -- to reach an agreement.
Failing that, the state would step in, possibly taking up to 30 percent of the future bank, the paper said.
The tie-up would create the second biggest banking group in France with combined equity capital of 40 billion euros (55 billion dollars), Caisse d'Epargne had said in October.
The specialist Mediapart website meanwhile predicted the two banks would announce record losses, of nearly two billion euros for Caisse d'Epargne and some 300 million for Banque Populaire.
The two sides began negotiations in November after approving merger plans in October.
They had been discussing a possible merger for two years but were forced into action by the financial meltdown rattling the European banking sector.
Banque Populaire and Caisse d'Epargne are mutual banks, partly owned by their depositors, and already jointly control the investment bank Natixis, whose shares have been ravaged by the credit crunch.
Mediapart said Natixis would report losses of between 2.5 billion and 3.0 billion euros.
Both Figaro and Mediapart said the government wanted to see a new management at the top of the merged bank to give confidence to the markets.