Now that European banks are imploding are we goiung to bail them out also?
Regulators Seek to Increase Confidence in Fortis (Update1)
By Jurjen van de Pol and Martijn van der Starre
Sept. 28 (Bloomberg) -- Belgian and Dutch central banks and regulators were discussing measures to restore confidence in Fortis, the financial-services company whose stock plunged 35 percent in Brussels trading last week.
``We are working on enhancing the confidence in the market of the Fortis share,'' Hein Lannoy, a spokesman for the Belgian financial regulator CBFA, said today by telephone. He declined to be more specific. The parties will hold a conference call and ``if necessary there will be a physical meeting,'' Lannoy said.
Brussels and Amsterdam-based Fortis needs more capital after spending 24 billion euros ($35 billion) on ABN Amro Holding NV assets last year just as the U.S. subprime-mortgage market started to collapse. Fortis tumbled a record 20 percent two days ago, when the company picked Filip Dierckx to replace Herman Verwilst as chief executive officer. The move was aimed at reassuring investors concerned that a plan to raise 8.3 billion euros would force Fortis to sell assets at knock-down prices.
``Fortis failed to restore confidence on its own and that can only be done now with the help of the regulatory institutions or rivals,'' said Corne van Zeijl, a senior portfolio manager at SNS Asset Management in Den Bosch, the Netherlands, who oversees about 750 million euros and owns Fortis shares.
The Dutch central bank governing board met late yesterday with Finance Minister Wouter Bos, Het Financieele Dagblad and news service ANP reported.
Takeover Talks Stall
``Bos is being informed meticulously by the Dutch central bank,'' ministry spokesman Jilles Heringa said. Heringa and Herman Lutke Schipholt, a spokesman for the Dutch central bank, declined to confirm the meeting.
Talks about a takeover of Fortis by ING Groep NV and BNP Paribas SA stalled late yesterday amid demands for state guarantees, De Standaard reported on its Web site, without saying where it got the information. The Sunday Times reported the Belgian central bank and regulator are preparing to bail out Fortis. The newspaper didn't say where it got the information.
Peter Jong, a spokesman for Amsterdam-based ING, and Jonathan Mullen, a spokesman for BNP Paribas in Paris, declined to comment. Wilfried Remans, a spokesman for Fortis, also declined to comment and referred to the company's statements on Sept. 26.
Fortis last week said it had earmarked for sale banking and insurance businesses that may be valued as high as 10 billion euros. The Belgian company said it won't sell assets at fire-sale prices and doesn't have an urgent need for funds.
Asset Sales
The financial-services company said on June 26 it would sell so-called non-core assets, notes and asset-backed debt to raise money. Fortis planned to part with 2 billion euros of assets this year and next. The lender also scrapped a 1.4 billion-euro dividend and sold 1.5 billion euros of shares to investors, including Ping An Insurance (Group) Co.
Verwilst and Dierckx appeared together at an impromptu press conference in Brussels on Sept. 26 to reassure investors about the capital-raising plan.
While the company may sell more assets than it earlier expected as it becomes harder to raise money by other means, the bank's financial position is ``solid,'' Verwilst said. Customer moves at its Benelux banking unit have remained limited to less than 3 percent of assets since the start of the year, Fortis said.
Funding Base
Fortis has about 3 billion euros of bonds maturing this year and needs to refinance an additional 7 billion euros next year, said Ivan Lathouders, an analyst at Banque Degroof SA in Brussels, in a report last week.
Fortis, formed in the 1990 merger of the Dutch insurance company NV Amev, Belgian insurer AG Group and the Dutch bank VSB, said last week it had a funding base of more than 300 billion euros from sources including retail and private deposits and institutional investors.
Fortis has about 5.2 million retail customers. It employs about 85,000 people and operates 2,500 retail branches including ABN Amro.
The company reported a 49 percent decline in second-quarter profit on credit-related writedowns on Aug. 4.
The banking business's core Tier I ratio, which measures a bank's ability to absorb losses, was 7.4 percent at the end of June compared with Fortis's own target of 6 percent.
The company's structured credit portfolio, which includes collateralized debt obligations and U.S. mortgage-backed securities, amounted to 41.7 billion euros at the end of June. Fortis said Aug. 4 the pretax impact of the credit market turmoil on its earnings was 918 million euros in the first half.
Belgian and Dutch regulators restricted short-selling in the shares and derivatives of financial companies for three months last week to curtail a market rout. The rules require investors betting on a decline in stock prices to arrange to borrow the shares before selling them. The Belgian and Dutch regulators also requested investors to refrain from lending the securities.
To contact the reporters on this story: Jurjen van de Pol in Amsterdam jvandepol@bloomberg.netMartijn van der Starre in Amsterdam at vanderstarre@bloomberg.net
Last Updated: September 28, 2008 09:50 EDT
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U.K. to Protect Bradford & Bingley; BBC Reports Nationalization
By Poppy Trowbridge and Jon Menon
Sept. 28 (Bloomberg) -- The U.K. government will act to protect Bradford & Bingley Plc customers, Chief Whip Geoff Hoon said after the British Broadcasting Corp. reported the country's biggest lender to landlords will be taken over by the state.
Prime Minister Gordon Brown and Chancellor of the Exchequer Alistair Darling ``have worked right through this weekend to sort out the problems we're facing,'' Hoon, a parliamentary officer, told Sky News today. ``I'm confident that in due course there will be a statement from the Treasury about Bradford & Bingley. We will act to ensure that the interests of depositors are properly protected.''
The government will take control of Bradford & Bingley, whose shares have tumbled 93 percent this year, the BBC reported on its Web site, without saying where it got the information. The Treasury and Financial Services Authority will negotiate with banks interested in buying parts of the Bingley, England-based bank, the BBC said. Possible buyers include Banco Santander SA, HSBC Holdings Plc and Barclays Plc, the report said.
``It was inevitable that nationalization has been decided as the risk has been too great,'' said Howard Wheeldon, a senior strategist at BGC Partners in London. ``It's a very sensible solution.''
A spokesman for the U.K. Treasury said discussions about Bradford & Bingley are ``ongoing.'' An announcement about the company's future will be made before markets open tomorrow, he said. He declined to be identified by name, in accordance with departmental policy
Northern Rock, HBOS
A voicemail message left on the cellphone of Bradford & Bingley spokesman Tony McGarahan today wasn't immediately answered. Late yesterday, he said the company was working with regulators ``to clarify the bank's future.''
The nationalization of Britain's biggest lender to landlords would follow Northern Rock Plc's in February and a government- assisted takeover of HBOS Plc, as banks struggle with funding amid the seizure of credit markets. U.S. lawmakers today said they made a breakthrough in talks on a $700 billion plan to buy assets from financial companies affected by a record number of home foreclosures, in an effort to revive credit markets.
Nationalization is ``a necessary move to maintain stability,'' said Mamoun Tazi, an analyst at MF Global Securities Ltd in London. ``Bradford & Bingley is unable to fund itself in the current environment because there's not enough money being lent between banks.''
Landlords
Almost half of Bradford & Bingley's 42 billion pounds ($77 billion) of loans in the first half were to landlords, bringing its share of the U.K. buy-to-let market to 19 percent. About 17 percent of the bank's loans go to customers who certify their own income on application and typically have a higher level of default than standard borrowers. Bad debts in the first half jumped to 74.6 million pounds, from 5.3 million pounds last year.
Bradford & Bingley's shares fell as the credit crunch made it impossible to find funds for new loans and day-to-day operation.
Deposits at the bank amount to only slightly more than half of loans outstanding, which means it depends on capital markets for about half of its financing. Bradford & Bingley was forced to curtail new business when those markets dried up and the cost of inter-bank borrowing soared causing banks to hoard cash following the collapse of the U.S. subprime mortgage-market.
David Cameron, leader of the opposition Conservatives, interviewed on the BBC's Andrew Marr television show today, refused to be drawn on whether his party would oppose nationalization, as it did earlier this year in the case of Northern Rock. ``We will look at it like a responsible opposition,'' he said. ``What matters most of all is safeguarding the depositors.''
Housing Slump
``People will wonder why on earth the British taxpayer is being asked by Gordon Brown to bear the full risk,'' Conservative Treasury spokesman George Osborne told Sky News. Vince Cable, treasury spokesman of the Liberal Democrats, told Sky that nationalization was the ``least worst option.''
Bradford & Bingley has been hurt by the worst British housing slump in 30 years, which has seen house prices decline for a fourth month in September. U.K. mortgage approvals fell to the lowest level in at least a decade in August, according to the British Bankers' Association.
The sliding housing market has pushed up Bradford & Bingley's late mortgage payments to more than 2 percent of all loans. That compares with the U.K. average of 0.5 percent, according to the Council of Mortgage Lenders.
Share Price
The lender was formed in 1964 as a result of the merger of the Bradford Equitable Building Society and the Bingley Building Society, both of which were established in 1851. It first sold shares on the London Stock Exchange in December 2000.
Bradford & Bingley, worth 3.2 billion pounds in March 2006, closed at 20 pence on Sept. 26 in London trading, valuing the bank at 256 million pounds. That's less than half the price it asked shareholder to pay for the 828 million shares it sold at 55 pence apiece in an August rights offering that was snubbed by almost three quarters of its investors.
The U.K. government took control of Newcastle-based lender Northern Rock after it was bailed out by the central bank last September. HBOS agreed to be bought by Lloyds TSB Group Plc for 11 billion pounds on Sept. 17, assisted by a government waiver of competition rules.
In the U.S., officials seized Washington Mutual Inc., the country's biggest failed bank, and sold its assets and branches on Sept. 26 to New York-based JPMorgan Chase & Co.
To contact the reporter on this story: Jon Menon in London at jmenon1@bloomberg.netPoppy Trowbridge in London at ptrowbridge@bloomberg.net
Last Updated: September 28, 2008 08:07 EDT
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