"European financial giant Fortis partially nationalized

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Phantasee
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"European financial giant Fortis partially nationalized

Post by Phantasee »

CNN Money

Huge European bank fails
European financial giant Fortis partially nationalized. Three governments to pour 11.2 billion euro ($16.4 billion) into the bank.
Last Updated: September 28, 2008: 6:57 PM ET

BRUSSELS, Belgium (AP) -- Dutch-Belgian bank and insurance giant Fortis NV was given a 11.2 billion euro ($16.4 billion) lifeline to avert insolvency as part of a wider bailout plan agreed to by Belgium, the Netherlands and Luxembourg, officials said Sunday.

Belgium's Prime Minister Yves Leterme said the bailout shows account holders and investors that Fortis will not be allowed to fall victim to the global credit crisis.

Leterme announced the deal after weekend talks between the three countries, European Union and national banking officials.

The deal will force the bank -- which has headquarters in both Brussels and the Dutch city of Utrecht -- to sell its stake in Dutch bank ABN Amro, which it partially took over last year. Fortis paid 24 billion euros for its share of ABN.

Fortis Chairman Maurice Lippens will be forced to resign and will be replaced by a candidate from outside the company, Leterme said.

"We have taken up our responsibility, we did not abandon" account holders, Leterme told reporters.

Under the bailout, Belgium will invest 4.7 billion euros ($6.88 billion) and the Netherlands 4 billion euros ($5.86 billion) in Fortis' banking operations in the two countries. In return, they each receive 49 percent ownership in those national arms of the bank.

Luxembourg will invest 2.7 billion euros ($3.95 billion) in the bank's Luxembourg operations, also for a 49 percent stake.

The deal, orchestrated by the three neighboring countries and EU Central Bank chief Jean-Claude Trichet, is meant to restore confidence in the bank before the reopening of markets on Monday after a tumultuous week in which Fortis' shares imploded.

Belgian officials also announced Sunday that they planned to offer better guarantees for all retail deposits at Fortis, the country's largest bank and largest private employer.

Fortis named its third chief executive officer in as many months Friday after insolvency fears caused the company's shares to tumble to 5.18 euros ($7.56), their lowest level in more than a decade. The shares have lost more than three-fourths of their value in the past year.

Fortis denies any imminent solvency problems, but it has been in trouble since it took part in a three-bank consortium last year that acquired ABN Amro in a 70 billion euros ($102.5 billion) deal that was the largest takeover in the history of the banking industry. To top of page
First Published: September 28, 2008: 6:03 PM ET

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So now it's not just UK/US banks failing? And I remember reading about the ABN Amro deal. So much for setting records, now that they have to sell it off...
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Post by Ypoknons »

I have a lot of close relationships with Fortis and ABN. I worked with them as an intern, for example. I'm still not really understating the mechanisms that drove this bank to collapse though - no real bad subprime securities, iirc. Could just be capital problems after buying ABN and not figuring the crisis would be this bad.
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Post by Siege »

Ypoknons wrote:Could just be capital problems after buying ABN and not figuring the crisis would be this bad.
Yeah, as I understand it - but I'm no financial expert - the botched buy of ABN Amro has a lot to do with Fortis' problems. They paid a lot for ABN, are strapped for cash because of it, and then got stuck with the currenct crisis. If credit was still cheap and plentiful they might not have been in much problem, but it's not, so they're screwed. They need cash, their stocks have plummeted, so the only way they're going to be able to get at the money they need is by selling parts of the company off. As it looks now they're going to have to sell ABN Amro off again, probably at a loss too.

It's not so much the subprime fiasco that's doing them in, it's the subsequent credit crunch.
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Post by Atlan »

SiegeTank wrote:
Ypoknons wrote:Could just be capital problems after buying ABN and not figuring the crisis would be this bad.
Yeah, as I understand it - but I'm no financial expert - the botched buy of ABN Amro has a lot to do with Fortis' problems. They paid a lot for ABN, are strapped for cash because of it, and then got stuck with the currenct crisis. If credit was still cheap and plentiful they might not have been in much problem, but it's not, so they're screwed. They need cash, their stocks have plummeted, so the only way they're going to be able to get at the money they need is by selling parts of the company off. As it looks now they're going to have to sell ABN Amro off again, probably at a loss too.

It's not so much the subprime fiasco that's doing them in, it's the subsequent credit crunch.
You're pretty much spot on. The thing which really was the nail in their coffin was malicious rumors about their credibility last week, which pretty much caused their stocks to tumble. Not quite freefall, but pretty bad.
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Post by Bounty »

There's may bank going under. Well not going under as such, but nationalised to ensure it keeps on ticking.

I'm glad the government acted quick on this, and it seems like they got a decent deal - Fortis is healthy enough for the nationalised part to turn a profit in the future. Unfortunately, it's spreading; since this morning the Belgian government has been negotiating a nationalisation of Dexia, another bank that's taken a nosedive.
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Post by Duckie »

Well, it's rather surprising that a bank named Fortis is crumbling and weakened. Ba dump... tish?

It's not often you hear about, at least in my experience, how this is affecting the world at large in American Media, so this is all new stuff to me.
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Post by wautd »

Bounty wrote:There's my bank going under.
Ha! Sucker
Dexia, another bank that's taken a nosedive.
No wait, that's my bank

I think both banks are healthy, but Fortis did a lot of stupid shit during the last year and a half (that's what happens when the CEO's get a huge bonus when the bank is doing well, but also a huge bonus when the bank is doing bad so they give them a golden handshake for a couple of millions. It's win-win for the CEO and taking risks with other peoples money becomes promising).

Dexia losses come directly from the crisis in America as far as I know. I'm going to look out to spend my money on an appartment I think. I don't feel like putting too much money on the bank right now.
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Post by Bounty »

Fortis should've kept its hands off ABN-AMRO. It was a risky move back then, and it relied on the market staying stable and prosperous. Oops.

I especially like how the bailout includes new management, and that Leterme has said golden parachutes are going the way of the dodo. Their pure banking arm should be healthy enough to be reliable, now that the bad American credit is contained with the cash injection. And the government has already stated that they can't let the bank fail - it holds IIRC a quarter of the business financing of the country.
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Post by Edi »

The Iceland bank Glitnir, which has expanded operations to ten countries, has been partialy nationalized due to the credit crisis. It's spreading, but the shockwaves in Europe have been relatively minor so far. We'll see where that goes.
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Post by Bounty »

Edi wrote:The Iceland bank Glitnir, which has expanded operations to ten countries, has been partialy nationalized due to the credit crisis. It's spreading, but the shockwaves in Europe have been relatively minor so far. We'll see where that goes.
Stricter regulation at work? European banks haven't been handing out credit like candy, maybe that's what keeping the losses in check.
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Post by Bounty »

Fortis and Dexia started trading again and their shares are climbing. The next big bank that started taking hist yesterday, KBC, has won back the loss it took this morning. Looks like there's at least short-term confidence again, even if the rest of the stock market is still struggling.

I walked by the local branch of Fortis today and they had taped the management's press release about the nationalisation to the door. It's the stock "we were in trouble but we'll make it" schlock, so no surprises there, but it was kinda sobering to think only a week ago the idea of such a piece of paper taped to a bank door was ludicrous.
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Re: "European financial giant Fortis partially nationalized

Post by Bounty »

BBC Business wrote:Belgium and Luxembourg have said they will take steps to protect the remaining assets of Fortis after its Netherlands business was nationalised.

Belgian Prime Minister Yves Leterme said he aimed to have a solution in place before the European stock markets opened on Monday.

He said the government was in talks with potential suitors, but would not rule out further state intervention.

The news comes after a cross-border rescue plan failed.

Last week, the governments of Belgium, the Netherlands and Luxembourg agreed to to put 11.2bn euros ($15.5bn; £8.7bn) into Fortis to reassure savers and clients about the financial health of the cross-border bank.

Under that deal, each government would have taken a 49% stake in the bank in their respective countries.

But unable to restore confidence in its balance sheet, the Dutch government took full control of its operations in the Netherlands on Friday.


Crisis of confidence

Governments across Europe are scrambling to restore trust in the region's financial system as the crisis that broke Wall Street financial giant Lehman Brothers sweeps across the Atlantic.

German property lender Hypo Real Estate, Franco-Belgian bank Dexia and UK bank Bradford & Bingley have all had to be propped up in one way or another by their respective governments.

Analysts say Fortis' funding problems began after it joined forces with Britain's Royal Bank of Scotland and Spain's Santander to buy Dutch bank ABN Amro for 70bn euros last year.

The purchase was agreed just before the US sub-prime mortgage market collapsed, wiping billions of dollars off banks' investments and paralysing the credit markets.

In interviews with Belgian television and radio stations, Belgian Prime Minister Yves Leterme said takeover talks were being discussed, but that he would not sell the bank in a rushed, cheap deal.

"Fortis is an important and healthy company that has good future prospects," he said.

"There are other possibilities than just leaving it to a private partner."
Looks like I was being way too optimistic. From the evening news, it looks BNP Paribas is set to buy up 80% of Fortis with the government keeping the rest; the alternative is a full nationalisation.

On a lighter note, the Dutch finance minister has said he's going to replace the "Fortis" sponsorship tags on football teams' shirts with "Treasury".
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