Fortis First-Quarter Net Profit Falls 12%

Bank and insurance company Fortis said Friday net profit fell 12% in the first-quarter as profits at its banking division declined.

The Belgian-Dutch financial group didn't mention its attempt to buy the Dutch operations of ABN Amro as part of a consortium of three banks led by Royal Bank of Scotland .

Net profit was 1.17 billion euros ($1.58 billion), down from 1.33 billion euros a year earlier.

At the banking arm, earnings declined 13% to 903 million euros ($1.22 billion). Fortis said the result was "almost entirely" due to a one-time gain of 120 million euros it booked in the first quarter of 2006 after reassessing the value of an investment.

Insurance profits gained 4% to 352 million euros ($477 million). That reflected strong gains in Fortis's life insurance business, which offset 86 million euros ($117 million) in damage claims after a major storm hit northern Europe in January.

Fortis and its partners in the RBS consortium are attempting to outbid a friendly offer for ABN Amro from Barclays with a bid worth about 69.9 billion euros ($94.7 billion), which would be the largest takeover in the history of the financial industry.

Fortis' shares have consequently underperformed the market by around 7% over the past month due to worries it may be paying too much.

Fortis has not presented any information on how it would finance its share of the transaction - estimated at 20 billion euros ($27 billion) - nearly half of Fortis's current market value.

Still, it's not clear how regulators would view the merger of ABN with Fortis.

In addition, though Fortis has dual headquarters in Utrecht and Brussels, it is seen in the Netherlands as having Belgian roots and nationalist rivalries may come into play. Dutch labor unions say an ABN-Fortis merger would lead to the loss of 11,000 jobs in the Netherlands as they close overlapping branch offices.