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Fortis shares rise after capital hike, risks remain

Reuters - Saturday, June 28

By Gilbert Kreijger

AMSTERDAM, June 27 - Belgian-Dutch Fortis <FOR.AS> <FOR.BR> raised 1.5 billion euros from a heavily discounted share issue, spurring a partial recovery in its stock on Friday as doubts remained about its growth prospects.

The financial services group said in a statement late on Thursday that it had sold 150 million new shares at 10 euros a piece, a 21 percent discount to Wednesday's closing price at 12.65 euros, with institutional investors showing substantial demand.

"This is a deep discount. Investors are very sceptical about what they can expect from Fortis," said Petercam analyst Ton Gietman, citing uncertainties such as more writedowns on credit assets. The group had 43.3 billion euros in credit assets at end-March.

Fortis shares gained as much as 6.3 percent in early trade on Friday and were up 5.8 percent to 10.79 euros by 1012 GMT, outperforming a 1 percent fall in the DJ Stoxx European banks index <.SX7P>.

On Thursday, Fortis stock plunged 19.4 percent to its lowest point in more than five years after the company announced a package of measures, including the share issue, to shore up its finances by more than 8 billion euros.

"There were panic sales yesterday," said Theodoor Gilissen analyst Paul Beijsens who cut its price target on the stock to 15.50 euros from 21.50. He said there was potential for a recovery from current levels as risks have already been priced in.

Fortis said on Thursday it was forced to take what it called "exceptional measures" by tough market conditions as well as its purchase of parts of its former Dutch rival ABN AMRO, sealed just as the credit crisis hit last year.

It said it would skip this year's interim dividend, sell about 6 percent of new shares, dispose of 2 billion euros of non-core assets, sell and lease back real estate and pay its full-year dividend in shares to boost its solvency by 8.3 billion euros.

Fortis could find it difficult to sell assets due to falling markets, analysts said. They also cited risks as it integrates ABN AMRO operations, which it bought last year with Royal Bank of Scotland <RBS.L> and Spain's Santander <SAN.MC>.

Fortis shares trade at 4.6 times expected 2009 earnings per share, compared with 5.8 for Dutch financial services group ING <ING.AS> and 7.5 for Belgian peer KBC <KBC.BR> according to Reuters Estimates. (Additional reporting by Foo Yun Chee; Editing by Erica Billingham)

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