Fortis Profit Falls 50%, but Tops Forecast

Belgian-Dutch financial services group Fortis reported a better than expected quarterly net profit on Monday, which halved from a year earlier on writedowns that offset one-off gains.

Map of Europe
Map of Europe

Net profit was 830 million euros ($1.3 billion) for the second quarter and 1.64 billion for the first half, compared with a year-earlier quarterly profit of 1.6 billion and 2.8 billion in the first half.

Analysts polled by Reuters had, on average, expected a second quarter net profit of 754 million euros and first half profit of 1.6 billion.

But reflecting uncertainty over the degree of potential writedowns, analysts forecasts ranged widely. The 13 analysts polled by Reuters gave estimates in a range between 524 million to 1.06 billion for the quarter.

Writedowns related to credit market turmoil totalled 362 million euros, Fortis said.

"Fortis continued to be impacted by the credit market turmoil," Chief Executive Herman Verwilst said in a statement.

Fortis's latest woes began in late June, when it announced a plan to sell shares and suspend its interim dividend payment to shore up its finances. Chief Executive Jean-Paul Votron was replaced by his deputy and began searching for a long-term successor.

Last Friday Fortis announced a shake-up of top management, with Chief Financial Officer Gilbert Mittler replaced by Lars Machenil. The group also said it would hold shareholder meetings to communicate its plans and strategy.

"I consider it crucial to strengthen the communication with our stakeholders and will update the market in full transparency on progress made," Verwilst said.

Fortis shares have fallen 62 percent in the past year, compared with a 40 percent drop in the DJ Stoxx Banking Index. Fortis is trading at 5.4 times projected 2008 earnings, among the lowest in the sector. European banks are trading at an average price-earnings multiple of 8.2.