Offering prices NLB at lower end of expectations
The release of the prospectus marks the formal launch of the initial public offering and privatisation of Slovenia's largest bank, delayed by more than a year due to the now resolved uncertainty over contingent liabilities in Croatia.
The order book will be open between 29 October and 8 November. Retail investors will be able to subscribe for up to 10% of the shares available by 7 November, while institutional investors will be able to do so on the last day when the final price per share will be revealed.
The seller will then adjust the amounts available in the respective tranches depending on demand. The shares are expected to be listed on the Ljubljana and London stock exchanges in mid-November.
The price range, which puts the value of the entire bank at between EUR 1.03bn and EUR 1.32bn, is believed to have been set low because the current market situation is not very auspicious.
Alta Invest analyst Matej Šimnic said that the price range was "a reflection of the current situation on the market rather than the bank's performance."
"Everything will depend on interest by foreign investors. Judging by the market volatility, the sentiment may change either way in the coming days, which will also determine the final proceeds."
The final price will determine how much of the taxpayer money the state pumped into the bank in the 2013 bailout and several years before that will be recovered.
Statements by politicians also suggest it will provide ammunition for opponents of the sale, in particular the Left.
Left leader Luka Mesec described the price as "scandalously low" and yet again urged the government to suspend the sale.
He said the state looked likely to recover only about EUR 800m, which, given that it spent EUR 2.4bn bailing it out, would mean it is losing more than it will cost to build the Koper-Divača rail expansion.
Coalition parties were reserved and reiterated that Slovenia needed to sell the bank regardless since it promised to do so in exchange for approval of the state aid in 2013.
Infrastructure Minister Alenka Bratušek, the prime minister at the time of the bailout, admitted the price was low but she stressed it could have been higher last year, when the sale was suspended. "Now we are in a phase when the state cannot do much any more," she said.
While the proceeds are unlikely to satisfy opponents of privatisation, the offering is seen as a good opportunity for investors.
Last year the bank tripled its net profit to EUR 189m, while group net profit doubled to EUR 225m. NLB recently projected an annual return on equity of about 12% until 2023 and a robust dividend policy.
Unofficially, there is interest in the shares among Slovenian institutional investors. There could also be interest among institutional investors in the region, for instance Croatian pension funds.
However, commentators have said that the negative experience with the 2007 IPO of NKBM bank - tens of thousands of shareholders lost everything in the 2013 bailout - could affect interest among Slovenian retail investors.
Under EU state-aid rules, Slovenia has committed to sell at least 50% of NLB by the end of this year and the remainder up to 75% less one share by the end of 2019.
The commitment was made as part of the 2013 bailout, when Slovenia pumped EUR 1.55bn into the bank. NLB's dividend yield totalled EUR 378.2m in 2015, 2016 and 2017, while another EUR 270.6m was paid out this year.