Troubled Slovene bank NLB sees more losses ahead

LJUBLJANA Wed Dec 5, 2012 10:09am EST

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LJUBLJANA Dec 5 (Reuters) - Slovenia's largest bank, Nova Ljubljanska Banka (NLB), said losses would continue into 2013 due to the high and rising number of bad loans since the economy plummeted in 2009.

The troubled state-owned bank is at the heart of speculation that the small euro zone member state may need an international bailout next year.

Chief executive Janko Medja said the bank, which hopes to raise 375 million euros ($490.74 million) in new capital by the end of the year, might need even more in 2013 if bad loans continued to rise, but gave no figure.

He said bad loans accounted for more than 20 percent of the bank's total loans and that percentage was expected to continue rising in 2013.

Slovenia's mostly state-owned banks are nursing some 6.5 billion euros of bad loans, equalling 18 percent of GDP.

"The uncertainty in the economy and in the banking system is by far the worst thing which actually creates costs," Medja told his first news conference since taking the post in September.

In October parliament passed legislation to create a "bad bank" which would take over toxic loans from banks. However, its enforcement was stalled by a referendum demand from an opposition party which claims the move would lead to a fast and non-transparent sell-off of state banks.

The government, which controls 61.4 percent of NLB, now hopes the Constitutional Court will ban the referendum and says NLB cannot attract investors until most of its bad loans are transferred to the bad bank.

The government said last week it was hoping to find a buyer for its entire stake in the bank, while Belgian banking and insurance group KBC, which owns 22 percent of NLB, has been trying to sell its stake for years.

The unlisted bank, which will end 2012 with a loss for the fourth year in a row, received a state capital injection of 381 million euros in July and had a Core Tier 1 capital ratio of 10.1 percent at the end of September, just above the 9 percent required by the European Banking Authority.

In October, Slovenia managed to issue its first sovereign bond in 19 months, averting a bailout for at least six months.

Medja said a possible bailout should not be seen as a stigma as it could bring "a psychological change and might even be stimulating".

Slovenia, which adopted the euro in 2007, was badly hit by the global crisis due to its reliance on exports, mostly to other EU markets, lack of fresh loans and strained public finances. ($1 = 0.7642 euros) (Reporting By Marja Novak; Editing by Zoran Radosavljevic and Helen Massy-Beresford)

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