21 July 2010

13th regular meeting of the Supervisory Board of the NLB

Today the Supervisory Board of the NLB met at its 13th regular meeting so as to study, together with the Management Board, the possibilities of ensuring additional capital needed for the implementation of the NLB Group Strategy as a regional bank in SE Europe. The Bank will convene the General Meeting of Shareholders of the NLB this September and propose a capital increase in the amount of EUR 400 million.

According to its strategy, the NLB will remain a strong regional universal bank, focusing both on retail and corporate banking. In addition to the domestic - Slovenian market, the strategy defines strategic markets in SE Europe, i.e.: Bosnia and Herzegovina, Montenegro, Kosovo, Macedonia, Serbia and the cross-border markets.

In order to pursue the set strategy, the Bank needs additional capital. The need for additional capital arises from the facts:
" that the new Basel III regulation, created as a response of regulators to the global financial crisis, focuses on significantly higher capital requirements;
" that the NLB's capital adequacy level is lower than that of competitive banks operating in the region, most of which increased their capital in the past year;
" that the NLB currently provides for capital adequacy by capital instruments which are essentially debt instruments and so far still included in equity, but will fall due in the following years.

The Bank has actively started transforming the NLB Group according to the strategy, focusing especially on the activities releasing capital and thus improving capital adequacy. These measures comprise also a reduction of the NLB Group by withdrawal from non-strategic markets.

In order to fulfil higher capital requirements and implement the set strategy, the Bank needs additional capital shortly, which due to the time mismatch cannot be realised only by its own activities without engaging the owners.
The Supervisory Board instructs the Management Board to convene the General Meeting of Shareholders of NLB d.d. in September 2010 and prepare a proposal for capital increase of NLB d.d. in the amount of EUR 400 million. The capital increase of EUR 400 million will enable the implementation of the NLB Strategy as a regional bank, the adjustment to new requirements setting higher regulatory capital, and will ensure capital strength.

If capital is not increased, the Bank will adjust its operations to capital capacities.

The Supervisory Board also acknowledged the mid-year results of the NLB and the NLB Group as well as the activities of the Management Board and employees aimed at improving operating results. The operations were once again characterised by high provisions reflecting persistent difficult operating conditions that the economy is faced with. Even though performance results before provisions were encouraging (the NLB: EUR 81.8 million and the NLB Group: EUR 118.5 million), both the NLB and the NLB Group operated at a loss, i.e. the NLB in the amount of EUR 20.2 million and the NLB Group in the amount of EUR 34.6 million. More detailed results will be published on 5 August 2010 in the Semi-Annual Report of the NLB Group.

The Supervisory Board accepted the letter of resignation of the Supervisory Board member, submitted by Gregor Dolenc on 18 July 2010.

Dr. Marko Simoneti,
Chairman of the Supervisory Board of NLB d.d.