NLB bank more than trebles Q1 net profit

Ljubljana – NLB, Slovenia’s largest banking group, reported a net profit of EUR 64.6 million for the first quarter of the year, about 3.5-fold the figure posted in the same period a year ago (EUR 18.3 million).

According to a regulatory filing posted with the Ljubljana Stock Exchange, the group’s net interest income rose by 26% to EUR 97.5 million, of which EUR 24 million was generated by the NLB’s latest acquisition, the Serbian group Komercijalna Banka.

The acquisition of the majority stake from Serbia was finalised late last year. In the subsequent takeover bid in spring, NLB increased its stake from 83.23% to just below 88%, follows from the interim report.

The release accompanying the report says the integration process of Komercijalna Banka continues to progress well, “with first sales initiatives showing positive response in the market amidst an improved macro environment and the first substantial wave of voluntary leaves of employees in progress”.

The group’s net interest income without the contribution from Komercijalna Banka was down year-on-year despite positive growth in loans in year to date in almost all banks, as pressure on interest rates continued.

Net fee and commission income increased by 27.6% to EUR 54.1 million, again mostly due to the contribution of Komercijalna Banka, but also as a result of a very solid asset management and bankassurance performance in the still challenging environment.

Komercijalna Banka and the costs of its integration also contributed to the increase in total costs at the group level by 29% to EUR 96.6 million, but they dropped by EUR 3.1 million to EUR 43.2 million at the parent bank NLB “as a result of continuing strict cost discipline”.

The parent bank posted EUR 39.3 million in profit, which compares to EUR 7.5 million in the first quarter of 2020.

Its net interest income fell by 9% to EUR 33.7 million, while net fee and commission income increased by 6%, less than third the rate at the group, to EUR 27.6 million.

Virtually all subsidiaries operated at a profit with the exception of NLB Lease&Go and the Banja Luka bank, which is part of the Komercijalna Bank group, follows from the report.

The group released EUR 15.5 million in net impairments and provisions, mostly due to repayment of several exposures and changes in credit ratings at the parent bank.

In the first quarter last year, EUR 28.3 million in impairments and provisions were formed due to the Covid-19 pandemic.

The parent bank released EUR 13.5 million worth of impairments and provisions in the first quarter of this year after forming EUR 14.2 million in the same period a year ago.

The group had 8,725 staff and almost EUR 20 billion in total assets at the end of March, of which EUR 11.3 billion at the parent bank.

Gross loans to customers increased from EUR 10.03 billion at the end of 2020 to EUR 10.21 billion as deposits increased from EUR 16.40 billion to EUR 16.73 billion.

The non-performing loans ratio (NLP) remains stable at 3.5% or 2.3% according to the European Banking Authority’s definition with a NLP coverage ratio of 56.6%.

The total capital ratio, at 16.1%, was down by 2.4 percentage points from the end of March 2020 and down 0.5 point from the end of 2020, which the bank says is still above regulatory requirements and chiefly a result of a decrease in minority interest due to the bid to take over Komercijalna Banka.

The group approved EUR 2.28 billion in loan moratoriums and EUR 119 million in new financing. Almost 78% of the moratoriums have already expired.

The report says that the group’s liquidity position remains very strong, with high level of unencumbered liquidity reserves.

The results were reviewed by the NLB supervisory board today with its chairman Primož Karpe saying the board was satisfied with the results.

NLB CEO Blaž Brodnjak commented that the journey to sustainable banking in the region was long and challenging, but the bank knew what its goal was.

“As an institution of a systemic reach, we want to be one of the key drivers of change and one of the most meaningful companies and most desirable employers in the region,” Brodnjak was quoted as saying.

After privatisation, the state has kept 25% plus one share in NLB. Other major owners remain financial firms Brandeis Investment Partners and Schroders and the European Bank for Investment and Development, which hold 5-10%.

Meanwhile, 57.68% of owners are hidden behind the US’s Bank of New York Mellon, which acts as the depositary, and the remaining 17.32% are held by other shareholders.