Planned IPO of Slovenian lender NLB collapses

Planned IPO of Slovenian lender NLB collapses
By bne IntelliNews June 9, 2017

Slovenian Prime Minister Miro Cerer announced on June 9 that his government has decided to give up on the IPO of the country’s largest lender Nova Ljubljanska Banka (NLB). The decision was made after his cabinet rejected €55 as the minimum bid price per share earlier in the day. 

Ljubljana has to sell off NLB by the end of this year, as agreed with the European Commission when it nationalised the bank in 2013. However, the planned IPO already looked doubtful amid strong resistance to the privatisation from the population and a split within the government coalition on the issue.

The government’s June 8 statement also indicated divisions between Cerar’s party and the Slovenian Sovereign Holding (SSH), the holding company that manages state assets, and whose position was closer to that of Cerar’s junior coalition partner the Democratic Party of Pensioners of Slovenia (Desus). 

SSH proposed a price range for NLB shares from €55 to €71, which according to media speculation was in the range anticipated by Desus leader and Deputy Prime Minister Karl Erjavec. 

Desus reportedly wanted the sale to bring in at least €1.55bn – the size of the capital increase when the state bailed out NLB in 2013 – but analysts believed Slovenia could at most get about €1bn for the whole bank, Reuters reported on June 6.

“The government has not approved the minimum price. Its key job now is to look for and find better solutions in cooperation with the European Commission,” Cerar announced at a press conference on June 8.

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, on May 11 the European Commission endorsed a request from the Slovenian government for a more gradual sale of the bank – a 50% stake by the end of 2017 and a further 25% by end-2018.

“We are in constructive contact with the Slovenian authorities. We cannot speculate further at this stage,” a spokesperson for the European Commission said, Reuters reported.

The other risk to the IPO process was a lawsuit over Yugoslav-era deposits, the government’s statement added. 

Croatia’s Privredna Banka Zagreb (PBZ) has sued the now-defunct Ljubljanska banka (LB) and its legal successor NLB over savings deposits from the Yugoslav era, and the case is still being considered in Zagreb. These deposits were repaid to Croatian savers by the Croatian state, which then authorised Croatian commercial banks to recover them in court. The liabilities are estimated at €350mn to €400mn. 

The Slovenian ministry of finance said, on May 29 that the government cannot provide additional measures requested by SSH related to this issue. The lawsuits represented such a risk as to prevent a successful sale of the bank, Cerar said, STA reported. 

Teneo Intelligence wrote on June 1 that the sale of NLB was 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. “Slow progress on privatisation could hurt investor confidence and threaten the stability of the cabinet, headed by … Cerar,” Teneo said.

Slovenians are generally in favour of state-ownership of major companies. NLB is one of the country’s oldest institutions, with roots dating back to 1889 when the Ljubljana city savings bank was founded, and public resistance toward its privatisation is significant.

NLB has seen 12 consecutive profitable quarters since 2014, on the back of a reduced balance sheet and a 65% reduction in non-performing loans (NPLs) since December 2012, according to the bank’s unaudited results for 2016 published on March 13.