August 13, 2020
“In a half-year marked by the COVID-19 pandemic that has significantly affected the global economy and our everyday lives, the NLB d.d. Supervisory Board is satisfied to conclude that the NLB Group business results are stable and – despite impairments and provisions – rather robust and profitable. Above all, we are pleased with the Groups’ responsible approach towards business and its understanding of the needs of the environment in which it operates,” said Chairman of the Supervisory Board of NLB d.d. Primož Karpe today, on the 13th of August, as the Supervisory Board met at its 64th meeting and discussed NLB Group operations in the first six months of 2020.
During this period, NLB Group generated EUR 73.7 million in net profit, a decrease of EUR 20.7 million or 22% YoY, on the back of its flat net operating income of EUR 260 million (0% YoY) and almost unchanged profit before impairments and provisions of EUR 115.2 million (-1% YoY) – exemplifying top line stability. The decrease in net profit can be attributed mainly to the establishment of the aforementioned impairments and provisions related to the COVID-19 outbreak in Q1 2020 (impairments and provisions in H1 2020: EUR 33.2 million; H1 2019: EUR 5.5 million), partially offset by non-recurring results of divesting approximately EUR 330 million of debt securities to reach a positive P&L result of EUR 17.2 million, and the recognition of the successful closing of NLB Vita in Q2 with a contribution to Group P&L of EUR 11.0 million. Subsidiary banks in SE Europe continued to perform well, contributing 40% to the Group’s profit before tax in the first half year of 2020.
Amongst other key developments that have affected NLB Groups’ results are lower net interest income (6% YoY) that is mostly due to tactical shifts in balance sheet positions in course of the pandemic, and a higher cash position (approximately EUR 1 bn YtD), as well as the effects of Tier 2 instruments issued partially in anticipation of the KB integration. Core revenues from loan books have remained stable YoY despite weaker loan production during the pandemic. The Group’s net interest margin thus decreased to 2.19% (-35 b.p. YoY), mostly as a result of previously mentioned measures. The higher net non-interest income (10% increase YoY) was due to non-recurring income and only slightly lower net fee and commission income (1%) due to the COVID-19 outbreak also contributed to the result. Costs remained stable, CIR stood at 55.7% or 0.5 p.p. higher YoY.
The total assets of the NLB Group increased and amounted to EUR 14,892 million, mostly as a result of increased deposit inflows. Gross loans to customers at the Group level increased 4% YoY (EUR 8,048.9 million) and are slightly up 1% (EUR 110.6 million) YtD. Growth was recorded in gross loans to corporate clients (EUR 185.9 million or 5% YoY) and individuals (EUR 160.5 million or 4% YoY).
The total capital ratio of the Group reached 20.5% (4.2 p.p. YtD increase) and was well above the regulatory thresholds, mostly due to the inclusion of EUR 240 million of subordinated Tier 2 instruments in 2020 and EUR 157.5 million in 2019 undistributed profit.
For more details on NLB Group operations in H1 2020, please refer to the NLB Group Interim Report, which was published today. Tomorrow, on Friday, 14th August, at 11:00 am CET all interested stakeholders are kindly invited to follow a live audio presentation of the financial results on this link.
At the meeting, members of the Supervisory Board also took note of the reports submitted by the Bank’s experts and granted consent to transactions requiring Supervisory Board approval.