Ljubljana, 15 September (STA) - The supervisory board of Slovenia's leading bank, NLB, approved the management's proposal for a EUR 400m capital hike this year on Thursday. The initial plan was for another EUR 250m injection after the one in March.
The central bank, Banka Slovenije, ordered NLB to improve capital adequacy by the end of the year and to achieve target ratios by means of a capital increase.
"Considering the likelihood that negative trends will prevail in the broader economic environment in the implementation of the strategy, the bank needs more capital as a backup to implement the strategy," chief supervisor Marko Simoneti said in a written statement.
"If the capital rising in the planned amount and time frame is not implemented, the strategy of the NLB group will need to be amended," according to Simoneti.
A continuation of the strained situation in the economy, coupled with a further deterioration in some industries is reflected in additional weakening of the loan portfolio and consequently the need for provisions and impairments.
In response to an intense deterioration of the portfolio, the NLB management has adopted measures for a more comprehensive and efficient management of bad investments, the release said.
In light of those developments, the bank expects to end the year in the red, according to Simoneti, who also assured the public of the bank's high liquidity; liquidity reserves top EUR 3bn.
The bank is intensively implementing measures to attain the goals set in the strategy by 2015, adopted last year, such as divestment, a reduction in risk-weighted assets and an improvement of cost efficiency.
"Even though the bulk of measures are being implemented according to plans, the implementation of the strategy has not yet yielded the expected results due to unexpected risks in the environment which will likely pose a major obstacle in the implementation of the strategy in the future."
The chief supervisor pinpointed the planned sale of Banka Celje, a key divestment item in the strategy, which he said was not running according to expectations. The sale of shares seized in the execution of collateral is being slowed down pending the regulators' approval.
Scrapping non-strategic activities is a demanding process "which on completion as a rule initially shows losses, which the bank can offset through enforcement in the longer run".
The shares that the bank has not managed to sell yet would require revaluation considering the falling market prices, which reflects directly on the operating results, Simoneti said.