Ljubljana, 11 February (STA) - The group around NLB, Slovenia's largest bank, posted a net loss of EUR 82m for 2009, compared to a profit of EUR 20.5m in 2008, mainly due to writedowns at its Frankfurt subsidiary LHB, which accounted for 70% of the group's loss, the bank said Thursday.
"Without one-off events, especially the EUR 32m writedown at LHB, the parent bank would have turned a profit even though it set aside EUR 28.5m for loss provisions. The group's loss would have been half what it is," CEO Bozo Jasovic said after a session of the bank's supervisory board.
The overall result is a reflection of the economic and financial crisis, which forced the group to set aside EUR 311.6m for writedowns and bad loans provisions.
The bottom line was also strongly affected by historically low interest margins. The bank would have turned a profit if margins had been at 2008 levels, board member Robert Kleindienst explained.
The share of bad loans in the bank's credit portfolio increased last year. NLB thus had to set aside EUR 33m for bad loans to the construction sector and EUR 29m for financial services.
Overall, crediting of businesses shrank by 3% (4% at group level), whereas loans to households rose 4% (3% at group level).
The bank provided no outlook for 2010 but it expects to turn a profit. Jasovic said a new strategy would be drawn up and it would determine whether the bank would continue to expand or potentially withdraw from certain markets or market segments.
NLB will also restructure loss-making subsidiaries, including LHB. "We have not yet decided what to do with this bank. We may shrink its operations or close it down entirely," said Jasovic, adding that there was currently no evidence on any wrongdoing at LHB.
The bank will also have to raise capital, as shareholders did not match its fast expansion with sufficient injections of money. Some EUR 800m of existing financial instruments are due until 2015 and they will probably have to be replaced with a share issue, board member David Benedek said.
Commenting on the massive loss, Finance Minister France Krizanic said the supervisory board would have to take measures and act if losses had been incurred due to negligence. Moreover, the management must make sure not to seek any bonuses, he told STA.
Boris Zakrajsek, who headed LHB between 2003 and 2005, attributes the subsidiary's performance to poor management. He told STA he did not feel responsible for the situation, as the bank had been profitable when he left.