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It was on 4 April that NKBM launched the first stage of its capital increase, valued at some EUR 132.4m. Existing owners, and subsequently other investors, were invited to subscribe to just over 13 million new shares to be double-listed in Ljubljana and Warsaw. The result was a much-needed influx of money into Slovenia's second largest bank - in the first round investors bought over eight million fresh shares, worth a total of EUR 64.45m. In the second round of the increase, 15 percent of shares were made available to smaller investors in Ljubljana and Warsaw and the rest to domestic and foreign institutional investors.

There was one big potential investor which, officially speaking, decided not to participate in the recapitalisation: namely, the state. Having recently supplied Slovenia's largest bank NLB with fresh investment, the government took the decision to step back from the NKBM capital injection. And yet some fancy footwork has ensured that the state will retain its significant influence in the bank in which it has owned a fifty one percent stake. The Capital Assets Management Agency (AUKN) took advantage of the state's preemptive right, as an existing owner, to purchase shares. But it did so by transferring the purchase right to state-owned power utility Gen Energija, national grid operator ELES and postal company Pošta Slovenije. The three firms reportedly bought EUR 20m, EUR 7.5m and EUR 20m worth of fresh shares respectively and, in so doing, ensured continued and strong state involvement in NKBM.

Political meddling?

This move by the guardian of the state's capital stakes in companies has quickly become a very hot political potato. Allegations have flown that Finance Minister Franc Križanič interfered in the decision-making process at AUKN, urging the body to find a way to purchase shares. Križanič has strongly rejected the claims. He is not the only one issuing denials over the matter - Prime Minister Borut Pahor has been forced to defend himself against suggestions that he allowed himself to be manipulated over the capital increase. The premier says the agency's management presented legal and economic reasons for state participation in the increase; reasons which convinced him that the agency's decision was the right one. He has assured the public that AUKN remains a politically independent body.

But even some within Pahor's own government are unconvinced by his claims. Economy Minister Darja Radić has argued that the agency's decision to carry out the capital increase on behalf of the state runs contrary to previously-stated government policy. Gregor Golobič agrees. The Minister for Higher Education, Science and Technology says "the prime minister is very wrong in this case".

"The move of the agency, which is obviously sponsored by the Finance Ministry, is an irresponsible, harmful action which runs contrary to the past talks of the government," Golobič argues. "[The agency] has decided to pursue some non-transparent logic of a not yet drafted government strategy on the financial sector while completely ignoring all priorities that have been agreed upon as part of the energy policy".

There are also fears that the move could be harmful to the three state companies which have bought shares in NKMB. Those worries seem to be borne out by a press release issued by ELES. The firm, which confirmed it had purchased EUR 7.5m of fresh NKBM shares in line with the agency's decision, expressed hope that AUKN would task the company to sell the shares "as soon as possible", and with profit. "Otherwise we'll be forced to take out a loan in the amount of the value of NKBM shares to finance our future investments," the company added.

Bad image

Those in the Slovenian banking industry, meanwhile, are concerned that the agency's actions could harm the image of the sector.

"Treating NKBM, which wants to get listed on a foreign stock exchange, in this way can cause the bank a lot of damage, which gives a bad impression about the entire banking system and financial stability in general," believes France Arhar, chairman of Unicredit banka Slovenije.

NKBM may now have the additional capital that its management has long argued it needs. But the question that many are now asking is: at what cost?