The governments of Luxembourg, Belgium and the Netherlands have agreed to buy just under half of the equity of European banking group Fortis, becoming the latest governments to partly or wholly nationalise embattled financial groups during the credit turmoil.

As part of the transaction, Fortis will dispose of its recently-acquired business units from rival listed Dutch bank ABN Amro, which includes a substantial private client business.

The ABN Amro disposal represents a dramatic U-turn in strategy for Fortis, which had been aggressively building up its private client operations. Last year, Fortis bought the private client business from ABN Amro while other units of ABN were purchased by Royal Bank of Scotland and Spain's Santander. The ABN Amro transaction subsequently came under heavy criticism as it was executed at what was the-then height of the mergers and acquisition boom.

ABN Amro's previous suitor, Barclays, was seen, at the time, to have been wise not to pursue its bid., but may be tempted to look again at the private client arm if it thinks the price is acceptable.

Fortis’s sale of the ABN Amro assets, at a price below its acquisition price of €24 billion ($34.6 billion), will create an impairment charge, Fortis said in a statement. This impairment will not impact total regulatory capital. However, a sale price below €12 billion would, for that difference, negatively impact core equity, the statement said.

Under the multi-government action, the government of Belgium has agreed to invest €4.7 billion in Fortis Bank ( Belgium) in exchange for a 49 per cent share in the common equity of this entity. The Dutch government will invest €4.0 billion in Fortis Bank Nederland Holding in exchange for a 49 per cent stake, while the government of Luxembourg is investing €2.5 billion in Fortis Banque Luxembourg in the form of a mandatory convertible loan. When the loan is converted, it will give the Luxembourg government a 49 per cent stake.

Under the changes, Maurice Lippens is to step down as Fortis’s chairman and he will be replaced from outside the company in consultation with the Belgian government. In addition, the supervisory boards of each of the Belgian, Dutch and Luxembourg Banks of Fortis will be reconstituted with significant presence of candidates nominated by each of the respective governments, the statement said.

“The actions taken by the Belgian, Luxembourg and Dutch governments are a sign of confidence in Fortis and of comfort to customers and all other stakeholders alike,” said Fortis chief executive elect Filip Dierckx.

Due to the change in strategy, the deteriorated business environment and the decision to further de-risk the balance sheet, total value adjustments are expected of around €5 billion after tax in the third quarter, related to, among others, the deferred tax assets, goodwill on the separately managed asset managers and the structured credit portfolio.

In addition, Fortis will record impairments of €1.2 billion of US deferred tax assets.

The total regulatory capital ratio of Fortis Bank under Basel II, a key measure of a bank’s financial strength, is estimated to be around 13 per cent.