Fortis faces cut-price ABN sale after ING quits

LONDON (Reuters) - Fortis NV (FOR.BR) may get less than a third of the price it paid for the ABN AMRO assets it bought less than a year ago after a plunge in bank valuations and the withdrawal of the front-runner to buy the unit, analysts said.

ING Groep NV (ING.AS) had been expected to buy ABN's Dutch banking assets, according to people familiar with the matter, but the Dutch banking and insurance firm said late on Monday it had decided not to make an offer.

"ING has examined the situation closely and carefully," it said in a statement. It remained disciplined on deals "especially in the current extraordinary market circumstances" and said a deal "would not meet its financial requirements."

ING's shares tumbled 18 percent on Monday as financial markets were battered by fears about the financial health of banks around the world, potentially swaying its decision to retreat. Its withdrawal leaves no obvious buyer.

Any buyer was already expected to pay far less than the 24 billion euros ($35 billion) put up by Fortis.

Jaap Meijer, an analyst at Dresdner, said earlier on Monday that ING was the most likely buyer, but would only pay about 7 billion euros.

Analysts at Cazenove estimated the business would fetch about 10 billion euros.

Fortis said any sale below its purchase price will result in an impairment and any sale below 12 billion euros would hurt its core equity.

The sale of the business bought just 11 months ago was announced alongside a partial nationalization of Fortis by the governments of Belgium, Netherlands and Luxembourg.

The prospect of a difficult sale does not affect the capital of Fortis' partners in the consortium that purchased ABN, analysts said.

ABN is owned by RFS Holdings, the vehicle set up to buy the bank that is ultimately owned by Royal Bank of Scotland Group Plc (RBS.L), which teamed up with Fortis and Banco Santander SA(SAN.MC) in the record 70 billion euro purchase and carve-up of ABN.

RFS operates separately and has strong capital ratios, higher than Fortis or RBS.

"The problems of Fortis stem from weak capital ratios and toxic assets, both of which reside outside of RFS," analysts at Cazenove said in a note. "Therefore the plight of Fortis does not have any direct capital implications for RBS."

Fortis's ABN assets were not due to be stripped from RFS until the third quarter of next year, but the Dutch central bank could be urged to speed up a deal amid the market turmoil.

Fortis shares plunged 24 percent and RBS shares fell 13 percent, hurt by a sell-off across the European banking sector, with the DJ Stoxx European bank index .SX7P tumbling 7.8 percent amid fears more banks will fail.

(Reporting by Steve Slater; Editing by Quentin Bryar, David Holmes and Andre Grenon)