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13 Feb 2009
Fortis Bank Luxembourg's (BGL) ratings are also placed on review with direction uncertain
Paris, February 13, 2009 -- Moody's Investors Service today placed the C- bank financial strength
rating (BFSR) and A1 long-term debt and deposit ratings of Fortis
Bank SA/NV (Fortis Bank) on review with direction uncertain. Moody's
also placed the C- BFSR and A1 long-term debt and deposit
ratings of Fortis Bank Luxembourg (now renamed BGL) on review with direction
uncertain. All these ratings were previously on review for possible
upgrade. The short-term debt and deposit ratings of both
entities were affirmed at Prime-1.
Moody's rating actions follow the decision of Fortis' shareholders
to reject the proposed sale of 50% plus one share of Fortis Bank
to the Belgian State, and the subsequent acquisition by BNP Paribas
(Aa1 /B/negative outlook) (BNPP) of Fortis Bank and BGL. As a result
of this vote, the current stake of 99.93% in Fortis
Bank held by the Belgian State could be contested even though the government
effectively assumed ownership in October 2008. Moody's said
that, although legal disputes cannot be ruled out, it considers
a potential ultimate reversal of a majority state ownership as the least
likely outcome though the review with direction uncertain reflects the
possibility thereof. On the other hand, the shareholder vote
implies that the "protocole d'accord" signed between
BNPP, the Belgian State and Fortis SA/NV on 10 October 2008 remains
valid until 28 February 2009. According to the terms of this agreement,
BNPP would acquire 75% of Fortis Bank and 67% of BGL from
the Belgian State.
Moody's decision to place the ratings on review with direction uncertain
reflects the uncertainties surrounding the future ownership of the banks.
While the likelihood of Fortis Bank being acquired by BNPP has now decreased,
completion of the transaction remains a possibility, and would have
a positive impact on the bank's intrinsic quality (see Moody's
press release published on 7 October 2008). Moody's is,
however, concerned that a further delay in completing the transaction
or even a termination thereof could have negative implications for the
Further, Moody's cautions that Fortis Bank's profitability
in 2008 was adversely affected by substantial impairments linked to its
previous acquisition of a stake in ABN AMRO and on its structured credit
portfolio. However, additional capital provided notably by
the sales proceeds of its former Dutch activities has enabled the bank
to absorb losses and should maintain the Tier 1 ratio above 10%
as at year-end 2008. The rating agency also believes that
the bank has suffered from the deterioration of its franchise in recent
months -- as evidenced most prominently by significant retail
deposit outflows -- and may be challenged to restore its
market position and level of profitability as a stand-alone entity.
BGL's BFSR had been aligned to that of its parent Fortis Bank to
reflect the high degree of integration within Fortis Bank Group and therefore
the possible contagion from events affecting its parent.
The review of both entities' BFSRs will focus on their ability to:
1) Absorb potential further losses stemming from the sizeable structured
credit portfolio. Although the most problematic assets of this
portfolio will be transferred to an SPV - the transfer will proceed
irrespective of the completion of the acquisition by BNPP -- Fortis
Bank's exposure to structured credit will remain high (EUR23.9
billion after the transfer to the SPV).
2) Maintain adequate solvency levels despite potential losses.
3) Restore their franchise value and market positions as well as sustainable
levels of profitability going forward -- potentially also helped
by the resolution of the acquisition by BNPP - while refocusing
on their retail banking and private banking core franchises and reducing
some of their significant merchant bank activities.
The review with direction uncertain on the long-term debt and deposit
ratings reflects the fact that either an upgrade or a downgrade of the
BFSR or the resolution of the take-over by the Belgian state,
the closure of the acquisition by BNPP or any other change in the ownership
of both banks could impact these ratings.
The previous rating action was taken on 7 October 2008, when Moody's
affirmed the A1 long-term ratings and the C- BFSRs of Fortis
Bank SA/NV and Fortis Banque Luxembourg, affirmed the Prime-1
short-term ratings and placed the ratings on review for possible
The principal methodology used in rating Fortis Bank SA/NV and Fortis
Banque Luxembourg (BGL) were "Bank Financial Strength Ratings: Global
Methodology" and "Incorporation of Joint-Default Analysis into
Moody's Bank Ratings: A Refined Methodology", which can be
found at www.moodys.com in the Credit Policy and Methodologies
directory, in the Ratings Methodologies subdirectory. Other
methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Credit Policy and Methodologies
Headquartered in Brussels, Fortis Bank had total assets of EUR876,063
billion and reported shareholders' equity (including minority interest)
of EUR31,650 billion as of 30 June 2008.
Vice President - Senior Analyst
Financial Institutions Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's places Fortis Bank SA/NV's ratings on review with direction uncertain
Senior Vice President
Financial Institutions Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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