Belgian-Dutch financial services group Fortis reported a 16 percent year-on-year rise in second-quarter net profit on Thursday, beating analysts' expectations due to strong banking results.
Net profit in the April to June period was 1.616 billion euros ($2.23 billion) compared with 1.390 billion in the same period last year and the average forecast of 1.273 billion euros from a Reuters poll of eight analysts.
Fortis, which is targeting compound annual growth in net profit per share of at least 15 percent over the 2004 to 2011 period, said the results strengthened its confidence in its long-term targets.
It also said the rise in underlying costs for 2007 would be in line with the 2 percent growth seen in the second quarter.
These are excellent results that are clearly in excess of what we had expected, said Bank Degroof's Ivan Lathouders, who has a buy rating on the stock. It's also important that they only expect a 2 percent rise in costs.
Fortis shares were down 0.5 percent at 28.31 euros at 4:00 a.m. EDT, faring better than the Dow Jones Stoxx European bank index, which was off 1.1 percent.
Profit in the banking division came in at 1.159 billion euros, up from 1.015 billion euros in the same period last year and the average forecast of 914 million euros, lifted by higher treasury and financial markets results.
The considerable enhancement of the top line -- albeit partly seasonal -- combined with controlled expense growth of 2 percent contributed to this major increase in net (banking) profit, it said.
Insurance profit totaled 413 million euros, up from 381 million euros and above the average forecast of 387 million, due to better results in life and non-life and to higher investment income.
Cor Kluis, analyst at Rabobank, said the results were broadly positive.
The trading results were very good, net interest income was good. Insurance was slightly lower than we expected but that was due to flooding in the UK. Expenses guidance is in line with expectations. The credit loss ratio guidance is conservative.
Fortis, which has announced aggressive expansion targets, is bidding for Dutch ABN AMRO as part of a consortium with Royal Bank of Scotland and Spain's Santander.
Fortis said it remained convinced the group's offer was superior to a rival bid for ABN by Britain's Barclays.