Les Echos said the planned sale of a 25 to 30 per cent stake to a group of "partner" shareholders will not take place by year end, preventing the bank financing the seven to eight billion franc capital boost it wanted to strengthen its solvency ratio.

Several groups, including Europe's largest two insurance companies -- France's Axa and Germany's Allianz -- have expressed interest in strategic stakes in the bank, but have said they do not want control.

It said the sale to the selected shareholders and a public offer of shares would probably now take place after Credit Lyonnais has published 1998 results in March next year.

It said the state would probably trim its stake to 60 per cent in April with the trade sale before putting as much as 50 per cent of the capital on the marketthrough a public share offer in May or June.

According to an agreement with the European Commission, the French government has to cut its stake in Credit Lyonnais to below 10 per cent by October 1999.

As a first step in the privatisation process, Les Echos said the bank would carry out a reserved capital increase by end-year to buy back a state participation clause and cancel a low-interest loan to EPFR imposed on the bank.

The EPFR is a special purpose finance vehicle set up with a state guarantee to finance the CDR holding company charged with selling Credit Lyonnais assets. Les Echos said the link between Lyonnais and CDR should also be cut.

The paper said the state's stake would rise to about 90 per cent from 81.7 per cent now as a result of the moves.