Belgian finance giant Fortis declares $37-billion loss, urges merger with BNP Paribas
31 Mar 2009
Belgian financial services company Fortis Holding reported a €28 billion 2008 loss on Tuesday as it urged shareholders to vote next week in favor of a takeover by French bank BNP Paribas. (See: New Fortis deal will have 'stable' impact: BNP Paribas)
Fortis's loss, equivalent to about $37 billion, compared with a profit of €4 billion in 2007. It said the sale of its banking arms to the Belgian and Dutch governments last October - an emergency rescue measure - landed it with a loss of €29.4 billion. The financial services group now owns a small global insurer and Belgium's largest insurance company as it waits for shareholders to finally approve the sale of most of the bank and all of the insurance business to France's BNP Paribas. (See: Netherlands government acquires Fortis' Dutch unit for €16.8 billion / Benelux governments inject €11.2 billion to save Fortis)
Total revenues were €14.6 billion in 2008, compared to €120 billion a year earlier. Fortis Insurance Belgium made a net profit of €6 million last year - down from €522 million in 2007. The company wrote down its investment portfolio and said sales were hit by the difficult environment and uncertainty of Fortis' fate. The international insurance unit broke even, reporting no profit compared to 2007's €40 million profit.
Fortis CEO, Karel De Boeck, said that a combination with BNP on recently improved terms would ensure Fortis's viability, and that the merged company would carefully consider the best way to employ its capital, including through acquisitions.
''This is a new start for Fortis, shareholders permitting,'' Boeck told a conference call. ''A number of our companies are fast-growers and they need additional capital in order to sustain their development. Sometimes in this world you can find insurance companies for sale at interesting prices.''
The company and the Belgian government reached a revised deal on 6 March with BNP, under which the French bank would pay €2.9 billion in shares for 75 per cent of Fortis Bank; that's about €510 million more for shareholders than in the previous offer. The new deal also provides guarantees that the insurance unit will remain in business. BNP Paribas will become the largest € zone bank in terms of deposits if the deal goes through.
Fortis, previously a Dutch-Belgian company, took on an unmanageable debt load when it took part in the acquisition and breakup of the Dutch bank ABM AMRO at the height of the credit bubble. With the company facing failure after the collapse of Lehman Brothers, the Dutch government nationalized the Netherlands operations in October and BNP Paribas agreed to acquire the Belgium and Luxembourg banking and insurance operations.
