Page 14 - bne_Magazine_September_2018

14 I Companies & Markets bne September 2018
EU approves plans to privatise Slovenia's largest bank NLB
bne IntelliNews
The European Commission (EC) has approved Slovenia’s commitment to sell a first tranche of at least 50%
plus one share in its largest lender, state-owned
Nova Ljubljanska Banka (NLB), by the end of 2018, the
EC announced on August 10.
Slovenia’s outgoing government had postponed the sale
of NLB, aiming to preserve support prior to the June 3 parliamentary elections, even though the country had committed to sell 75% of the bank by 2017 in a restructuring plan that served as a basis for the EC’s approval of state aid to the bank in the 2013 bailout of the sector.
Despite this commitment, the government scrapped a planned IPO in June 2016 due to a dispute over the pricing of the
“The government scrapped a planned IPO in June 2016 due to a dispute over the pricing”
offer and an ongoing lawsuit over Yugoslav-era deposits in Croatia. The same cabinet, by that time already outgoing, submitted a new proposal to the EC for the modification of its commitments with respect to NLB on July 15.
Even though the EC has now approved this package, it is still uncertain whether the next Slovenian government will be able to carry it out.
Political newcomer Marjan Sarec is on the verge of forming a new government at the head of a coalition of five small parties, three of which were in the previous government. However, as a minority government every decision will need the support
of the radical left party Levica, which decided to support the government but not to participate in it. Levica loudly opposes the privatisation of NLB.
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This could have negative consequences for Slovenia.
“If Slovenia does not respect the deadlines foreseen, a divestiture trustee will be appointed to take over the sales process. This commitment is important, as the Commission in the January 2018 decision already suggested that a fully empowered divestiture trustee could further improve NLB's viability,” the EC warned on August 10.
Under the new agreement, Slovenia’s key existing commitments are prolonged. 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, the EC stressed. This will help ensure the long term profitability of the bank and limit undue distortions of competition.
NLB will also not re-enter the businesses it sold as part of the restructuring plan (such as the leasing business) and will strictly comply with an acquisition ban, the EC added.
According to the EC, Slovenia's aid for the bank remains compatible with EU state aid rules on the basis of the new commitment package submitted by the Slovenian authorities on July 13.
The package includes strict deadlines to complete the sale of 75% minus one share of NLB. 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.
“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 NLB will close additional bank branches in its home market and – unless a full sale is completed by the end of 2018 – also sell its stake in its insurance subsidiary NLB Vita. In order to further remove any viability doubts, NLB will also issue a so-called "Tier 2 bond" (subordinated debt),” the EC said.