STA, 5 July 2019 - Biser Bidco, the sole owner of Slovenia's second largest bank NKBM, decided on Friday to pay out EUR 5 million in dividends, leaving EUR 126,66 million in profit undistributed.
The EUR 5 million payout is significantly lower than the year before, when Bidco Biser decided to pay out EUR 45.8 million in dividends. The AGM also granted a discharge of liability to the bank's management and supervisory boards.
The Luxembourg-based company is owned by US fund Apollo, which holds 80% of the company, and the European Bank for Reconstruction and Development (EBRD).
The two companies signed a contract to buy the Maribor-based state-owned bank for EUR 250m in mid-2015, meeting all the requirements in April 2016.
The AGM comes only a few weeks after NKBM was selected as the best bidder in the privatisation of Abanka. A EUR 444 million sales contract has already been signed, with the transaction pending regulatory approval.
The sale is expected to go through by the end of the year. The NKBM-Abanka merger, which is expected to be wrapped up in the first quarter of 2020, will create the second largest bank group in Slovenia.
STA, 2 July - Speaking to the Slovenian press in Budapest in the wake of a takeover of SKB bank, the CEO of financial services provider OTP Sandor Csanyi announced organic growth on the Slovenian market, with detailed decisions still subject to an ongoing analysis.
Csanyi described the operations of SKB, which has been sold to Hungary's OTP by the French group Societe Generale, as above average.
He said the foray onto the Slovenian market was important for OTP because of its proximity and promise of good results. Csanyi simultaneously sees the Slovenian market as demanding, arguing banks will have to operate more efficiently.
Still, major changes are not planned for now at SKB, which includes staffing. If there are no mergers, mass layoffs do not make sense, he said, while arguing it was of course normal for some posts to be centralised and that the detailed plans still depended on an ongoing analysis.
Csanyi did not wish to reveal how much OTP paid for SKB, the third largest Slovenian bank when it was acquired by Societe Generale in 2001.
He would also not say how much OTP had offered for Abanka, the current Slovenian no. 3 which ended up being sold by the state two weeks ago to the NKBM bank under its new owner, US fund Apollo. He said OTP just offered too little, while he described the sales procedure as entirely transparent.
According to Csanyi, OTP wants to grow in an organic fashion in Slovenia and reach at least a 10% market share.
The company is interested in helping finance the new Koper-Divača rail track, even if Hungary as a country would not participate, while Csanyi would also not mind participating in some other state projects.
Also highlighted was Ljubljana's Emonika, the stalled train and bus passenger terminal project, with Csanyi saying the situation was presently being examined.
STA, 17 June 2019 - The final decision on the privatisation of Abanka, Slovenia's third largest bank, has been deferred to Wednesday after the supervisory board of Slovenian Sovereign Holding (SSH) decided not to convene Monday as planned. Nevertheless, comments by Prime Minister Šarec suggest the bank will be privatised despite initial apprehension.
Karmen Dietner, the chief supervisor of SSH, said the session was postponed so that the supervisory can "thoroughly examine the large amount of material that represents the substantive basis for the decision."
Abanka must be privatised by the end of this month according to commitments Slovenia made in exchange for a state aid clearance it received from the European Commission in 2013.
The procedure went according to plan until Prime Minister Šarec cast doubt on the plan by tweeting on 7 June that SSH should think about its decision given that police investigations into the bailout are ongoing.
But Šarec appeared to backtrack today, telling parliament during questions time that he was not putting any pressure on anyone. "The decision on the sale of Abanka will be adopted by SSH," he said.
The statement appears to settle who will have the final say: after the original tweet, SSH said only the government, representing the state as SSH's sole shareholder, had the power to change the course of the privatisation.
"I believe [SSH supervisors] are capable of taking this decision themselves without making anyone else responsible," Šarec said.
Šarec suggested his original tweet had simply been a comment on new facts revealed at the time - the release of the criminal complaint against the 2013 board of the central bank.
"I'm not pressuring anyone... This is simply a major story and the criminal complaint was a new fact for me," he told MPs.
Commenting on the issue before the postponement decision was made, Infrastructure Minister Alenka Bratušek, who was prime minister at the time of the 2013 bank bailout, said that there were actually no new facts lately which could affect the sale.
"It is irresponsible to change political decisions based on one documentary show," the head of the coalition Alenka Bratušek Party (SAB) said in reference to RTV Slovenija's documentary about the bailout.
The film raised questions about the role of the European Commission in ordering that junior creditors of three banks be wiped out, prompting Šarec to publish the tweet in question.
Bratušek said that the coalition partners had immediately agreed that they would contact the European Commission last September to present the arguments for postponing the sale. This should have been done in September, not a week before the deadline, she added.
"When [SSH] is able to tell what will be the consequences of sale or non-sale, then we will be able to make the right decision. I hope that those who started this non-sale are aware of the possible consequences."
Coalition Pensioners' Party (DeSUS) head Karl Erjavec noted that the party had been against selling banks all the time, but added he did not believe anyone could stop the Abanka sale.
Asked about his potential vote in the government, the foreign minister said he would see what arguments SSH would give for leaving it to the government to decide.
Igor Zorčič, the head of the deputy group of the coalition Modern Centre Party (SMC), said that the "prime minister said he was reserved about this, and we are reserved even more."
"If SSH returns the issue to the government, it will probably need to decide in line with what its representatives have been saying," he added.
Luka Mesec of the opposition Left said that given Šarec's tweet, "we expect from the supervisory board to reject the sale of Abanka or leave it to the government to reject the sale and launch appropriate proceedings before the European Commission".
On the other hand, Jernej Vrtovec of the opposition New Slovenia said that Abanka needed to be sold, "not because of the commitments, but because I believe it would perform better in private ownership".
"I've had enough of these co-financing and recapitalisations of the banking system we had witnessed in the past," he said, adding that the pressure not to sale Abanka now, including from politicians, was inadmissible.
SSH is selling 100% of Abanka, with three binding bids reportedly in the EUR 400-500 million range, about a fifth below book value but, together with recent dividend payments, the proceeds would still be higher than what the state invested in Abanka as part of the bailout.
The SSH supervisors can either complete the sale directly or ask the government as the sole shareholder to have the final say, which is exactly what happened last year, when marker leader NLB was privatised.
STA, 11 June 2019 - Coalition parties are mostly in favour of somehow suspending the privatisation of Abanka, although opinions differ and at least some advocate the position that commitments must be honoured. In any case, it appears that the government will have the final say.
Abanka is supposed to be privatised by the end of the month according to commitments Slovenia made in exchange for EU clearance of state aid. But just weeks before the due date Prime Minister Marjan Šarec cast doubt on the procedure by calling for a re-examination of the commitments.
His party, the Marjan Šarec List (LMŠ), thinks it is necessary to clarify what went on in the run-up to the bailout, a reference to ongoing police investigations of the circumstances of the 2013 bailout.
"We'll see what goes on in the coming days and weeks. But these are things that cannot be resolved fast. The government will have to adopt a position and we have to clarify what had been going on," LMŠ deputy group leader Brane Golubović said on Tuesday.
Similarly, the Social Democrats (SD) think a reconsideration is in order. The government should "decide whether to carry out the sale or not, and whether to negotiate new terms with the Commission at least until court procedures regarding the correctness of the calculation of the bank capital shortfall are ongoing," deputy group chair Matjaž Han said.
The Modern Centre Party (SMC) shares the SD's opinion. "We advocate the position that the government should reconsider and, if necessary, stop the sale," deputy group leader Igor Zorčič said, adding that his party was "against unnecessarily selling state assets".
Only the Pensioners' Party (DeSUS) thinks obligations Slovenia made should be honoured. "The state has made some commitments regarding the bank and will probably have to realise them," the party said, but added that it would still be good if Slovenia had one state-owned bank.
The SAB, led by Alenka Bratušek, prime minister during the bailout, pointed out the coalition agreement said the government would try to convince Brussels it did not have to sell Abanka. But since the Finance Ministry has to its knowledge not yet launched the talks, "this indicates that we will probably sell Abanka".
Given that Slovenia has managed to rescue its banks with its own money and the economy without the intervention of the troika, the right approach could result in the Commission not insisting on the sale, the SAB believes.
The Finance Ministry would not comment on the issue.
The privatisation of Abanka had been considered a foregone conclusion until last Friday when Šarec cast doubt on the plan by saying on Twitter that SSH, which manages equity in companies on behalf of the state, may have to reconsider the move.
The tweet came after the public broadcaster RTV Slovenija aired a documentary about the 2013 bailout a day earlier, raising questions in particular about the role of the European Commission in ordering that junior creditors of three banks be wiped out.
SSH said yesterday it had to stick to the commitment to sell Abanka, which Slovenia made when it received clearance for state aid, but it also said that the government could take a final decision on the bank's sale.
The European Commission has said it expects Slovenia to honour its commitments.
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.
Mladina: Government failing to protect national interest from Hungary
STA, 19 April 2019 – The left-leaning Mladina is critical of Slovenia's reluctance to protect its national interests in a commentary accompanying revelations about connections between the European Commission, the Hungarian government and a bank vying to take over Abanka. The weekly underlines that strong financial institutions are the backbone of a sovereign country.
Editor-in-chief Grega Repovž says that a journalist of Mladina found new connections between the Hungarian government and a Hungarian official at the European Commission who insisted that Slovenia privatise its banks.
The situation is becoming increasingly problematic because the revelations trigger doubts about the actions of those involved in Slovenia, as well as the expertise of the European Commission.
Mladina shows connection between the Hungarian government led by Viktor Orban and István P. Székely, who works for the commission, also highlighting the efforts of Hungarian OTP bank to take over Abanka, which is being privatised.
It wonders why the Hungarian Imre Balogh, who also has links to the Orban government, was appointed the CEO of Slovenian bad bank in 2015 and why Laszlo Urban, a member of Orban's party Fidesz, was appointed a member of the NLB supervisory board in 2016.
"What sort of network has the Hungarian government already woven in Slovenia, apart from the obvious links to the Democrats (SDS) and the media it bought from it?" the weekly wonders, adding that Ambassador Edit Szilágyiné Bátorfi had met privately with Slovenia's central bank governor Boštjan Vasle.
The world is changing and countries are pursuing increasingly selfish interests. "Small countries, above all, need to think very carefully about future relations and how to position themselves today to be safe from turbulence in the future."
But Slovenia does not have many experts capable of thinking so far in advance, Mladina says under the headline Time for the Wise.
Strong banks and financial institutions are the backbone of a country but the incumbent government does not seem to be aware of this.
It has not stopped the privatisation of Abanka although countries are fighting for "the last segment of Slovenia's financial backbone" in plain sight.
Demokracija: Politicians should not speak of media freedom
STA, 18 April 2019 – The right-leaning Demokracija says in its latest commentary that the concern for freedom of the press expressed by ruling politicians in the wake of the alleged pressures on the private broadcaster POP TV should be taken with a grain of salt, adding that journalists should actually be worried about politicians who are doing that.
The ruling politicians were quick to swear on democracy and presented themselves as defenders of media independence from politics and capital, but this care of politicians for freedom of the press should raise concern among journalists.
Friday's editorial headlined Riders of Freedom notes that, for instance, MEP Tanja Fajon of the coalition Social Democrats (SD) said on Twitter that "if there is no democracy, there could be no media freedom".
Fajon's idea that democracy ensures freedom of the press is wrong. It is the opposite: freedom of the press, individuals, expression and economy can ensure democracy, which manifests itself in various forms, the editor-in-chief of the right-leaning weekly, Jože Biščak, argues.
Slovenia has around 20,000 laws and by-laws and also has media legislation. "What is regulated by law cannot be free. The media are therefore not free, they are regulated. And the government will make media legislation only stricter."
Some have gone as far as proposing licences for journalists, which would be a very totalitarian thing, as an "expert committee" appointed by politicians would determine who is journalist and who is not.
They say this is a method to fight bad journalism, protect the public from fake media and fake journalists, and improve media professionalism. But this has no basis in reality, as despite the increasing regulation, there are a lot more media outlets today, and they are much more accessible to an average citizen.
"It is not up to the state or politicians to recognise the legitimacy of the media, it is up to every individual to choose freely what sources and media they will believe. This is how it goes in free societies."
Biščak concludes by saying that those who think that the majority of Slovenian citizens are not capable of differentiating between disinformation and information and that politics could "help" them in that, are inclined to dictatorship.
All our posts in this series can be found here
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.
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.
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.
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
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.
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.
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
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
STA, 9 November 2018 - Slovenia's largest bank, NLB, fetched EUR 51.50 per share in the initial public offering, the bottom of the offering price range. The state will initially sell 59.1% of the bank for just below EUR 609m, but taking into account an over-allotment option that stake could increase to 65%.
Based on the pricing, the market capitalisation of NLB will be approximately EUR 1.03bn at the start of trading on the Ljubljana Stock Exchange and the Main Market of the London Stock Exchange on 14 November, a release from the bank and Slovenian Sovereign Holding (SSH) said.
The book value of the share capital at the end of June was EUR 1.51bn and the final offering price represents 68% of the share's book value. The SSH set the IPO offering price at EUR 51.50 and EUR 66 per share. The offering price in the aborted IPO last year was set at EUR 55-71.
The release says that the seller is making an additional 1,18 million NLB shares available pursuant to the over-allotment option which, if exercised in full, would increase the offer size to EUR 669.5m, representing 65% of the share capital on admission.
A stabilisation mechanism, the option is said to have been made available on the demand of large international investors. Stabilisation managers Citigroup and WOOD & Company will retain a portion of the shares to close deals within 30 days from listing in order to stabilise the price.
The shares are to be floated on the Ljubljana and London stock markets on 14 November when the settlement of shares is to take place. Investors have time to pay for their shares by then.
According to the pricing notification issued on NLB's website, the biggest single institutional buyers of shares are US financial fund Brandes Investment Partners (7.6%) and the EBRD (6.3%).
Since information on the buyers of shares in London are not public, detailed data on the dispersed structure of foreign owners will not be available when details are to be presented on 14 November.
Unofficially, the demand considerably outstripped what SSH was willing to accept in a bid to avoid the most predatory investors while forming a buffer if anything was to go wrong.
"We are very proud of having completed the offering of NLB's shares. Today's announcement represents a significant milestone in the privatisation process and in fulfilling our commitments to the European Commission," SSH chairman Lidia Glavina was quoted as saying in the release.
NLB chairman Blaž Brodnjak hailed the pricing as "another important milestone in the process of privatization". "We are looking forward to opportunities and challenges that the listing on the stock exchange will bring to the bank."
The government committed to sell the bank in exchange for the European Commission's approving a EUR 1.56bn state aid for the bank in late 2013.
While the state is to keep a controlling stake of 25% plus one share, it committed to sell at least 50% this year and any outstanding share of up to 75% minus one share by the end of next year.
Until the sale commitment is met in full, the bank will need to implement at least part of compensatory measures, including closing down offices in Slovenia, with 14 slated for closure in early December.
Moreover, since the state sold this year will be less than 75% minus one share, the bank will also have to start procedures to sell NLB Vita, its insurance subsidiary.
In addition, NLB will be able to approve new loans only if receives the minimum yield from equity instruments. NLB cannot do leasing business or make acquisitions either.
The bulk of shares in the IPO was offered to institutional investors. Retail investors were able to subscribe at least 10 shares at EUR 66 apiece. Unofficially they paid in some EUR 30m. The overpaid amount will be returned by 15 November.
The shares were also bought by members of the NLB supervisory and management boards. NLB chairman Blaž Brodnjak acquired 1,136 shares and the head of the supervisory board Primož Karpe 606 shares.
NLB paid out a total of EUR 378.2m in dividends to the state in the past three years. The state aid in 2013 amounted to EUR 1.56bn.
STA, 29 October 2018 - Shares of NLB, Slovenia's largest bank, will be priced at EUR 51.50-66 in the forthcoming initial public offering of up to 75% of the bank minus one share, valuing the entire bank at EUR 1-1.3bn. The pricing, revealed in a prospectus released on Friday, is at the lower end of expectations but reflects the current market situation.