Talks on future of Fortis to run into Sunday (Reuters)

Saturday, September 27th, 2008 | Finance News

Financial authorities were examining ways to restore confidence in Fortis (FOR.BR) this weekend, while the troubled Belgian-Dutch financial group sought to close key divestment deals.

Financial authorities were contacting other institutions, a source familiar with the situation told Reuters on Saturday, although no particular solution was preferred and nothing concrete was likely to emerge before Sunday.

Asked about the talks, Belgian Prime Minister Yves Leterme told reporters after a party meeting: "We are being informed."

"It is crucial for people of this country who entrust their savings to a bank that we safeguard the credibility of these banks and, in particular, ensure that every person who has entrusted a bank with a euro can be sure of getting it back."

The stakes are high in Belgium, where Fortis is the biggest private sector employer and where over 1.5 million households, roughly half the country, bank with the group.

Veerle De Schryver, a spokeswoman for the Banking, Financial and Insurance Commission (CBFA), said: "The CBFA and the national bank are assessing initiatives to reestablish confidence in Fortis."

She added Belgian and Dutch financial authorities were in touch. "There will be communication by the end of the weekend."

The Dutch central bank (DNB) declined to comment, although DNB governor Nout Wellink, who is also a European Central Bank governing council member, canceled a Chicago trip to return to the Netherlands.

The banking and insurance group sought on Friday to reassure investors it was solvent and in no danger of collapse after market talk that it could become another credit crisis casualty.

Fortis is hoping to announce deals to sell off parts of its business by Monday in an attempt to show investors it can raise cash and restore confidence in the business, while buyers for the business may emerge over the weekend, local media reported.

As its shares plummeted more than 20 percent to 15 year-lows on Friday, Fortis called an emergency news conference to say its position was strong and that it would expand asset sales to as much as 10 billion euros ($14.6 billion) to raise cash.

After a fifth straight day of share declines, Fortis also named a new chief executive, nominating banking chief Filip Dierckx, 52, to replace interim CEO Herman Verwilst.


Dierckx and Fortis managers are scrambling to complete some deals this weekend, reported Dutch daily Financieele Dagblad, citing unnamed sources from Dutch bank ABN AMRO, which Fortis bought parts of last year.

"Fortis is working with all its power to sell business units during the crisis," the newspaper said.

Belgian newspaper De Tijd said the heads of Belgium's big banks and financial supervisors would hold talks over Fortis in a bid to restore confidence among savers and investors.

Several Belgian and Dutch media outlets cited France's BNP Paribas (BNPP.PA) as a potential buyer.

At the core of market concerns is Fortis' liquidity, but the financial group reminded investors that it was sitting on a funding base of 300 billion euros. The European Central Bank has also made clear that it is ready to fund any liquidity shortfalls as European money markets remain effectively frozen.

"They are feeling strong but developments go fast. Look at what happened with Lehman Brothers. Of course, we cannot compare Fortis to Lehman, they're different banks, but things can change quickly," said Rob Koenders of Dutch asset manager Harmony Vermogensbeheer, which holds Fortis shares.

In Turkey, where Fortis is listed (FORTS.IS) as a 94 percent-owned subsidiary worth 1.071 billion lira ($868.1 million), the group sought to reassure investors that its position remained strong.

"Fortis Turkey is still continuing its commercial activities successfully and it is growing in a stable fashion," the financial group said in a statement.


Weekends have become a tense time for financial institutions and investors because they have been marked recently by around-the-clock negotiations to save some prominent U.S. financial institutions.

Two weeks ago, U.S. investment bank Lehman Brothers (LEHMQ.PK) filed for bankruptcy protection and Merrill Lynch agreed to be taken over by Bank of America (BAC.N). Since then, U.S. insurer American International Group (AIG.N) was rescued by U.S. authorities, and Washington Mutual (WM.N) was closed by the government and sold to JPMorgan Chase & Co. (JPM.N)

A bailout deal in Washington could restore confidence in the European financial sector and together with a new CEO and a more open communication policy, Fortis could be saved, a senior Fortis insider told Reuters.

Verwilst told a conference call on Friday there was no way that Fortis would go bankrupt.

The biggest vulnerability for Fortis right now would be depositors withdrawing funds and forcing the bank to shore up more capital than it is capable of.

Fortis shares, which closed down 20 percent at 5.2 euros on Friday, have lost more than two-thirds of their value since buying the Dutch operations and asset management arm of ABN AMRO as part of a three-bank, 70 billion euros buyout consortium.

(Additional reporting by Gilbert Kreijger in Amsterdam, Antonia van de Velde and Paul Taylor in Brussels and Daren Butler in Istanbul; Editing by Dominic Evans)