Fortis shares plummet on first day of trading

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Fortis shares plunge over 60 percent in Amsterdam and Brussels stock market after a six-day suspension on trading was lifted on Tuesday.

14 October 2008

BRUSSELS -- Fortis shares plunged 60 percent in Amsterdam trading on Tuesday as the bank relisted as a stripped-down insurer, a week after it was forced to sell its main business to the Belgian, Dutch and Luxembourg governments.

Shares of Fortis, once the biggest Belgian and Dutch bank, fell to EUR 2.10 by noon after regulators lifted a six-day suspension on trading.

Shares lost 64 percent of their value when they were reintroduced on the Brussels stock market at 11 am on Tuesday.

Asked for a reaction to the latest drop in Fortis' share price, CEO Filip Dierckx told reporters on a conference call: "The market is never wrong."

They have dropped nearly 90 percent since the start of the year on fears that the bank could not get credit on frozen markets to cover the debt it built up buying part of Dutch rival ABN Amro.

Fortis sought state rescue, with the three governments agreeing first to partly nationalise the bank and then to split it, with the Dutch government taking control of its Dutch operations, and Belgium and Luxembourg selling most of the bank's activities to France's BNP Paribas, the largest euro-zone bank by assets.

Some 7,000 Fortis shareholders have signed up to sue the company's management for allegedly misleading them and agreeing to the sale without consulting them. They will take a case to the Amsterdam commercial courts, which could block or delay the bailout plan.

Fortis said in a statement Tuesday it had "undergone a complete metamorphosis" after it was stripped of its Dutch and Belgian banking and insurance businesses as part of the state bailout.

It said it would seek to delay publishing third quarter results - originally due on 3 November - warning that unravelling its new situation "cannot be done in a few days".

"Fortis, like many financial institutions, has been confronted with a systemic financial crisis of ever-growing, unparalleled proportions," the company said, defending the sale of its core business as the only way to ensure they could continue to function.

Fortis said it would hold a special shareholder meeting within eight weeks and would announce changes to its governance, strategy and dividend policy.

Fortis says it is worth EUR 8.8 billion - based on 30 June evaluation - with EUR 7.4 billion in shareholder equity and the rest in minority interests.

It says it has EUR 10.5 billion in cash which would be more than enough to pay for its debt obligations of EUR 9.4 billion.

What remains of Fortis is an international insurer active in Britain, Portugal, Hong Kong that was valued at EUR 1.6 billion on 30 June, managing life insurance worth EUR 21 billion  and reporting a net profit of EUR 72 million for the first two quarters of 2008.

Fortis also owns two-thirds of a structured products vehicle holding "toxic assets" - complex investments based on repackaged debt now worth around EUR 10.4 billion - that have plummeted in value and may still drop.

The Belgian government and BNP Paribas hold the rest.

But Fortis warned of possible further losses, saying there were risks on "the still unknown effects of third-quarter developments on the balance sheet and income statement."

[AP / Expatica]

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