FORTIS, THE Belgian financial services group that is a partner with An Post in Irish banking joint venture Postbank, reported a halving of its net profit in the three months to the end of June, blaming the credit market turmoil.
Fortis, which has replaced senior management and promised better communication with shareholders after surprising investors with an emergency solvency plan in June, reported a net profit of €830 million ($1.3 billion) for the three months, compared with €1.6 billion a year earlier. Net profit for the first six months of the year fell to €1.6 billion from €2.8 billion last year.
Credit crunch-related writedowns totalled €362 million in the second quarter, Fortis said, adding that its structured credit portfolio stood at €41.7 billion at the end of June, down €1.6 billion from the end of the first quarter.
"The environment is becoming more difficult on different fronts," chief executive Herman Verwilst said. Analysts had expected a second-quarter net profit of €754 million, but forecasts ranged widely, reflecting uncertainty over the degree of possible writedowns.
Fortis's latest woes began in June, when it announced a plan for a cash call to raise €1.5 billion and suspend its interim dividend to shore up finances. This sparked a massive fall in its share price.
Chief executive Jean-Paul Votron was replaced by his deputy, Mr Verwilst, last month amid shareholder anger over his handling of problems relating to the credit crisis. Fortis announced a further shake-up of top management last Friday, with chief financial officer Gilbert Mittler being replaced.
The group said it would hold shareholder meetings to communicate its plans and strategy.
Fortis shares have fallen 62 per cent in the past year, compared with a 40 per cent drop in the DJ Stoxx Banking Index.
The company is trading at 5.4 times projected 2008 earnings, among the lowest in the sector.
- (Bloomberg)
