Slovenia delays IPO of largest lender NLB until 2017

Slovenia delays IPO of largest lender NLB until 2017
By Ivana Jovanovic in Belgrade September 14, 2016

No decision will be made on the timing of the IPO of Slovenia’s largest lender Nova Ljubljanska Banka (NLB) until early 2017, Slovenian Sovereign Holding (SSH) indicated on September 13. SSH, which manages Slovenian state owned assets, said the bank was due to be sold off by the end of next year. 

SSH previously announced that NLB’s privatisation would be launched in 2016, but it expected the bank would be challenging to offload. It now seems the date for the IPO could be pushed back to the end-2017 deadline set by the European Commission. 

The sale of the state's stake in NLB, which was nationalised in 2013, is seen as a highly important step for the country. SSH said on May 12 that an initial public offering had been assessed as the most appropriate method for the privatisation of NLB. The state is expected to keep 25% plus one share in the bank.

SSH also said on September 13 that the decision on the timing of the IPO launch would be made taking into account all the relevant factors, together with the bank’s full-year results, with the objective of maximising the value for the Slovenian government and consequently receiving the highest return for the state from the bank’s 2013 recapitalisation. Since the bank's annual results are usually released in February or March, this means no decision is anticipated until early next year. 

NLB released its 2015 results on March 7. NLB Group, which includes NLB bank, increased its net profit to €91.9mn in 2015, up 47% compared to 2014.

According to STA, while it is not mentioned in SSH's September 13 press release, relevant factors in the decision on the IPO timing could also include the Constitutional Court's decision in a case concerning the erasure of junior bond holders and small shareholders in the 2013 bank bailout.

A July 19 ruling by the Court of Justice of the European Union (CJEU) was expected to clear up questions about the legality of Slovenia’s December 2013 bank bail-in and specifically the decision to wipe out holders of subordinated bonds. But with both the Slovenian authorities and representatives of junior debt and shareholders claiming the verdict vindicated their positions, the situation remains as confused as ever. More clarity is not expected until a separate ruling from the Slovenian constitutional court, due in December.

STA reported that the IPO of NLB was previously expected to be launched this autumn. It was to be preceded by roadshows, after meetings with potential investors were moved back from the summer due to uncertainty in financial markets after Britain voted to leave the EU.

In the restructuring plan underpinning the European Commission's approval for the 2013 recapitalisation of NLB, Slovenia committed to sell NLB by the end of 2017.

“During this short four-month period of preparatory activities, a significant step forward has been achieved by NLB aiming at a thorough preparation for a successful IPO. The most significant action includes the recent adoption of the amended 2020 NLB Group Strategy, which the bank's management considers as the necessary foundation for improving the bank's performance and its short-term and medium-term competitive position. The NLB Group half-year financial report highlights the bank's improved profitability and its solid progress towards reduction of non-performing loans,” SSH said on September 13.

NLB Group increased its profit after taxes to €69.5mn in H1, up 30% compared to H1 2015, the company announced on August 26 in a press release posted on its website.

One of the important contributor to the company’s results in H1 was the significant reduction of the volume of non-performing loans (NPLs). The NLB Group's NPLs decreased in the first half of the year by €146.3mn to €1.75bn at June 30, 2016. The percentage of NPLs fell by 1.4pp to 17.9%.