Published April 12, 2013
LJUBLJANA – The head of Slovenia's largest bank backed a government estimate of around 1 billion euros to recapitalize the country's three main lenders after the figure was questioned by the Organisation for Economic Cooperation and Development earlier this week.
Slovenia, racing to avert a bailout, said on Friday it would have a plan ready to put to parliament in two weeks to sell off state assets, probably including a bank. The country is facing intensifying pressure from markets and a potential squeeze on its finances following the messy bailout of Cyprus last month.
Janko Medja, head of Nova Ljubljanska Banka (NLB), told Reuters in an interview earlier on Friday that NLB's internal evaluations also put the cost of recapitalizing the top three banks at around 1 billion euros - but added he did not think the bank would be ready for sale this year.
The OECD said on Tuesday it thought Slovenia, a small Alpine state of 2 million people, may have underestimated the cost of cleaning up mostly state-owned local banks, which are struggling with bad loans estimated at 7 billion euros or fifth of GDP.
Slovenia has said it will need to raise about 3 billion euros ($3.94 billion) this year to recapitalize the banks, repay maturing debt and cover the budget deficit.
"The government assessment stands at roughly 1 billion euros for recapitalization(of local banks). I would support this figure," Medja said.
"I don't think a buyer for the bank could be found this year, but if we recapitalize the bank and restructure it as we said we will .... that would be possible next year," he added.
NLB's Medja told Reuters his bank would need a capital hike of 375 million euros this year as forecast, though did not exclude the possibility that could rise if regulators increased capital demands or restructuring was slower than planned.
The new centre-left government has said it will start transferring bad loans from state banks to a newly established bad bank in June to enable their sales. Slovenian officials have also said the state would keep a 25 percent in each bank.
Medja said he expected NLB would eventually have to be sold in its entirety as foreign investors would baulk at buying a bank in which the state still had a major stake.
Shares in NLB are not publicly traded. At the end of December 2012 the government bought 22 percent of it from Belgian bank KBC for 2.77 million euros, just 1 percent of its book value.
Medja said that was not an accurate evaluation of the overall bank. He said he hoped bad loans would level out sometime this year but refused to say whether the bank's loss in 2013 would be bigger or smaller than its 2012 loss of 273.5 million euros.
He also said he expected stress tests of Slovenian banks to be performed before summer after the OECD said the country should undertake rigorous measures to assess its lenders' capital adequacy.
Slovenia was badly hit by the global crisis due to its dependency on exports. It has been struggling with a new recession since 2012 amid lower export demand and a fall of domestic spending caused by budget cuts.
($1 = 0.7618 euros)
(Reporting By Marja Novak; Editing by Sophie Walker)