The decision by top Belgian-Dutch financial group Fortis to sell up to 10 billion euros of assets has raised concerns on the markets even though the company stated that its "solvency is solid and well above the regulatory minimum".
Belgian-Dutch financial group Fortis battled on Friday to dispel liquidity concerns hammering its shares, insisting it had ample funding and announcing plans to sell assets worth up to 10 billion euros.
After two days of steep slides in its share price, the banking and insurance group was forced to issue a statement assuring it had "a diversified funding base of more than 300 billion euros" (438 billion dollars) at its disposal.
The group, burnt by turmoil on the credit markets, also insisted that its "solvency is solid and well above the regulatory minimum."
Nevertheless, it said it had earmarked 10 assets both in and out of its main Benelux markets to be sold in order to raise between five and 10 billion euros but no new capital increase was planned.
"We are confident, the bank is working very well, insurance is working very well," chief executive Herman Verwilst insisted at an impromptu press conference, adding that clients "have nothing to fear."
After sliding nearly 13 percent in early trading in Brussels, Fortis shares were showing a loss of 8.68 percent at 5.963 euros following the surprise announcement -- down 67 percent since the start of the year.
In the wake of a recent flurry of market rumours about Fortis' liquidity, Verwilst said: "The stock price today does not reflect the value of our company."
Fortis plummetted more than 20 percent on Thursday despite denials of market rumours that it faced liquidity problems but the stock managed to finish the day with a loss of just over six percent.
Belgian authorities also scrambled to calm nerves with Finance Minister Didier Reynders appealing "for calm and responsibility from all market participants."
He also insisted that the group's customers should not worry about the situation, saying "as everywhere in Europe, we will not leave any client in Belgium in difficulty."
Earlier, a spokeswoman for the CBFA financial sector authority told AFP: "For the moment, we are following the issue very closely.
"When there are incidents on the market, we watch the transactions to see if there are abnormal things going on," she said.
In July, Fortis' then chief executive, Jean-Paul Votron, was forced to step down amid shareholder anger at his handling of problems arising partly from the US subprime home loan crisis and from its acquisition of assets from Dutch bank ABN Amro.
He also came under fierce fire from shareholders by announcing that Fortis would need a capital hike after earlier saying that it was not needed.
Despite Fortis' assurances Friday, some banking analysts said the group was looking increasingly vulnerable to a takeover.
"A takeover by ING (of Holland) or BNP Paribas (of France) is more and more possible," Dresdner Kleinwort analyst Jaap Meijer said, adding that BNP Paribas had already shown interest in Fortis in 1999.
Verwilst declined to comment on the possibility of a takeover.
Date created : 2008-09-26