Slovenia’s largest lender NLB announces IPO plans

Slovenia’s largest lender NLB announces IPO plans
NLB was nationalised in 2013.
By bne IntelliNews May 15, 2017

Slovenia’s nationalised Nova Ljubljanska Banka (NLB) has announced plans to proceed with an IPO of at least 50% of its existing ordinary shares on the Ljubljana Stock Exchange (LJSE). NLB also plans to list global depository receipts on the London Stock Exchange (LSE).

NLB was wholly nationalised as part of the Slovenian government’s bailout of several major banks in 2013, and its privatisation is required under Ljubljana’s commitments to the European Commission. 

The offering is expected to be completed by mid-June, according to the NLB’s press release posted on the website of the LJSE on May 15. 

Slovenia’s government, acting through holding company Slovenian Sovereign Holding (SSH), has also confirmed the plans for the IPO. 

Deutsche Bank’s London branch is acting as sole global coordinator, and together with J.P. Morgan Securities and UBS  as joint bookrunners. Wood & Company is acting as co-lead manager and Nova Ljubljanska banka d.d., Ljubljana as domestic co-lead manager, the lender said.

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 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: a 50% stake by the end of 2017 and a further 25% by end-2018.

Commenting on the IPO plans, Lidia Glavina, president of the management board of SSH, described the move as a “milestone in the state asset management strategy of the Republic of Slovenia”. 

“NLB has demonstrated significant progress in its business performance, through return to sustainable profitability and improving asset quality. We believe that the company is ready to enter a new period as a privatised company," Glavina said. 

Standard & Poor’s Global Ratings raised its long-term counterparty credit rating on NLB from BB- to BB on May 12. At the same time, S&P affirmed the short-term counterparty credit rating at B, while the bank’s outlook remained positive.

The rating agency said the action follows its review of the Slovenian banking sector and reflects the view of reduced economic risks and improved operating conditions for banks in the country. 

“In our view, the planned partial privatisation of NLB within 2017-2018 via an initial public offering is likely to bolster the bank's business position in the long term, but we don't anticipate a material impact on the bank's profile in the next two years,” S&P commented. 

However, even though the government is obliged to sell off NLB, the Slovenian public is still resistant. Many Slovenians are against the privatisation of state property and have opposed major privatisations such as that of retailer Mercator in the past. 

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. 

As of March 31, NLB in Slovenia had 113 branches, five business centres for small business clients, five regional centres for mid-sized companies and two centres for large and institutional clients. NLB served over 695,000 active clients across its retail and corporate banking operations in Slovenia.

The NLB Group is the largest banking and financial group in selected markets in Southeast Europe with a focus on its core international markets of Macedonia, Bosnia & Herzegovina, Montenegro, Kosovo and Serbia.

NLB Group has recorded more than three consecutive profitable years since the fourth quarter of 2013 (when NLB was nationalised) while achieving a balance sheet deleveraging. Net profit reached €81.6mn in Q1, up €29.4mn compared to Q1 2016, the group announced on May 12.

Total assets decreased by €400mn between December 31, 2013 and March 31, 2017. During the same period, its non-performing loan (NPL) stock fell by more than €1.5bn.

The bank’s strong emphasis on restructuring was demonstrated in 2016, when it reduced NPLs by 31% or €597mn. The company sold a portfolio comprised of Slovenian retail and corporate NPLs, with gross book values of €104mn and €396mn respectively, to international investors, which resulted in a one-off reduction in NPLs of €233.3mn. 65.3% of its NPLs are currently being restructured. 

S&P said on May 12 that it expects further reduction of the NPL stock, reflecting the economic recovery in Slovenia, intensive workout efforts, repayments, and active market for NPL sales.