KEY POINTS:
Fortis, the largest Belgian financial-services firm, will receive a ¬11.2 billion ($23.7 billion) rescue from Belgium, the Netherlands and Luxembourg after investor confidence in the bank evaporated last week.
Belgium will buy 49 per cent of Fortis' Belgian banking unit for ¬4.7 billion, while the Netherlands will pay
¬4 billion for a similar stake in the Dutch banking business, the governments said yesterday.
Luxembourg will provide a ¬2.5 billion loan convertible into 49 per cent of Fortis' banking division in that country.
Fortis is the largest European firm so far caught up in the global financial crisis that drove Lehman Brothers Holdings into bankruptcy two weeks ago and prompted US President George W. Bush to seek a US$700 billion bank rescue package.
Fortis dropped 35 per cent last week in Brussels trading on concern the company would struggle to replenish capital depleted by the ¬24.2 billion takeover of ABN Amro and credit writedowns.
Fortis plans to sell its stake in ABN Amro's consumer banking unit, though a buyer wasn't identified. Fortis joined with Royal Bank of Scotland and Spain's Banco Santander last year to buy Amsterdam-based ABN Amro for ¬72 billion, just as the US sub-prime mortgage market collapsed.
Fortis chairman Maurice Lippens stepped down and will be replaced by someone from outside the company, Fortis said. The firm picked company insider Filip Dierckx to succeed Herman Verwilst as chief executive last week, just three months after former chief executive Jean-Paul Votron was pushed out.
Fortis, formed in the 1990 merger of the Dutch insurer NV Amev, Belgian insurer AG Group and the Dutch bank VSB, angered investors on June 26 by scrapping the interim dividend and announcing plans to sell shares to help strengthen its finances.
"We're buying power in the bank, getting more influence on the decisions that will be made, that's what savers need in these times," Dutch Finance Minister Wouter Bos told Dutch public television NOS. Bos said he couldn't comment on who'll buy the ABN Amro business.
Fortis tried three days ago to assuage investor concerns by stating that its financial position was "solid," and that it had identified banking and insurance businesses to sell worth as much as ¬10 billion. Fortis said it wouldn't sell assets at fire-sale prices, and didn't have an urgent need for funds.
The remarks, presented in an impromptu press conference by Verwilst and Dierckx, failed to stem the selling.
The stock ended the day down 20 per cent.
"Markets thought that they were over-leveraged," European Central Bank Governing Council member Nout Wellink said. "What's happening in the US is having an impact on the rest of the world. At the end of the day Fortis is a good bank," said Wellink, who also heads the Dutch central bank.
Fortis has fallen 71 per cent this year in Brussels, the second-worst performance among the 69 companies on the Bloomberg Europe Banks and Financial Services Index, cutting the lender's market capitalisation to ¬12.2 billion.
- BLOOMBERG