Fortis: pride comes before a fall?
It seems the Belgian-Dutch banking group Fortis bit off more than it could chew with the takeover of ABN Amro.
Jean Paul Votron, the charismatic Belgian CEO of the company, made his apologies this week and resigned. The future looks uncertain for Fortis.
It seems the Belgian-Dutch banking group Fortis bit off more than it could chew with the takeover of ABN Amro. Jean Paul Votron, the charismatic Belgian CEO of the company, made his apologies this week and resigned. The future looks uncertain for Fortis.
The debacle came to light two weeks ago when Fortis, the "golden boy" of European banks, was forced to admit it needed an immediate cash injection of 8.3 billion euros to survive. The combination of an international credit crisis and the take-over of ABN Amro had been too much.
Despite this, the bank and its Board of Commissioners were still united behind its chief executive, even when the announcement of the shortfall was made and Fortis' shares plummeted 20 percent. The chairman of the board, Maurice Lippens, was shocked by all the commotion:
"It was a terrible day at the stock exchange. Lots of speculation. We had become a gambling chip for quite a few funds. So, a terrible day in that sense."
But Fortis' shareholders, mostly Belgian private investors trying to build a little nest egg, were furious. In their eyes, the shortfall was the last straw as they had already seen their shares lose 70 percent of their value in the previous six months.
In the Netherlands, the Dutch Investors' Association (VEB) was up in arms calling for the Financial Markets' Authority (AFM) to investigate whether Fortis - i.e. Mr Votron - had pulled the wool over the shareholders eyes.
The AFM is currently examining the VEB letter to that effect, but has so far not commented. The VEB claims that Mr Votron painted far too a rosy picture of the situation and the sudden shortfall of 8.3 billion euros does lend this view some credence.
Things seemed to be going so well: a year ago Mr Votron was still top dog. Under his leadership, his old employer ABN Amro - which had never offered him a seat on the board - had been taken over.
Of course, Fortis could not have done that alone. The Royal Bank of Scotland and Santander of Spain had taken the non-Dutch part of ABN Amro for a sum of 47 billion euros. Even so, that still meant the amount Fortis had to scrape together on its own to buy the Dutch part was an astronomical 24 billion.
There were warning noises at the time, but these were probably ignored because they came from ABN Amro itself. Bank president Rijkman Groenink commented that Fortis was overeating. At the time, the scale of the US credit crisis was not really apparent and the moment banks around the world began experiencing major problems, Mr Groenink thought it unwise of Fortis and Mr Votron to carry out such a stunt.
Mr Votron shrugged his shoulders and continued. As a born optimist, he had virtually no doubts. His motto was positive thinking and behind his desk hung a board "no whining". Chairman Maurice Lippens originally saw no reason to regret the take-over either:
"Neither I nor the full board of directors and commissioners [had] any misgivings. On the contrary, at the last meeting of the board of commissioners we felt really very enthusiastic. You could never pay too much if you looked at the fantastic ABN Amro team working well alongside Fortis and you could see your portfolios doing extremely well."
(Photo right: Jean Paul Votron)
All the same, last week Jean Paul Votron had to acknowledge the first major defeat of his career. On Friday the board spent the whole day discussing getting rid of Votron, and at eight that evening announced that "as a result of mutual discussions and in the interest of the group" he would be resigning.
He received a golden handshake worth 1.3 million euros. Not an exceptionally high figure, in line with the Tabaksblat code for good management and not in excess of his basic salary.
Fortis will be looking for a suitable successor for Mr Votron. Since the name of Filip Dierckx, a banker characterised by financial analysts as a "dossier-consuming grey mouse", is already doing the rounds, we can safely assume that the Wild West era of banking at Fortis is now definitely over.
By Thijs Westerbeek van Eerten
15 July 2008