Fortis scraps dividend, issues new shares

Financial services group Fortis said on Thursday it is to take measures worth more than €8bn to shore up its finances and help it ‘navigate through the current challenging market circumstances’.

The steps include issuing €1.5bn-worth of new shares and saving €1.3bn by not paying an interim dividend this year.
Fortis said the decision follows from the forced sale of some of ABN Amro’s commercial banking activities and the acquisition of the remaining 51% of a joint venture with Delta Lloyd.
‘We believe is a prudent approach to take in the current environment,’ said Fortis CEO Jean-Paul Votron. ‘We believe that 2008 will be a difficult year for our industry and we do not expect an improvement in the economic environment soon.’
Shareholders lobby group VEB said the news was extremely disappointing and showed that Votron’s bonus for the ABN Amro takeover was ‘premature and unjust’. Votron picked up €2.5m for his role in the takeover and his salary was raised by 73% to €1.3m.
Fortis has already raised extra capital by selling a 50% stake in its asset management division and a 5% stake in itself to Chinese insurance company Ping An for €2bn. In March, Fortis said that its 2007 fourth-quarter profits had halved following a €1.5bn write-down due to the sub-prime crisis.
‘After an initial relief that the ‘news is out’ and Fortis has bitten the bullet, we think that doubts will come back soon,’ news agency Reuters quoted Petercam analyst Ton Gietman as saying. Further write-downs might be necessary, he said.
The Telegraaf reports that Standard & Poor’s is considering lowering Fortis’ credit rating.

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