Fortis investors face a weekend of uncertainty after the banking and insurance group went out of its way on Friday to reassure them that it was solvent and in no danger of collapse following market talk the company could become another casualty of the credit crisis. -- PHOTO: AGENCE FRANCE-PRESSE
BRUSSELS - BELGIAN banking authorities held talks with Fortis NV officials on Saturday to try to restore confidence in the embattled bank after its shares slumped amid fears of insolvency.
The Dutch-Belgian bank and regulators were trying before markets reopened on Monday to find a way to stop it from falling victim to the credit crisis, said Ms Veerle De Schrijver, a spokeswoman at the Belgian Banking Finance and Insurance Commission.
Overview of Fortis issues
BELGIAN-DUTCH Fortis is the latest European financial group to be in trouble, with shares trading at 15 year-lows amid investors' concerns over its liquidity.
The following overview details some of the financial issues facing Fortis:
'We are working and looking at various initiatives to restore confidence in Fortis,' Ms De Schrijver told VTM television, but declined to comment on the options under discussion.
Media reports said the group could be taken over by other European banks like French banking giant BNP Paribas or HSBC Holdings, Europe's largest bank by market value.
Other possible scenarios reported by Belgian media included selling off Fortis assets such as its profitable insurance arm or recruiting fresh investors from the Netherlands and Belgium.
Belgian media reported that Finance Minister Didier Reynders was involved in negotiations. His office did not return calls seeking confirmation.
As of Saturday, financial authorities were contacting other institutions, a source familiar with the situation told Reuters, although no particular solution was preferred and nothing concrete was likely to emerge before Sunday.
Fortis investors face a weekend of uncertainty after the banking and insurance group went out of its way on Friday to reassure them that it was solvent and in no danger of collapse following market talk the company could become another casualty of the credit crisis.
Ms De Schrijver said: 'The parties will discuss scenarios for Fortis in a cooperative way.' She declined to say exactly which parties would be involved in the talks.
Another CBFA official told Flemish radio talks would include the government, market regulators and the Belgian central bank.
The Dutch central bank (DNB) declined to comment, although Mr Nout Wellink, also a European Central Bank governing council member, cancelled a Chicago trip to return to the Netherlands.
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 per cent to 15 year-lows on Friday, Fortis called an emergency news conference to say its position was strong and that it would expand assets sales to as much as 10 billion euros (S$20.9 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.
Asset sale scramble
Mr 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 as a potential buyer.
'A sustainable solution has to come in the coming days,' a source told the Belgian paper.
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 Mr Rob Koenders of Dutch asset manager Harmony Vermogensbeheer, which holds Fortis shares.
In Turkey, where Fortis is listed as a 94 per cent-owned subsidiary worth US$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.
Weekend woes
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 US financial institutions.
Two weeks ago, US investment bank Lehman Brothers filed for bankruptcy protection and Merrill Lynch agreed to be taken over by Bank of America over a long and tense weekend.
Since then, US insurer American International Group was rescued by US authorities, and Washington Mutual was closed by the government and sold to JPMorgan Chase.
This weekend, US legislators are trying to reach an agreement on a proposed US$700 billion bailout for Wall Street and questions are swirling about whether Belgian and Dutch financial and banking authorities will devise a plan to support Fortis.
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.
Mr 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 per cent at 5.2 euros on Friday, has lost more than two-thirds of its value since buying the Dutch operations and asset management arm of ABN AMRO as part of a three-bank, 70 billion euros buyout consortium. -- REUTERS, AP
