Vienna, 29 March (STA) - Analysts of the Austrian Raiffeisen Bank International do not expect Slovenia will have to resort to international assistance to bail out its banks. Their baseline assumption is that it will be able to finance the bad bank with borrowing.
A report released on Friday by Raiffeisen Research indicates uncertainty over the new government's commitment to pursue the bad bank project.
But the analysts note that the current events in Cyprus are "putting additional pressure on politics in Slovenia for a fast solution".
A public debt restructuring can be regarded as unlikely even in case of a bailout by the EU and IMF.
Additionally, public debt levels (even including bank restructuring costs) would not yet reach levels that would make public debt levels unsustainable.
Therefore there would most likely be no pressure from the EU/IMF to bail-in either government bond holders as it happened in Greece, or bank deposits above EUR 100,000 as it happened in Cyprus.
Raiffeisen considers the current pricing for Slovenian government bonds as excessive and would expect a tangible yield drop of between 150 and 200 basis points "as soon as markets learn to live with the Cyprus fall-out".
Analysing the differences and similarities between Slovenia and Cyprus, the Raiffeisen analysts say the two countries are similar in terms of the low foreign ownership of banks, rapid pre-crisis expansion, high share of non-performing loans and the fact that both countries are small, "possibly non-systemic".
However, they point out that the differences are much more profound.
Slovenia's banking sector is not oversized, accounting for 120-130% of GDP as opposed to 800% of GDP in Cyprus.
Some 60% of deposits in Cyprus are from non-residents, whereas Slovenian banks derive 90% of their business from the domestic market.
Slovenia also has much lower debt than Cyprus, and its banks' exposure to peripheral eurozone countries is "negligible".