Bloomberg News

Fitch Downgrades Seven Slovenian Banks on Poor Asset Quality

September 29, 2011

(Updates with Fitch comment from third paragraph, NLB CEO comment from seventh paragraph.)

Sept. 29 (Bloomberg) -- Seven Slovenian lenders, including Nova Ljubljanska Banka d.d. and Nova Kreditna Banka Maribor d.d., country’s two biggest, were downgraded by Fitch Ratings, which cited a worsening asset quality in the Alpine country.

Abanka Vipa d.d., Gorenjska Banka d.d., Banka Celje d.d. and Probanka d.d. had their long-term credit and viability ratings lowered, while Banka Koper’s viability rating was cut, Fitch said today in a statement issued in London.

“The downgrade of NLB’s issuer default rating also considers delays and some uncertainty surrounding the bank’s pending recapitalization and the government’s participation in this,” Fitch said in the statement. The Sept. 20 collapse of the government “could significantly delay NLB’s recapitalization,” it said.

Slovenia’s banking industry is under strain after the recession of 2009 depleted its capital. Banks set aside record loan-loss reserves, which may rise more as the export-dependent economy slows on weakening demand in Europe. Nova Ljubljanska needs to raise 400 million euros ($544 million) in fresh capital, a second such move this year, to improve its capital ratios after Slovenia’s biggest bank barely passed the European Union’s stress test in July.

Moody’s Downgrade

The government of Prime Minister Borut Pahor fell after disagreements with its coalition partners, increasing uncertainty in the euro-region nation until Dec. 4, when the early vote will take place.

Fitch yesterday became the second rating service to cut Slovenia’s credit score by one level after Moody’s did so on Sept. 23, citing weak economic outlook and the political uncertainty.

“The situation is quite serious since a capital boost for the banks would increase the government’s deficit even further, which Slovenia simply can’t afford,” Radivoj Pregelj, an analyst at Abanka Vipa d.d., said in an e-mail.

Slovenian banks may resort to financing by the European Central Bank, Nova Ljubljanska Chief Executive Officer Bozo Jasovic said at a business forum in Portoroz, Slovenia.

“This, of course, is not a long-term solution,” Jasovic said.

Nova Ljubljanska received 243 million euros in a capital increase from the government in March. It now aims to raise 400 million euros by the end of the year.

-- Editors: James M. Gomez, Alan Crosby

To contact the reporters on this story: Agnes Lovasz in London at Boris Cerni in Ljubljana at

To contact the editors responsible for this story: James M. Gomez at Andrew Langley at

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