Slovenian NLB Meets Capital Levels, Nova Kreditna Fails
Nova Kreditna Banka Maribor d.d. failed to meet the capital requirements set by European banking regulators while its larger rival, Nova Ljubljanska Banka d.d., passed the examination after the government injected fresh capital into Slovenia’s biggest lender.
Nova Kreditna, based in Maribor, fell short of a core Tier 1 capital ratio of 9 percent while NLB in Ljubljana met the requirement of the European Banking Authority, the lenders said in separate statements late yesterday. NLB received 381 million euros ($492 million) of state funding in June.
“A last minute capital injection by the government saved NLB, though Nova Kreditna was left to fail,” Andraz Grahek, an independent financial adviser and a former fund manager at KD Funds LLC in Ljubljana, said. “As both state-owned lenders need additional capital, this could be an opportunity for the government to find a suitable banking group partner for one of the banks, probably Nova Kreditna (KBMR), to provide capital and essentially take it over.”
State-owned banks, which are struggling with rising bad loans as the economy enters its second recession in three years, are at the focus of investors’ concern that Slovenia may become the sixth euro-region nation to ask for a bailout. Confidence in the European Union’s banking industry plunged as the sovereign debt crisis that started in Greece extends into its fourth year.
Nova Kreditna shares jumped the most since Aug. 27 on the Ljubljana Stock Exchange today, climbing 9.6 percent to 1.491 euros and valuing the lender at 58.3 million euros.
Moody’s Investors Service “expects the operating environment for Slovenian banks to remain challenging” as it kept a negative outlook on the industry, the ratings company said in a statement late yesterday. It forecast the economy will shrink 2 percent this year and 1.4 percent in 2013.
“This difficult operating environment will continue to weigh on fragile business confidence and limit demand for credit,” the ratings company said. “Slovenian banks’ high dependence on wholesale funding will remain a major challenge as they face difficult refinancing conditions amid volatile international markets.”
Asset-quality ratios, capitalization levels and provisioning buffers of Slovenian banks remain among the weakest in central and eastern Europe, Moody’s said.
Lawmakers in the capital Ljubljana last week voted to pass legislation to stabilize the banking industry. The plan creates a special government agency to take up bad loans from banks in exchange for as much as 4 billion euros of state-backed bonds the lenders could use as collateral with the European Central Bank, Finance Minister Janez Sustersic has said.
“Privatization is a fundamental way to solve banks’ problems and lower the debt burden of the corporate sector,” Antonio Spilimbergo, head of a International Monetary Fund mission to Slovenia, said on Oct. 2.
Nova Kreditna will be the first major Slovenian state-owned company to be sold to international investors, Finance newspaper reported yesterday without saying where it obtained the information.
The bank needs 100 million euros of capital, with Russia’s Gazprombank OJSC among the probable candidates to purchase a stake in the Slovenian lender, the newspaper said.
“Such sharing of the burden by a strategic private investor could only work if the state exits the ownership structure completely,” Grahek said. “With current appetites of the government to keep a 25 percent holding, this remains a mission impossible.”
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