Fitch improves outlook for NKBM and Abanka as merger expected
Fitch has also kept the banks' short-term risk rating at B and the bank's long-term sustainability of operation at bb+.
The recently published ratings follow the announcement by the Maribor-based NKBM about acquiring a 100% stake in Abanka from the state, i.e. Slovenian Sovereign Holding.
The New York-based ratings firm thus decided to revise and harmonise the ratings of both banks as a future merged bank.
According to Fitch, NKBM has announced that soon after a green light from the Competition Protection Agency and the European Central Bank it would launch procedure to merge with Abanka into the second largest banking institution in Slovenia.
In terms of market share (estimated at 22.5% based on data from the end of 2018), the merged bank would come close to the NLB bank. Owned by the US fund Apollo, NKBM would increase its assets by 70% with the merger.
Fitch expects that the takeover of the country's third largest bank will significantly strengthen the Maribor banking group, including by reducing the amount of bad loans.
A merger would balance out the risk portfolio of both banks, which is why Fitch expects the long-term credit rating to increase in the future.
The effect of merger on capital adequacy would be manageable and it could be carried out without capital injections. Some synergy effects of the merger could result in CET 1 capital adequacy standing at 16%, according to Fitch.
Loan risks are also expected to decrease as Abanka has a lower share of bad loans than NKBM, while the liquidity of both banks is high enough that the acquisition is not expected to affect the liquidity of NKBM and a future merged bank.