The results of the operations of the Nova KBM Group for the first six months of the year demonstrate that the main projects set out in our restructuring programme, which the European Commission consented to last December upon the recapitalisation of Nova KBM, are gradually being implemented, in spite of the difficult and uncertain conditions in the financial markets and the Slovene economy in general. The common objective of these projects is to reshape the Nova KBM Group into a more cost-efficient and profitable financial institution that builds its success on a slimmer organisational structure.
“We can see a clear improvement in the results of the Nova KBM Group for the first six months of the year compared with those of last year´s June. The Bank is implementing the commitments set out in its restructuring programme and has, after three years, re-established itself as a profitable financial institution. We expect the Management Board to make every effort to continue improving the performance of both the Group and the Bank,” said Peter Kukovica, Chairman of the Nova KBM Supervisory Board. The supervisors of Nova KBM were informed of the Management Board´s report on the operations of the Bank and the Group in the first half of the year, and were presented the internal audit report for the same period. In addition, they were given a report on the restructuring of Nova KBM, a report on cost-cutting measures taken by the Group, and a report on the recovery of bad loans. “Nova KBM is a reliable and profitable financial institution with a strong liquidity position. We are happy to notice that an increasing number of individuals and companies place confidence in our performance, which is evidenced by the fact that the volume of certain transactions increased and that we managed to acquire quite a significant number of new customers in the first half of the year. We will devote all our energy to improving the performance of the Nova KBM Group and to strengthening confidence of all stakeholders of the Bank and the Group,” stated Aleš Hauc, President of the Nova KBM Management Board.
The ratio between debt and equity financing has seen an improvement in Slovenia. While the companies have started to reduce the level of their borrowing from banks, they are not willing to provide lending to either suppliers or buyers, due to strained liquidity conditions and the fear of insolvency. The demand of Slovene households for loans is weak too. Customer deposits placed with the Nova KBM Group increased by 3.3% in the first six months of the year, reflecting an improvement in customer confidence. Despite a decline of 6.0% in net loans outstanding to customers, Nova KBM managed to retain its market share of 7.8% in gross loans to the non-banking sector. As a result of these changes, the loan-to-deposit ratio (gross LTD ratio) improved in the first half of the year by 5.91 percentage points, to 85.73% as of 30 June 2014. Nova KBM´s cost-efficiency improved as well. The Nova KBM Group continues to make determined efforts to strengthen its relationships with customers, for example by closely monitoring their operations, while participating in the restructuring processes of companies. Moreover, by providing funding to businesses that have the ability to deliver profitable results, it plays an important role in generating fresh momentum for economic growth.
Following the cleaning up and restructuring of the Nova KBM Group´s loan portfolio at the end of last year, a number of measures have been introduced to improve the management of credit risk, so it is expected the level of NPLs and provisioning charges incurred by the Nova KBM Group in the future will stay relatively low. The proportion of net NPLs in the Nova KBM Group´s total loan portfolio registered an increase of 9.9% in the first six months of the year, mainly owing to a worsening in the quality of several loans granted in the past. However, despite this deterioration, net provisioning charges set aside by the Nova KBM Group were relatively low at €18,973,000, indicating a downturn in the number of new defaulting customers.
Operating costs (staff costs, general and administration costs) were 8.4% below those reported for the same period last year. As of 30 June 2014, the Nova KBM Group had 1,829 employees, down 204 on the end of June 2013, reflecting its commitment to gradually reduce the number of staff. As a responsible employer, the Nova KBM Group has so far implemented mostly so-called soft measures when making employees redundant. Nova KBM Group´s cost-to-income ratio improved to 55.30%, while its total assets amounted to €4,545,553,000 at the end of June 2014, a decrease of 5.5% from the end of 2013.
The Nova KBM Group is in the process of restructuring: more extensive consolidation activities, including the sale of leasing subsidiaries, the end of the liquidation proceedings against KBM Fineko, and a decision concerning the future of Adria Bank, are expected to be implemented in the second half of the year, with the outcome of these activities having an impact on the year-end results of the Nova KBM Group. It is expected that the extraordinary costs incurred by the Nova KBM Group will see an increase this year as a result of the asset quality review and stress tests that Nova KBM was obliged to undergo because of its systemic importance in the Eurozone.
The process of selling Nova KBM, the parent company of the Nova KBM Group, entered the second stage in August. The Slovene Sovereign Holding, which runs the sale process on behalf of the Republic of Slovenia, expects to receive binding offers in October 2014. Irrespective of any change in the shareholding of Nova KBM, and irrespective of when the sale takes place, the Nova KBM Group remains committed to accomplishing the objectives set out in its restructuring programme and business strategy, namely to provide sound and reliable performance by devoting increased attention to its principal activities, and to strengthen customer confidence.
