FRENCH bank BNP Paribas has confirmed it has taken control of ailing finance group Fortis’s arms in Belgium and Luxembourg to create the “leading European bank in terms of deposits.”
The deal, thrashed out over a weekend of intense talks, leaves the Belgian and Luxembourg governments with reduced holdings in Fortis, which they partly nationaised a week earlier.
Under the deal, announced by Belgian and BNP officials in Brussels and official sources in Luxembourg, France’s biggest bank will take up to 75 per cent of Fortis’s Belgian operation leaving the other 25 per cent, a blocking minority, in the hands of the Belgian Government.
On the Luxembourg side, BNP Paribas will take 66 per cent of the shares leaving the Grand Duchy with 33 per cent, the source said.
Fortis ran into liquidity problems which originated with the US-born financial crisis and the BNP move is the latest bid to reassure savers and staff alike.
On Friday the Dutch Government totally renationalised the group’s Dutch arm.
BNP Paribas managing director Baudoin Prot, announcing the deal to reporters in Brussels, said it would be financed by BNP Paribas shares, with the Belgian state taking a stake of “around 11.7 per cent” in the French bank, significantly making it the largest shareholder.
Mr Prot added that Luxembourg would assume a 1.1 per cent stake in BNP Paribas in a similar fashion.
“The operation should be done without BNP Paribas having to spend cash, at least for the banking part,” a bank spokesman told AFP in Paris.
BNP Paribas put the value of the operation at €14.7 million ($26 million).
BNP Paribas picked up a network of 1500 bank branch offices in Belgium, Luxembourg, France, Germany, Poland and Turkey, making it the “leading European bank in terms of deposits”, according to the bank.
BNP Paribas will also take over Fortis insurance activities for €5.7 billion.
However, the French bank said it would not be taking over €10 billion of Fortis’ risky assets, which have been placed into a separate structure under the control of the Belgian and Luxembourg governments, it said.
BNP Paribas is just the sort of major bank, relatively uninjured so far by the global financial firestorm, that the two governments had been hoping for as a suitor.
The moving of most of Fortis to one of Europe’s biggest financial groups is just the latest episode in the efforts to save the Belgian-Dutch banking group.
Under an original, hastily arranged rescue deal a week earlier, Belgium, the Netherlands and Luxembourg announced a €11.2 billion part-nationalisation of Fortis to prevent the US-driven financial crisis from claiming another victim in Europe.
Belgium made the biggest contribution, taking a 49-per cent stake in the Belgian arm of the company, for €4.7 billion.
Then on Friday the Dutch Government announced it was totally nationalising the Dutch arm of the group.
That move left the Belgian and Luxembourg arms appearing weak, and there were fears of more freefall when the stock markets open on Monday.
Speaking on Belgian television earlier Sunday, Belgian Prime Minister Yves Leterme said the Government was doing everything possible and was keen to reassure Fortis savers, clients and staff.
However, the Belgian leader had no such words of comfort for the bank’s shareholders.
“Naturally that’s different,” he told RTBF television, when asked particularly about small shareholders.
“A shareholder in a company takes risks and therefore the state, the Belgian taxpayers cannot guarantee all the interests of all the shareholders of the whole economy.”
Fortis, caught up in the US-born international financial crisis, has seen nearly 70 per cent of its share value wiped out this year.
BNP Paribas’ share capitalisation at Friday’s close of trading was around €65 billion.