Slovenia's Nova Kreditna Will Raise Up to $258 Million in Syndicated Loan

Nova Kreditna Banka Maribor d.d., Slovenia’s biggest publicly traded lender, plans to raise as much as 200 million euros ($258 million) in a syndicated loan without government support to ensure its long-term funding.

“We are completing a club deal with some of the European banks for financing without the state backing,” Matjaz Kovacic, chief executive officer of the Maribor-based lender, said in an interview. “We need long-term funding and the response from banks is great so the deal will be completed this month.”

The bank, also known as NKBM, is the one of the three top lenders in Slovenia that scrapped plans to sell corporate debt with the guarantees of the Slovenian government. Kovacic had said in a May 11 interview that Nova Kreditna would seek to take an international syndicated loan or issue corporate debt with no aid from the state.

Nova Kreditna’s profit surged in the first half of the year as the bank relied on household and company deposits to boost lending to the economy. Profit for the period was 17.2 million euros, compared with 2.8 million euros in the same period a year earlier.

“The upcoming loan is actually positive news, it really depends what will they spend the money on, which sector will get financing,” Jovan Sikimic, an analyst at Raiffeisen Centrobank AG said in a phone interview.

Nova Ljubljanska Banka d.d., the country’s largest bank, and the third-largest lender Abanka Vipa d.d. sold a combined 2 billion euros of corporate securities last year with government guarantees at the height of the credit squeeze.

‘Higher Revenue’

“The reliance on our deposit base enabled the bank to improve the net interest margin and the net fee and commission income, which translated into substantially higher revenue,” Kovacic said in an interview at the bank’s central Ljubljana branch on Sept. 1. “We have also seen an improvement in our insurance unit.”

Slovenia’s export-led economy returned to growth in the period from April to July as demand for its manufactured goods in Europe recovered. Gross domestic product advanced an annual 2.2 percent after shrinking for five consecutive quarters.

“The exports and import companies as well as manufacturing are under less pressure,” Kovacic, 42, said. “I expect an increase in investments from these companies and a rise in employment.”

Economic Drag

Slovenia’s construction industry is the main drag on the pace of the economic recovery, Slovenian Finance Minister Franc Krizanic said in a Sept. 2 interview. NKBM’s assets have deteriorated further at the end of second quarter and provisions for bad loans have not yet peaked as they did in the Czech Republic or Poland, Raiffeisen’s Sikimic said. Nova Kreditna sees provisions for bad loans rising to 53 million euros by year’s end compared with 77.4 million euros in 2009.

“Bad-loan reserves will rise by year’s end even though at a slower pace than in the last 18 months,” Kovacic said. “We have already put aside funds to cover possible bad loans to the construction industry, though the big question is possible bankruptcies in manufacturing and retail.”

Nova Kreditna dropped 5 euro cents, or 0.5 percent, to close at 10.50 euros in Ljubljana. The stock, the second-best performer in the benchmark SBITOP index, lost 8 percent of its value this year, giving the bank a market value of 274 million euros.

“NKBM trades at around 0.7 times this year’s book value, which is roughly at a 50 percent discount to the average of banks in our coverage,” Sikimic said. “Any noteworthy downside risk is rather limited from current levels, assumed that we would not see any major loan defaults in the second half of the year. ”

To contact the reporter on this story: Boris Cerni in Ljubljana, Slovenia, at bcerni@bloomberg.net

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