Based on Growth in Q3, NLB Group Improves Outlook for 2021

November 11, 2021

Encouraged by the economic recovery driven by healthy private consumption and strong loan demand, NLB Group recorded another successful quarter, with minimal or no effect of once again growing health concerns. The Group generated EUR 205.5 million of profit after tax (EUR 100.9 million or 96% higher YoY), and as a result is well on track to exceed 2021 guidance in main categories. Based on this strong performance and the favourable business environment, we have improved our 2021 outlook.

Strong recurring performance of all banks contributed to the result of NLB Group in the third quarter of the year, learned NLB’s Supervisory Board at today’s regular meeting, during which it discussed the Group’s operations in the first nine months of 2021 and familiarized itself with the Interim Report, available here.

  • The cost of risk in 2021 is expected to outperform previous outlook guidance and is expected to be around -20 bps, leading to improved ROE above 10%. We anticipate risk costs to remain moderate throughout 2022 and 2023, and so we improve the 2023 CoR outlook to between 30 and 50 bps (from the previous 40 – 60 bps).
  • Net interest income totalled EUR 103.7 million in the third quarter (3% growth QoQ), mostly on the back of strong loan growth as margins remain under pressure. Net interest income in the first nine months grew by 35% (by EUR 77.8 million) due to the acquired Komercijalna banka group (“KB group”) contribution (EUR 74.4 million), and totalled EUR 302.3 million. Margins remain under pressure due to abundant liquidity of the financial sector globally, with NLB Group NIM at 2.07% and the operational business margin at 3.30%. 
  • The net non-interest income reached EUR 197.5 million in the first nine months. The Group’s business development efforts remain firmly focused to the growth of this top line category. The key business focus net fee and commission income grew by 38% YoY (14% without KB group contribution) because of the growth in all banks, but mostly in NLB d.d. due to the repricing of the packages, introduction of fees for high balances, higher net fees from asset management and bancassurance, and arrangement fees for the organisation of syndicated loans.  
  • Total costs remained flat QoQ as cost containment remains one of our key focus areas. The Group further optimised its branch footprint, predominantly in KB group banks, with 11 branch closures QoQ and total of 14 in 2021. We expect to realise approximately half of the revised integration costs EUR 19.7 million by the end of 2021. The Cost to income ratio (CIR) stood at 59.4%, a 3.0 p.p. increase YoY.
  • Net impairments and provisions for credit risk were released in the amount of EUR 34.1 million in the first nine months, mainly due to repayment or sale of several exposures (including already written off) and changed parameters for collective impairments and provisions related to more favourable macroeconomic forecasts, leading to CoR in first nine months of -50 bps. Loans with expired moratoriums show no material signs of deterioration as indicated by stable DPD data. NPL ratio declined further to 2.6% (NPL by EBA 3.7%) and we expect benign risk environment to persist till the end of the year. 
  • The lending activity recorded healthy and significant growth in all the banks of the Group in the first nine months of 2021. Retail loan growth was very strong across the Group, with a 11% YtD increase in Strategic foreign banks (excluding KB group), while KB group was able to grow despite the pending merger efforts at 6% YtD. Slovenia performed exceptionally strong at 8% YtD (EUR 197.9 million) on the basis of a very strong housing loan demand. Corporate loan growth at the Group level showed healthy 3% YtD.
  • The deposit inflow in retail segment has abated, indicating return to normality, i.e., increased spending from discretionary items. 
  • A strong capital position with 14.75% CET1 ratio and 17.16% TCR is a solid foundation for further growth, both organically or with acquisitions should opportunities arise, while still maintaining a strong dividend potential given the strong earnings outlook.  

More information on NLB Group operations in 3Q 2021 is available in the Interim Report. Tomorrow, on Friday, 12 November at 11:00 CET/10:00 GMT, all interested stakeholders are kindly invited to the presentation of business results by the NLB Management Board, which will be available here. Members of the Management Board will, as usual, receive and address your questions live during the webcast, however, if you already know what you wish to ask them, you may submit your questions now. If you register for the event, you will be able to send them via web app, or you may simply send them to the email address

Committed to our stakeholders and our home region 

At today’s meeting, members of the Supervisory Board also took note of the reports submitted by the Bank’s team and granted consent to transactions requiring its approval. They expressed satisfaction with the achieved results of the NLB Group, emphasizing that strengthened capital and liquidity positions ensure justifying the expectations of NLB’s stakeholders. 

“We are very pleased that the Group’s strong business performance, together with the expiration of the Bank of Slovenia’s decision restricting the payment of dividends, enabled NLB d.d. to propose an additional allocation of distributable profit for 2020. The General Meeting that will decide on the proposition that EUR 67.4 million of distributable profit be paid to NLB shareholders on 24 December 2021, will be held on 16 December. If this proposal receives sufficient support from shareholders, NLB will pay a total of EUR 92.2 million in dividends in 2021, thus confirming a successful implementation of the Bank’s business strategy including high dividends for shareholders,” emphasized Supervisory Board President Primož Karpe

NLB’s CEO Blaž Brodnjak, on the other hand, indicated that justifying the expectations of our stakeholders is not the only benefit of the Group’s successful business operations. As he pointed out, this also enables us to search for new growth opportunities. 

“We will continue to successfully grow and increase our market shares organically, however, we are closely monitoring developments in our home region, South-eastern Europe, and would not shy away from analysing and addressing eventual value accretive opportunities also for the M&A-based growth. NLB has the capacity to buy banks and/or portfolios in any of our existing, as well as other markets in the region, thus becoming a true regional champion,” he explained. 

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