January 27, 2008 13:03 ET

Fortis Confirms Sound Capital and Solvency Position and Unchanged Dividend Policy

BRUSSELS, BELGIUM--(Marketwire - January 27, 2008) -

Update on 2007 profit forecast taking into account very stringent and market consistent sub prime assumptions

In view of recent market speculation, Fortis provides the market with the following information, which was also presented to the regular Fortis Board of Directors meeting of 25 January 2008.

Regarding the 2007 results:

* Fortis Bank end-of-year solvency well above 8%.

Fortis end-of-year solvency is expected to surpass regulatory requirements and Fortis Bank core tier 1 ratio would be, even under the most stringent coverage assumptions simulated below, well above 8%.

* Fortis intends to keep its dividend policy unchanged.

Fortis management will recommend to the Board of Directors meeting of 6 March 2008 to propose to the General Shareholders Meeting of 29 April 2008 that the cash dividend is maintained at the same level as last year, i.e. a final 2007 dividend of EUR 0.59 per share.

* Capital and solvency requirements will be met, even in very stringent scenarios on the impact of the sub prime CDO portfolio.

Fortis is reviewing the value of its sub prime CDO portfolio on an ongoing basis. Different scenarios are used in this assessment. Even under very stringent coverage assumptions based on the most recent and presently available market information and data, Fortis 's capital and solvency requirements would still be met.

The CDO sub prime gross exposure remained unchanged compared with the disclosure at the time of the presentation of the 3rd quarter financial results early November 2007.

Applying the Fortis valuation model at year end would lead today to impair 40% of the Mezzanine super senior CDO tranches and 15% of the High Grade super senior CDO tranches. Those impairments would result in a Net Profit before divestments - and barring unforeseen circumstances - of around EUR 4.0 billion (i.e. EUR 5.0 billion including the EUR 1 billion of the Caifor sale). These aforementioned indications of Fortis Net Profit are excluding the positive profit contribution of ABN AMRO.

Since January 2008 a number of peers applied substantially higher coverage ratios. Fortis therefore simulated the impact of provisions taken through the Profit & Loss Accounts, leading to a coverage ratio of 60% of its mezzanine super senior CDO tranches (gross exposure of EUR 0.6 billion) and 45% of the high grade super senior CDO tranches (gross exposure of EUR 4.6 billion). If these scenarios were to be applied to the closing of the accounts of 2007 - which would be subject to approval by the Board of 6 March 2008 - the net profit of Fortis is estimated to be around EUR 3.0 billion - barring unforeseen circumstances. This is before the impact of the divestment of the participation in the Spanish joint-venture Caifor, i.e. it would be EUR 4.0 billion including the EUR 1 billion of the Caifor sale. These indications of Fortis Net Profit do not include the positive profit contribution of ABN AMRO.

* Loan loss provisions in line with earlier guidance

Fortis confirms that the loan loss provisions of the remaining part of the portfolio (including the asset backed credit portfolio, but excluding the impairments of the sub prime CDO portfolio) are expected to remain within the guidance given in previous communications (10-15bp). Fortis will provide further details on the full portfolio, including its asset backed credit portfolio of EUR 51 billion, at the announcement of the annual results on 7 March 2008.

Regarding 2008:

* Fortis does not need to and is not considering to issue common stock or dilutive equity linked capital instruments.

Fortis is fully on track in completing its EUR 24 billion financing plan for the acquisition of selected activities of ABN AMRO. At the end of 2007 around EUR 20 billion of capital has been secured. The remaining EUR 4 billion additional solvency will be mainly raised by divestments of non-core assets and possibly alternative financing. Divestments include, as communicated to the market, a further sale of non-core assets of acquired activities of ABN AMRO and of Fortis in the course of this year. It includes amongst others the sale of certain commercial banking activities in the Netherlands as imposed by the European Commission. Alternative financing is possible including the issue of Core Tier 1 instruments, but excluding the issue of common stock or any dilutive equity linked capital instruments, even under the stringent assumptions mentioned above.

* Fortis focuses on the implementation of its strategic plans, in particular the integration of the ABN AMRO businesses

The underlying performance of Fortis' stand-alone businesses and the acquired ABN AMRO activities have demonstrated their resilient nature in the fourth quarter of 2007 and also in the first weeks of 2008.

The preparation of the integration of the acquired ABN AMRO activities is progressing according to plan, in terms of detailing separation and integration plans, launching first customer oriented initiatives, clarifying the headquarters offices future use, building joint teams, and specifying IT platforms.

Fortis will present its full year audited results on 7 March 2008 that will reflect the most recent views on sub prime in the markets. Fortis continues to focus on the implementation of its strategic plans, and in particular the integration of the acquired activities of ABN AMRO.

Fortis is an international financial services provider engaged in banking and insurance. We offer our personal, business and institutional customers a comprehensive package of products and services through our own channels, in collaboration with intermediaries and through other distribution partners. With a market capitalisation of EUR 39.7 billion (31/12/2007), Fortis ranks among the 15 largest financial institutions in Europe. Our sound solvency position, our presence in over 50 countries and our dedicated, professional workforce of 60,000 enable us to combine global strength with local flexibility and provide our clients with optimum support. More information is available at

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