Fortis subprime impact estimate boosts shares
BRUSSELS (Reuters) - Investor relief after an update from Belgian-Dutch financial services group Fortis (FOR.BR) (FOR.AS) on its subprime exposure powered strong gains in the stock on Monday.
Fortis said on Sunday its 2007 profit could be hit by 1 billion euros ($1.47 billion), depending on the valuation models it will choose to assess the value of its subprime portfolio.
"The 1 billion euros is not excessive," said Ivan Lathouders, an analyst who covers the stock for Bank Degroof.
Lathouders argued that the reassuring statement provided by Fortis on its solvency and the fact that it ruled out a rights issue, outweighed the negative news on its subprime portfolio.
"Yesterday Fortis sent out a press release which takes away the worries that have been in the market," Rabo Securities said in a research note, while KBC said it would maintain its Buy rating on the stock but reduce its target price to 24 euros from 28.
Fortis shares were up 6.94 percent at 14.18 euros at 0854 GMT on Euronext Brussels while the DJ Stoxx banking index was down about 1.5 percent.
Fortis is due to present full-year results on March 7.
The bank was under pressure to provide information about its subprime exposure after a newspaper report on Saturday said it would need to write off up to 2 billion euros ($2.9 billion) in its subprime portfolio.
Shares in Fortis fell more than 10 percent on Friday on market talk of profit warnings and possible exposure to U.S. subprime mortgages, traders said.
Fortis sought to reassure investors in its Sunday statement and said its capital and solvency position were sound that it planned to maintain its dividend at last year's level and ruled out it was considering issuing new shares.
Fortis also said it was on track to complete its 24 billion-euro financing plan for the acquisition of the Dutch activities of ABN AMRO.
Financial markets remain nervous after last week when stocks plummeted on fears of a U.S. recession and investors saw both a massive rate cut by the U.S. Federal Reserve and the biggest trading scandal in banking history after a junior trader at France's Societe Generale (SOGN.PA) was accused of secretly amassing a $7 billion loss in bad bets.
(Reporting by Julien Ponthus; Editing by Jason Neely)
