Fortis's banks chief executive since 2004, Jean-Paul Votron, is in trouble. Deep,deep do-doo. (shares down 4% @ €9.94 now they fell 20% on Thursday to €10.20 see chart right)
He has announced major measures for raising and conserving capital - he announced issue of €1.5 billion, (US $2.3 billion) of new shares at €10, plus up to €2 billion of nondilutive preference shares. On top of this the 2008 dividend will not be paid saving €1.3 billion.
Other noncore assets and sell and lease back real estate investments wiil also be sold off.
This follows selling a 5 % stake in the group and half its asset management business to China's Ping An Insurance.
On top of this they need funding for the €24 billion acquisition and integration of parts of its former Dutch rival ABN AMRO.
As a result Royal Bank of Scotland Group Plc and Fortis (Bank of the Year 2007) , partners in last year's takeover of ABN Amro Holding NV, had their credit ratings lowered by Moody's Investors Service . RBS the UK's 2nd largest Bank (and one of Lord Patel's bankers) financial-strength rating was cut to B from B+ and its senior debt rating to Aa2 from Aa1. They said that RBS's writedowns were prudent but still has ``large credit exposures'' and may have to take more losses.
Moody's reduced Fortis's financial strength rating to C+ from B-. Moody's said asset sales and a planned acquisition will erode capital. It also lowered its long-term debt and deposits ratings on Fortis to Aa3 from Aa2.
CEO Votron said he needs ``exceptional measures'' because the business environment won't improve anytime soon. Fortis lost more than half its market value since it agreed to spend €24 billion on ABN Amro.
Forced under Europe's antitrust rules to divest parts of the ABN Amro empire, Fortis claims this will yield €300 million less than their (book) net asset value. Fortis also will have to set aside capital to cover credit risk on €10 billion of the unit's assets.
This contrasts with remarks in May by Votron that they had "highly resilient results" with net income down 31% year on year. In March he had called Fortis a "well oiled machine". In April Merrill Lynch who were involved in the ABN Amro take over told clients Fortis was a European stock that would rise in value. Brokers talk about a "U tirn".
The market has been spooked by the reported remarks on Monday of Fortis chairman Maurice Lippens (on Board since 1981) “We have been saved just in time. The situation in the US is much worse than we thought”, Fortis expects he said," ..bankruptcies amongst 6000 American banks which have a small coverage currently. But also Citigroup, General Motors, there is starting a complete meltdown in the US”
Fortis verwacht faillissementen onder 6000 Amerikaanse banken die nu weinig dekking hebben. „Maar ook Citigroup, General Motors, er begint een complete meltdown in de VS.”) der Telegraf
Wall Street Journal say Globally, banks have raised US$300Bn in fresh capital to offset US$400MN to date writedowns on their ravaged Balance Sheets.... see Citigroup share price ...heavy selling on opening evry day for 5 days.....
See also 18th May 2005 GM makes you sick
Taster extract .... "So what have GM been doing to increase fuel efficiency? Well fleet performance of GM cars has gone from 27.8 miles per US gallon to 28.8 mpg in the last 5 years and for light trucks 20.7 mpg to 21.2 (which includes a notional “E35 credit” for ethanol) says the Company 2004 Corporate Responsibility report. It explains “since 1990, new vehicle fuel economy has been relatively constant as consumers, reflecting increased disposable income and relatively low fuel prices, have not emphasized vehicles with high fuel economy”.
That’s it folks, it’s down to the consumers, faced with refinery shutdowns, declining oil resource, increasing oil imports from less stable political zones we did nothing. The dollar dives, the imports soar – and do you know, it’s the consumers fault – those wacky guys over at Toyota with their hybrids (sales over 500,000 worldwide as they lead the technology) ***and customer queues sneaking round the block, well, maybe they just got lucky. "
*** now over 1 Million
"US manufacturing industry has failed to understand and react to a rapidly changing world. Emboldened by the strident, pre-emptive, transformational world of the Bush imperialist gang, exporting by force of arms and bribery their distorted vision of democracy, their own has been disembowelled.
Black Monday II coming soon at a Stock Market near you."