Slovenia to Take Full Control of Biggest Bank as KBC Pulls Out

Slovenia will probably gain full control of Nova Ljubljanska Banka d.d., its biggest bank, as Belgium’s KBC Groep NV (KBC) is pulling out, Finance Minister Janez Sustersic said.

The government increased its stake in Nova Ljubljanska to 59 percent after contributing 381 million euros ($493 million) in its capital boost in June. KBC’s holding fell to 22 percent as the Belgian lender, which is seeking funds to repay a state aid, didn’t buy NLB’s new shares, according to NLB’s website.

“The state’s holding will soon reach 100 percent as KBC must pull out and I expect them to do that,” Sustersic told reporters in Ljubljana today. “KBC can sell its stake to some other party or they can just watch and see their capital rot.”

Slovenian banks are the main worry of investors as the euro region nation may be forced to seek an international bailout to prop up the ailing banking industry. Political bickering may push the Adriatic nation to seek assistance, Sustersic said as he sees no economic reasons for a bailout.

Referendum Call

Labor union and opposition leaders have initiated a referendum call on the creation of a so-called bad bank as well as the wealth fund that is delaying government’s plans to recapitalize banks and overhaul the economy. A vote on these measures will probably take place in January unless the Constitutional Court rules otherwise.

“Referendums are the real threat that Slovenia will have to ask for aid as there are no economic reasons to do that since we are doing all we can to lower the budget deficit,” Sustersic said. The gap will probably shrink to “about 4 percent,” of gross domestic product this year from 6.4 percent in 2011, according to Sustersic.

The bad bank legislation that was already adopted by lawmakers foresees cleaning up banks’s balance sheets by taking out bad loans and swapping them for government-guaranteed bonds of as much as 4 billion euros, Sustersic has said.

Nova Kreditna Banka Maribor d.d. and Abanka Vipa d.d. need more capital and “we may see a smaller need for fresh funding for NLB by the year’s end,” Sustersic said. “We will have to think about alternative measures if the bad bank plan fails and lenders themselves will have to accelerate asset sales.”

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

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net