Ljubljana, 07 January (STA) - Chairman of NLB Bozo Jasovic has told business daily Finance that the proposed capital injection for Slovenia's top bank does not amount to a rescue package. He said that NLB needed the fresh capital for its operations.
"This is by no means a rescue package," Jasovic said for Thursday's edition of the newspaper. Every bank needs capital, even more so in time of crisis, he explained the decision to seek EUR 250m in fresh capital.
According to him, the need for fresh capital is also necessitated by new banking regulations that seek to shore up the capital adequacy of banks.
In line with the changes that are due to be adopted in the first half of the year, banks are expected to make lower returns on capital, but will subsequently be more stable, he said.
He said that funds for the capital injections at the state-controlled bank were envisaged in the national budget for 2009, but were not planned for this year.
"We want to tap into this even though we don't need the money right now. But we will need it during the year so that we are able to pay subordinated innovate instruments with which we provided for capital adequacy in the past."
Jasovic explained that NLB would have to repay around EUR 700m in subordinated debt in the coming three years.
Jasovic warned however that in the event that the capital injection were to fail, the NLB would have to resort to downsizing measures.
Asked whether this included the sale of Banka Celje, a small regional bank, Jasovic said that this was an issue that the bank would deal with should the owners fail to provide fresh capital.
He also announced that demand for credit had fallen in recent times. "Those who aren't able to get loans are not convincing enough."
He added that the bank was also dealing with an uncertain forecasts. "There are no tangible signs of a recovery...This means that we will be dealing with similar conditions to those in 2009."
The NLB boss confirmed the belief that the construction sector was currently the hardest hit by the economic conditions.
"The banks are overly exposed to this sector. Many of these companies will likely have to be encouraged to sell real estate that is currently waiting for better times."
Jasovic announced the bank would take a tougher stance towards creditors who show no willingness to cooperate in settling their debts. This, he said, would include individuals who get into financial difficulties during the crisis.
Asked about the sale of stakes NLB seized from companies linked to beverage group Pivovarna Lasko and the Istrabenz holding in 2009, Jasovic said NLB was in touch with potential buyers, including foreign investors.
The NLB management is drawing up a new strategy for Slovenia's top bank, which will be sent to the supervisory board for confirmation.
"The supervisory board will launch the debate with the owners. The strategy will touch on the question of what the owners want to do with the bank," said Jasovic, who would not comment on speculation about possible ownership shuffles.
The NLB boss also confirmed that the bank's profit would continue to be hit by impairments in 2010. "We have no final estimates however."
Asked about the government's measures for the crisis, he said that "there is no magic wand" in Slovenia's case. According to him, there is little possibility for effective stimulus measures in an export-based economy with such limited budget means.
But he pointed to the construction of a second track between the port city of Koper and railway hub of Divaca as a large-scale project that would help Slovenia's economy while also enjoy the support of the bank.
"We would be happy to support this project, which would impact positively on many economic subjects," Jasovic told Finance.