Slovenian bank NLB asks for more capital

By bne IntelliNews February 19, 2013

bne -

State-owned Nova Ljubljanska Banka (NLB), Slovenia's largest bank, said on February 18 that it expects further losses this year due to bad loans, and that it will need a fresh capital injection of around €400m.

NLB is at the centre of a growing storm that puts Slovenia at the top of the list of countries that it is suspected will eventually require an international bailout. Its - mostly state-owned - banks are burdened with a huge volume of bad loans worth some 20% of annual GDP. Meanwhile, the country is back in recession and in the midst of a political crisis.

NLB made a net loss last year of €273.5m due to provisioning on its loans, up from a loss of €239m in 2011. CEO Janko Medja said the bank will need fresh capital, presumably by the middle of the year, after a capital hike of €375m was postponed by shareholders in December.

"The situation in the environment and the situation in the bank is very serious. The year 2013 will be very difficult for us as we will continue to clean up the bank's portfolio," Medja told a news conference, according to Reuters.

The government will in the coming weeks raise its stake in the bank to over 90% - from around 85% currently - by converting a €320m contingent convertible bond issued last year. The conversion will boost NLB's Tier 1 capital solvency ratio; however, at 8.7% it will still sit below the 9% recommended by the European Banking Authority.

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