BNP Paribas reached deep into its pockets to snare the French government's 10.9 per cent stake in Crédit Lyonnais over the weekend, in an audacious move that opens the door to a bidding war for the country's fourth-largest listed bank.

The French finance ministry, which shocked the banking establishment and investors on Friday by announcing an auction of its stake, said just before midnight on Saturday that BNP had won the contest by offering a "significantly better" price than other pretenders.

BNP Paribas, the biggest listed French bank and the producer of the biggest bank profits in the euro zone, put in the highest bid of €2.2 billion or €58 per share by the 6 p.m. deadline on Saturday night. At a stroke, it has become the leading contender to mount an eventual takeover of Crédit Lyonnais.

The offer was at a 49 per cent premium to Crédit Lyonnais' closing price on Friday, and appears to have exceeded the government's most optimistic predictions.

Société Générale, the next highest bidder, is understood to have offered a much lower price of about €46, followed by Crédit Agricole and AGF, the French insurance subsidiary of Germany's Allianz.

"It wasn't exactly a photo finish," said one banker.

Mr Jean Peyrelevade, the Crédit Lyonnais chairman, who has sought to retain the bank's independence as a state bank was unaware of the auction plans until minutes before they were announced, and was taken aback.

French retail banking giant Crédit Agricole, which already holds 10.5 per cent of Crédit Lyonnais, had long been seen as the favourite to win all or part of the government's stake and ultimately take over Crédit Lyonnais.

But sources say that in private talks between Crédit Agricole and the government in recent weeks, the bank was unwilling to pay the 45 to 50 euros per share demanded by Finance Minister Mr Francis Mer for the state's stake. - (Financial Times Service/Reuters)