After the continuous news of bank failures from the US and recent collapse of Germany's IKB  Deutsche Industriebank under the weight of the sub-prime mortgage crisis, now it's time for their French counterparts to reveal their wounds. (See: Lone Star acquires IKB Deutsche Industriebank AG, first German casualty of sub-prime mortgage crisis)

The country's third- and fourth-largest banks reported slumping results from the credit crunch on Thursday, with Credit Agricole revealing a 94 per cent profit drop and Natixis swinging to a loss of about $1.5 billion.

Agricole's net income fell to €76 million, or $112 million, from €1.29 billion a year earlier, the Paris-based bank said. But the shares rose as much as 5.5 per cent after the company said its Tier 1 capital ratio, a key measure of financial strength, held steady.

Natixis shares fell as much as 7.6 per cent after the company posted a net loss of €1.02 billion compared with the €669 million median loss estimate of analysts and net income of €1.01 billion a year earlier.

The bank reported €1.51 billion of markdowns in the second quarter and said it planned to scale back risk at the investment banking division and review the pace of the unit's international development.

Natixis CEO Dominique Ferrero told analysts that its plans include "immediate measures that aim to significantly reduce the risk profile of the corporate and investment banking division and then more structural reforms aiming to focus resources on our strong points."

The immediate steps include a "significant decrease" in high volatility, proprietary trading activity, or bets the bank makes with its own money. In some areas proprietary trading could cease altogether, Ferrero added.

"This is the most significant, most violent and most long lasting of all the financial crises we've had since the war," he said.

The bank will also cap its risk exposure in certain sectors or geographic areas.

Over the longer-term it's planning to scale back the proportion of capital allocated to corporate and investment banking to 46 per cent in 2010 - from 52 per cent in 2007 - and is targeting annual growth in net banking income of 4 per cent, excluding the impact of the credit crisis.

Like Natixis, Credit Agricole said it's developed a new strategy for its investment-banking arm, which will be unveiled in September. It's also already begun a cost-reduction program that cut expenses in investment banking by around 11 per cent in the latest quarter, the bank added.

Agricole was hit by around €1.1 billion of write-downs related to the credit crisis and monoline insurers, which it said had a negative impact of €693 million on its Calyon investment bank's earnings.