Fortis announces profits fall of 40%

| August 4, 2008

Fortis bank has today warned it is facing a tough time after it posted a 41% fall in first-half profits.

The Belgian-Dutch bank, which last year joined with the Royal Bank of Scotland to buy ABN Amro, said credit market turbulence and rising bad loan charges was responsible for the fall in profits.

Profits for the first half of the year fell by 41% to €1.6 billion (£1.2 billion, $2.4 billion) compared with the same period last year, while second quarter profits nearly halved to €830 million.

Last month, the bank parted ways with its chief executive, Jean-Paul Votron, following criticism of his handling of problems linked to the credit crisis.

Mr Votron was criticised by investors after raising funds of €8.3 billion via a rights issue to shore up its balance sheet.

Fortis stated that its performance for the first six months of the year must be seen in the context of a very strong performance in the same period of 2007.

The bank has a core funding of €24.6 billion and has a Tier one capital ratio of 7.4% (a measure of a bank’s financial strength) and said its capital position ‘remains sound‘.

Herman Verwilst, who replaced Jean-Paul Votron, said costs were well controlled but we are aware that the current environment is becoming challenging and he added that the bank continued to be impacted by the turmoil in the credit markets.

Profits from the group’s banking business fell by 24% compared with a year ago, however, its insurance arm performed better with returns rising by 8%.


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