The Slovenia Times

Open Questions About NLB Recapitalisation


The recapitalisation was proposed by the supervisors in November as a precaution measure. Yesterday, the government said it would buy from Belgian financial group KBC a 22% stake in the bank.

Owners representing 23.63% of capital attended today's meeting. CEO Janko Medja told those present that since late November, when the session was called, the bank recorded great changes for the better.

Capital adequacy is satisfactory and the bank's main owner - the state - decided to postpone the recapitalisation, Medja said. He added however that a capital increase will be needed next year.

"Our shareholders can sleep peacefully," said Medja and said that the bank will "keep up the fight" to remain stable and safe next year. They will also try to fill the gap in the bank's assets and continue restructuring.

Finance Minister Janez Šušteršič told the press after announcing the state would buy KBC's share yesterday that the cabinet believes a new recapitalisation is not yet needed and expects the bank to work on improving its capital adequacy.

The government wants the bank to sell non-strategic assets, including real estate and shareholdings, and close some of its unprofitable subsidiaries. It should moreover improve its cost-revenue ratio and look actively for potential strategic investors.

Medja said today that the management has set up a similar list of measures for itself.

According to the minister, the state already holds directly and indirectly a 64% stake in the bank.

The perfect scenario for the state would be for the recapitalisation to take place after it becomes clear which and how many of NLB's bad claims will be transferred onto Slovenia's bad bank and how much fresh capital will be needed, the minister said on Friday..

The total sum of bad claims at NLB could be estimated within three months, he believes. The recapitalisation could take place within six months, during which the bank could operate normally.

The government announced that it would buy the KBC's stake in the bank for EUR 2.77m only days after the Constitutional Court cleared the way for the establishment of a bad bank.

NLB's Core Tier 1 capital reached 10.2% after a EUR 382.9m recapitalisation earlier this year. However, capital adequacy is to deteriorate after additional reservations and impairments are formed.

The funds for 2012 recapitalisation of NLB have been provided by the state after the KBC withdrew at the last moment. The state thus bought EUR 320m worth of Co Co bonds in late June, while the state-run KAD and SOD funds provided EUR 62.9m. After the recapitalisation, the value of the NLB share was at EUR 37.

It is possible for NLB's core capital to drop below 7%, which means that Co Co bonds acquired by the state in the summer would be converted into equity. The minister said today this could happen in the first quarter or the first half of 2013.


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