The Slovenia Times

NLB Due Diligence Finds EUR 1.5BN in Lowest Quality Loans


Provisions have already been made for a third of the lowest quality loans, while insurance would cover another third of the bad loans.

The EUR 500m of new capital is the worst-case scenario, while under a "basic scenario", the bank would need no further funds, Šušteršič stressed.

Under government plans, state-owned banks, including NLB, would transfer their bad loans to the planned Slovenian Sovereign Holding, a super-custodian of all state assets.

The holding would then recover the loans or invoke the insurances, which would minimize losses and enable NLB to focus on its core business and attract investors, Šušteršič said.

The due diligence examined 75% of the bank's total portfolio. It was conducted by the European Resolution Capital Fund, Šušteršič said.

Loans have been categorised into three groups: unproblematic loans, which are being serviced regularly; "yellow" loans, which are overdue but can be reclaimed following restructuring; and "red" loans - the lowest quality loans, which are probably non-collectible.

Having acquired the results of due diligence, POP TV reported that loans to 20 companies account for the bulk of the "red loans". NLB will take the biggest hit, EUR 126m, on loans to the bankrupt Church-owned Zvon holding.

Its exposure to the construction sector will also cost it dearly, as NLB expects to lose millions in the bankruptcies of builders SCT (EUR 84m), Vegrad (EUR 85m), Primorje (EUR 72m) and Kraški zidar (EUR 23m).

One of the government's next steps will be to prepare a detailed, EU-compatible plan for clearing the banks' balance sheets. Šušteršič said Slovenia would take experiences of Ireland and Spain as an example.

Slovenia's second-largest bank, NKBM, is currently undergoing due diligence, and third-largest Abanka is next in line. The minister also expects to receive preliminary data on bad claims based on a bank survey conducted by Slovenia's central bank, Banka Slovenije.

NLB recently completed a EUR 381m capital increase, most of which came in the form of a hybrid loan provided by the state.


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