By Paul Taylor and Philip Blenkinsop
BRUSSELS (Reuters) - Belgium and Luxembourg raced to find a buyer for troubled financial group FORTIS <:FORB.BR:>(FORA.AM)
In a second weekend of crisis talks, Belgian Prime Minister Yves Leterme told broadcasters on Sunday he hoped to keep the Belgian and Luxembourg operations of the group together after the Dutch nationalized most of Fortis's Dutch units on Friday.
"There are contacts with private groups, several private groups. We are not going to decide in this situation with our backs to the wall," he said. "The only thing certain is that we are going to send a clear and strong signal to the markets before they open tomorrow.
An industry source close to the situation confirmed reports in several Belgian media that BNP Paribas was negotiating to take up to 80 percent of Fortis banks in both countries, but said nothing had been agreed yet.
Belgium and Luxembourg, which took 49 percent stakes in the Fortis banks in their countries last Sunday, would keep a 20 percent stake in each. BNP declined comment.
Luxembourg Budget Minister Luc Frieden told RTL television the governments were close to a solution for Fortis involving one of the Europe's most solid banks.
"We are very close to an agreement for a clever combination of a strong state, taking responsibility in the bank, and one of the biggest international banking groups," Frieden said.
He declined to name the group but said it would involve a public-private partnership in which the state would keep a veto right over strategic decisions.
Leterme said the government would not sell out Fortis for "peanuts" and was determined to protect savers, clients and staff at the company, Belgium's biggest private employer.
He was less reassuring to shareholders, saying they took a risk by investing in any company and the Belgian state could not guarantee their investment.
Franco-Belgian financial group Dexia
Dexia said in a statement that credit risks related to HRE would have a very limited impact on the group's solvency and the September 30 capital increase had taken account of possible negative impacts that could arise.
A source at Dexia said the unsecured part of the bank's exposure to HRE was about 200 million euros ($277.2 million).
DUTCH NATIONALISED
Belgium and Luxembourg were left to deal with the remains of Fortis' banking and insurance operations after the Netherlands nationalized the Dutch activities for 16.8 billion euros at the end of a week of turmoil for European banks.
Dutch Finance Minister Wouter Bos said the company had hit an acute cash crunch even after last Sunday's initial 11.2 billion euro rescue by the three governments as depositors withdrew money and banks refused to lend.
Sources close to the situation said BNP Paribas pulled out of the original rescue negotiations after offering just 1.60 euros a share, compared to Fortis' market price of 5.40 euros, and demanding state guarantees against future losses.
The sources said any bid now would obviously be lower after what happened to Fortis during the week.
Dutch central bank Governor Nout Wellink confirmed that the Netherlands had never paid its 4 billion share of the plan.
Wellink said Fortis would have to be integrated with the Dutch parts of ABN AMRO that it bought last year at a top-of-the-market price before it could be privatized again.
"That also depends on the length of the financial crisis," he added.
In Belgium, Leterme made clear the government might also resort to a temporary nationalization rather than give away Fortis in a fire sale.
"Fortis is an important and healthy company that has good future prospects. Out of respect for the staff we're not just going to sell it off for peanuts. There are other possibilities than just leaving it to a private partner," he said.
"On the other hand, we will calmly study every serious offer that offers the company a future," he added.
Separately on Sunday China's second-largest life insurer, Ping An <601318.SS>, said it would report an impairment loss of about 15.7 billion yuan ($2.3 billion) on its investment in Fortis.
(Additional reporting by Foo Yun Chee and Niclas Mika in Amsterdam, Michele Sinner in Luxembourg; Editing by Erica Billingham and Kenneth Barry)
