Fortis earnings fall 50 percent in Q2
The company saw its profits drop from EUR 1.62 billion to EUR 808 million in the second quarter of 2008.5 August 2008
AMSTERDAM - Banking and insurance company Fortis NV reported a 50 percent fall in net profit for the second quarter on Monday, blaming the turmoil in financial markets for a fall in the value of its loans and investment portfolio.
Net profit was EUR 808 million, down from EUR 1.62 billion a year earlier.
Acting chief executive Herman Verwilst said in a statement the company had "performed satisfactorily in turbulent market conditions".
He said underlying banking and insurance revenues were growing at most subsidiaries, and the company's costs were "well controlled".
"But we observe that the environment is becoming more difficult, on different fronts," he said.
Shares fell 1.3 percent to EUR 9.18 in Amsterdam.
At the company's banking division, earnings were EUR 465 million, down from EUR 1.16 billion a year earlier due to lower capital gains and higher impairments on its loan portfolio.
At its insurance arm, earnings were EUR 423 million, up from EUR 413 million.
The results "were much better results than we had expected," said Petercam analyst Ton Gietman in a note on the earnings.
"Although partly driven by lower-than-expected impairments ... the operating profit of the bank held up reasonably well," Gietman said.
Fortis, with dual headquarters in Brussels, Belgium, and Utrecht, Netherlands, became one of Europe's largest financial companies after it bought EUR 24 billion worth of assets from ABN Amro last year during ABN's carve-up - the largest banking takeover in history.
Last month, Fortis's previous chief executive stepped down after Fortis issued shares and said it would stop paying dividends in order to preserve cash and remain within regulatory limits.
The move sent shares tumbling. They have now lost two-thirds of their value since Fortis joined the consortium that bought ABN.
It was the second time this year that shareholders felt blind-sided: in March, Fortis announced a EUR 2.7 billion writedown due to fallout from the U.S. subprime mortgage crisis. That was months after most other banks had disclosed their exposure.
On Friday, the company's chief financial officer was moved to an advisory role.
"I consider it crucial to strengthen the communication with our stakeholders and will update the market in full transparency on progress made" in integrating ABN Amro, Verwilst said.
In that spirit, he said that the sale of some of ABN Amro's commercial banking activities in the Netherlands - a condition of the EU's antitrust approval of the deal - was likely to result in a book loss of as much as EUR 900 million later this year.
Deutsche Bank is the buyer, though a price has not been announced.
The businesses Fortis acquired from ABN had operating profits of EUR 335 million in the second quarter, Fortis said, but Fortis reported a net loss of EUR 30 million on them after financing and integration costs.
Fortis said Monday it might need to write down the value of its ABN assets later this year.
[AP / Expatica]