EUROPE - Continental European financial institutions are facing a tough time, with two issuing profits warnings in the last month.
Dutch financial services firm Aegon has issued a full-year profits warning. The firm cited “deteriorating market conditions and a weakened US dollar” as it announced that full year 2002 earnings were likely to fall between 30% to 35% lower than previous estimates.
Back in May, Aegon said that full year results were likely to equal 2001 earnings of E2,397m. But the new outlook is based on worse than expected Q2 results and “further unforeseen market circumstances”.
But Don Shepard, chairman of Aegon’s executive board, insisted that the firm’s solvency remains in good shape: “In our first quarter report we announced that, given economic and financial market uncertainty, we were very cautious about the remainder of the year.
Due to the lack of the recovery of the bond and the deterioration of equity markets since the first quarter, we think it is prudent to take this action. I want to emphasise that during the past few months our base business remained good. Without the developments mentioned above we would have been on target for the year.”
Aegon published its Q2 results in August 2002.
Fortis is another financial services firm to issue a full year profits warning on the back of crumbling markets. The Dutch-Belgian firm blamed “ongoing deterioration” around stock markets for the revision, although no figure was disclosed. Initial estimates for 2002 had stood around 13% growth. Fortis’s insurance and banking are now expected to be particularly hard hit due to writedowns, explained chief executive Anton van Rossum.
“Unforeseen and exceptional conditions in the equity markets could have a heavy impact on the results of the insurance business particularly. For the first time in Fortis’s history, the market value of the equity portfolio has fallen below purchase value, and unrealised losses must be charged to operating profit,” he said.
Losses amounted to around E900m, even though the group had not sold the stock.
He added that the firm’s 1H income and expenses are both in line with expectations. Fortis also insisted that its solvency position remained good, adding that the firm was padded 5% above the legal minimum. Its half-yearly results will be published on 28 August.
And BNP Paribas Group, France’s biggest bank, posted a net income of just over E1bn for the second quarter, a drop of 13% on the corresponding period last year.
The group cited a “deep crisis” in equity and corporate debt markets as it registered net banking income of E4.1bn, down 5.5% on Q2 2001.
Michel Pébereau, BNP Paribas’ chairman and CEO said: “As I feared the first half of the year 2002 was marked by an unfavourable and unpredictable economic and stock market environment. Our group suffered the consequences of this, especially in June. Erratic and sharp swings in the stock markets in July give no reason to anticipate a change in the situation for months to come.”
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