Chief Executive Officer Herman Verwilst told reporters at a press briefing in Brussels today that he's ``flabbergasted'' by the share decline and said the bank's market value doesn't reflect its worth. The efforts failed to bolster the stock, which fell a record 20 percent to 5.20 euros in Brussels trading, while the cost of protecting Fortis bonds from default surged.
Fortis has come under pressure because of speculation the company will struggle to raise the 8.3 billion euros ($12.2 billion) it's seeking to bolster capital, and might even need more funds as financial markets deteriorate. Verwilst repeated today that the firm may sell more assets than anticipated as it becomes harder to raise money by other means.
``Investors are concerned Fortis may have to sell assets at knock-down prices,'' said Jaap Meijer, a London-based analyst at Dresdner Kleinwort who has a ``hold'' rating on the stock.
Fortis has fallen 71 percent this year, the second-worst performance among the 69 companies on the Bloomberg Europe Banks and Financial Services Index, cutting the lender's market capitalization to 12.2 billion euros. Today's decline was the biggest since the company was created in a 1990 merger.
WaMu Failure
The collapse of New York-based Lehman Brothers Holdings Inc. on Sept. 15 and the U.S. rescue of American International Group Inc. heightened concern about the global financial system and made it costlier for banks to raise funds. Seattle-based Washington Mutual Inc., the largest U.S. savings and loan, was seized by regulators yesterday in the biggest U.S. bank failure in history.
Financial shares across Europe also fell as U.S. Treasury Secretary Henry Paulson's proposed $700 billion rescue of the nation's financial system stumbled in Congress. The Bloomberg European banks index dropped 1.9 percent.
Fortis, based in Brussels and Amsterdam, needs to raise capital after agreeing to buy the Dutch consumer banking and asset management units of ABN Amro Holding NV last year for 24.2 billion euros.
The firm said today it earmarked for sale banking and insurance businesses that may be worth as much as 10 billion euros. In each case, ``concrete interest of potential buyers is indicated,'' the company said, without elaborating.
Fortis said it won't sell assets at fire-sale prices, and doesn't have an urgent need for funds.
``The future need for additional capital will actually only be in 12 to 18 months as we start to fold in the largest part'' of ABN Amro's business, the company said today in a statement distributed by Hugin.
Ping An Deal
Fortis agreed in March to sell half of its asset-management unit to Ping An Insurance (Group) Co., China's second-biggest insurer, for 2.15 billion euros. Verwilst said in an interview with Bloomberg Television today he still expects the companies to get regulatory approval before the end of the year.
Fortis said on June 26 it would sell so-called non-core assets, notes and asset-backed debt to raise money. It planned to sell 2 billion euros of assets this and next year. The lender also scrapped a 1.4 billion-euro dividend and sold 1.5 billion euros of shares to investors including Ping An.
The Chinese insurer said today it may make further provisions in the third quarter for losses arising from its 4.99 percent stake in Fortis. Ping An booked a 10.5 billion yuan ($1.5 billion) loss in the first half from its holding. Its shares tumbled 9.7 percent in Hong Kong trading.
`Confidence' in Fortis
Fortis repeated today that a share sale isn't being considered. Filip Dierckx, head of the company's banking unit, told reporters in Brussels that Fortis has no shortage of liquidity. Customer moves at its Benelux banking business have remained limited to less than 3 percent of assets since the start of the year, Fortis said.
Fortis started offering Belgian customers opening online savings accounts 4 percent interest on deposits of as much as 250,000 euros in July, in a bid to hang onto customers after ING Groep NV, Dexia SA and KBC Group NV raised interest rates on savings accounts.
``I still have confidence in Fortis,'' said Dominique Achourt, a client for more than 35 years, when leaving the Fortis Bank branch at the head office in Brussels. ``Clients should see that Fortis is just being caught up in the global financial crisis and that its banking activities are not affected by the share price falling.''
Deposit Guarantees
Belgian Prime Minister Yves Leterme and Finance Minister Didier Reynders reiterated that the government guarantees deposits, in a bid to calm Fortis clients, local newswire Belga reported today. They also said that the Belgian financial regulator will probe any false information or rumor about Fortis, according to Belga.
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.
As of Sept. 24, short interest in Fortis amounted to 2.45 percent of its market value, according to London-based Data Explorers Ltd.
Credit-default swaps on Fortis by assets jumped 311 basis points to 583, according to CMA Datavision prices at 4:45 p.m. in London. Credit-default swaps on the lender's subordinated debt rose 416 basis points to 854, CMA prices show.
A basis point on a credit-default swap contract protecting 10 million euros of debt from default for five years is equivalent to 1,000 euros a year.
