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Shares in Fortis fell sharply on concerns the Belgian-Dutch financial services group might have to raise more funds and after the Dutch market regulator said it was looking into the company's funding plan.
Fortis on Tuesday denied market rumors that customers were withdrawing funds en masse but declined to comment on talk the group might have to raise even more capital after it angered investors with a surprise funding plan last month.
The AFM regulator said it was looking into the package worth 8.3 billion euros ($13.2 billion) -- which includes Fortis issuing new shares and scrapping its interim dividend -- that pushed its shares down sharply and led to the exit of the chief executive.
Shares in Fortis were down 11.2 percent at 8.45 euros on the Belgian exchange, the biggest decliner on a 3.9 percent weaker DJ Stoxx European Banks index, already hurt by growing concern about exposure to U.S. mortgage lenders.
"Sentiment is very black," one London-based trader said.
Fortis shares have lost about 55 percent this year, compared with a 40 percent decline of the index.
Forced to bolster its finances due to the credit crisis, like many global banks, Fortis has also had to raise funds to pay for its 24 billion euro purchase of parts of former Dutch rival ABN Amro, sealed just as the global storm hit banks last year.
Investors have accused the company of misleading the market by maintaining there was nothing wrong and then announcing the surprise solvency plan that prompted the ouster of Chief Executive Jean-Paul Votron last Friday.
Investors Surprised
The AFM regulator said it was looking into whether investors had been kept well enough informed but had not yet launched an official investigation, a spokeswoman said.
"This is a big event that came as a surprise to investors. You have to carefully study this," AFM Chairman Hans Hoogervorst said in a radio interview.
A Fortis spokesman said it had not yet heard from the AFM but the group was willing to cooperate with any investigation.
Investors are speculating that Fortis might need to raise more capital and that its customers are shifting to other banks, Theodoor Gilissen analyst Paul Beijsens said.
"Fortis needs two things: confidence from its shareholders and confidence from its clients. They are losing this more and more with these kind of share slides," said Beijsens.
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He expected Fortis to issue a statement this week to reassure the market.
Asset manager Fred Huibers at Dutch Haags Effectenkantoor said: "If markets remain bad they will have to write down on assets, weighing on the balance sheet."
Huibers team manages about 150 million euros in assets, including Fortis shares and options.
Het Financieele Dagblad reported on Tuesday that board chairman Maurice Lippens might also have to go.
The Dutch business daily quoted unnamed bankers as saying Lippens would have to leave if Fortis was forced to raise more capital.
Dutch shareholder group VEB, Deminor and Belgian consumer group Test Aankoop have asked for clarification of the decision-making process at Fortis, which said before the solvency plan announcement that its capital position was good.
Belgian consumer claims group Delor wants to sue Fortis, accusing it of stock market manipulation, it said last week.
Fortis said it had to take what it called "exceptional measures" due to tough market conditions and the ABN buy.
Fortis, Royal Bank of Scotland and Spain's Santander paid 70 billion euros for ABN last year.
The enlarged Fortis is now worth less than the 24 billion euros it paid for its parts of ABN.
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