Bloomberg News

NLB Shareholders Approve Capital Boost of 400 Million Euros

October 27, 2011

(Updates with bank comment from second paragraph.)

Oct. 27 (Bloomberg) -- Nova Ljubljanska Banka d.d. shareholders approved a 400 million-euro ($565 million) capital boost meant to strengthen the finances of Slovenia’s biggest lender.

The executive board has been authorized to “once or more times increase the base capital as much as 50 percent” in consultation with the supervisory board and without further approval from shareholders, the Ljubljana-based company said in an e-mailed statement today.

Slovenian banks are reeling from the impact of the global recession as reserves for bad loans mount and the faltering economic recovery pushes more and more companies in Slovenia into bankruptcy or receivership. Nova Ljubljanska may be heading for a third year of losses this year after a loss of 202 million euros in 2010.

“I don’t exclude the possibility to ask for financial assistance from European Financial Stability Facility,” Bozo Jasovic, chief executive officer of NLB told reporters today, according to Finance newspaper.

The bank may ask the European Union rescue fund for assistance if the Slovenian government and KBC Groep NV, the two biggest investors, fail to agree on who will provide the proposed 400 million euros capital increase, according to the Ljubljana-based newspaper.

Debt Crisis

The Slovenian central bank said lenders will probably need to raise money by securing more equity capital to withstand the impact of the debt crisis in Europe.

“It’s expected that the main portion of their capital increase will come from equity investments rather than asset sales,” Banka Slovenije said in an e-mailed statement today. “A further strengthening of banks’ should also be accomplished by withholding dividend payments and curbing bonuses.”

The announcement came after the European Banking Authority said banks in Europe need to raise 106 billion euros in response to the continent’s sovereign debt crisis. Slovenia’s share is estimated at 297 million euros.

Nova Kreditna Banka Maribor d.d., Slovenia’s second-biggest bank by assets, said today the lender doesn’t own any Greek government bonds. The bank, based in Maribor, said its core Tier 1 capital ratio was at 9.48 percent at the end of June.

Banks in Europe need to ensure a core Tier 1 capital ratio of 9 percent by June next year, the central bank said.

Nova Ljubljanska shareholders today rejected a proposal by the government’s agency for managing state assets to replace four members of the supervisory board, including its president Marko Simoneti.

--Editors: Douglas Lytle, Tim Farrand

To contact the reporter on this story: Boris Cerni in Ljubljana at bcerni@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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