Expatica news

Slovenia funds to invest in NLB bank after KBC pullout

Two Slovenian state-owned funds will invest in the country’s biggest bank NLB to shore up its finances after Belgian banking group KBC pulled out of a deal to boost its stake, the government said.

“NLB’s capital hike will not be under any threat,” the finance ministry said in a statement late Friday, adding however that it was “disappointed” by KBC’s decision to back out of the plans to increase its shareholding.

KBC said Friday it would not invest 61 million euros ($77 million) in Nova Ljubljanska Banka, because it failed to secure European Commission approval for the deal and assurances it could keep its stake in NLB beyond 2012.

KBC is being forced to divest assets under the oversight of the European Commission after the banking and insurance company was bailed out by the Belgian government during the 2007-2009 global financial crisis.

It had initially agreeed to increase its stake in the loss-making NLB to 33.9 percent from 25 percent.

At the same time, the Slovenian state, which currently owns 55.6 percent of the bank, agreed to buy 320 million euros worth of contingent convertible bonds as a temporary loan to NLB that would expire in June 2013.

The Slovenian finance ministry said investment funds SOD and KAD will now inject money into NLB using reserves “prepared for such cases so there will be no need for new debts or to raise the budget deficit”.

“We believe KBC’s decision was premature and they could have acted differently,” Finance Minister Janez Sustersic said Friday.

The European Banking Authority has called on NLB to lift its capital ratio by the end of June to nine percent from six percent currently.

The bank, which has been burdened by non-performing loans, reported net losses in 2011 of 239 million euros after suffering a loss of 202 million euros a year earlier.