Regulators Seek to Increase Confidence in Fortis

By Jurjen van de Pol and Martijn van der Starre

Sept. 28 (Bloomberg) -- Belgian and Dutch central banks and regulators were discussing measures to restore confidence in Fortis, the financial-services company whose stock plunged 35 percent in Brussels trading last week.

``We are working on enhancing the confidence in the market of the Fortis share,'' Hein Lannoy, a spokesman for the Belgian financial regulator CBFA, said today by telephone. He declined to be more specific. The parties will hold a conference call and ``if necessary there will be a physical meeting,'' Lannoy said.

Brussels and Amsterdam-based Fortis needs more capital after spending 24 billion euros ($35 billion) on ABN Amro Holding NV assets last year just as the U.S. subprime-mortgage market started to collapse. Fortis tumbled a record 20 percent two days ago, when the company picked Filip Dierckx to replace Herman Verwilst as chief executive officer. The move was aimed at reassuring investors concerned that a plan to raise 8.3 billion euros would force Fortis to sell assets at knock-down prices.

``Fortis failed to restore confidence on its own and that can only be done now with the help of the regulatory institutions or rivals,'' said Corne van Zeijl, a senior portfolio manager at SNS Asset Management in Den Bosch, the Netherlands, who oversees about 750 million euros and owns Fortis shares.

The Dutch central bank governing board met late yesterday with Finance Minister Wouter Bos, Het Financieele Dagblad and news service ANP reported.

Takeover Talks Stall

``Bos is being informed meticulously by the Dutch central bank,'' ministry spokesman Jilles Heringa said. Heringa and Herman Lutke Schipholt, a spokesman for the Dutch central bank, declined to confirm the meeting.

Talks about a takeover of Fortis by ING Groep NV and BNP Paribas SA stalled late yesterday amid demands for state guarantees, De Standaard reported on its Web site, without saying where it got the information. The Sunday Times reported the Belgian central bank and regulator are preparing to bail out Fortis. The newspaper didn't say where it got the information.

Peter Jong, a spokesman for Amsterdam-based ING, and Jonathan Mullen, a spokesman for BNP Paribas in Paris, declined to comment. Wilfried Remans, a spokesman for Fortis, also declined to comment and referred to the company's statements on Sept. 26.

Fortis last week said it had earmarked for sale banking and insurance businesses that may be valued as high as 10 billion euros. The Belgian company said it won't sell assets at fire-sale prices and doesn't have an urgent need for funds.

Asset Sales

The financial-services company said on June 26 it would sell so-called non-core assets, notes and asset-backed debt to raise money. Fortis planned to part with 2 billion euros of assets this year and next. The lender also scrapped a 1.4 billion-euro dividend and sold 1.5 billion euros of shares to investors, including Ping An Insurance (Group) Co.

Verwilst and Dierckx appeared together at an impromptu press conference in Brussels on Sept. 26 to reassure investors about the capital-raising plan.

While the company may sell more assets than it earlier expected as it becomes harder to raise money by other means, the bank's financial position is ``solid,'' Verwilst said. Customer moves at its Benelux banking unit have remained limited to less than 3 percent of assets since the start of the year, Fortis said.

Funding Base

Fortis has about 3 billion euros of bonds maturing this year and needs to refinance an additional 7 billion euros next year, said Ivan Lathouders, an analyst at Banque Degroof SA in Brussels, in a report last week.

Fortis, formed in the 1990 merger of the Dutch insurance company NV Amev, Belgian insurer AG Group and the Dutch bank VSB, said last week it had a funding base of more than 300 billion euros from sources including retail and private deposits and institutional investors.

Fortis has about 5.2 million retail customers. It employs about 85,000 people and operates 2,500 retail branches including ABN Amro.

The company reported a 49 percent decline in second-quarter profit on credit-related writedowns on Aug. 4.

The banking business's core Tier I ratio, which measures a bank's ability to absorb losses, was 7.4 percent at the end of June compared with Fortis's own target of 6 percent.

The company's structured credit portfolio, which includes collateralized debt obligations and U.S. mortgage-backed securities, amounted to 41.7 billion euros at the end of June. Fortis said Aug. 4 the pretax impact of the credit market turmoil on its earnings was 918 million euros in the first half.

Belgian and Dutch regulators restricted short-selling in the shares and derivatives of financial companies for three months last week to curtail a market rout. The rules require investors betting on a decline in stock prices to arrange to borrow the shares before selling them. The Belgian and Dutch regulators also requested investors to refrain from lending the securities.

To contact the reporters on this story: Jurjen van de Pol in Amsterdam jvandepol@bloomberg.netMartijn van der Starre in Amsterdam at vanderstarre@bloomberg.net