After a pre-tax loss of EUR 101.2m in 2010 and EUR 539.1m in 2011, the data of Banka Slovenije show that the country's banks made a EUR 155.3m loss ahead of taxation in the first ten months of 2012, which is almost 25% more year-on-year.

The main reason for the negative results of Slovenian banks - especially the three biggest ones, which are majority state-owned - are write-downs and impairments, which amounted to EUR 840.3m in the January-October period of 2012, which is 19% more compared to the same period in 2011, when they were already very high.

The quality of banks' loan portfolio also continued to decline in 2012, although the growth of bad loans did slow down somewhat. Claims defaulted by over 90 days accounted for 14.3% of all banks' claims end of October, which is 3.1 percentage points more than at the end of last year.

Slovenia's two biggest banks expect an important tool for salvaging bank balance sheets in the form of state-backed systemic solutions, so they welcomed the law from October envisaging the establishment of a "bad bank" to take over outstanding loans of Slovenian banks.

However, while NKBM expects a turn in the credit crunch is tightly bound to solving bad investments, NLB stressed that such expectations were too "black and white".

According to NLB, the transfer of bad loans will first help ease the capital crunch and only then - especially if this brings enough foreign capital in the country - also loosen up the credit crunch, but only if the economy reduces its debts along with this.

Slovenian companies are relatively strongly indebted and must improve their ownership sources of financing, while capital hikes in companies will also be essential for the stabilisation of the economy, the bank believes.

Banks in Slovenia have sufficient liquidity despite the crisis, but according to the central bank, the solvency risk is increasing. However, this trend is expected to be broken off with the bad bank.

Nevertheless, capital injections are still expected to be needed in both NKBM and NLB in 2013, which is initially to be provided by the state, which plans to sell both banks later on. More is to be known about the sales towards the end of 2013.

NKBM improved its capital structure at the end of 2012 by selling insurer Zavarovalnica Maribor and with a buyback of hybrid bonds.

After a EUR 382.9m injection in June 2012, NLB announced at the end of the year it would need another EUR 375m to secure stability, so another hike is expected in mid-2013.

Last week, the state announced it would buy the 22% stake of NLB's second biggest owner, Belgium's KBC bank, for EUR 2.77m.

KBC decided to offload its non-strategic investment in line with its 2009 commitment to the European Commission, and the Slovenian Finance Ministry expects the consolidation of ownership will ease the salvaging of NLB and later also its sale.