* German banks replace French banks at top of league tables

* US banks increase market share

By Tessa Walsh

LONDON, March 30 (Reuters) - Bank lending in Europe, Middle East and Africa (EMEA) in the first quarter of this year fell to its lowest in a decade, showing the impact of the sector's funding problems and also a push to shrink balance sheets to meet tough new capital rules.

The lending slowdown has shaken up the syndicated loan league tables in EMEA, with German banks replacing French banks at the top.

Loan volume in the first quarter of $128.4 billion was the lowest for 10 years, according to data from Thomson Reuters LPC.

Only 192 loans were completed in the first quarter -- 43 percent lower than the 340 loans completed in the same period of 2011 -- which is the lowest first-quarter deal count since 2000.

The impact of lower lending on banks' revenue and headcount will soon start to be felt if low levels of activity persist. Bankers are worried about more job cuts as banks struggle to support large loan teams.

Any impact on profitability could start to show up in banks' first quarter results, due in late April and May. Although any hit to income may, however, be reduced because while banks are lending less, they are charging higher fees.

Final numbers released by Thomson Reuters LPC on Friday show EMEA first quarter loan volume 37 percent lower than a year earlier and 48 percent lower than the fourth quarter of 2011 as deleveraging started to bite.

The first quarter saw top companies from Europe's peripheral economies returning to the market including Italian utility Enel and Spanish telecom Telefonica, which paid record margins to borrow.

German banks topped the league tables after an active first quarter refinancing round by German companies, including Henkel , HeidelbergCement and Schaeffler.

A year ago, the top three slots were taken by Credit Agricole, BNP Paribas and Societe Generale respectively, which had a combined 28.2 percent market share. BNP Paribas is now in fifth place and Societe Generale is tenth.

Credit Agricole was the highest-ranking French bank, dropping one place to second from a year earlier with a 7.9 percent market share, down from 11.3 percent a year ago.

Deutsche Bank headed the first quarter EMEA bookrunner league table with an 8.1 percent market share, and Commerzbank was third with a 7 percent market share.

U.S. banks used the market dislocation to increase their market share. Bank of America Merrill Lynch, JP Morgan and Citigroup climbed to fourth, sixth and seventh place respectively.

Refinancing activity was 50 percent lower year-on-year in the first quarter. Many companies had accelerated refinancings in late 2011 fearing a rise in loan pricing. This created a deal hole in early 2012.

Lending was down in all regions as European banks continued to pull back to home markets and struggled to lend in dollars, which remained scarce and expensive.

The dollar-based loan markets of Africa, Central and Eastern Europe and the Middle East showed the biggest year-on year falls of 68 percent, 67 percent and 36 percent respectively. Western Europe loan volume was 43 percent down year-on-year.

ACTIVITY LOW

The high funding costs which were partly to blame for the low loan volume in the first three months prompted a sharp burst of bank deleveraging in the fourth quarter of 2011.

Banks sold loan portfolios and lent less to conserve capital to hit mid 2012 targets for core Tier 1 capital - a measure of financial strength - set by European regulators.

The European Central Bank's (ECB) dual cash injection via its Long Term Refinancing Operation (LTRO) repurchase facility December 2011 and February 2012 did help to boost bank liquidity and ease high funding costs.

But the programme came too late to rescue first quarter volume although Enel and Telefonica's loans were documented under local law to allow the loans to be used as collateral to raise funds from the ECB.

Post the ECB's action, banks had more money to lend, although dollars remained difficult to source for most European banks but demand for loans -- particularly for M&A financing -- stayed low.

ABB was one of a handful of companies to raise M&A financing with a $4 billion bridge loan to back its purchase of US electrical components maker Thomas & Betts.

Cash-rich companies were also reluctant to raise new loans from increasingly unpredictable banks, and turned to the bond market for more reliable longer-term financing.

But loans still managed to outstrip bonds as a source of cash for blue chip companies.

Highly-rated companies raised $81.3 billion of loans, slightly higher than $74 billion of investment-grade bond issuance, according to Thomson Reuters data.

Dealflow in loans remains worryingly thin going into the second quarter with only $33 billion of investment-grade loans in the pipeline and $3.7 billion of leveraged loans on the blocks.

First quarter leveraged loan volume of $25.2 billion was 32 percent lower than a year earlier and was outstripped by a more active high-yield bond market where issuance hit $28.3 billion.

The leveraged loan market saw a flood of refinancings to amend existing loans and extend the maturities of their debt. More restructurings were also seen as banks took a harder line with companies that failed to boost earnings.

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