European Commission approves sale of Slovenian bank NLB

Nova Ljubljanska Banka (NLB), Slovenia’s largest lender, has been given the nod by the European Commission (EC) to sell a first tranche of shares (equal to at least 50 per cent plus one share) by the end of 2018. The Commission said in a statement that Slovenia’s aid for NLB remains compatible with EU State Aid rules on the basis of a new commitment package submitted by the Slovenian authorities in mid-July 2018.

“The sale of NLB was an important remaining milestone in the bank’s restructuring plan, which allowed us to approve over 2 billion euros of state aid to the bank in 2013,” said Commissioner Margrethe Vestager, in charge of competition policy. “Therefore, I welcome Slovenia’s commitment to a clear time path to achieve this sale. Thanks to this, the Commission can today approve Slovenia’s new commitment package for NLB, ensuring that the bank will be a viable long-term player in the Slovenian banking market.”

At the beginning of 2018, the Commission opened an investigation to assess whether new measures proposed by the Slovenian authorities regarding the restructuring of NLB sufficiently compensated for delaying the bank’s sale. In particular, the Commission was concerned that Slovenia had not sold a first tranche in NLB before the end of 2017, in line with the commitments originally proposed by Slovenia to ensure the bank’s long-term viability.

The sale, which the Slovenian authorities first committed to in 2013, was critical for the Commission.

The new commitment package proposed by the Slovenian authorities includes strict deadlines to complete the sale of 75 per cent minus one share of NLB with the first tranche of 50 per cent of shares to be sold by the end of 2018 and the remaining 25 per cent by the end of 2019.

If Slovenia does not respect these deadlines, a divestiture trustee will be appointed to take over the sale 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 bank’s other commitments mean that it can only grant new loans if the bank receives a minimum return on equity on those loans. NLB will also not re-enter the businesses it sold as part of the restructuring plan, for example the leasing business, and will also strictly comply with an acquisition ban.

At the end of 2017, NLB’s balance sheet amounted to 13 billion euros. It has received three State re-capitalisations, one of 250 million euros in March 2011, one of 383 million euros in July 2012 and a third in December 2013 of almost 1.6 billion euros, together with a transfer of impaired assets to a state-owned bad bank with an implied aid element of 130 million euros.