Thread: Bank chiefs in Europe face the ax

Bank chiefs in Europe face the ax
By Julia Werdigier
Published: July 11, 2008

LONDON: For the most part, chief executives at European banks have been able to hold on to their jobs while reporting billions of dollars of write-downs, even as they watch their U.S. counterparts clearing their desks.

But as financial markets sour and investors become increasingly concerned about further write-downs, pressure on at least two executives on the Continent is mounting.

Jean-Paul Votron was ousted as chief executive of Fortis, the largest financial services company in Belgium, following a marathon board meeting Friday in Brussels. Meanwhile, the French newspaper Le Monde reported that Crédit Agricole's chief executive, Georges Pauget, would seek a vote of confidence at a board meeting Tuesday and may end up quitting. "Heads will have to roll," said Mamoun Tazi, an analyst at MF Global Securities in London. "We're still waiting to have a clearer picture on the capital as banks report second-quarter results," he said, but it could be that banks would have to raise more capital.



Unlike those on Wall Street, most European executives have been able to hang on to their jobs in recent months. The exceptions are the worst-hit, UBS, the largest Swiss bank, which underwent a major management shuffle after record write-downs related to subprime mortgage assets. The French bank Société Générale also got a new chief executive in the wake of a trading scandal.

Pressure elsewhere also increased. Fred Goodwin, chief executive of Royal Bank of Scotland, is trying to appease investors after shares of the bank dropped 59 percent this year. Royal Bank of Scotland, which is still paying for its acquisition of ABN AMRO together with Fortis and Banco Santander, is raising capital to digest $15.4 billion of write-downs and on Thursday lost one of the top bidders for the British insurance unit it put up for sale.

Crédit Agricole's shares fell the most in almost six years Friday as some investors interpreted the report on the possible chief executive resignation to mean that the French bank, which was already among the hardest hit in France by the credit crunch, may face further write-downs.

The shares closed down €1.25, or 9.8 percent, to close at €11.57 in Paris.

The bank, which replaced its head of investment banking earlier this year, announced more than €5 billion, or almost $8 billion at current rates, of write-downs linked to the collapse of the subprime mortgage market.

The Fortis board convened a special meeting Friday to discuss what it called the "public reaction in Belgium and the Netherlands" to the cancellation of the interim dividend this year. Herman Verwilst, currently Fortis deputy chief executive will take over from Mr. Votron until a replacement is found, Fortis said Friday.

Once hailed by shareholders for pledging to change Fortis from a regional banking and insurance company into a global financial services firm, Votron came under pressure from investors after shouldering a large bill for the acquisition of ABN AMRO just as the subprime mortgage market started to falter.

Fortis has lost more than half of its market value since then, mainly because of concerns about its capital base, and is now worth less than the €24 billion it spent to buy parts of ABN AMRO.

"A new chief executive may take a fresh look at the capital situation," said Jaap Meijer, an analyst at Dresdner Kleinwort in London. "They still have to do a lot of disposals and there are still questions about their capital position."

The financial burden from the ABN AMRO acquisition, the biggest in the banking world, forced Votron to issue new shares twice and cancel the interim dividend. He told investors last month that the bank needed to sell noncore assets like real estate to replenish its finances.

But the financial market turmoil has already led Fortis to sell businesses below their net asset value. Deutsche Bank agreed to buy the Dutch commercial banking businesses, which Fortis took over from ABN AMRO, at a 30 percent discount to their net asset value earlier this month.

In addition to the takeover bill, Fortis is also grappling with write-downs on structured credit assets, and its first-quarter profit fell 31 percent to €808 million from €1.17 billion a year earlier. Votron has said that "extraordinary measures" are needed to shore up Fortis's balance sheet after €6.7 billion of write-downs.

Before running into trouble with the purchase of ABN AMRO, where Fortis was the smallest member of the takeover consortium but had agreed to pay the largest bill, Votron had won shareholder confidence by pledging to reduce the bank's reliance on the Dutch, Belgian and Luxembourg markets and expand in faster-growing regions like Turkey and Poland.

Fortis is the creation of a 1990 merger of the Dutch insurance company NV Amev, Belgian insurer AG Group and the Dutch bank VSB.

http://www.iht.com/articles/2008/07/11/ ... fortis.php

Gee thats to bad Wally . If they worked in the States Dubya would bail them out , with our money too .NP if your a greedy crook over here . Your covered by the "Good Hands Pres" , King Dubya