In 2003 the first issue of subordinated bonds, 12% market share in securities dealing, increase in foreign exchange and derivatives dealings, 70% growth in asset management services.
Issue and trading with securities
NLB Bank issued six new bond series in 2003
In 2003, NLB Bank issued six bond series on the primary market (namely NLB9 to NLB14). Four were senior bond issues totalling 56 billion tolars, and two were subordinated bond issues totalling 15.8 billion tolars. Subordinated bonds were used for the first time in 2003 for the purpose of raising Tier 2 capital. All NLB Bank bonds were sold in private placement and are listed on the official market on the Ljubljana Stock Exchange. The last issue is in preparation for quotation.
NLB Bank was involved in another deal new to Slovenian market, which involved underwriting bonds issued by a foreign issuer, a Dutch company KBC Ifima for 3 billion tolars. The entire issue was underwritten by NLB Bank, with the purpose of selling on to Slovenian investors. This transaction represents the first cooperation with KBC Bank on the securities issue area.
Growth in assets under management
In 2003, NLB Bank recorded strong growth in asset management fees through selling standardized products through the branch network. Favourable circumstances on the domestic and foreign markets, options to invest in assets in Slovenia and abroad as well as low interest rates on deposits, resulted in numerous investors turning towards alternative investments, and were the main reasons for growth in 2003.
The enforcement of the new Act on Investment Funds and Management Companies at the beginning of 2003 represents a significant movement in the development of custody services. The act brings about some major novelties on the area of custody services for investment funds. A crucial feature presents the implementation of a mandatory custody bank, performing custody services for individual funds, mutual and pension, as well as supervisory function of the overall management of the funds.
Throughout the year intensive preparations were taking place within the project Custody Bank in NLB Bank, with the aim of developing custody services for investment funds in compliance with the new act. The year-end was marked by marketing activities and presentation of Custody Bank services to pension and management companies.
The positive performance of other custody services is reflected in total assets under custody reaching the amount of 104 billion tolars.
In the forthcoming year closing of the Custody Bank project and implementation of the new service is envisaged, thus setting forth a new turning point in development of securities services on the Slovenian capital market.
Trading with securities within NLB Group
In Slovenia securities trading for the Group is done through the investment banking unit of NLB Bank that holds the brokerage licence, however Banka Celje also offers securities trading services.
In SE Europe Tutunska banka established a brokerage-agent company Tutunskabroker, Skopje.
Surpluses in foreign exchange inflows increased temporary sales of foreign exchange swap's with Bank of Slovenia from 815 million euros in January 2002 to 1,701 million euros at the end of August 2003. Additional surplus foreign exchange was also sold in the interbank market.
Turnover in currency trading increased by 18% in 2003, with the number of deals rising by 63% on 2002 to 10,772. From that, the number of foreign exchange purchases for companies almost tripled, while the number of selling deals rose by 32%.
Trading in derivative financial instruments
In 2003, a system of trading in interest rate forward transactions, interest rate swaps and interest rate options was developed. A number of transactions with new interest-related derivative financial instruments were also made: forward deposits (forward/forward) and agreements involving forward interest rate (FRA) in order to improve the liquidity scale required by Bank of Slovenia's regulations.
As a result of volatility in foreign markets, trading in forward transactions and synthetic forward transactions increased. Several interest rate swaps (IRS) were made in order to secure interest risk for clients who had taken foreign exchange loans with variable interest rates. The number of transactions involving derivative financial instruments in 2003 was 5,901, up 39%. The volume of business increased by 45% to 4.8 billion euros.
Syndicated loans placed
In 2003 NLB Bank, together with the Group and other Slovenian banks as participants arranged several significant syndicated loans for major Slovenian companies. Arranging of syndicated facilities represents an important source of fee income for NLB Bank. The total amount of syndicated loans arranged in 2003 was 47 billion tolars, a 30% increase over value in 2002. More than half of the facilities were arranged in tolars, the remainder in euros.
Compliance with Bank of Slovenia's regulations
In 2003, NLB Bank complied with the regulation on statutory reserve since the percentage of compliance ranged between 100.3% (November) and 101.5% (July).
The year 2003 saw the introduction of two changes relating to the meeting of statutory reserve requirement, which represent a major step towards adjusting to the statutory reserves of the European Central Bank:
NLB Bank complied with the prescribed measure for liquidity ratio of a minimum of 1.
In addition to these liquidity ratios, banks must also comply with a measure of achieved foreign exchange liquid investments. Banks must ensure, on a daily basis, that their foreign exchange liquid investments excluding loans in the second class of the foreign exchange section equal at least 80% of the monthly average of their balance sheet obligations for the preceding calendar month (since March 1, 2003). Of this, at least 45% of the said balance sheet obligations must be kept in the Bank of Slovenia's bills denominated in foreign currencies. NLB Bank complied with this regulation throughout the period.
NLB Group liquidity management is based on the treasury formal agreement between NLB Bank and subsidiaries. All banks fulfilled Bank of Slovenia's liquidity requirements as NLB Bank is offering adequate instruments in case of disproportions. The Group's treasury activities also include monthly control over compliance of non-Slovenian subsidiary banks with their central bank's regulation.