Dear Stakeholders,

2020 was an extremely challenging and, yet in many ways, a ground-breaking year, not soon to be forgotten. In more ways than one it was also very memorable for the Group, although by far not only due to the COVID-19 pandemic and its consequences as one might think. The pandemic has, of course, had an impact on our business operations and day-to-day work, but even more notable were the lessons learned and new practices we have since adopted. Also notable are a couple of essential milestones. In the middle of the year we managed to complete a divestment of insurance company NLB Vita as the last commitment to the EC, by which a highly limiting state aid process was officially completed and after many years the Group could resume its full business capacity. This enabled us to again address eventual value accretive business opportunities, and we very proudly ended the year with the game-changing acquisition of Komercijalna banka a.d. Beograd (Komercijalna Banka, Beograd). With this transaction, we further solidified the Group’s presence in all our markets in SEE, our home region.

Blaž Brodnjak, CEO & CMO 

High responsibility, supported by knowledge, experience, professionalism, and finally the strong market position of NLB Group as a regional player proved once again to be especially effective in times of crisis, brought by the COVID-19 pandemic. We have responded successfully and effectively to the new circumstances, maintaining as a priority the concern for the health of our employees. We provided protective equipment in our offices, while enabling as many of them as possible to work from home. In the meantime, the latter has also been supported as the regular working mode, wherever applicable and mutually acceptable. As the utmost priority, we also protected the health of our customers by securing preventive measures in our branches, while at the same time providing significantly enhanced accessibility and quality of our key services through online channels. Clients of NLB in Slovenia can now get cash loans, overdrafts, credit cards and can order any other services 24/7 via a mobile bank without direct personal interaction, and as unique experience can sign any contract with the Bank digitally through our mobile bank Klikin. All of that is supported by 24/7 chat and the video chat service from our Contact Centre with a closing capacity for the majority of services. With that, NLB has already surpassed the client experience levels of majority of FinTech challengers. We have a clear plan for further enhancements and consistent replication of this delivery model in all our markets.

After witnessing economic hibernation during a substantial part of the first half-year, various factors contributed to a robust revival of especially industrial activities by the end of the year. As a result, in the second half of the year the Group recorded a normalisation of revenues to pre-COVID-19 levels and generated a sound net profit of EUR 141.3 million,*  with all SEE subsidiary banks reporting solidly positive net earnings and contributing 36%* to the result.

This outcome was clearly strongly supported by a quick and determined response from governments and regulators with measures that helped stabilise the economic environment, but also by a very proactive response of our whole Group. We have learnt our lessons in the period from 2008‒2014 and we are fully aware that concrete actions speak the loudest, especially in times of crisis. That is why we decisively addressed clients’ needs as soon as the pandemic hit, and its potential consequences were assessed. We have, for instance, secured stable liquidity by instituting significant working capital lines to vital businesses, maintaining regular lending activity and releasing eventual liquidity squeeze to all client segments through moratoria.

Andreas Burkhardt, CROWe enhanced relationships and maintained the high quality of portfolios with very limited NPL migration by intensified daily contacts with clients and prompt reactions. During the first wave of epidemic we anticipated material impacts to credit quality, resulting in significant pool impairments and provisions and cautious guidance regarding the cost of risk. However, in the second half of the year the economy and clients proved to be more resilient and actual cost of risk did not follow the initial estimates. This is clear proof that the underwriting criteria and practices we introduced in 2013 have been very robust across economic cycles.

Structural profitability challenges, in contrast, escalated further. Due to lockdowns, prohibiting consumption, along with governmental measures, defending employment and boosting household income, and the influx of predominantly retail deposits introduced further significant drag on interest income. We managed to partially mitigate this impact by strongly focusing on additional fee and commission income, thus defending the financial intermediation margin, though it has become obvious that in the EUR-denominated Slovenian market there is no alternative to following the logic of corporate deposits and also introducing charges for household balances. Given that a decision was taken to start charging fees from 1 April 2021 on for the balances exceeding EUR 250 thousand with the ambition to reduce the threshold to EUR 100 thousand in the second half of 2021.

With the implementation of capital relief measures, the inclusion of two successfully issued subordinated Tier 2 bonds and undistributed profit for the year 2019 into capital (due to the BoS restricted dividend payout in 2020 following ECB recommendation) the Group even after the sizeable acquisition concluded the year with a diversified capital structure and solid capital position above the regulatory requirements and management buffer. This besides very high liquidity reserve balances provides a solid foundation for our further business operations and resumed targeted dividend payouts as soon as supported by regulators. This position has been also shared by Moody’s rating agency when upgrading the long-term local and foreign currency deposit ratings of the Bank from Baa2 to Baa1.

Archibald Kremser, CFODespite the pandemic and numerous related challenges, measures, key activities and achievements, we positioned the Group in the most important growth market through the successfully completed acquisition of Komercijalna Banka, Beograd. Consequently, we have assumed a unique top 3 banking positions with more than a 10% market share in six out of seven of our markets. Moreover, we further improved our international footprint by supporting selected cross-border corporate projects, we reintroduced leasing services in Slovenia through the subsidiary NLB Lease&Go with the firm ambition of a regional roll-out, we adopted a consistent and decisive IT strategy with the aim to build the best digital bank and IT team in the SEE with cyber security being at its core, and we undertook several strategic initiatives and measures for strategic cost optimisation and boosting sales ‒ among them an ambitious channel strategy with further swift digitization, paperless operations, corporate real-estate optimisation, etc.

The Group closed 2020 in a very good shape. We realised that this crisis offered us many opportunities to differentiate in the market and above all by being relevant and further strengthening our relationships with clients. One of these insights resulted in the first Group-wide CSR project that has a clearly defined sustainability component, #HelpFrame project, with which we further demonstrated our genuine interest in improving the quality of life in our region we call and therefore treat as home. We have been supporting people with an entrepreneurial spirit and creative ideas who have introduced products and services with a sustainable local footprint. In the Group, we acknowledged their efforts and provided almost 274 entrepreneurs, farmers, and micro and small businesses from all our markets, not only with our financial mentorship and professional support, but also with advertising space that they would otherwise not have been able to afford.

We consciously and decisively committed to sustainability by signing the UN Principles for Responsible Banking and commitments toward EBRD and MIGA. NLB Group decided to discontinue any financing support to coal-based technologies and has been actively seeking and supporting energy efficiency improvement and renewable energy production projects. We are genuinely focusing on the sustainability of our business decisions and actions, as well as customers’ needs and expectations. As a systemic player, we are in the position to truly influence the environment and the quality of life. We know that sustainability is an ongoing series of decisions and actions. We thus aim to create a regional sustainability platform with an important positive impact on the environment and society, while being recognised as a role model in governance. By that we strive to become one of the most meaningful businesses and the most desirable employers in our region. We wish to partner in these endeavours with like-thinking clients, associations and other entities to create an ecosystem of relevant services, delivered in a sustainable way.

Petr Brunclík, COO

All this cannot be secured without a dedicated team of colleagues who truly care about our customers and our mission and go the extra mile when needed. Year 2020 was truly an exceptional year and colleagues deserve clear recognition of extraordinary efforts and a resounding gratitude. We have learnt that in times of great uncertainty and concern, things that once seemed unfeasible, undesirable, or even unacceptable, can become possible.

In 2020 the Supervisory Board of NLB added members, appointed by the Workers’ Council, enabling the inclusion of employees in the strategic steering of the Group. The Supervisory Board acknowledged the team’s efforts and demonstrated trust in the Management Board by extending the mandates of the CEO/CMO, CFO and CRO until July 2026.

Our plan for 2021 is to continue to act prudently to leave COVID-19 behind us as soon as possible, while in parallel to further enhance our capabilities in the field of knowing our clients, in order to provide even more relevant, personalised services, whenever and wherever necessary. Our goal is no longer to just be an excellent distributor of universal financial services, but also one of the most ambitious, technologically-driven banking groups in our home region providing top quality experience to our existing and prospective clients.

We truly believe that the best for the Group is yet to come and we confidently look forward to the challenges in front of us. We are convinced that we will not only overcome them, but also learn from them and become even stronger. With full motivation and energy we will take the Group to another level as one of the most meaningful businesses in the region with great positive impact in the environment and society we live in. This is our home, we respect it and we will support it, nurture it, invest in it, and make sure that it is ready – for whatever may come.

Yours truly,
Management Board of NLB 

* Without the effect of the acquisition of Komercijalna Banka, Beograd.