6

"It is a good thing that these tests are winding down after several months, because the banks and the financial sector and economy as a whole must now focus on the future," Hauc said, adding that he was not worried by what the results would show.

"We are awaiting the results in good condition and determined to press ahead with measures...to restructure the bank."

Echoing the sentiment of the central bank, Hauc rushed to alleviate fears about what would follow when the results are published. "There will be no impact on the operations of the bank with its clients...nor with access to deposits or their security."

He stressed that operating results for this year indicated that the negative trends were slowly being reversed at NKBM. The bank had EUR 66.9m in writedowns due to bad loans in the first nine months, which is less than in the same period last year.

Hauc would not speculate about how much fresh capital the bank would need, nor the exact value of toxic assets that the NKBM is expected to move to the BAMC.

"After the results of the stress tests are out, measures are no longer in our hands, as we will be bound to make writedowns based on a demands from Brussels."

From a little over EUR 1bn in bad loans held by the bank, he expects that the bulk will be moved to the bad bank. "We are making significant progress in this, as we have strengthened the sector for managing risky claims and have already began a transparent sale of real estate held by the banks and its subsidiaries."

The wait for the results of the stress tests has also put the search of a strategic partner for the bank on hold. "Potential partners are waiting for these results and are most likely expecting a state-backed capital injection. But I'm confident that, once we put this behind us, we will be able to restart talks in January."

Hauc reiterated his forecast that the bank could operate in the black next year, saying that the measures adopted by the bank should allow for this.

"Along with the transfer of toxic assets to the bad bank, we have made moves to optimize costs and we expect to have next year all the conditions for making a profit," he said, adding that the only threat to breaking even was a significant worsening in the economic situation.

In addition to cleaning up its balance sheet, the bank has been busy reviewing past operations and brining those responsible for bad loans to account. A number of lawsuits against former managers have been filed based on an audit carried out earlier this year, while Hauc expects fresh lawsuits to be filed in a couple of months.

"We are determined to take this action and it is our duty to protect the interests of the bank and all its stakeholders," he said.

Moreover, he announced that the NKBM was also planning to recapitalise its subsidiary, the Poštna banka postal bank, which has also been hit by bad loans, especially those related to the construction sector.

The value of the required capital injection for Poštna banka is not yet known, Hauc said, adding that the bank will also have to get clearance from the European Commission for the operation.

Despite its troubles in recent years, Hauc is confident that the future for the NKBM is bright. "My main wish is that we will become closer to our clients. We want to fully dedicate ourselves to our clients."