Slovenia’s three biggest banks including Nova Ljubljanska Banka d.d. may need about 1 billion euros ($1.3 billion) of capital as bad loans grow amid the country’s recession, the International Monetary Fund said.
Bad debt at Nova Ljubljanska, Nova Kreditna Banka Maribor d.d. and Abanka Vipa d.d. accounted for 20.5 percent of their total loans in 2012, climbing from 15.6 percent a year earlier, the Washington-based lender said in an e-mailed report today. The economy, which shrank 2.3 percent last year, will probably contract 2 percent in 2013, it said.
“A negative loop between financial distress, fiscal consolidation and weak corporate balance sheets is prolonging the recession,” the IMF said in the report. “Lenders need to be substantially recapitalized” as their deteriorating loan portfolio is eroding capital.
The new government of Prime Minister Alenka Bratusek that will probably be confirmed by a parliamentary vote today, pledged to continue boosting bank capital by as much as 4 billion euros as well as cut the budget gap. Slovenian banks last year reported a combined pretax loss of 769 million euros.
“Financing requirements are particularly pronounced in summer, with bank recapitalization needed soon and a large 18-month T-bill coming due in June,” the IMF said, estimating Slovenia needs to borrow some 3 billion euros this year. Large part of funds should come from external financing, which “highlights the importance of safeguarding market access.”
Slovenia scrapped a plan to sell a benchmark bond in January, when the political crisis erupted after corruption allegations surfaced against then-Premier Janez Jansa, who denied any wrongdoing.