The supervisory board of Slovenian Sovereign Holding (SSH) has refused its consent for a proposal on the offer price range for the planned IPO of Nova Ljubljanska Banka (NLB), the holding company announced on June 1. 

The state plans to sell at least 50% of the country’s largest lender by the end of this year, to be followed by the sale of a further 25% in 2018. The IPO is still expected to go ahead given Ljubljana’s commitments to the EU to privatise the bank. However, with the government divided the timing is now looking uncertain. It is possible it could be delayed until after the 2018 parliamentary elections, since it also faces opposition from the public. 

SSH’s supervisory board advised its management to act in accordance with the company law, which stipulates that if the supervisory board refuses to give its consent, the management board can allow the decision to be made at a general meeting. This would throw the decision back to the government, as the sole shareholder in NLB. 

Supervisory board chairman Damjan Belic told state-owned Slovenian Press Agency (STA) that SSH’s management has already sent a demand for the government to make the decision in its capacity as the general meeting. Unofficial information has it that the government will decide on the price range around June 8.

On May 29, the Slovenian ministry of finance said, that the government cannot provide additional measures requested by SSH related to a lawsuit over Yugoslavian era deposits, which are seen as a potential risk in the sale of NLB. 

The IPO process is likely to face further delays due to a lack of political will within the three-party coalition to pursue the unpopular privatisation ahead of the mid-2018 parliamentary elections, Teneo Intelligence’s CEE advisor Andrius Tursa commented in a June 1 analyst note. 

“Slow progress on privatisation could hurt investor confidence and threaten the stability of the cabinet, headed by Prime Minister Miro Cerar,” Tursa said.

NLB was nationalised in 2013 and Slovenia had committed to sell 75% of the bank by the end of 2017 in a restructuring plan that served as a basis for the European Commission's approval of state aid to the bank in the 2013 bailout. Initially the government planned to reduce its current 100% stake to 25% plus one share via an IPO in 2017. However, the European Commission endorsed, on May 11, a request from the Slovenian government for a more gradual sale of the bank - 50% stake by the end of 2017 and a further 25% by end-2018.

Now, however, support within the government is reportedly waning. “Within the cabinet, only the PM’s SMC remains broadly supportive of the NLB sale, while the other two coalition partners – Social Democrats (SD) and the Democratic Party of Pensioners (DeSUS) – are becoming increasingly reluctant to pursue unpopular privatisation ahead of the general elections in mid-2018,” Tursa said. 

“To preserve the coalition stability and regain voter support, Cerar will likely seek to renegotiate with the EC at least a part of the bank’s privatisation terms. Should the EC demand Slovenia to continue with the privatisation as initially planned, tensions within the three-party coalition government would likely increase.”

NLB is the largest banking and financial group in Slovenia with a 23.9% market share in loans to the non-banking sector and 25.3% in deposits from the non-banking sector as of December 31, 2016.

According to local media speculation, Slovenia hopes to reach price of about €1bn for NLB for 75% stake.

However, Teneo’s Tursa points out that even after selling the 75% stake in the NLB, the Slovenian government would remain the largest shareholder in the bank. According to Slovenian law, no single investor can hold more than the state’s share in strategically important companies.

“This provision could further dampen investor interest in the NLB and prolong the privatisation process,” the analyst said.