Brussels: BNP Paribas announced on Sunday that it is taking control of ailing finance group Fortis’s operations in Belgium and Luxembourg, in a deal which will make Belgium the largest shareholder in the French bank.
The deal, thrashed out over a weekend of intense talks, leaves the Belgian and Luxembourg governments with reduced holdings in Fortis, which they partly nationalised a week earlier, in exchange for part of BNP Paribas, which becomes the biggest bank in Europe in terms of deposits.
Meanwhile, as the US-born financial crisis takes a grip in Europe, Germany sealed a public-private rescue plan for the country’s fourth biggest bank Hypo Real Estate on Sunday as the government extended a blanket guarantee for all personal bank deposits to avert panic withdrawals.
The announcements came on the eve of a meeting of European finance ministers in Luxembourg, who will seek to flesh out broad plans for restoring confidence in the crisis-struck banking system, agreed over the weekend by Europe’s biggest economic powers.
Under the Fortis deal, announced by Belgian and BNP officials in Brussels and official sources in Luxembourg, France’s biggest bank will take up to 75% of the company’s Belgian operation leaving the other 25%, a blocking minority on strategic decisions, in the hands of the Belgian government.
On the Luxembourg side, BNP Paribas will take 66% of the shares leaving the Grand Duchy with 33%, the source said.
On Friday the Dutch government totally nationalised 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%” in the French bank, making it the largest shareholder.
Prot added that Luxembourg would assume a 1.1% 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 said.
BNP Paribas put the value of the operation at euro14.7 billion.
It will also take over Fortis insurance activities for euro5.7 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 Luxumbourg governments.
BNP Paribas did though pick up a network of 1,500 bank branch offices in Belgium, Luxembourg, France, Germany, Poland and Turkey, making it the “leading European bank in terms of deposits”, according to a bank statement.
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 $15.5 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% stake in the Belgian arm of the company, for euro4.7 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 on Sunday, Belgian Prime Minister Yves Leterme said his 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. “A shareholder in a company takes risks.”
Fortis, caught up in the US-born international financial crisis, has seen nearly 70% of its share value wiped out this year.