By pursuing an alliance with France's Credit Lyonnais SA, Mellon Bank Corp. is looking to gain an asset management presence in Europe.

Credit Lyonnais of Paris confirmed Thursday that it is in talks with Pittsburgh-based Mellon regarding a possible joint venture. Mellon declined to comment.

Though Credit Lyonnais would not outline details of the talks, a London bank-stock analyst said that Mellon could take an equity stake of as much as 10% in the French bank under a proposed privatization program.

However, Mellon is more likely to buy 2% to 3% of Credit Lyonnais, the analyst said. That would be an investment of about $100 million, based on a projected market capitalization of $43.9 billion for the French bank.

Mellon is likely to be one of several investors that would buy equity stakes totaling 33% of Credit Lyonnais in the first phase of its proposed privatization. The bank, which is mostly owned by the French government, must privatize by October in order to meet the demands of the European Union, which helped bail it out in recent years.

Under the proposal, announced Sunday, the French government would retain a 10% stake.

Credit Lyonnais manages $127.4 billion of assets in France, Germany, Spain, Italy, Luxembourg, and Scandinavia, said a bank spokesman.

For Mellon, which manages $390 billion, an alliance on mainland Europe would help it continue its bid to become an international asset management presence.

Since January 1998, the Pittsburgh banking company has sought to expand its asset management business globally without making an outright acquisition. It has pursued joint ventures and alliances in Latin America and Asia but took its boldest step in July when it bought a 75% stake in a British firm, Newton Management Ltd.

"Credit Lyonnais is a recognized brand name in France," said Diana MacKay, director of business development at Lipper Analytical Services in London.

However, she added, the bank's image may have been tarnished by its financial history. The French bank posted heavy losses for much of the 1990s and was plagued by mismanagement and allegations of fraud.

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