Belgian-Dutch bank Fortis denied on Friday it faced a liquidity crisis and pledged to speed up asset sales as it became the latest focus of investor concern about Europe's fragile financial sector.
As its shares fell for the fifth straight day in feverish trade, Fortis said it had a funding base of 300 billion euros and solid solvency ratios and was in talks to raise 5 to 10 billion euros ($7.3-$14.6 billion) from the sale of a broader range of assets than previously intended.
Fortis also moved to calm depositors, assuring them their money was safe as it said withdrawals by account holders represented less than 3 percent of its total Benelux retail and private banking customers' assets so far this year.
A "flabbergasted" Herman Verwilst, interim chief executive, told a hastily convened news conference the group was not in danger of bankruptcy, and that its businesses were worth more than its market value which, having sunk to a 14-year low on Thursday, is currently around 14 billion euros.
That is little more than half the 24 billion euros it paid for its part of Dutch rival ABN AMRO, which it bought last year with Royal Bank of Scotland and Spain's Santander.
Traders said on Friday they were worried about the liquidity and funding of the bank. Broker Dresdner Kleinwort said there was an increasing likelihood that it would be taken over by BNP Paribas or ING, who both declined to comment.
With details of the accelerated disposals programme yet to emerge, sector analysts said assets Fortis was likely to be looking to sell might include UK asset manager Artemis and fund administrator Prime Fund Solutions, as well as insurance joint ventures in Portugal and Asia and its Turkish banking business.
The Dutch and Belgian governments discussed the crisis.
Belgian Prime Minister Yves Leterme called for calm and his Finance Minister Didier Reynders said no bank clients would be "left in the cold".
Dutch central bank (DNB) president and European Central Bank governing council member Nout Wellink cancelled plans to speak at a conference in Chicago and was returning to the Netherlands, but a DNB official did not say why.
Fortis reported 94 billion euros in customer deposits at the end of June. Depositors, protected under law on sums up to 20,000 euros in Belgium and the Netherlands, would be reimbursed under all circumstances, Verwilst said.
NERVOUS MARKETS
Fortis's latest woes began in June when it announced a badly received 8.3 billion euro capital programme, including a 1.5 billion euro share issue to shore up its capital.
Since it had already raised 3.1 billion euros of that amount, Fortis is looking for a further 5.2 billion euros, Verwilst said. If that amount is reached through asset sales, Fortis may not seek hybrid funding or adopt other steps.
At the end of June Fortis reported a core tier 1 equity ratio of 7.4 percent under Basel I guidelines, well above its target. That ratio is expected to dip below 6 percent — considered a key threshold — as Fortis digests ABN AMRO but recover after it raises funds and integrates the business.
Europe's money markets remained paralysed on Friday, despite increased liquidity injections from central banks around the world, as U.S. political wrangling appeared to stall the passing of a $700 billion bailout plan.
Liquidity concerns pushed credit default swaps (CDS) on Fortis' five-year senior debt 163 basis points wider to 458 basis points on Friday, according to Markit data.
Fortis shares were down 12.8 percent at 5.69 euros at 1345 GMT after touching a 14-year low of 5.5 euros on Thursday. Shares in Belgian rival Dexia were down 6.8 percent.
"I think it's retail investors now heading for the exit," a Brussels-based trader said. "It's irrational behaviour."
SNS Asset Management's Corne van Zeijl, who manages about 740 million euros, said that he was buying Fortis shares.
"I think this is a risk worth taking because there is sufficient potential for recovery," he said.
Belgian financial authorities said they were refraining from taking any action on Fortis. The Dutch market regulator AFM declined to comment specifically on Fortis, but a spokeswoman said: "We look very closely at movements like that."
In Asia, Fortis partner and China's second-biggest insurer, Ping An Insurance, saw its shares dive 10 percent on concerns over Fortis. Ping An owns 5 percent of Fortis.
The recent financial crisis, which has seen the collapse or failure of several U.S. banks, has raised funding costs, hurting Fortis' plan to pay for its 24 billion euros acquisition of Dutch bank ABN AMRO's local activities last year.
SEEKING ASSET BUYERS
Fortis sought to reassure investors on the progress of asset sales, saying in a statement that 10 deals had been earmarked. "So far on every file concrete interest of potential buyers is indicated and confidentiality agreements have been signed."
ING analyst Albert Ploegh said Fortis needed to be more more specific.
Fortis shares had dropped on Thursday on denied market talk that the Dutch Central Bank (DNB) had asked Dutch rival Rabobank to support its liquidity position.
