The Dutch-Belgian bank Fortis is taking steps to increase its solvency by about 8bn euros ($12.5bn; £6.3bn).

Like many banks, Fortis needs extra capital to deal with the credit crunch, and it also needs to fund its 24bn euro acquisition of parts of ABN Amro.

Fortis will issue 1.5bn euros in new shares, it will not pay an interim dividend and it plans to pay its full-year dividend in shares.

Fortis shares fell 17% to 10.49 euros, the lowest in more than five years.

"We are unpleasantly surprised by today's announcement," said Ivan Lathouders, an analyst at Bank Degroof.

"Measures of this scale clearly indicate that management is not very confident in Fortis's ability to generate organic solvency in the near term."

Carlo Ponfoort, an analyst at Effectenkantoor, said that the shock for investors was that the bank would not pay a dividend and that banking stocks should "always pay dividends".

Bite the bullet

The bank also plans to sell and lease back some of its property, sell non-core assets and issue up to 2bn euros of non-dilutive capital instruments, such as preference shares.

Fortis took a charge of 380m euros from sub-prime losses in the first three months of the year.

The bank was part of the consortium with Royal Bank of Scotland and Santander that bought ABN Amro last year for 70bn euros.

Fortis ended up with ABN's Dutch operations, as well as its private banking and asset management businesses.

The company said difficult market conditions, caused by a global credit crunch, meant it had to take "exceptional measures".

For some observers, the biggest fear was that the company was still not out of the woods, and its earlier problems may resurface.

"After an initial relief that the 'news is out' and Fortis has bitten the bullet, we think that doubts will come back soon," said Ton Gietman, an analyst at Petercam.

(BBC)

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