STA, 4 November 2019 - The parliamentary inquiry into suspected abuse of office at the bad bank interviewed on Monday the former chairmen of NLB and NKBM, Janko Medja and Aleš Hauc, who said that the banks had no power in determining which assets will and which will not be transferred to the bad bank as part of the 2013 bailout.

First to be interviewed was Medja, who said the bank was only an "object" and could not participate in determining the methodology for appraising assets, nor had it final say about which assets and why would be transferred to the bad bank.

He was faced with the questions from the inquiry chair, Jernej Vrtovec of the opposition New Slovenia (NSi), about the Bank Assets Management Company (BAMC) using "double standards".

Vrtovec noted that the BAMC made different assessments when placing a company or group on the list for transfer of assets, taking the DZS group as an example, as it had been transferred on the bad bank, while KD Group, which is also a financial holding, was not.

Medja, who was the chairman of NLB between the autumn of 2012 and February 2016, which included the state-sponsored bank bailout, said he could not answer the question as he did not remember concrete cases.

Regarding alleged pressures, he said that representatives of certain companies did ask the bank about the transfer, but NLB's answer was always that it stuck to the rules and procedures in line with the law.

According to Medja, the first list of claims to be transferred to BAMC was compiled by NLB, and was sent to an inter-ministerial task force and the Banka Slovenije central bank, with the two coming up with the final list.

Banka Slovenije had data on claims to individual companies from other banks, he said, adding that he could not tell why some claims or assets had not been transferred, as he did not have access to all documents.

According to Medja, the bank did not agree with certain results of asset quality reviews (AQR) regarding for how much claims could be sold. Due to the large quantity of data and relatively short time, he allows for the possibility that not all appraisals were compliant with the international accounting standards, in particular in real estate.

In individual cases, the bank's assessments did not comply with the AQR results, but the eventual estimates on the amount of the required capital were at a similar level, he added.

Medja explained the difference in the initial estimate about how much capital NLB needs and the final calculations with the fact that not the entire portfolio was reviewed in the first estimate.

Surprising things were discovered mainly in investments in foreign countries, he said, adding that NLB services were adopting in 2013 the recommendations of the European Banking Authority (EBA), which were becoming stricter.

Medja stressed on several occasions that when it comes to the bailout measures, NLB was an "object", adding that the bank's management had wanted to get a clearer picture and get a greater role in talks, "but had no chance to discuss it".

The bank could not risk capital inadequacy, and could not get capital on the market, he said, adding that the state-sponsored measures were an "all or nothing" approach, with the bank not being able to pick recapitalisation or transfer or bad claims to the bad bank alone.

"We could only pick recapitalisation as it was envisaged, or capital inadequacy, risking to lose the trust of deposit holders," he concluded.

Also interviewed was Hauc, who managed NKBM from March 2012 to February 2015. He too said that the bank had no say about which assets would be eventually transferred to BAMC, and repeated some of the other explanations offered by Medja.

He said that the the stress tests in 2013 had been "too brutal" and the AQR strongly underestimated the value of insurance of claims. Banka Slovenije was warned about this, but the bank had no influence whatsoever, he added.

Hauc noted that NKBM had wanted that all non-performing assets be transferred to the bad bank, with many of them staying in the bank after the bailout. "There is no logic in carrying out a bailout without transferring everything that is disputable to BAMC."

He also assessed that Banka Slovenije had been rather limited and that the European Commission had the main say, in fact its "lower-ranked officials", who had been sending e-mails about what needed to be done. "The bank had to implement the measures, otherwise it would go bankrupt."

Regarding the estimate of the amount the banks needed in the bailout, Hauc said that no damage had been done. "The state put the money from one pocket to the other. Even if too much money was given, it has not been lost."

He assessed that a majority of bad loans were a consequence of the crisis, and to lesser degree of bad practices. "Companies were borrowing excessively and then stumbled, while banks were not conservative enough in approving loans."

According to him, the US fund Apollo and the EBRD, which acquired NKBM in 2016 for EUR 250 million, got the bank for cheap but are doing a good job. "Apparently a bank had to be sold to show that we are a serious country, not a banana republic," Hauc concluded.

On the other hand, Janez Fabijan of Banka Slovenije said that the banks themselves had sent the lists of companies to the central banks, as he was quizzed about his role in due diligence procedures, transfer of claims to DUTB and other bail-out procedures.

"I never worked in supervision, but I'm objectively responsible as a member of the Banka Slovenije board of directors," he said, adding that when it came to the bailout, it would be wrong if the central bank had acted differently.

According to him, the transfer of claims to BAMC was transparent, with lists of companies to be transferred being made by the banks, as they were obliged to know their clients.

It was determined with a government decree which claims will be transferred, said Fabijan, who could not tell whether Banka Slovenije made any interventions in the lists. "Perhaps something was changed, but not too many times."

This was done in any case with consent from the banks, and the decree determining the criteria for the transfer of claims gave the banks and BAMC absolute advantage compared to Banka Slovenije, he said.

He added that the central bank had only participated in the process and admitted that he had been visited by a few representatives of companies claims to whom were planned to be transferred to BAMC.

STA, 28 October 2019 - The National Council unanimously vetoed the government-sponsored bill designed to provide legal recourse for holders of subordinated bank liabilities wiped out in the 2013 bank bailout, with the interest group proposing the suspensive veto arguing that the bill does not regulate the issue appropriately.

Following the veto from the upper chamber of parliament, the bill, which was passed in a 46:34 vote in the National Assembly last week, will now have to undergo a re-vote and get an absolute majority to be confirmed.

The National Council voted 24 votes for and none against to suspend the implementation of the bill, which aims at providing easier access to recourse for up to 100,000 potential plaintiffs, both shareholders and holders of junior bonds wiped out on instruction of the EU.

But it may take a while before the erased investors are compensated as, in addition to the opposition from the National Council, the central bank had announced a constitutional review.

The veto in the upper chamber had been proposed by the interest group representing employees, which argues that the bill does not provide effective recourse, as councillor Maja Lah reiterated at the session today.

The bill relates to the ruling of the Constitutional Court in 2016, which says that the affected subordinated creditors and shareholders did not have sufficient access to recourse under existing legislation.

Involving up to EUR 963 million, the bill has been a controversial topic.

The proponents of the veto claim the government-sponsored bill falls short of what the Constitutional Court ordered.

When it proposed its own version of the bill in April, the upper chamber said that excessive procedural costs would discourage potential plaintiffs from suing the central bank Banka Slovenije.

The National Council argues that the bill fails to address reservations regarding the exclusive jurisdiction of the Maribor District Court in procedures related to disputes under the bill, as well as the issues related to determining court fees.

It believes the bill also does not address the issues related to the protection of personal information of plaintiffs and the issue of out-of-court settlement with the payment of a lump-sum compensation to the former holders of subordinated bank liabilities.

Lah said that Banka Slovenije as the regulator who had insight into all details of the functioning of the banking system had a professional, personnel and information advantage over a typical small investor.

Such imbalance could significantly affect the realistic chances of plaintiffs to be successful in lawsuits, she said, adding that the group was also critical of the intention to incentivise plaintiffs to group themselves by lowering court fees.

"This results in an unjustified differentiation between 30 or more plaintiffs, who would file a lawsuit together and have a joint representative, and other plaintiffs who would not meet conditions to do so," the veto proposal says.

This could also constitute a violation of the right to free selection of the representative, as plaintiffs who want to reduce their costs for court fees would be forced to agree on a single, joint representative.

Arguing against the veto, Finance Ministry State Secretary Metod Dragonja said that the bill was "protecting the taxpayers and budget", noting that potential damages would have to be paid by Banka Slovenije from its reserves.

Regarding the disclosure of personal information of the former holders of subordinated bank liabilities, he said that the public interests superseded their interest, as the funds for damages would be secured from public sources.

The bill envisages lump-sum compensations of up to EUR 20,000 to uninformed investors. "This is a civilised option of out-of-court settlement for those who waive the right to use further legal remedies," Dragonja added.

National councillor Matjaž Gams meanwhile pointed to the alleged overestimation of the shortage in the state-owned banks, estimated at the time at EUR 1.5 billion.

He wondered who would be held responsible for that given the fact that this resulted in money being taken away from holders of subordinated bank liabilities.

STA, 6 September 2019 - Slovenia's largest banking group, NLB saw its half-year-net profit fall by 10% year-on-year to EUR 94.3 million despite higher interest and non-interest income.

Profit before impairments and provisions was up 13% to EUR 116 million, according to the interim report released by the bank on the website of the Ljubljana Stock Exchange.

Total net operating income amounted to EUR 257.4 million, a 6% increase y/y. Net interest income rose by 5% to EUR 159 million, and net non-interest revenue increased by 8% to EUR 98.3 million.

Net interest income rose in all banks of the group as a result of loan volume growth and lower interest expenses. Subsidiary banks in SE Europe continued to perform well, contributing 38.4% to the group's profit before tax.

Net loans to customers rose by 3% year-on-year to EUR 7.28 billion, while deposits went up by 7% to EUR 10.75 billion. The growth was mainly due to retail deposits.

This year saw a gradual increase in new consumer and housing loans. The share of consumer loans in all gross loans rose from 26% in the first half of 2018 to 28% in the first half of 2019.

The group's total assets rose by 5% to EUR 13.16 billion. This is attributed mainly to the continuous inflow of retail deposits.

NLB also reports having continued with the trend of improved credit portfolio quality. The proportion of non-performing loans dropped to 6%, 2.3 percentage points down compared to a year ago.

The internationally comparable non-performing exposure ratio dropped by 1.7 percentage points to 4.1% in line with the European Banking Authority guidelines, which is very close to the mid-term target of 4%.

Total capital ratio for the NLB group at the end of June reached 16.5%.

"NLB Group is on a good path toward meeting its mid-term financial targets despite the increasingly challenging economic environment of low interest rates," the bank commented on the results.

The parent bank generated EUR 122.6 million in profit, which compares to EUR 103.3 million in the first half of last year.

The macroeconomic outlook suggests the countries where the group is present are likely to post growth rates of between 3% and 4%, if supported by loose monetary conditions, fiscal easing and solid domestic demand.

"Considering these circumstances and presented risk factors, in 2019 the Group aims to achieve a single
digit % increase of revenue and pre-provision profit with continued loan growth (in line with GDP
dynamics) and stable net interest margin," reads the release.

The results were reviewed by the bank's supervisory board today.

The board also gave a green light to establishing a new leasing company, as restrictions on leasing activities ceased to apply following the bank's completed privatisation earlier this year.

STA, 4 September 2019 - Abanka Group generated EUR 26.3 million in net profit in the first six months of the year, according to unaudited report, which is 32.3% less than in the same period last year. Net interest revenue was down by 0.5% and net non-interest income by 19.5%, Abanka said on Wednesday.

Net interest reached EUR 29.8 million and net non-interest income stood at EUR 27.3 million, according to a report published on the web site of the Ljubljana Stock Exchange.

The bank's supervisory board got acquainted with the results on Tuesday.

The total assets of the group, which includes the Abanka bank and real estate company Anepremičnine, amounted to EUR 3.76 billion at the end of June, after standing at EUR 3.73 billion at the end of December.

Anepremičnine contributed EUR 17.4 million or 0.5% to the group's consolidated total assets.

Abanka posted a net profit of EUR 26.2 million in the January-June period, down 35.2% from the same period last year. Its market share reached 9.4% at the end of June.

Net interest was up by around 1% to EUR 29.8 million, while net non-interest income dropped by a quarter to EUR 26.2 million.

The bank said the rise in net interest was due to higher interest income from loans to non-banking clients.

Abanka's cancelled provisions and impairments reached EUR 5.5 million net after topping EUR 13.4 million in the same period last year.

Loans to the non-banking sector reached EUR 2.05 billion at the end of June, which is up EUR 86 million compared to the end of 2018. Loans to legal entities and sole traders increased by EUR 61.9 million and loans to individuals by EUR 24.1 million.

The biggest share of loans, 45.5%, were to individuals, followed by big companies (25.2%) and small and medium sized companies (17.1%).

The state has been Abanka's sole owner since a massive bank bailout at the end of 2013 which also saw the state salvaging NLB, NKBM and Banka Celje. The latter was merged with Abanka in 2014.

In June, a contract was signed on the sale of Abanka, Slovenia's third largest bank, to NKBM bank. The transaction is to be completed by the end of the year.

All our stories on banks in Slovenia are here

STA, 7 August 2019 - The Slovenian subsidiary of the Italian banking group Unicredit posted EUR 16 million in consolidated profit in the first half of the year, a marginal increase of 0.3% on the same period a year ago, shows the annual report released by the parent bank.

Unicredit Banka Slovenija and Unicredit Leasing saw their operating profit increase by almost 6% to EUR 19 million in the same period. Operating revenue rose by 7.2% to EUR 42 million and net interest revenue was up 1.3% to EUR 23 million.

The bank formed EUR 5 million in net write-downs on loans, a decline of 7.4% compared with the first half of 2018.

Unicredit Group reported a net profit of EUR 2.16 billion for the first half of the year, up 1% year-on-year.

All out stories on banking in Slovenia can be found here

STA, 5 July 2019 - Biser Bidco, the sole owner of Slovenia's second largest bank NKBM, decided on Friday to pay out EUR 5 million in dividends, leaving EUR 126,66 million in profit undistributed.

The EUR 5 million payout is significantly lower than the year before, when Bidco Biser decided to pay out EUR 45.8 million in dividends. The AGM also granted a discharge of liability to the bank's management and supervisory boards.

The Luxembourg-based company is owned by US fund Apollo, which holds 80% of the company, and the European Bank for Reconstruction and Development (EBRD).

The two companies signed a contract to buy the Maribor-based state-owned bank for EUR 250m in mid-2015, meeting all the requirements in April 2016.

The AGM comes only a few weeks after NKBM was selected as the best bidder in the privatisation of Abanka. A EUR 444 million sales contract has already been signed, with the transaction pending regulatory approval.

The sale is expected to go through by the end of the year. The NKBM-Abanka merger, which is expected to be wrapped up in the first quarter of 2020, will create the second largest bank group in Slovenia.

STA, 2 July - Speaking to the Slovenian press in Budapest in the wake of a takeover of SKB bank, the CEO of financial services provider OTP Sandor Csanyi announced organic growth on the Slovenian market, with detailed decisions still subject to an ongoing analysis.

Csanyi described the operations of SKB, which has been sold to Hungary's OTP by the French group Societe Generale, as above average.

He said the foray onto the Slovenian market was important for OTP because of its proximity and promise of good results. Csanyi simultaneously sees the Slovenian market as demanding, arguing banks will have to operate more efficiently.

Still, major changes are not planned for now at SKB, which includes staffing. If there are no mergers, mass layoffs do not make sense, he said, while arguing it was of course normal for some posts to be centralised and that the detailed plans still depended on an ongoing analysis.

Csanyi did not wish to reveal how much OTP paid for SKB, the third largest Slovenian bank when it was acquired by Societe Generale in 2001.

He would also not say how much OTP had offered for Abanka, the current Slovenian no. 3 which ended up being sold by the state two weeks ago to the NKBM bank under its new owner, US fund Apollo. He said OTP just offered too little, while he described the sales procedure as entirely transparent.

According to Csanyi, OTP wants to grow in an organic fashion in Slovenia and reach at least a 10% market share.

The company is interested in helping finance the new Koper-Divača rail track, even if Hungary as a country would not participate, while Csanyi would also not mind participating in some other state projects.

Also highlighted was Ljubljana's Emonika, the stalled train and bus passenger terminal project, with Csanyi saying the situation was presently being examined.

STA, 17 June 2019 - The final decision on the privatisation of Abanka, Slovenia's third largest bank, has been deferred to Wednesday after the supervisory board of Slovenian Sovereign Holding (SSH) decided not to convene Monday as planned. Nevertheless, comments by Prime Minister Šarec suggest the bank will be privatised despite initial apprehension.

Karmen Dietner, the chief supervisor of SSH, said the session was postponed so that the supervisory can "thoroughly examine the large amount of material that represents the substantive basis for the decision."

Abanka must be privatised by the end of this month according to commitments Slovenia made in exchange for a state aid clearance it received from the European Commission in 2013.

The procedure went according to plan until Prime Minister Šarec cast doubt on the plan by tweeting on 7 June that SSH should think about its decision given that police investigations into the bailout are ongoing.

But Šarec appeared to backtrack today, telling parliament during questions time that he was not putting any pressure on anyone. "The decision on the sale of Abanka will be adopted by SSH," he said.

The statement appears to settle who will have the final say: after the original tweet, SSH said only the government, representing the state as SSH's sole shareholder, had the power to change the course of the privatisation.

"I believe [SSH supervisors] are capable of taking this decision themselves without making anyone else responsible," Šarec said.

Šarec suggested his original tweet had simply been a comment on new facts revealed at the time - the release of the criminal complaint against the 2013 board of the central bank.

"I'm not pressuring anyone... This is simply a major story and the criminal complaint was a new fact for me," he told MPs.

Commenting on the issue before the postponement decision was made, Infrastructure Minister Alenka Bratušek, who was prime minister at the time of the 2013 bank bailout, said that there were actually no new facts lately which could affect the sale.

"It is irresponsible to change political decisions based on one documentary show," the head of the coalition Alenka Bratušek Party (SAB) said in reference to RTV Slovenija's documentary about the bailout.

The film raised questions about the role of the European Commission in ordering that junior creditors of three banks be wiped out, prompting Šarec to publish the tweet in question.

Bratušek said that the coalition partners had immediately agreed that they would contact the European Commission last September to present the arguments for postponing the sale. This should have been done in September, not a week before the deadline, she added.

"When [SSH] is able to tell what will be the consequences of sale or non-sale, then we will be able to make the right decision. I hope that those who started this non-sale are aware of the possible consequences."

Coalition Pensioners' Party (DeSUS) head Karl Erjavec noted that the party had been against selling banks all the time, but added he did not believe anyone could stop the Abanka sale.

Asked about his potential vote in the government, the foreign minister said he would see what arguments SSH would give for leaving it to the government to decide.

Igor Zorčič, the head of the deputy group of the coalition Modern Centre Party (SMC), said that the "prime minister said he was reserved about this, and we are reserved even more."

"If SSH returns the issue to the government, it will probably need to decide in line with what its representatives have been saying," he added.

Luka Mesec of the opposition Left said that given Šarec's tweet, "we expect from the supervisory board to reject the sale of Abanka or leave it to the government to reject the sale and launch appropriate proceedings before the European Commission".

On the other hand, Jernej Vrtovec of the opposition New Slovenia said that Abanka needed to be sold, "not because of the commitments, but because I believe it would perform better in private ownership".

"I've had enough of these co-financing and recapitalisations of the banking system we had witnessed in the past," he said, adding that the pressure not to sale Abanka now, including from politicians, was inadmissible.

SSH is selling 100% of Abanka, with three binding bids reportedly in the EUR 400-500 million range, about a fifth below book value but, together with recent dividend payments, the proceeds would still be higher than what the state invested in Abanka as part of the bailout.

The SSH supervisors can either complete the sale directly or ask the government as the sole shareholder to have the final say, which is exactly what happened last year, when marker leader NLB was privatised.

STA, 11 June 2019 - Coalition parties are mostly in favour of somehow suspending the privatisation of Abanka, although opinions differ and at least some advocate the position that commitments must be honoured. In any case, it appears that the government will have the final say.

Abanka is supposed to be privatised by the end of the month according to commitments Slovenia made in exchange for EU clearance of state aid. But just weeks before the due date Prime Minister Marjan Šarec cast doubt on the procedure by calling for a re-examination of the commitments.

His party, the Marjan Šarec List (LMŠ), thinks it is necessary to clarify what went on in the run-up to the bailout, a reference to ongoing police investigations of the circumstances of the 2013 bailout.

"We'll see what goes on in the coming days and weeks. But these are things that cannot be resolved fast. The government will have to adopt a position and we have to clarify what had been going on," LMŠ deputy group leader Brane Golubović said on Tuesday.

Similarly, the Social Democrats (SD) think a reconsideration is in order. The government should "decide whether to carry out the sale or not, and whether to negotiate new terms with the Commission at least until court procedures regarding the correctness of the calculation of the bank capital shortfall are ongoing," deputy group chair Matjaž Han said.

The Modern Centre Party (SMC) shares the SD's opinion. "We advocate the position that the government should reconsider and, if necessary, stop the sale," deputy group leader Igor Zorčič said, adding that his party was "against unnecessarily selling state assets".

Only the Pensioners' Party (DeSUS) thinks obligations Slovenia made should be honoured. "The state has made some commitments regarding the bank and will probably have to realise them," the party said, but added that it would still be good if Slovenia had one state-owned bank.

The SAB, led by Alenka Bratušek, prime minister during the bailout, pointed out the coalition agreement said the government would try to convince Brussels it did not have to sell Abanka. But since the Finance Ministry has to its knowledge not yet launched the talks, "this indicates that we will probably sell Abanka".

Given that Slovenia has managed to rescue its banks with its own money and the economy without the intervention of the troika, the right approach could result in the Commission not insisting on the sale, the SAB believes.

The Finance Ministry would not comment on the issue.

The privatisation of Abanka had been considered a foregone conclusion until last Friday when Šarec cast doubt on the plan by saying on Twitter that SSH, which manages equity in companies on behalf of the state, may have to reconsider the move.

The tweet came after the public broadcaster RTV Slovenija aired a documentary about the 2013 bailout a day earlier, raising questions in particular about the role of the European Commission in ordering that junior creditors of three banks be wiped out.

SSH said yesterday it had to stick to the commitment to sell Abanka, which Slovenia made when it received clearance for state aid, but it also said that the government could take a final decision on the bank's sale.

The European Commission has said it expects Slovenia to honour its commitments.

STA, 10 June 2019 - The shareholders of NLB bank on Monday confirmed the proposal to pay out EUR 142.6 million in dividends at EUR 7.13 per share, and endorsed all new candidates for the supervisory board.

Mark William Lane Richards, Shrenik Dhirajlal Davda and Gregor Rok Kastelic have been appointed new supervisors and Andreas Klingen was reappointed effective on 11 June.

The management has been authorised to buy NLB up to 36,542 own shares on the organised market over the next 36 months to be used in remuneration packages.

It also received a discharge of liabilities despite a counterproposal by a shareholder who also proposed that the shareholders task the management with making provisions for lawsuits brought by wiped-out junior creditors.

The motion was rejected because it is not within the purview of the shareholders to do that.

Chairman Blaž Brodnjak described 2018 as a very special year since the bank was privatised, which will allow it to conduct business free of limitations imposed by the EU due to state aid commitments once the state has reduced its stake to 25% plus one share.

"When another 10% is sold, it will be able to breathe with full lungs and start competing on a level playing field," he said.

As for business prospects, Brodnjak said the trends were good but indicated the bank was remaining vigilant since the region where it operates is very open and hence susceptible to external shocks.

Since last year's initial public offering, NLB's ownership is dispersed among small domestic shareholders and foreign institutional investors.

The state's stake has been reduced to 35%, but it is expected to be reduced further by the end of the year to 25% plus one share.

One benefit of the state no longer exerting majority control is that the board members are no longer subject to pay restrictions imposed on managers of state-owned companies.

Supervisory board president Primož Karpe said the debate about future remuneration packages has been concluded and pay levels will range from EUR 340,000 to EUR 420,000 gross starting with salaries for June.

This is a significant improvement from current levels: the annual report for 2018 shows that CEO Brodnjak got EUR 192,000 last year, while foreign board members got slightly more, up to EUR 210,000.

"We reached a consensus in the end, bearing in mind that we wanted a stable and motivated board," Karpe said about the new remuneration packages.