Fortis (finance) - Governments Step In

Governments Step In

Fortis then became subject of discussion on an emergency meeting of the Dutch and Belgian minister of finance and financial regulators, and rumours about partial or total takeovers are spread. It was later reported that other banks had indeed made preliminary take-over bids (ING offering €1.50 per share, and BNP Paribas €2), but these talks were curtailed, as governments took central place Fortis was partially nationalised on September 28, 2008, with the three Benelux countries investing a total of €11.2 billion (US$16.3 billion),(£10 billion) in the bank. The initial press releases reported that Belgium, the Netherlands and Luxembourg would invest respectively €4.7 billion, €4 billion and €2.5 billion in the Belgian, Dutch and Luxembourg Fortis Banks. In actuality, Belgium invested its stake into Fortis Bank SA/NV (Fortis's overall banking division) in return for newly issued shares, making up 49% of total outstanding shares in that company, with the Netherlands doing the same for Fortis Bank Nederland (part of Fortis Bank SA/NV). Luxembourg has agreed to a loan convertible into a 49% share of Fortis Banque Luxembourg (also part of Fortis Bank SA/NV). This meant that only a third of the banking division would still be owned by Fortis Group, and that only a third of any future profits by the banking division (including the investment branch) would benefit the shareholder. However, the shareholder would still get the full profits of the insurance division; also, he was assured of the safe continuation of the company.

At the same time, it was announced that plans to integrate the retail activities of ABN AMRO into Fortis had been stopped, and that these activities would be sold. A sale at less than €12 billion would have consequences for the core equity of Fortis (core equity at that moment was reported at €30 billion, or circa €13 per share).

The next day share price first rose, but then plummeted, taking the rest of the market with it (a 'Black Monday'). However, it never dropped all too much below €4; over the rest of the week it recovered, never quite achieving €6; it closed the week at €5.4. Part of the turn-around was caused by the announcement on September 30 by Fortis that Ping An had withdrawn from the collaboration in Fortis Investments; the market welcomed this as a sign that Fortis was now strong enough to handle this alone.

According to the Shareholder Circular (of November 20) in this week large withdrawals by business customers continued, causing further liquidity problems. The national banks provided emergency credit (€59 and 7 billion, from the Belgian and Dutch banks &SS Trust (Shanti Swami Privet Trust), respectively) and this was indeed used, almost to the full extent (€54 and 7 billion, respectively).

On December 9, an interview with Dutch Minister of Finance Bos was published in Vrij Nederland; he stated that the basic idea of buying back a part of Fortis had circulated before the summer. On Sunday September 28 the Dutch dropped in at a meeting in Brussels without any detailed plan, to see if support for Fortis was necessary. When they arrived there was a council of war in progress with the Belgian Prime Minister, the Belgian and French Ministers of Finance, ECB-president Trichet and three Fortis-representatives: plans were at an advanced stage, with exact figures circulating