Fortis launches share issue to boost solvency

The group lost 15.81 percent by 1207 GMT to stand at 10.65 euros, on the back of which the AEX index of major Dutch companies fell 2.05 percent.

In morning trading on the Brussels stock exchange, Fortis shares shed nearly 10 percent to 11.40 euros. The plan announced by Fortis directors Thursday would see the group issue new shares worth 1.5 billion euros ($2.4 billion) to shore up its finances and help boost its solvency by eight billion euros.

As well as the share sale to institutional investors, the bank said it would scrap its interim dividend this year to save about 1.3 billion euros in cash, would issue new debt, and divest non-core assets and real estate -- thus raising about 3.5 billion euros.

"We believe that 2008 will be a difficult year for our industry and we do not expect an improvement in the economic environment soon," chief executive Jean-Paul Votron said in a statement announcing the plan.

"While our solvency today is strong, the announced measures prepare us for the road ahead, which we believe is a prudent approach to take in the current environment."

Ton Gietman, an analyst at Belgian investment bank Petercam, said: "It remains to be seen whether these measures are sufficient ... we think that uncertainties will return swiftly."

Fortis follows in the footsteps of a number of international banking groups that have raised new capital to repair balance sheets that battered by the collapse of the US subprime home loan market last year.

Last year, Fortis bought part of Dutch rival ABN Amro as part of a trio of banks in a 70-billion-euro deal. Shortly after winning the takeover battle, the U.S. housing crisis erupted.