Statement by the President of the Management Board of NLB

Dear NLB business partners, shareholders, and employees,

In 2009, NLB Group operations were characterized by difficult and changing conditions in the immediate and extended business environment and by an exacerbated financial situation. Due to the economic and financial crisis that harshly affected a large number of our business partners and consequently also our bank, this was an especially trying period. The management endeavored to react appropriately and in a timely fashion to unfavorable market conditions and use the measures adopted to reduce the consequences of the financial crisis and mitigate their impact on operations. In adopting these kinds of business decisions, it is necessary to act with a great deal of prudence and caution.

The crisis was reflected in two ways: in the first part of the year, it was especially reflected in the bank’s liquidity and, in the second part of the year, the deteriorating business conditions in Slovenia began to come to the fore, which had a key impact on the quality of the bank’s portfolio. During the year, payment delays therefore began to increase, which resulted in poorer quality of loans and thus also a poorer credit structure of debtors. To protect ourselves against any unexpected blows from the financial crisis, the NLB pursued a conservative policy of making provisions. This caused poorer results, but also contributed to the enhanced stability of the bank, especially from the viewpoint of efforts under further difficult operating conditions.

In these difficult circumstances, fairly good results before provisions were achieved, but the scale of impairments and provisions formed exceeded the profit achieved, which resulted in a loss in the amount of €23.6 million at the NLB level, and €86.8 million at the NLB Group level. A great part of this negative outcome resulted from extraordinary events such as the impairment of capital investments in subsidiaries, the write-off of investment in real estate, and impairment of some other investments.

Despite all the difficulty resulting from the unfavorable business situation, it is important not to focus merely on addressing problems caused by the economic standstill, but also to make good use of the opportunities that have appeared or will appear due to the changes resulting from the financial crisis.

In doing this, we take courage in the experience gained to date, which bodes well in the upcoming years. Our strongest support is the expertise, efforts, and commitment of our employees, numbering over 8,000 in seventeen countries.

2010 will also be full of new challenges. We are confident that we will be able to cope with the demanding conditions, and expectations predominate that conditions will improve and give us a new opportunity to operate successfully and with high quality. Next year, the bank will have to outline new strategy reflecting our experience and expertise. We will nurture our commitment to NLB and its values to restore bankers’ good name and to safeguard the successful performance of our bank.

Božo Jašovič,
President of the
NLB Management Board