The Slovenia Times

NLB Supervisors Back 400M Capital Hike


The central bank, Banka Slovenije, ordered NLB to improve capital adequacy by the end of the year and to achieve target ratios by means of a capital increase.

"Considering the likelihood that negative trends will prevail in the broader business environment in the implementation of the strategy, the bank needs more capital as a backup to implement the strategy," chief supervisor Marko Simoneti said in a written statement.

NLB chairman Bozo Jasovic told the public broadcaster TV Slovenija that the higher capital hike was proposed to create a safety reserves. "So that we had enough capital in the worst-case scenario not needing to ask the owners or other investors for capital again."

"If the capital rising in the planned amount and time frame is not implemented, the strategy of the NLB group will need to be amended," according to Simoneti.

A continuation of the strained situation in the economy, coupled with a further deterioration in some industries is reflected in additional weakening of the loan portfolio and consequently the need for provisions and impairments.

In response to an intense deterioration of the portfolio, the NLB management has adopted measures for a more comprehensive and efficient management of bad investments, the release said.

In light of those developments, the bank expects to end the year in the red, according to Simoneti, who also assured the public of the bank's high liquidity; liquidity reserves top EUR 3bn.

Jasovic confirmed for TV Slovenija that the bank was expected to make a loss for the year, but would not talk about figures. Media reports suggest the loss will be EUR 70m, to which Jasovic said: "the figures circulating are not the product of our analyses".

The bank is intensively implementing measures to attain the goals set in the strategy by 2015, adopted last year, such as divestment, a reduction in risk-weighted assets and an improvement of cost efficiency.

"Even though the bulk of measures are being implemented according to plans, the implementation of the strategy has not yet yielded the expected results due to unexpected risks in the environment which will likely pose a major obstacle in the implementation of the strategy in the future."

The chief supervisor pinpointed the planned sale of Banka Celje, a key divestment item in the strategy, which he said was not running according to expectations. The sale of shares seized in the execution of collateral is being slowed down pending the regulators' approval.

Scrapping non-strategic activities is a demanding process "which on completion as a rule initially shows losses, which the bank can offset through enforcement in the longer run".

The shares that the bank has not managed to sell yet would require revaluation considering the falling market prices, which reflects directly on the operating results, Simoneti said.

It remains unclear who will supply the funds for the capital hike. The investor is being sought by a group headed by the Capital Assets Management Agency. The owners need to reach agreement by the end of the month.

The European Bank for Reconstruction and Development and the IFC, a member of the World Bank Group, are reportedly ready to raise the extra capital instead of the state this time.

Unofficially, their representatives have visited Ljubljana over the matter, but the main obstacle is said to be the price at EUR 116 per share, the TV Slovenija report said.

The broadcaster also reported that NLB would have to form more than the initially planned EUR 180m in provisions and writedowns. Jasovic said that 15% of the claims were bad and that the figure was growing still.

The appointment of a task force is being mulled to "deal with restructuring of the companies that still have business potential. It's not just enforcement, but a reprogramming, restructuring of liabilities," Jasovic told TV Slovenija.

According to him, agreement on the conversion of the flag carrier Adria Airways's debts has been reached. NLB will transform a quarter of Adria's debts into an ownership share, the report said.


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