Ljubljana related

11 Jun 2019, 10:56 AM

STA, 10 June 2019 - The shareholders of NLB bank on Monday confirmed the proposal to pay out EUR 142.6 million in dividends at EUR 7.13 per share, and endorsed all new candidates for the supervisory board.

Mark William Lane Richards, Shrenik Dhirajlal Davda and Gregor Rok Kastelic have been appointed new supervisors and Andreas Klingen was reappointed effective on 11 June.

The management has been authorised to buy NLB up to 36,542 own shares on the organised market over the next 36 months to be used in remuneration packages.

It also received a discharge of liabilities despite a counterproposal by a shareholder who also proposed that the shareholders task the management with making provisions for lawsuits brought by wiped-out junior creditors.

The motion was rejected because it is not within the purview of the shareholders to do that.

Chairman Blaž Brodnjak described 2018 as a very special year since the bank was privatised, which will allow it to conduct business free of limitations imposed by the EU due to state aid commitments once the state has reduced its stake to 25% plus one share.

"When another 10% is sold, it will be able to breathe with full lungs and start competing on a level playing field," he said.

As for business prospects, Brodnjak said the trends were good but indicated the bank was remaining vigilant since the region where it operates is very open and hence susceptible to external shocks.

Since last year's initial public offering, NLB's ownership is dispersed among small domestic shareholders and foreign institutional investors.

The state's stake has been reduced to 35%, but it is expected to be reduced further by the end of the year to 25% plus one share.

One benefit of the state no longer exerting majority control is that the board members are no longer subject to pay restrictions imposed on managers of state-owned companies.

Supervisory board president Primož Karpe said the debate about future remuneration packages has been concluded and pay levels will range from EUR 340,000 to EUR 420,000 gross starting with salaries for June.

This is a significant improvement from current levels: the annual report for 2018 shows that CEO Brodnjak got EUR 192,000 last year, while foreign board members got slightly more, up to EUR 210,000.

"We reached a consensus in the end, bearing in mind that we wanted a stable and motivated board," Karpe said about the new remuneration packages.

05 May 2019, 11:10 AM

STA, 3 May 2019 - The French group Societe Generale signed an agreement on Friday with OTP Bank Group on selling SKB Banka and its subsidiaries to the Hungarian financial service provider, which will thus enter the Slovenian market. OTP is also reportedly one of the three most serious bidders for the country's third largest bank Abanka.

 

The purchase price was not revealed in today's press release by Societe Generale, which had taken over SKB in 2001, when it was the third largest Slovenian bank.

According to the agreement, OTP will take over SKB Banka, which is still among the top five largest banks in the country, as well as its subsidiaries SKB Leasing and SKB Leasing Select.

The takeover will be completed pending approvals of both banking regulators, Banka Slovenije and the European Central Bank, as well as competition regulators in the upcoming months.

The French group has already sold a number of banks in SE Europe, striving to improve its solvency ratio and lower the risk exposure level.

On the other hand, OTP Bank Group has strengthened its foothold in Central, Eastern and SE Europe in recent years, mostly through taking over businesses from Societe Generale.

OTP, Hungary's largest commercial bank and one of the largest independent financial service providers in Central and Eastern Europe, already made an attempt to enter the Slovenian market in 2014, when it was one of the bidders for the bank NKBM, according to unofficial reports.

The Hungarian bank has also confirmed its interest for Abanka, with two other companies vying to take over the third largest Slovenian bank, the private equity fund Apollo and Serbian bank AIK Banka.

Besides agreeing on the takeover, Societe Generale and OTP have also come to an agreement on the cooperation in providing various financial services, including investment banking, capital markets, liquidity management, with Slovenia being part of this agreement.

The sale of SKB is coming despite the bank's positive business results in the last year. SKB Banka generated EUR 57.6m in net profit in 2018, a 32.7% increase year-on-year, marking the bank's second-best result since it became part of Societe Generale.

19 Apr 2019, 16:20 PM

STA, 17 April 2019 - Slovenians prefer to save in bank deposits, however mutual funds have seen an increase in assets and savers. At the end of 2018 Slovenian households had 1.7 billion euros invested in mutual funds, said Karmen Rejc, director of the Slovenian Investment Fund Association.

The average European invests 10% or 5,800 euros of their assets in mutual funds, whereas in Slovenia that figure is lower, namely 6% or 900 euros, Rejc said at a news conference leading up to Friday's World Mutual Fund Day.

Matjaž Lorenčič, president of the Slovenian Investment Fund Association and Infond Investment Funds chairman, said that out of the over 20 billion euros in last year's bank deposits, between 250 and 300 million euros were lost due to inflation.

Slovenian asset managers manage approximately 2.7 billion euros in 100 mutual funds. Adding the assets in alternative funds and those managed based on contracts for the sound management of operational risk, this figure amounts to approximately 3.7 billion euros. The number of investors in mutual funds is approximately 450,000.

Slovenian mutual funds are managed by six companies. Last year they recorded an inflow of approximately 540 million euros, an outflow of 550 million euros. This year, cash flow is positive, according to Lorenčič.

There are 96 foreign mutual funds operating in Slovenia. These manage 211 million euros in assets.

17 Apr 2019, 14:25 PM

STA, 17 April 2019 - Abanka, the country's third largest bank, posted EUR 66.7m in net profit last year, up 56.6% over 2017, according to the audited annual report released on Wednesday.

The report says that the optimisation of operations of Abanka continued in 2018, reflecting in a reduction of operating costs, which were down by 2.4% or EUR 1.8m compared to the year before.

Net interest revenue amounted to EUR 60.6m, down from EUR 71.9m in 2017, while net non-interest revenue was up to EUR 64.4m from EUR 46.8m. Impairments and provisions amounted to EUR 22m, up from EUR 8.2m in 2017.

Abanka's total assets amounted to EUR 3.73bn at the end of last year, up from EUR 3.66bn at the end of 2017.

The Abanka group's net profit was up by 57% to EUR 65.6m, while net interest revenue was down by almost 17% to EUR 61.1m.

The bank continued to lower the share of non-performing loans, which dropped by 5.6 percentage points at the group level to 4.6% through the sale of non-performing claims.

Abanka noted that the operating results, the sound capital position, a high level of liquidity and a significant reduction in non-performing loans also resulted in an improved credit rating by Moody's to investment grade in 2018.

The bank has been in 100% state ownership since it was bailed out with taxpayer money in 2013. The government must privatise Abanka to meet the commitments it made in exchange for the EU clearance of the state aid.

According to unofficial reports, three binding bids for the bank were submitted in the second half of March.

The media have mentioned the US private equity fund Apollo, Hungarian bank OTP, Serbia's AIK Banka, Austrian Erste Group, as well as US private equity funds Blackstone and Advent International as potential buyers.

While the pricing of the offers remains a secret, analysts estimated late last year the bank was worth EUR 340-460m based on the book value.

25 Mar 2019, 11:44 AM

STA, 22 March 2017 – NKBM (Nova Kreditna Banka Maribor), Slovenia's second largest bank, posted a group net profit of EUR 72.5m for 2018, a year-on-year increase of 50%, shows the audited annual report released on Friday.

 

The bank recorded a substantial increase in net interest revenue, which was up 32% to EUR 109.6m, whereas non-interest revenue declined marginally to EUR 59.3m.

NKBM also booked substantial revenue, EUR 16.5m, from the cancellation of write-downs and provisions, an indication of an improving credit portfolio.

The share of non-performing loans declined by over four percentage points at group level, the bank said in a press release.

The bank remains well capitalised, with the common equity tier 1 capital ratio, a key benchmark of capital adequacy, remaining roughly level at 20.13%.

Total assets rose marginally to just under EUR 5bn.

Keep up with all the business news in Slovenia here

13 Mar 2019, 06:25 AM

STA, 12 March 2019 - The Specialised State Prosecution, which deals with the most complex forms of crime, has told the STA that investigations continue into a number of cases of banking crime. Some tangible success has already been achieved, with two bankers, both former executives at Factor Banka, sent to prison so far.

The specialised service, which was launched in its current form in 2012, said it presently had 22 cases in the investigation. These involve 127 individuals and legal entities, 82 of which are practising or former bankers. The total damage in the cases is estimated at EUR 221.67m.

There are moreover 15 cases where a criminal charging document has already been filed. 48 individuals face charges, 29 of whom were working in the banking sector at the time of the alleged crime. The total damage estimated for these cases is EUR 92.19m.

While there are several more open cases in the pre-trial phase, the beginning of 2018 saw the first final guilty verdict for bankers in Slovenia.

It involved Dušan Valenčič and Boris Pesjak, the former executives of Factor Banka, the small bank that was liquidated in early 2016. Found guilty of abuse of office, both are serving prison sentences of 15 months.

Another Factor Banka executive, Mojca Lampret Križaj, pleaded guilty to abuse of office in 2017 and received a suspended sentence of three years.

Meanwhile, a trial has been underway at the Ljubljana District Court since 2015 against four former managers of the Slovenian branch of Hypo Alpe Adria - Andrej Potočnik, Andrej Oblak, Anton Romih and Božidar Špan - who stand accused of defrauding the bank of millions of euro.

A fifth defendant in the case, the former boss of bankrupt builder Vegrad, Hilda Tovšak, pleaded guilty in return for a suspended sentence of a year and a half.

Also still open is the case against former board members of the recently privatised NLB - Draško Veselinovič, Miran Vičič and Matej Narat.

The trio have been accused of acting with criminal intent in approving in 2009 a generous loan to Simona Dimic, an aide to Borut Pahor, the head of state, when he served as prime minister. They were found innocent in 2016, but the Higher Court ordered a retrial.

Another NLB executive, Dušan Šuštar, was found guilty of approving two loans worth EUR 2.75m in 2008 although knowing they would not be returned. He got four years in prison, but the verdict is not final yet. Several more lower profile cases of guilty verdicts related to NLB were listed by the prosecution.

The latest senior bakers to be found guilty of fraud committed at the height of the economic and financial crisis were Romana Pajenk and Milana Lah, who served as CEO and board member, respectively, at Probanka, a similar case to Factor Banka.

The pair received in January this year suspended sentences of 23 months with four-year probation for defrauding two businessmen of EUR 1.5m. The prosecution had sought four years in prison and has announced an appeal.

08 Mar 2019, 14:30 PM

STA, 7 March 2019 - Slovenian banks recorded a cumulative net profit of just over EUR 496m in 2018, the highest since the pre-crisis year 2007 and an increase of almost 17% over the year before on the back of robust growth of non-interest revenue.

Whereas net interest revenue rose by just 3% to EUR 672m due to persistently low interest rates, non-interest revenue surged by over 14% to EUR 482m, shows a central bank report released on Thursday.

The figure confirms earlier findings that banks have been increasing service fees to offset low interest rates.

The sector also profited from the cancellation of provisions for non-performing loans, though that contributed only EUR 48m to the bottom line, a tenth more than in the year before.

Operating costs increased only marginally, by 0.6% to EUR 700m.

Total assets increased by 2.2% to EUR 38.78bn, in what is the second consecutive annual increase.

Non-banking deposits were up 5.3% to almost EUR 30bn, mostly due to a EUR 1.2bn increase in household deposits.

Loans to the non-banking sector grew at a rate of 3.3% on the back of robust lending to households, which now account for a quarter of total outstanding loans.

Asset quality improved last year as banks reduced exposure to non-performing loans to 4% from 6% measured by the broad definition of the European Banking Authority.

Despite the rapid improvement, the share of non-performing loans to the corporate sector remains high, at 8.4%. This is however a 4.5-point improvement on the year before.

All our stories about Slovenia and banks can be found here

20 Feb 2019, 18:00 PM

STA, 20 February 2019 - Slovenian bank NKBM has warned against suspicions transactions from Slovenia mostly to Turkey which it believes amount to a romance scam. Slovenian women transferred over 200,000 euros to persons they met online in 14 such transactions the bank detected in January and December alone.

The bulk of the money went to Istanbul but some transactions were also made to Cyprus, Spain, the US and Estonia, Laura Jekler, head of NKBM's anti-fraud department, told the press in Maribor on Wednesday.

The con-artists usually get in touch with the victims on Facebook or Messenger. The sums the women are asked to wire are low at first, 100-200 euros, but soon rise to as much as 10,000s euro.

Among the 14 transactions, more than 60,000 euros was transferred in a single case, the bank official explained.

Tadej Hren from SI-CERT, the national cybersecurity response centre, said the money most probably ends up at bank accounts of money mules, who then forward it.

"The trace of the money disappears very quickly," he said, adding the first such case in Slovenia was identified in 2013, but this practice gained ground last year.

While one to two cases had been discovered before 2018, there were as many as 40 reports of such fraud last year.

"The reported cases are probably just the tip of the iceberg because many people just don't not want to talk about it," Hren explained.

A major obstacle to investigating this illegal practice is that victims do not want to face the truth.

The crooks usually target middle-aged women who are often lonely, divorced or live on their own, promising them happiness, said Hren.

Some women have admitted the whole thing seemed suspicious but they did not want to stop it because they were happy, said Hren, adding "it hurt them more to be rejected than to lose the money".

NKBM employees have been instructed to be alert and always check the origin of the money if cash is used in suspicious bank transfers.

The bank has also launched a special website with information on how to identify such fraud and how to act, advising the victims to report it to the police.

Prosecuting such fraud is difficult though, especially since the suspects often come from countries with loose anti-money laundering legislation.

25 Jan 2019, 10:20 AM

STA, 24 January 2019 - Slovenia will have to defend itself in front of the EU Court over its "violation of the inviolability of the archives of the European Central Bank (ECB) and the duty of sincere cooperation in the context of the seizure of ECB documents," the EU Commission announced on Thursday.

The case refers to a July 2016 police raid of the offices of Slovenia's central bank, a part of an investigation into the causes of the late-2013 bailout of the Slovenian banking system.

Since the Slovenian central bank is a part of the ECB system, some of the files seized pertained to the ECB, which is shielded from domestic law enforcement in member states by a special protocol to the Treaty on the Functioning of the European Union.

The Commission said today the Slovenian authorities had seized information that included ECB documents and hardware, whereby "the ECB had given no prior authorisation for the seizure of those items, and subsequent attempts by the ECB to resolve the matter amicably have been unsuccessful."

"The unilateral seizure by Slovenia of ECB documents in an investigation about matters under national law at the premises of the Bank of Slovenia constitutes a violation of the inviolability of the archives of the ECB," the Commission's press release reads.

Unofficial sources say that the case is being closely monitored in Brussels as it is an important precedent.

The European Commission is said to be wanting access to the seized documents and information about which documents have been seized, but the Slovenian authorities have failed to cooperate.

The Ministry of Justice said it would be able to respond to the Commission's decision once it received and examined the wording of the lawsuit, of which it had not been notified.

If the EU Court establishes that Slovenia has not fulfilled an obligation as stipulated by Article 260 of the Treaty on the Functioning of the European Union, the government will take appropriate measures to implement the ruling, the ministry added.

The police raid in which the documents were seized targeted the management of the central bank and their role in the December 2013 bailout, which resulted among other things in the wiping out of holders of junior debt.

As a result of the investigation, the National Bureau of Investigation (NBI) filed at the end of December a criminal complaint on suspicion of abuse of office. Unofficially, it has been filed against all individuals who served as board members of the central bank at the time.

15 Jan 2019, 10:20 AM

STA, 12 January 2019 - The global financial crisis, which erupted in 2008 with the collapse of Lehman Brothers, hit Slovenia with a delay, but it exposed huge weaknesses that had built up in the majority state-owned banking system. By 2012 Slovenia was locked out of financial market, and it took until the bank bailout in late 2013 before the sector recovered.

In the run-up to the crisis, credit growth was buoyant, driven by cheap money after interest rates collapsed following the changeover to the euro in 2007.

Loans to the non-banking sector surged by almost two-thirds between 2006 and 2008. Banks financed the expansion mostly by securing financing from foreign banks.

The crisis thoroughly razed the banking landscape.

Banks' total assets peaked at over EUR 50bn in 2010 before reaching a low of just 37bn six years later.

Related: Economic Crisis that Produced a “Lost Decade” in Slovenia

Similarly, lending contracted by more than a third between 2010 and 2016, as banks deleveraged to pay back their foreign loans rather than extend new loans to Slovenian businesses.

On the other hand, deposits remained robust as households responded to the crisis by tightening spending, which deepened the economic crisis but gave banks a lifeline when foreign financing dried up.

The total volume of loans slipped slightly during the crisis as households drew down their savings, going from EUR 23.9 bn in 2010 to EUR 22.4bn in 2013, but the contraction was never as severe as the tightening of lending.

Bank statistics

       Total assets     Loans to non-banking sector

          (in EUR m)       (in EUR m)

2006      34.1             20.6

2007      42.6             28.5

2008      47.9             33.7

2010      50.8             34.7

2013      40.3             24.3

2014      38.7             21.5

2016      37.1             20.5

2018*     38.3             22.2

* As of 31 October

Source: Slovenian central bank

A property bubble that burst in 2010

The credit explosion leading up to the crisis inflated a property bubble, which burst post-2010 as large construction companies that also financed their own projects collapsed one after the other, as did over-leveraged financial holdings.

The share of non-performing loans started to soar, forcing banks to set aside increasing provisions and writing down assets, leading to a negative spiral.

Whereas foreign-owned banks received capital injections from their shareholders, the three biggest banks in the country were all in state ownership, requiring growing amounts of public funds to keep them afloat.

Video: Slovenia's Economic Crisis, 2012

The story came to a head in December 2013, when the treasury spent EUR 3.5bn recapitalising NLB, NKBM and Abanka, wiping out shareholders and junior bondholders in the process. Two smaller banks, Probanka and Factor Banka, were wound down.

At the same time, about four billion euros in non-performing loans were transferred onto the newly-established Bank Assets Management Company (BAMC), which also absorbed the assets of Probanka and Factor Banka.

After the banking system was bailed out banks were flush with cash and largely freed of non-performing loans, but it took several years before lending recovered.

Bank performance

      Net profit       Net provisions, write-downs

         (in EUR m)       (in EUR m)

2008     208              -120

2009     162              -279

2010     -99              -811

2013   -3439             -3809

2014    -106              -650

2016     364               -96

2017     443                43

2018*    452                45

* As of 31 October

Source: Slovenian central bank

Lawsuits related to the period

Echoes of this period continue to reverberate five years later, as lawsuits by subordinated bondholders and shareholders wiped out in the bailout make their way through courts.

These investors have targeted in particular the valuations that determined the size of the bailout, alleging that Slovenia had been the target of speculators and a guinea pig for new EU bank resolution rules.

The commotion over the bailout resulted in criminal investigations at the central bank, the resignation of governor Boštjan Jazbec and, recently, criminal charges against the board of governors serving at the time of the bailout.

The costs of the bailout accounted for a significant chunk of the increase in general government debt during the crisis, which ballooned from 22% of GDP in 2008 to almost 84% of GDP by 2015.

The surging debt was accompanied by growing debt servicing costs, as the precarious state of the economy during the crisis led to higher borrowing costs; for a while, Slovenia was practically locked out of the eurobond market and had to borrow in US dollars.

Public debt did not start to decline until 2016, when the economic recovery was already in full swing. In the past two years the treasury has been busy replacing dollar debt with euro bonds and debt has started to decline at a more rapid pace towards the eurozone ceiling of 60% of GDP.

General government finances

      Deficit       Debt        Debt servicing costs

         (% of GDP)  (% of GDP)   (EUR m)

2008     -1.4         21.8         326.1

2009     -5.8         34.6         326.4

2010     -5.6         38.4         476.7

2011     -6.7         46.6         510.6

2012     -4.0         53.8         632.5

2013    -14.7         70.4         827.0

2014     -5.5         80.4        1082.6

2015     -2.8         82.6        1028.8

2016     -1.9         78.7        1064.0

2017     +0.1         74.1         977.3

Source: Eurostat, Statistics Office, Ministry of Finance

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