Fortis said today it plans to shore up its finances with measures worth more than €8 billion ($12.54 billion), including issuing new shares, hitting its stock on dilution worries.
The Belgian-Dutch financial services group said it would issue €1.5 billion in new shares, plus up to €2 billion of non-dilutive preference shares. It will save €1.3 billion by not paying an interim 2008 dividend, and will also sell non-core assets and sell and lease back real estate.
"We believe that 2008 will be a difficult year for our industry and we do not expect an improvement in the economic environment soon," Fortis Chief Executive Jean-Paul Votron said in a statement.
"The measures announced today will help Fortis navigate through the current challenging market circumstances." One analyst said the measures would go some way to dispel worries about the company's finances but were dilutive.
"There were lots of worries regarding Fortis's capital action. These actions will take away some of these worries," said Theodoor Gilissen analyst Paul Beijsens.
"Unfortunately because of the excess shares, there will be share dilution which is a negative thing for shareholders."
Fortis shares were down 11.1 per cent at €11.27 by 8.07am, making it the biggest loser on the DJ Stoxx index of European banks which was own 1.9 per cent.
Reeling from the credit crunch like other global banks, Fortis had already sought to raise more capital by selling a 5 per cent stake in the group and half its asset management business to China's Ping An Insurance.
It also needs funding for its €24 billion acquisition and integration of parts of its former Dutch rival ABN AMRO.