Fortis hit by subprime exposure but overall outlook positive

28-01-2008

Fortis hit by subprime exposure but overall outlook positive
The Belgian bank Fortis has announced that subprime exposure could cost it €1 billion (£740 million) in full-year profits.

Many banks around the world will be seeking over £70 billion on US subprime mortgage exposure, but Fortis has said that its finances remained sound despite the "stringent" conditions.

In a statement the bank and insurer said that net profit before divestments may be lowered to €3 billion from €4 billion, depending on the valuation model used.

A report in Belgian daily De Standaard said that Fortis would be writing off nearly €2 billion (£1.49 billion).

"Since January 2008 a number of peers applied substantially higher coverage ratios," the company's statement said.

"If these scenarios were to be applied to the closing of the accounts of 2008 - which would be subject to approval by the board of 6 March 2008 - the net profit of Fortis is estimated to be around €3 billion."

The company also announced that it would be keeping its dividend unchanged and that its capital and solvency positions remained tenable despite the subprime writedowns.

The bank said that end-of-year solvency was "well above" eight per cent.

It also said that it would not be issuing new shares following its acquisition of Dutch bank ABN AMRO and that it would be presenting its full-year results in early March.

After shares fell more than ten per cent last Friday, the profit warning has been reassuring to investors, with shares in Fortis up nearly seven per cent on Euronext Brussels and Amsterdam in early trading today.

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