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Belgian, French PMs Say Fortis Remains Viable

Belgian and French leaders said Thursday that bailed-out Fortis bank has a future despite shareholder rejection of the sale of the troubled lender to France's BNP Paribas.

Belgian Premier Herman Van Rompuy said the government would, for the time being, remain the majority owner of the bank but was studying what steps it could take following the rejection of the takeover.

"We believe that this bank remains viable with the ownership of the Belgian state," Van Rompuy said after talks with French Prime Minister Francois Fillon, adding the bank's operations "remain healthy."

"Of course we would have preferred another solution, but the shareholders have spoken," Van Rompuy added.

Fillon said his government was not directly involved in Belgian government attempts to sell off large parts of Fortis to BNP Paribas but agreed Belgium had "taken all the necessary decisions to assure the viability" of Fortis amid the global financial crisis.

Fortis shares plunged some 20 percent in early trading and stood at euro1.05 ($1.34) per share at mid-afternoon. They traded at around euro18 ($23) a year ago, but their value has dropped 93 percent since then.

Furious that their stakes have become nearly worthless since Fortis sought government help last September, Fortis shareholders have demanded that Belgium and BNP Paribas re-negotiate the deal.

The bank ran into trouble and needed to be rescued during the credit crunch last fall. Because of it, Fortis could no longer pay for its 2007 takeover of ABN Amro's Dutch retail banking armor cover its heavy investments in high-risk derivatives.

Van Rompuy faced a grilling from opposition lawmakers in the Belgian parliament over the apparent collapse of the Fortis takeover.

Opposition parties criticized the government for failing to secure a stable future for the bank, its workers and clients.

Van Rompuy said he "stood ready" for new talks with both shareholders and BNP Paribas to secure Fortis' future.

BNP Paribas offered only a cool reaction to the shareholder revolt and gave little indication what it would do next.

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It reiterated that its original October offer to buy the bank under a deal with the Belgian government "remains valid until the 28th February 2009."

Fortis took out large newspaper adverts on Thursday to reassure account holders and other customers they were open for business as usual.

Once the largest bank in Belgium and the Netherlands, Fortis was carved up by government officials who failed to consult shareholders about the fire sale of its Belgian banking and insurance operations to BNP Paribas and the Dutch state takeover of its Dutch arm.

That left Fortis shareholders with stakes in an almost empty shell — a tiny international insurer and a large pile of toxic debt. They won a legal challenge in December that called for shareholders to vote on those decisions.

In an effort to woo shareholders toward a "Yes" vote, the Belgian government sweetened the terms of its bailout last month. It returned most of the Belgian insurance business to the Fortis holding company and took on more of the toxic credit derivatives.