The Slovenia Times

NLB Rated Speculative Investment by S&P


The BB- rating is considered the highest speculative grade by investors, according to S&P, which also announced it would hold the bank on negative ratings watch for now.

In its ratings release on Tuesday, the S&P said that the NLB has a dominant market position at home, moderate capital level, but very high credit risk despite the December EUR 1.5bn state bailout and subsequent transfer of toxic assets to the bad bank.

The bank's business position was assessed as "adequate" due to the bank's dominant position, although the agency warns of "muted business prospects for Slovenia banks, particularly in the corporate segment" due to the weak economy.

The main concern for S&P is the bank's credit portfolio, assessing that the bank is still saddled with a high amount of problem loans stemming from its exposure to the heavily leveraged corporate sector.

This is also a key reason for the negative outlook.

S&P assesses that despite the NLB's systemic position and the institutional support it enjoys - which will be subject to tighter EU rules in the future - the bank will need to improve the quality of its assets and implement its strategy to stabilise its outlook.

As part of the state bailout, the bank has committed to a restructuring plan as part of which it has cut costs by closing several foreign subsidiaries and slimming operations at home, including by cutting 700 jobs to 2,800.

The bank has also embarked on a shift to small scale investments, with the focus on small- and medium-sized companies, while limiting its involvement in large-scale construction projects and high-leverage financial holdings.


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