June 13, 2012 / 9:41 AM / 7 years ago

Bad loans in Slovenia soar in March

* Bad loans reach 11.8 pct of all loans or 6 bln euros

* Bad loans up by 300 mln euros in March

By Marja Novak

LJUBLJANA, June 13 (Reuters) - Non-performing loans in Slovenia rose to 11.8 percent of all outstanding bank loans in March and totalled some 6 billion euros ($7.47 billion), the government’s macroeconomic institute said on Wednesday.

Bad loans rose by 300 million euros in March, the biggest monthly increase so far, mainly because of non-performing loans to construction companies and to financial services and insurance firms, the institute said in a monthly report.

The amount of loans banks extended to the non-financial sector continued to decline this year and was down by 1.7 percent year-on-year in April, it said.

The global crisis hit the Slovenian economy hard because of its dependence on exports. The government expects the economy to decline by 0.9 percent this year, following a contraction of 0.2 percent in 2011.

The country’s banking sector is expected to end 2012 with a loss for the third straight year and the three largest banks need capital injections this year to cover non-performing loans extended to local companies in the past.

The number one bank, state-owned Nova Ljubljanska Banka (NLB), needs the biggest cash injection as it must boost its capital by at least 320 million euros by the end of this month in line with the European Banking Authority (EBA) requirement.

Faced with a lack of private investors, NLB plans to issue a contingent convertible bond this month to cover its capital needs until a strategic investor is found.

The institute also said the yield demanded for a possible new Slovenian bond issue remained high at about 5.5 percent, in part due to the ongoing euro zone debt crisis.

Slovenia in April postponed a 1.5 billion euro sovereign bond issue because the yield demanded was above 5 percent, compared to 4.4 percent paid for the 10-year bond issued in January 2011.

The government hopes the yields will fall in the coming months as austerity measures implemented this month take effect and help bring down the budget deficit which reached 6.4 percent of GDP in 2011. ($1 = 0.8028 euros) (Reporting By Marja Novak; editing by Zoran Radosavljevic and Adrian Croft)

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