30 September 2008

AMSTERDAM -- Shares in troubled bank Fortis NV fell sharply Monday despite a EUR 11.2 billion government bailout, amid growing signs European banks were hit harder by the U.S. financial crisis than they wanted to admit.

Belgium, the Netherlands and Luxembourg agreed late Sunday to the bailout of one of the countries' largest retail banks. But they demanded a 49 percent stake in exchange and ordered Fortis to sell ABN Amro, which it bought for EUR 24 billion in 2007.

Amsterdam-based bank ING Group announced in a two-paragraph statement late Monday that it does not plan to buy ABN.

"ING has examined the situation closely and carefully", the bank said. "We are mindful of the interests of all stakeholders, but recognize that the ultimate responsibility is to our shareholders".

Bankruptcy fears caused the company's shares to fall more than 20 percent Friday to their lowest level in 15 years. On Monday they fell again.

Chief Executive Officer Filip Dierckx blamed "bad timing" for the failure of the ABN Amro deal. Appointed Friday, he is Fortis' third CEO since July.

Fortis, with headquarters in Brussels, Belgium, and Utrecht, Netherlands, is Belgium's largest retail bank, while ABN Amro is the largest in the Netherlands.

Nout Wellink, the head of the Dutch central bank, said the US financial crisis was partly to blame.

"What is happening in the US has most certainly had an impact", he told reporters. "Due to rumours, I have to say, Fortis became a bank in a special position".

Fortis said Monday it would be left with EUR 9.5 billion after the bailout. But because ABN Amro's retail business is worth less than EUR 12 billion, the company will lose money.

Fortis' key mistake was joining a three-bank group led by Royal Bank of Scotland PLC that bought ABN Amro in a EUR 70 billion deal that was the largest takeover in the history of the banking industry.

"In these times, it is simply a step too far for this company" to absorb ABN, Dierckx said.

[AP / Expatica]