Britain's government bought a majority stake in one of the country's biggest banks and Germany's Commerzbank accelerated its takeover of a rival as the shake-up of European banks gathered pace with help from taxpayers and shareholders.
Britain's move was the latest attempt by countries around the world to shore up ailing banks amid a global credit crisis and give them a more solid footing for looming recession.
Shareholders in Royal Bank of Scotland shunned its share offer, leaving the government to take a 58 percent stake for 15 billion pounds ($23 billion).
In contrast, Spain's Santander said investors had signed up for all of its 7.2 billion euro rights issue, which will beef up its capital ratios.
Commerzbank, which has taken 8.2 billion euros from the German government to prop up its flagging finances, cheered investors by saying its purchase price of Dresdner Bank would be 4.7 billion euros less than first envisaged in August and is speeding up the deal.
Insurer Allianz, which is selling Dresdner and will get an 18 percent stake in the enlarged Commerzbank, said the takeover could go ahead six to nine months ahead of plan.
"In the current situation on the financial markets, an accelerated takeover of Dresdner by Commerzbank is to the advantage of all parties," said Allianz Chief Executive Michael Diekmann.
Commerzbank shares surged by as much as 19 percent on the news and by 1500 GMT were up 5.7 percent and Allianz jumped 9 percent.
The DJ Stoxx Europe bank sector dipped 0.4 percent to 166.3 points, but the index is on course for its strongest week for seven years after falling to a 12-year low last week.
The index has rallied over 17 percent this week, clawing back almost all of the previous week's plunge and its strongest weekly move since a 17.5 percent surge in September 2001, according to Thomson Reuters data.
The index has tumbled over 60 percent this year and investors in many banks have suffered big dilution from fundraisings, but those banks to raise cash should now be well positioned for the downturn, some investors said.
"The dilution has happened and now the banks are well capitalised, they can cope with the bad debts that are inevitably coming, and now people can look at the underlying businesses," said Alan Beaney at Principal Investment Management, which holds shares in most UK banks.
IRISH PRESSURE RBS, one of Europe's biggest banks until losses on risky U.S. assets and last year's purchase of parts of Dutch bank ABN AMRO overwhelmed its balance sheet, said investors took just 0.2 percent of its 15 billion pound ($23.1 billion) share offer.
A low take-up had been expected due to RBS's depressed share price and left the government to pick up almost all the shares.
Ireland's banks were under pressure as speculation grew that the sector needs to be recapitalised or consolidated, and shares in Anglo Irish Bank tumbled 19 percent.
Irish Finance Minister Brian Lenihan is working "very hard" to find a solution for the sector, the chairman of one of the banks said following talks.
Other banks showed the impact of strains from the crisis.
Profits at Austrian cooperative bank Raiffeisen Zentralbank will be hurt by writedowns on its exposure to Lehman Brothers and its Icelandic debt assets, but it expects to turn a profit for 2008, its chief executive said.
Dutch group ING said it plans to repay its 10 billion euro state injection when profits normalise or when its stock price goes back up.
But Chinese insurer Ping An is asking China to help seek compensation from Belgium over its losses in Dutch-Belgian financial group Fortis after it was nationalised, a government source said on Friday.
Ping An booked a $2.3 billion loss on its investment in Fortis after marking down the value of its 5 percent stake.
The source familiar with the situation told Reuters Ping An believes the Belgian government's role in carving up Fortis along national lines last month is tantamount to confiscation and it wants to pursue compensation.
