Fortis first-quarter earnings drop 31 percent

Fortis reported net profit of euro808 million (US$1.25 billion), down from euro1.167 billion from the same period a year ago, while total income fell 4 percent to euro30.7 billion (US$47.7 billion).

In all, the company says it suffered euro380 million (US$590 million) in losses due to "credit market turmoil."

Fortis had booked euro2.7 billion in impairments on mortgage-related investments in the fourth quarter.

It said Tuesday it had additional impairments of euro231 million (US$356 million) on "structured credit products" in the first quarter and warned of a "further deterioration of financial markets in the second half of March 2008."

"While it is clear that the U.S. economy is suffering, it is still uncertain how the crisis will impact other economies, which in turn could affect commercial activity," said Chief Executive Jean-Paul Votron in a statement.

Votron noted that Fortis was profitable in the quarter despite the write-downs -a contrast with some peers such as UBS AG of Switzerland -and said the earnings "reflect the benefits of our strategy of having a significant presence in the Benelux countries (Belgium, the Netherlands and Luxembourg), a region with a very strong credit history and relatively low volatility in earnings."

Shares fell 0.2 percent to euro16.90 (US$26.25) in early Amsterdam trading.

Fortis, with dual headquarters in Brussels, Belgium, and Utrecht, Netherlands, became one of Europe's largest financial companies after it bought euro24 billion worth of operations from ABN Amro last year, including its large Dutch retail banking operations.

Fortis' share price was cut in half over the past year as it issued shares, took on debt, and sold operations in order to finance the deal.

It said Tuesday the ABN Amro operations it bought had a pro-forma net profit of euro279 million (US$433 million) in the quarter, down 23 percent.

Fortis said profits at its banking arm fell 20 percent to euro721 million (US$1.12 billion), while profits at its insurance arm were down 38 percent to euro219 million (US$340 million).

The main reason for the fall at the banking arm was the impairments, while insurance operations suffered from investment losses. The underlying insurance operations grew, Fortis said.