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Belgian KBC Withdraws from Capital Increase in NLB (II)

Ljubljana, 29 June (STA) - Belgian financial group KBC, the second largest owner of NLB, told the STA on Friday that it would not participate in the recapitalisation of Slovenia's largest bank. Finance Minister Janez Šušteršič however said that NLB would meet the demands of EBA and Slovenia's central bank to raise its Core Tier 1 ratio to 9% by the end of June.

KBC decided after careful deliberation and consultation with all relevant parties that it would not take part in the recapitalisation of NLB, as part of which it was to invest EUR 61m in the bank, the Belgian group said.

"KBC has remained in close and intense discussion with the Slovenian government and the National Bank of Slovenia regarding NLB's capital position over the last months...and it has voted in favour of the short term capital solution proposed by NLB and the Republic of Slovenia," a press release from the group reads.

According to KBC, all its decisions must be in line with the strategic plan KBC has drafted in cooperation with the European Commission to get the green light for state aid. The plan includes divesting KBC's non-strategic investments in NLB, KBC said.

"We believe that an agreement could be reached in the coming months and we are disappointed that KBC decided against participating in the first phase of the recapitalisation," the Finance Ministry said in a press release.

But this will not jeopardise the recapitalisation, as the EUR 61m will be secured from the reserves of the state-run funds KAD and SOD, "which have been built over the past few years", according to the ministry.

In agreement with the European Banking Authority (EBA) and the central bank, all procedures and transactions of the EUR 381m recapitalisation, aimed at raising the bank's Core Tier 1 ratio from just below 6% to 9%, will be carried out next week, the ministry explained.

The EUR 320m hybrid loan aimed at bridging the time needed to find a private investor for NLB is to be raised by means of temporary convertible bonds, which will be automatically converted to 8.7 million shares at an estimated EUR 36.7 apiece in case NLB's Core Tier 1 capital falls below 7%.

The Finance Ministry moreover said that it would try to find out in talks with KBC in the coming weeks whether there was still mutual interest for finding a private investor and a lasting solution for NLB.

KBC, which bought a 34% stake in NLB in 2002, was to increase its stake in NLB from 25% to 33.9% in line with the recapitalisation, while Slovenia would retain over 50% stake in the bank.

Following a EUR 233m loss in 2011, NLB ran up EUR 36.5m in loss in the first quarter of 2012, mostly due to impairments and provisions.

Šušteršič moreover disclosed for the business daily Finance today that the group around NLB had around EUR 3bn worth of bad claims, but added that most of these would probably be reclaimed, although at some kind of discount.

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