New Fortis deal will have 'stable' impact: BNP Paribas

10 March 2009

BNP Paribas SA, France's biggest bank, said it expects a ''stable'' impact on its capital from the revised agreement to purchase banking and insurance assets from Belgium's Fortis Bank. ''BNP Paribas group's Tier 1 ratio should remain stable on the day the transaction closes,'' the Paris-based bank said in an e-mailed statement on Sunday. The operation will probably increase earnings by 2010 excluding integration costs, it said.

Total deposits of the combined bank are above 540 billion euros ($683 billion), BNP Paribas said. Total deposits of the combination were 586 billion euros at the end of 2007, the French bank said on 6 October, when it announced the original purchase plan.

On Saturday, the Belgian government and BNP Paribas agreed on revised terms for the break-up of Fortis. The transaction now has to be approved by Fortis shareholders, who had rejected earlier terms on a Fortis break-up, with the debacle leading to the collapse of the previous Belgian government.

Belgium will give BNP Paribas 75 per cent of Fortis Bank in a deal valuing the whole of Fortis Bank at 11 billion euros ($13.9 billion). In exchange, Belgium will get BNP Paribas shares, issued at 68 euros. This would provide Fortis with an 11.4 per cent stake in BNP Paribas.

However, under the new agreement, BNP Paribas will now look to purchase 25 per cent of Fortis' insurance business, Fortis Holding, up from the 10 per cent previously, for 1.38 billion euros.

Furthermore, BNP Paribas will pay 200 euros million into a shell company to hold Fortis' risky assets and bad loans. For its part, Fortis will pay 760 euros million to the company, while the Belgian government is to contribute 740 million euros, as well as guarantee up to 1.5 billion euros on losses of more than 3.5 billion euros on current Fortis loans.