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EC approves Slovenia's plan to sell 75% minus one share of NLB by end-2019

Author Maja Garaca
EC approves Slovenia's plan to sell 75% minus one share of NLB by end-2019 NLB Banka Beograd headquarters in Belgrade Source:

LJUBLJANA (Slovenia), August 10 (SeeNews) - The European Commission approved on Friday a new Slovenian commitment package for Nova Ljubljanska Banka (NLB), under which the government will complete the sale of 75% minus one share of the bank's capital by the end of 2019.

A first significant sale tranche of at least 50% plus one share will be sold by the end of 2018 and the Slovenian government will reduce its stake in NLB to 25% plus one share by the end of 2019, the European Commission said in a statement.

The Commission noted it has concluded that Slovenia's aid for NLB remains compatible with the EU state aid rules on the basis of the new commitments submitted by the Slovenian authorities on July 13, 2018.

"Slovenia has firmly committed to an ambitious time schedule for NLB's sale with a first sale tranche of at least 50% plus one share by the end of 2018. Slovenia prolonged key commitments and also offered new commitments to compensate for the delayed sale and restructuring process of NLB," the Commission said.

The sale of NLB is an important remaining milestone of plan for NLB restructuring, which allowed the Commission to approve over 2 billion euro ($2.3 billion) of state aid to the bank in 2013.

The Commission opened an in-depth state aid investigation on January 26 this year to assess whether new measures proposed by the Slovenian authorities regarding the restructuring of NLB sufficiently compensated for delaying the sale of the bank.

In particular, the Commission was concerned that Slovenia had not sold a first tranche of NLB before the end of 2017, in line with the commitments originally proposed by Slovenia to ensure NLB's long-term viability.

The sale of NLB was a crucial element of the Commission's viability assessment in the NLB state aid decision of December 2013, allowing the Commission to approve the granting of significant state aid to NLB.

Slovenia committed in 2013 and again in 2017 to the sale of NLB to ensure that it would no longer unduly influence the bank's daily business operations.

A change in ownership is expected to allow the bank – at all its levels – to operate solely for commercial objectives.

If Slovenia does not respect the deadlines foreseen in the new commitment package, a divestiture trustee will be appointed to take over the sale process, the Commission said.

Furthermore, it added, the key existing commitments are prolonged by the new package. An important commitment in this regard is the return on equity commitment, which ensures that NLB can only grant new loans if the bank receives a minimum return on equity on those loans.

"This commitment will help ensure the long term profitability of the bank and limit undue distortions of competition," the EC explained.

NLB will also not re-enter the businesses it sold as part of the restructuring plan (such as the leasing business) and will also strictly comply with an acquisition ban.

Finally, the new commitment package also includes additional compensatory measures, which will improve the viability of NLB and help to avoid undue distortions of competition in the Slovenian banking market.

Under these measures NLB will close additional bank branches in its home market and – unless a full sale is completed by the end of 2018 – sell its stake in its insurance subsidiary NLB Vita; while also issuing a so-called "Tier 2 bond"  to further remove any viability doubts.

NLB is the largest banking group in Slovenia with a balance sheet of 13 billion euro as at end-2017.

It has received three state recapitalisations, one of 250 million euro in March 2011, one of 383 million euro in July 2012 and in December 2013 a third recapitalisation of 1,558 million euro together with a transfer of impaired assets to a state-owned bad bank with an implied aid element of 130 million euro.

($=0.872761 euro)