Pictured: NLB employees
Creating better
footprints.
For today.
NLB Group Annual Report 2022
Forward-looking statements
The expectations, forecasts and statements regarding future
developments that are contained in this report are based on
assumptions and are contingent on a number of factors that
will come into play in the future. Consequently, the actual
situation may turn out to be different.
2
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
NLB Group at a Glance
........................................
3
Statement by the Management Board of NLB
.................
4
Statement by the Chairman of the Supervisory Board of NLB . . 7
Key Members Overview
......................................
9
Key Highlights
...............................................
10
Key Events
..................................................
15
Market Performance of NLB’s Shares and GDRs
..............
17
The Macroeconomic Environment
............................
19
The Regulatory Environment
.................................
25
BUSINESS REPORT
..........................................
27
Strategy
......................................................
29
Funding Strategy and MREL Compliance
.....................
31
Risk Factors and Outlook
....................................
32
The Impact on Operations of the Russian
invasion in Ukraine
...........................................
36
Sustainability
...............................................
40
Overview of Financial Performance
..........................
43
Segment Analysis
............................................
64
Retail Banking in Slovenia
....................................
65
Corporate and Investment Banking in Slovenia
...............
70
Strategic Foreign Markets
...................................
76
Financial Markets in Slovenia
................................
86
Non-Core Members
.........................................
90
Risk Management
............................................
93
IT and Cyber Security
.......................................
102
Human Resources
..........................................
106
Corporate Governance
......................................
110
Compliance and Integrity
....................................
118
Internal Audit
................................................
121
Corporate Governance Statements
..........................
122
Disclosure on Shares and Shareholders of NLB
.............
143
Events After the End of the 2022 Financial Year
..............
146
Reconciliation of Financial Statements in
Business and Financial Part of the Report
...................
147
Alternative Performance Indicators
.........................
149
NLB Group Chart
............................................
169
Organisational Structure of NLB
............................
170
FINANCIAL REPORT
.........................................
171
NLB Group Directory
.......................................
330
Definitions and Glossary of Selected Terms
..................
334
3
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Vision
The Group will take care of the
financial needs of its clients and
improve the quality of life in its
home region – South-Eastern
Europe.
Sustainable banking
• NLB officially joined the
Net-Zero Banking Alliance
in May 2022.
•
Sustainalytics ESG Rating:
17.7 (top 15%).
• Improving our operational energy
efficiency and
lowering carbon footprint.
•
Reduction of CO
2
footprint 2022:
•
52% (Scope 1 and 2)
•
46% (Scope 1, 2, 3; category 15
(financed emissions) excluded)
•
Substantial progress made in all three pillars:
•
Sustainable finance
•
Sustainable operations
•
Contribution to society
•
Following sustainability reporting standards:
•
Global Reporting Initiative
•
UNEP FI Principles of Responsible Banking
•
TCFD standards
•
Implementation of ECB Guide
on climate
and environmental risk management.
Ratings
Who we are
•
The leading banking and financial group in the region
,
with eight banking members, companies for ancillary
services (leasing, asset management, real estate
management, etc.) and limited number of subsidiaries in
a controlled wind-down.
Total
Assets:
EUR 24,160
million
Total
Capital:
EUR 2,806
million
Regular
Income:
EUR 779
million
•
The leading and systemically most important bank in
Slovenia.
•
Universal banking model
offering services to retail
and corporate clients.
•
The market share of member banks in excess of 10%
(measured by total assets) in six out of seven markets.
Number of
active clients:
more than
2.7 million
Employees:
8,228
Branches:
440
Our strategic focus
• Be a
regional champion
•
Put
clients first
•
Grow
our market position
• Monetize
opportunities and synergies
2021
BBB-
2022
BBB
Positive
investment grade rating
dynamics in S&P Global Ratings.
NLB Group
at a
Glance
4
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Esteemed Stakeholders,
We have been living in an extremely turbulent period in 2022,
with serious new challenges throughout the entire European
society. In the past year, more than ever before, the systemically
important role of the banks in the Group and the footprints we
create in our home region of South-Eastern Europe (SEE) came
to the forefront.
“We consistently follow our
strategic priorities and look into
the future with confidence.”
— Blaž Brodnjak,
CEO
The need to prove our systemic importance has been
accentuated soon after the beginning of the year. We entered
2022 firmly positioned and prepared to tackle any challenges
still anticipated by the post-covid recovery of the economies in
SEE where we operate. What wasn’t anticipated, however, were
the uncertainties, challenges, and consequences brought on by
the Russian aggression in Ukraine. Nonetheless, our response
was decisive and concrete. We are enormously proud to be
able to confidently state that the Group and its member banks
have contributed their share to stabilisation of the industry and
regional economy. Following the sanctions directed towards
the Russian Sberbank and its subsidiaries, including Sberbank
banka d.d. Slovenija, NLB responded conscientiously and
responsibly, and by entering the ownership structure of this
Slovenian bank (later renamed to N Banka) at short notice
helped to stabilise the Slovenian banking system during one
of its most critical periods. In parallel, we also signalled our
interest in resolving comparable challenges in Bosnia and
Herzegovina and potentially Croatia (if legacy hurdles were
removed), and in case of lack of alternatives, NLB was prepared
to act as the last resort solution. Furthermore, the Group’s
banks in various markets also stepped up in times of instability
of the energy sectors and by providing much-needed liquidity
contributed to the successful mastering of this challenge as well.
All of this came on top of the Group’s regular business
objectives of growth in all key segments and providing our
clients with innovative, relevant solutions through an ever-
improving user experience. The Group responded to the global
industry disruptive trends by establishing a Group competence
centre, ‘NLB DigIT,’ in Belgrade to act as a development hub
for group wide IT solutions. Nowadays, NLB Group is no longer
just a banking group, but surely one of the most ambitious and
most dedicated IT employers in the region. The Group’s clear
objective is to keep and build its digital leadership position by
using the most advanced available technologies in all of its
home markets.
Yet, NLB DigIT and the aforementioned N Banka, were not
the only new strategic members of the Group in 2022. As we
see the potential and believe that modern mobility solutions
with embedded leasing services significantly complement our
universal offering, we decided to gradually expand this activity
by establishing a presence in Serbia and in North Macedonia.
“Our high quality of the loan
portfolio is a warranty for the
sustainable growth of the Group.”
— Andreas Burkhardt,
Member of the Management Board (CRO)
“We strive to keep and build
Group’s digital leadership
position.”
— Archibald Kremser,
Member of the Management Board (CFO)
Statement by the
Management Board
of NLB
5
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
It is planned that in its mature phase, leasing will contribute
more than EUR 1 billion to the total assets of the Group, through
organic and potentially also inorganic growth. With leasing
activities and its eventual partnering ecosystem, we aim to
become one of the leading providers of mobility solutions in the
region.
It is also worth to highlight one of the most challenging, but
also the most important processes NLB has undertaken in
recent years – the integration of NLB Banka, Beograd and
Komercijalna Banka, Beograd to NLB Komercijalna Banka,
Beograd in spring of 2022. This successfully completed process
further strengthened NLB’s position in Serbia, providing it
with the ability and the responsibility to truly influence the
economic environment and society in one of the key markets in
the region; while on the other hand once again confirming the
ever-growing, key importance of subsidiary banks and their
contribution to the Group’s financial performance.
Despite the aforementioned precarious circumstances, the
shadow of the war in Europe, the resulting energy crisis, and
the economic slowdown, 2022 was the best year in the history
of this banking group, evidenced by the historically highest
absolute net income of any business group headquartered
in Slovenia. The financial performance was truly exceptional
despite the level of fear and stress in the markets. While the
Group generated EUR 446.9 million in profit after tax (89%
higher year on year), we also enhanced market shares in all key
segments.
The Group’s strong business results translated into added value
for our shareholders, with a substantial dividend pay-out in
two tranches in the total amount of EUR 100 million. The Group
remains committed to justify stakeholder expectations, and
projects a total capital return through solid cash dividends in
the cumulative amount of EUR 500 million (including 2022 pay-
outs) by 2025. This will, on one hand, ensure a stable dividend
increase, and on the other provide room for incremental
organic growth and pursuit of tactical M&A opportunities.
More specifically, NLB has the capacity to grow organically or
by acquisition in any of our existing, as well as neighbouring
markets, including the currently missing Croatia, thus becoming
a natural choice for a pan-regional platform.
The Group’s business results, although remarkable and
unprecedented thus far, are by no means the only indicator of
the vital role the Group holds in SEE. At least equally important
is our goal of improving the quality of lives and business
environment in our home region. Guided by this objective, it is
not surprising that we have put sustainability in its broadest
sense at the heart of our business decisions and actions. Our
efforts encompass the environmental, social and management
aspects, and result in a number of initiatives and milestones,
many of them reached in 2022. In the past year, we have, for
example, established the NLB Group Sustainability framework
and joined the United Nations Net Zero Banking Alliance, which
aims to harmonise credit and investment portfolios to reaching
zero net emissions by 2050 or earlier. We have continued to
develop a range of green services and solutions, have been
mindful of our own carbon footprint, and have supported and
promoted sports, culture, and socially disadvantaged groups.
We further recognised not only opportunities, but also our
responsibility for helping the economy outside the framework
of banking, as demonstrated by the project #FrameOfHelp in
“We support our clients and
stand for what’s right, in
business and everyday life.”
— Hedvika Usenik,
Member of the Management Board
(i)
“We are only as strong and
robust as our clients are – our
households and our economies.”
— Andrej Lasič,
Member of the Management Board
(i)
“We are a trusted partner
for the financial well-being
of the region.”
— Antonio Argir,
Member of the Management Board
(i)
(i) Since 28 April 2022.
6
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Management Board of NLB
its third edition, during which we encouraged reflection and
discussion about the sustainable future of our home region.
We are truly proud that our efforts and our progress were
recognised by receiving our first ESG rating. Sustainalytics, one
of the leading independent ESG research, ratings, and data
firms in the world has rated NLB with an ESG Risk Rating of 17.7
and a low risk of experiencing material financial impacts from
ESG factors, due to medium exposure and strong management
of material ESG issues. NLB thereby became the first bank
with headquarters and an exclusive strategic interest in SEE
which has obtained this rating, as well as the first among the
companies listed on the Ljubljana Stock Exchange.
The first ESG rating, however, was not the only important
recognition NLB received in 2022. Standard and Poor’s rating
agency raised NLB’s credit rating to BBB/A-2 from BBB-
/A-3, with a stable outlook; while the Top Employers Institute
awarded NLB the prestigious Top Employer certificate.
Looking at all these achievements and results of the Group in
the past year, it can-not be denied that they are impressive and
make us feel extremely proud. However, with an entrepreneurial
mindset being amongst our core values, we are not the ones to
sit idly, resting on our laurels. Circumstances have arisen where
it is essential to look into the future. In it, we see plenty of new
challenges, but, above all, plenty of opportunities. The Group is
extremely well positioned. We will do our best to live up to the
expectations of all our stakeholders – shareholders, employees,
clients, and the public – to seize all opportunities and thereby
create better footprints in the region which is our home.
Yours truly,
EUR
446.9
million
net profit of NLB Group
(EUR 184.1 million
contribution of
N Banka)
Blaž Brodnjak
Chief executive officer
Andreas Burkhardt
Member
Archibald Kremser
Member
Hedvika Usenik
Member
Antonio Argir
Member
Andrej Lasič
Member
7
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Statement by the
Chairman of the
Supervisory Board
of NLB
To Our Shareholders,
“It’s about being, not having” wrote Derek Sivers, in his heart-
warming book,
Anything You Want.
You might ask yourself what
does this book have to do with banking? I’ll tell you that the
answer lies in the mindset Derek describes in his book about
the logic we should pursue when talking about “put clients first,”
which is one of our strategic focus points.
More specifically, if we want to grow with a self-sustaining long-
term rate, show the investment public our underwriting and
lending practices are the industry’s best practices, grow using the
principles of margin accretion (and not only volume), continue
proving our business model is set to create value because we
can profitably grow at a fast pace and increase the positive gap
between the cost of our equity and our RAROC and ROE metrics,
then we need to be the banking group that works on establishing
a deep, even emotional connection with our growing client base.
It is from that connection that our other stakeholder groups feed,
including you shareholders. This connection should be created
everywhere you look within our banking group. Starting from the
welcoming smile at our retail desks, up to the complex financing
instruments serving our most demanding corporate clients, while
at the same time placing the utmost attention and skillset to the
investment tactics we use to shield and profitably grow our big
surplus liquidity. Everything we embark upon, as we do our job,
stems from the desire to be able to create an offering of services
and products our existing and new clients will want to use on
a recurring basis. These are the services and products which
they need, like, and will be ready to recommend to their friends,
neighbours, peers, and even competitors.
So, it’s all about what we want to be, before we get to the point
of having and deciding what we’ll distribute to our shareholders,
employees, and society. So, what do we want to be, and are we
on a good path to become that?
If you read this Annual Report, you should find some of the
answers yourself. We hope you see that we want to be a bank
which is customer-centric and exists and develops to serve our
clientele in a way that makes them happy. I personally believe
our clients don’t care about our size and systemic nature, they
care about their customer experience and nothing else. It’s also
about being a bank our current and future employees are and
will be proud to work for, and it’s about being a bank whose
business model is ESG-focused, creating a future-proof society
impact alongside above-average returns. Furthermore, it’s about
showing our investors our regional risk premium is decreasing.
You see, to have something is the means, not the end, while to be
something we promise is the final goal. The end game in sight
is the banking group, which is built on the strong fundamental
principles of a modern, future-focused financial institution
business model. We want to follow the best peers across the
globe and to strive to learn from the best, while acknowledging
we have comparative advantages in our core region. We believe
the business ideas embedded in our budget and forecasts are
just the multiplier of our execution capacity, and is only up to our
execution capacity to show we can deliver on our promises. And
in our capacity as the Supervisory Board, we can only promise
you that we are doing everything in our power to spread this
logic of thinking across our organisation, so that NLB Group will
always be able to back its promises with its execution.
Yes, 2022 brought precarious circumstances, like the continuing
shadow of war in Europe, the resulting energy crisis, and the
economic slowdown, but 2022 was also the year when suddenly
almost everything changed in the world of banking. Interest
rates leaped from their historic lows, and with them, bank
margins increased after a decade or more of contraction. The
spread between inflation and interest rates in Europe reached
a 40-year high (almost 9 p.p. difference between the Eurozone
inflation and marginal refinancing rate), something unseen
across the investors’ universe to-date. The business model of
banks across the world started to create returns on equity above
the cost of capital after years of languishing below it. It’s now
the time to realize that banks everywhere have an opportunity
to make use of these higher margins to invest and reinvent as
they lay the groundwork for long-term accelerated growth and
profitability. Of course, there are strong divergences among
developed, emerging, and what is classified as frontier markets,
but our core region should be anything but a frontier. Since
asset valuations have contracted across several industries, and
market volatility peaked, some so-called “reinventors of financial
industry” (referring to several fintech segments) have come
to the realisation that sales growth has to be profitable to be
sustainable. And somewhere in the background we observed the
retrenchment to value investing. Seeing that, we in the NLB Group
believe we sit at the heart of it. Because so many banks have
such low valuations, it is a clear sign that the banking industry
still lacks a persuasive future-proof business model to create
the growth premium seen in other industries. And now is the
perfect time to change the existing model and re-wire our mental
perception of the future. How?
We should focus on persistence. I mean, the persistence to
innovate in the field of digital solutions and products, the
persistence to innovate in the field of middle and back-office
processes, the persistence to step out of the “doing business
as usual” mentality in the fields of talent attraction, and the
persistence in the digging deeper into the AI-driven data science
to drive incremental value for the business through improved
business performance, better marketing leads, customer
satisfaction, and engagement experience. And finally, we should
show the persistence to find ways to safeguard the bank by
applying sophisticated risk and fraud detection models.
Dear shareholders, we at the NLB Group believe the right time to
prove that is right now.
Yours truly,
— Primož Karpe,
President of the Supervisory Board of NLB
Supervisory Board of NLB
Primož Karpe
Chairman
8
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2021
Financial Report
Result after tax
160
(in EUR milliions)
Total assets
13,939
(in EUR millions)
Active clients
687,537
Market share
by total assets
27.6%
NLB, Ljubljana
Result after tax
11
(in EUR milliions)
Total assets
838
(in EUR millions)
Active clients
138,454
Market share
by total assets
5.9%
NLB Banka, Sarajevo
Result after tax
11
(in EUR milliions)
Total assets
1,293
(in EUR millions)
Active clients
39,769
Market share
by total assets
2.6%
N Banka, Ljubljana
Result after tax
17
(in EUR milliions)
Total assets
852
(in EUR millions)
Active clients
84,720
Market share
by total assets
13.3%
NLB Banka, Podgorica
Result after tax
19
(in EUR milliions)
Total assets
995
(in EUR millions)
Active clients
211,356
Market share
by total assets
20.1%
NLB Banka, Banja Luka
Result after tax
66
(in EUR milliions)
Total assets
4,670
(in EUR millions)
Active clients
972,264
Market share
by total assets
10.0%
NLB Komercijalna Banka, Beograd
Result after tax
38
(in EUR milliions)
Total assets
1,848
(in EUR millions)
Active clients
412,362
Market share
by total assets
16.3%
NLB Banka, Skopje
Result after tax
32
(in EUR milliions)
Total assets
1,084
(in EUR millions)
Active clients
225,880
Market share
by total assets
16.7%
NLB Banka, Prishtina
This is our home. A region of opportunities.
Key Members
Overview
1
1
Data on a stand-alone basis as included in the consolidated financial
statements of the Group. Only members with material contributions to the NLB
Group performance are included.
Table 1:
Key members overview for 2022 or as at 31 December 2022
Slovenia
Serbia
North
Macedonia
Bosnia and Herzegovina
Kosovo
Montenegro
NLB Group
NLB, Ljubljana
N Banka,
Ljubljana
NLB Lease&Go,
Ljubljana
NLB Skladi,
Ljubljana
NLB
Komercijalna
Banka,
Beograd
(viii)
NLB Banka,
Skopje
NLB Banka,
Banja Luka
NLB Banka,
Sarajevo
NLB Banka,
Prishtina
NLB Banka,
Podgorica
Market position
Total assets
(in EUR millions)
24,160
13,939
1,293
217
1,960
(iii)
4,670
1,848
995
838
1,084
852
Net loans to customers
(in EUR millions)
13,073
6,062
939
189
-
2,589
1,171
523
521
741
532
Deposits from customers
(in EUR millions)
20,028
10,984
899
-
-
3,692
1,462
797
673
894
693
Result after tax
(in EUR millions)
447
160
11
1
8
66
38
19
11
32
17
Market share
by total assets
-
27.6%
2.6%
-
39.1%
(iv)
10.0%
16.3%
20.1%
(v, vi)
5.9%
(v, vii)
16.7%
13.3%
Branches
440
(i)
71
11
-
-
180
48
47
35
33
22
Active clients
2,772,342
687,537
39,769
-
-
972,264
(ii)
412,362
211,356
138,454
225,880
84,720
Macroeconomic indicators
GDP (real growth)
3.8%
5.4%
2.3%
2.1%
3.8%
3.3%
6.1%
Average inflation
11.5%
9.3%
12.0%
14.1%
14.0%
11.6%
13.0%
Unemployment rate
9.3%
4.2%
9.4%
14.4%
15.6%
17.0%
14.8%
Current account of the
balance of payments
(as a % of GDP)
-4.6%
-0.8%
-7.0%
-6.0%
-4.1%
-9.4%
-11.6%
Budget deficit/surplus
(as a % of GDP)
-2.9%
-3.5%
-3.3%
-4.5%
0.5%
-1.6%
-5.3%
(i) 7 out of 11 N Banka’s branches operating within NLB, Ljubljana branches, therefore not included in total number.
(ii) Number of active clients of NLB Komercijalna Banka, Beograd measured by different definitions as for the rest of the NLB Group members.
(iii) Assets under management.
(iv) Market share of assets under management in mutual funds.
(v) Market share as at 30 September 2022.
(vi) Market share in the Republic of Srpska.
(vii) Market share in the Federation of BiH.
(viii) In April 2022 NLB Banka, Beograd merged with Komercijalna Banka, Beograd.
9
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
10
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Key Highlights
Key Highlights
Records achieved in all financial dimensions
(in EUR millions)
Profit a.t.
2,838
2,623
1,896
1,299
844
622
375
475
367
328
31 Dec
2013
31 Dec
2014
31 Dec
2015
31 Dec
2016
31 Dec
2017
31 Dec
2018
31 Dec
2019
31 Dec
2020
31 Dec
2021
31 Dec
2022
Non-performing loans (NPLs)
Net interest income
234
330
340
317
309
313
318
300
409
505
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Net fee and commission income
138
140
147
146
155
161
170
170
237
273
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
-1,442
62
92
110
225
204
194
270
236
447
2013
2014
2015
2016
2017
2018
2019
2020
2021
138
NGW
KB
173
NGW
N Banka
2022
Gross loans to customers
9,509
9,053
8,351
7,901
7,641
7,627
7,938
10,033
10,903
13,397
31 Dec
2013
31 Dec
2014
31 Dec
2015
31 Dec
2016
31 Dec
2017
31 Dec
2018
31 Dec
2019
31 Dec
2020
31 Dec
2021
1,877
KB
954
N Banka
31 Dec
2022
11
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
negative goodwill
EUR
173
million
14 bps
N Banka acquisition
2
Capital
Asset quality
vs 15.1%
requirement (incl. P2G)
vs 28.7%
requirement
EUR
1,293
million
~ EUR 300 million
in subordinated debt
~ EUR 440 million
in other MREL eligible instruments
~ EUR
740
million
ambition for 2022 to 2025
(of which EUR 100 million
paid in 2022)
EUR
500
million
19.2%
36.3%
1.8%
Fortress balance sheet to enable seizing of growth opportunities
MREL
total assets
TCR
dividends paid out
MREL ratio
MREL funding
cost of risk
NPL ratio
2 On 1 March 2022 NLB acquired the Slovenian Sberbank and renamed it to N Banka. It is currently in the process of integration with NLB.
Key Performance Indicators
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Income statement data
(in EUR millions)
Net interest income
505
409
300
177
139
139
Net non-interest income
294
258
205
189
222
173
Net non-interest income (BoS)
503
294
360
199
232
180
Total costs
-460
-415
-294
-208
-184
-180
Operating costs (BoS)
-496
-451
-311
-218
-193
-188
Result before impairments and provisions
(i)
338
252
211
158
178
131
Impairments and provisions
-29
9
-71
6
34
-17
Gains less losses from capital investments in subsidiaries, associates, and joint ventures
1
1
1
-
-
-
Result before tax
483
261
278
164
211
114
Result of non-controlling interests
11
11
3
-
-
-
Result after tax
447
236
270
160
208
114
Financial position statement data
(in EUR millions)
Total assets
24,160
21,577
19,566
13,939
12,700
11,027
Gross loans to customers
13,397
10,903
10,033
6,157
5,250
4,753
Impairments and deviations from FV
-324
-316
-388
-95
-97
-158
Net loans to customers
13,073
10,587
9,645
6,062
5,153
4,595
Financial assets
4,877
5,208
5,120
2,961
3,034
3,017
Deposits from customers
20,028
17,641
16,397
10,984
9,660
8,851
Equity
2,366
2,079
1,953
1,603
1,552
1,451
Non-controlling interests
57
137
170
-
-
-
Total off-balance sheet items
5,449
4,655
4,671
4,046
3,489
3,684
Key financial indicators
a) Capital adequacy
Total capital ratio
19.2%
17.8%
16.6%
25.6%
24.6%
27.1%
Tier 1 ratio
15.7%
15.5%
14.2%
19.1%
20.3%
22.3%
CET 1 ratio
15.1%
15.5%
14.1%
18.1%
20.3%
22.3%
Total RWA (in EUR millions)
14,653
12,667
12,421
7,833
6,709
6,029
RWA / Total assets
60.6%
58.7%
63.5%
56.2%
52.8%
54.7%
b) Asset quality
NPL coverage ratio 1 (coverage of gross non-performing
loans with impairments for all loans)
98.9%
86.1%
81.8%
86.1%
75.1%
76.0%
NPL coverage ratio 2 (coverage of gross non-performing
loans with impairments for non-performing loans)
57.1%
57.9%
57.3%
58.1%
60.6%
57.9%
NPL coverage ratio (EBA definition)
(ii)
58.1%
58.4%
56.9%
58.2%
60.8%
55.3%
NPL coverage ratio (EBA definition) (BoS)
(iii)
58.1%
58.4%
56.9%
58.2%
60.8%
55.3%
NPL volume (in EUR millions)
328
367
475
111
130
208
NPL ratio (internal def.; NPL/ Total loans)
1.8%
2.4%
3.5%
1.1%
1.5%
3.0%
Net NPL ratio (internal def.; net NPL / Total net loans)
0.8%
1.0%
1.5%
0.5%
0.6%
1.3%
NPL ratio (EBA definition)
(ii)
2.4%
3.4%
4.5%
1.7%
2.4%
4.0%
NPL ratio (EBA definition) (BoS)
(iii)
1.8%
2.4%
3.4%
1.1%
1.5%
2.8%
NPE ratio (EBA definition)
1.3%
1.7%
2.3%
0.9%
1.1%
1.9%
Table 2:
Key financial indicators for NLB Group and NLB
12
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
NLB Group
NLB
2022
2021
2020
2022
2021
2020
NPE ratio (EBA definition) (BoS)
(iv)
1.3%
1.7%
2.3%
0.9%
1.1%
1.9%
Received collaterals / NPL
61.0%
61.7%
60.7%
58.4%
60.0%
65.8%
NPL Collateral received / NPL (EBA definition)
54.7%
58.8%
42.4%
75.6%
63.1%
43.5%
Credit impairments and provisions / RWA
0.1%
-0.3%
0.5%
0.2%
-0.4%
0.1%
c) Profitability
Net interest margin (BoS)
(v)
2.2%
2.0%
2.0%
1.3%
1.2%
1.3%
Financial intermediation margin (BoS)
4.4%
3.4%
4.4%
2.9%
3.1%
3.1%
Operational business margin
(vi)
3.6%
3.3%
3.2%
2.5%
2.3%
2.5%
ROE b.t.
20.6%
11.8%
15.4%
10.5%
14.0%
8.2%
ROA b.t.
2.1%
1.3%
1.8%
1.2%
1.8%
1.1%
ROE a.t.
19.9%
11.4%
15.4%
10.2%
13.8%
8.2%
ROA a.t.
1.9%
1.1%
1.8%
1.2%
1.8%
1.1%
d) Business costs
Operating costs / Average total assets (BoS)
2.2%
2.2%
2.1%
1.7%
1.6%
1.8%
CIR
57.6%
62.3%
58.3%
56.8%
50.8%
57.9%
Total costs / RWA
3.1%
3.3%
2.4%
2.7%
2.7%
3.0%
Total costs / Total assets
1.9%
1.9%
1.5%
1.5%
1.4%
1.6%
e) Liquidity
Liquidity assets / Short-term financial liabilities to non-banking sector
48.5%
48.9%
56.1%
61.8%
59.4%
65.8%
Liquidity assets / Average total assets
40.7%
40.2%
51.8%
49.8%
47.4%
54.9%
Liquidity Coverage Ratio (LCR)
220.3%
252.6%
257.5%
276.5%
314.5%
336.3%
Net stable funding ratio (NSFR)
183.0%
185.2%
165.7%
177.6%
171.4%
162.1%
f) Leverage ratio
Leverage ratio
9.1%
10.2%
7.8%
10.3%
13.6%
10.3%
g) Other
Market share in terms of total assets
-
-
-
27.6%
26.3%
24.7%
LTD
65.3%
60.0%
58.8%
55.2%
53.3%
51.9%
Total revenues / RWA
5.4%
5.3%
4.1%
4.7%
5.4%
5.2%
Key indicators per share
Shareholders
(vii)
-
-
-
3,025
2,571
2,455
Shares
-
-
-
20,000,000
20,000,000
20,000,000
The corresponding value of one share (in EUR)
-
-
-
10
10
10
Book value (in EUR)
114.1
103.9
97.6
75.9
77.6
72.5
Branches
Number of branches
440
479
(viii)
530
(ix)
71
75
80
Employees
Number of employees
8,228
8,185
8,792
2,418
2,510
2,591
International credit ratings
NLB Rating 2022
NLB Rating 2021
NLB Rating 2020
NLB Outlook 2022
NLB Outlook 2021
NLB Outlook 2020
S&P
BBB
BBB-
BBB-
Stable
Stable
Negative
Fitch
-
-
BB+
-
-
Negative
Moody's
(viii), (ix)
Baa1
Baa1
Baa1
Stable
Stable
Stable
Further details on the definition of certain indicators in this table are available in the chapter
Alternative Performance Indicators
.
(i) The result before impairments and provisions of NLB Group for the years 2020 and 2022 does not include negative goodwill.
(ii) Loans and advances without loans and advances classified as held for sale, cash balances at central banks and other demand deposits.
(iii) Loans and advances including cash balances at CBs and other demand deposits.
(iv) The carrying amount of debt instruments measured at fair value through other comprehensive income (FVOCI) is increased by value adjustments due to impairments.
(v) Calculated on the basis of average total assets.
(vi) Calculated as Net income from operational business (NII - Tier 2 expenses + Net fee and commission income + Recurring net income from financial operations)/Average total assets.
(vii) As per share register of Central Securities Clearing Corporation (KDD). The shares are listed on Ljubljana Stock Exchange. The Bank of New York Mellon (the 'GDR Depositary') represented in the share register of KDD as
one holder is not the beneficial owner of shares, it holds shares in its capacity as the depositary for the GDR holders. The GDRs representing shares are issued against the deposit of shares and are listed on London Stock
Exchange. Therefore, the number in the share register of KDD does not represent all final beneficial owners of the Bank shares. The rights under the deposited shares can be exercised by the GDR holders only through
the GDR Depositary and individual GDR holders do not have any direct right to either attend the general meeting of bank's shareholders or to exercise any voting rights under the deposited shares.
(viii) Unsolicited rating.
(ix) For more information, see chapter
Events After the End of the 2022 Financial Year
.
13
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
The Bank’s shares are listed on the Prime Market sub-segment
of the Ljubljana Stock Exchange (ISIN SI0021117344, Ljubljana
Stock Exchange trading symbol: NLBR), and the GDRs, that
represent shares, are listed on the Main Market of the London
Stock Exchange (ISIN: US66980N2036 and US66980N1046,
London Stock Exchange GDR trading symbol: NLB and 55VX).
Five GDRs represent one share of NLB.
Table 3:
NLB’s main shareholders as at 31 December 2022
(i)
Shareholder
Number of
shares
Percentage
of shares
Bank of New York Mellon on
behalf of the GDR holders
(ii)
10,957,270
54.79
of which EBRD
(iii)
/
>5 and <10
of which Schroders plc
(iii), (iv)
/
>5 and <10
Republic of Slovenia (RoS)
5,000,001
25.00
Other shareholders
4,042,729
20.21
Total
20,000,000
100.00
(i) The information is sourced from NLB’s shareholders book that is accessible at
the web services of CSD (Central Security Depository, Slovenian: KDD - Centralna
klirinško depotna družba) and available to CSD members. The information on
major holdings is based on the self-declarations by individual holders pursuant
to the applicable provisions of Slovenian legislation which require that the holders
of shares in a listed company notify the company whenever their direct and/or
indirect holdings pass the set thresholds of 5%, 10%, 15%, 20%, 25%, 1/3, 50%, or
75%. The table lists all self-declared major holders whose notifications have been
received. In reliance of this obligation vested with the holders of major holdings, the
Bank postulates that no other entities nor any natural person holds directly and/or
indirectly 10 or more percent of the Bank’s shares.
(ii) The Bank of New York Mellon holds shares in its capacity as the depositary
(the GDR Depositary) for the GDR holders and is not the beneficial owner of such
shares. The GDR holders have the right to convert their GDRs into shares. The rights
under the deposited shares can be exercised by the GDR holders only through
the GDR Depositary and individual GDR holders do not have any direct right to
either attend the shareholder’s meeting or to exercise any voting rights under the
deposited shares.
(iii) The information on GDR ownership is based on self-declarations by individual
GDR holders as required pursuant to the applicable provisions of Slovenian law.
(iv) Further information is available in the chapter
Key Events
.
The Shareholder
Structure of NLB
14
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
54.79%
Shares in GDR format
(i)
(i)
Bank of New York Mellon
on behalf of the GDR holders
GDR holders with shares >5% and <10%:
- EBRD
- Schroders plc
25%
+1 share
Republic of Slovenia
20.21%
Other shareholders
15
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
January
‘Top Employer’
certificate
February
New SREP
Decision
reduced P2R
1
3
5
7
9
11
2
4
6
8
10
12
March
Acquisition of
N Banka
May
S&P
upgrade
July
NLB 100%
owner of NLB
Komercijalna
Banka, Beograd
Senior Preferred
Notes issued
April
Merger of
Serbian
subsidiaries
June
Dividend
payment
August
Cancelation of high
balance deposit fee
September
Leasing
activities in
N. Macedonia
AT1 Notes
issued
November
T2 Notes issued
Leasing
activities in
Serbia
December
Dividend
payment
ESG rating
New SREP
Decision
reduced P2R
Key Events
May
• 1
st
Investor Day of NLB Group held in Beograd:
The commitment to exceed EUR 300 million
5
in regular profit
by 2025.
•
Rating upgrade:
Standard and Poor’s rating agency
upgraded NLB’s credit rating to BBB/A-2 from BBB-/A-3, with
a stable outlook.
•
The Bank officially joined the UN-Convened Net-Zero
Banking Alliance.
June
•
Notifications of major holdings change:
The shareholding
of Brandes Investment Partners, L.P. in the Bank changed to
4.78%.
•
Dividend payment:
The Bank paid the dividends (the first
tranche) in the amount of EUR 50 million.
July
•
NLB became a 100% owner of NLB Komercijalna Banka,
Beograd.
•
Supervisory Board change:
Janja Žabjek Dolinšek member
of the Supervisory Board – Workers’ Representative
terminated her mandate.
•
Senior Preferred Notes:
The Bank issued 3NC2 Senior
Preferred notes in the amount of EUR 300 million.
August
•
High balance deposit fee:
The Bank stopped charging fees
on high balances for individuals and corporate clients.
September
•
Leasing activities:
Leasing company NLB Liz&Go, Skopje was
established, and it was renamed to NLB Lease&Go, Skopje in
December.
•
Supervisory Board change:
NLB Workers’ Council recalls a
member of the Supervisory Board – workers’ representative
Bojana Šteblaj.
•
AT1 Notes:
The Bank issued AT1 notes in the amount of
EUR 82 million.
October
•
Notifications of major holdings change:
Schroders’s
shareholding in the Bank changed from 4.95% to 5.05%.
5 Further information is available in the chapter
Risk Factors and Outlook
, the
subchapter
Outlook
.
November
•
Tier 2 Notes:
The Bank issued 10NC5 subordinated Tier 2
notes in the amount of EUR 225 million.
•
Notifications of major holdings change:
Schroders’s
shareholding in the Bank changed from 5.05% to 5.12%.
•
Leasing activities:
Acquisition of leasing company Zastava
Istrabenz Lizing, Serbia, and it was renamed to NLB
Lease&Go Leasing, Beograd on 17 January 2023.
December
•
Dividend payment:
The Bank paid the dividends (the second
tranche) in the amount of EUR 50 million.
•
ESG rating:
NLB obtained for the first time an ESG Risk Rating
of 17.7 for having a low risk of experiencing material financial
impacts from ESG factors.
•
New SREP Decision:
ECB issued a new SREP decision for
the Bank under which it has reduced the P2R from 2.60% to
2.40%, while P2G remains at 1.00%. The new SREP decision
applies as of 1 January 2023.
6
•
Macroprudential instruments:
The BoS raised the
countercyclical capital buffer for exposures to Slovenia from
zero to 0.5% of the total risk exposure amount. Banks have to
meet the requirement by 31 December 2023.
7
6 Further information is available in the chapter
Capital
.
7
Further information is available in the chapter
Capital
.
January
•
‘Top Employer’ certificate:
The Top Employers Institute
awarded the Bank the prestigious ‘Top Employer’ certificate
for the 7
th
consecutive year.
February
•
Swiss Francs Law:
NLB, together with eight other banks, filed
an initiative to review the constitutionality of the adopted Swiss
Francs Law by The National Assembly. The Constitutional
Court adopted a decision to suspend in whole the
implementation of the Swiss Francs Law until the final decision
conformity of the Swiss Francs Law with the Constitution. In
December, the Constitutional Court annulled the Law.
•
New Supervisory Review and Evaluation Process (SREP)
Decision:
The European Central Bank (ECB) issued a new
SREP decision for the Bank under which it has reduced the
P2R from 2.75% to 2.60%, while P2G remains at 1.00%.
3
March
•
Acquisition of N Banka:
NLB became a 100% owner of
Sberbank banka d.d. (Sberbank). Sberbank was renamed to
N Banka and new supervisory board members of the bank
were appointed.
•
Notifications of major holdings change:
Schroders’s
shareholding in the Bank changed from 5.061% to 4.95%.
April
•
New members of the Management Board:
Hedvika Usenik,
Antonio Argir and Andrej Lasič assumed their offices. Thus,
the Management Board has six members.
•
Merger of Serbian subsidiaries:
Serbian subsidiaries,
Komercijalna Banka, Beograd and NLB Banka, Beograd
merged and operate under the new name NLB Komercijalna
banka a.d. Beograd.
•
New Macroprudential instruments:
The BoS issued a new
regulation on determining the requirement to maintain a
systemic risk buffer for banks and savings banks which has
with 1 January 2023 introduced the systemic risk buffer rates
for the sectoral exposures.
4
•
IT solutions:
NLB established NLB DigIT in Serbia to act as a
development hub for common IT Group solutions.
3
Further information is available in the chapter
Capital
.
4
Further information is available in the chapter
Capital
.
Key Events
16
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
European banking stocks lost roughly only 4% in value during
2022, and it was all thanks to a stellar performance in the last
quarter. Rebased to January 2022, the index saw it highest
point in February after growing approximately 15%, only to
reach -15% in the beginning of March. Investors clearly were
afraid that a weakening economy would result in credit losses,
which explains the steep fall. The lowest point of the year was
reached in October 2022 with the index hovering in the negative
territory the whole time. Thanks to the strong close of the year,
European banking stocks outperformed the European stock
index. In fact, the last quarter performance was the strongest
amongst all sectors contributing to the index. The reason must
lie in the higher interest rates, that saw banks increase their net
interest margins. Yet, still it was not enough to break into the
positive territory at the close of the year. A war, high (energy)
prices, and the looming stagflation have weighed on the gains
from higher interest rates.
The SBI index saw its peak in the beginning of the year,
towards the end of January 2022, and was in a steady decline
that lasted until mid-March 2022. A rebound that made up for
roughly half of the lost value was followed by a period where
the indexes stuck to a certain level, followed by a drop in
October 2022 that marked the lowest value of the year (losing
almost 10% compared to the year’s maximum). The European
stock markets had their worst year since 2018 due to the war,
persisting inflation, and a tightened monetary policy, as the
central banks were directing the markets with their action.
The Bank’s stock declined through the vast majority of year
2022. From its peak in January 2022, the value declined almost
24% in March 2022, a consequence of the hostilities breaking
out and the inflation imposing itself on the economy. Two
periods, consisting of a rebound and a steady decline ended
with the lowest value of the 2022 in November, after which the
Bank’s stock gained some 15% in value again, to close the year
on a positive note. In 2022, the stock lost 18% in value, while still
outperforming the SBI top Slovenian blue-chip index by 2 p.p.
Figure 1:
NLB shares’ price movement on the Ljubljana Stock Exchange and NLB GDR’s price movement on the London Stock Exchange (in EUR)
Shares (NLBR)
GDR (NLB)
GDR
Shares
18.00
17.00
16.00
15.00
14.00
13.00
12.00
11.00
10.00
9.00
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
85.00
80.00
75.00
70.00
65.00
60.00
55.00
50.00
45.00
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.00
Jan 2022
Feb 2022
Mar 2022
Apr 2022
May 2022
Jun 2022
Jul 2022
Aug 2022
Sep 2022
Oct 2022
Nov 2022
Dec 2022
Source: Ljubljana Stock Exchange, Bloomberg.
17
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MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Growth
in Trading
Combined trading in our shares and GDRs
in 2022 increased by more than
40%
as compared to the previous year
Market Performance
of NLB’s Shares and
GDRs
>EUR
600,000
in combined average regular
trading volume per day
(excluding block trades)
Table 4:
NLB share information
Share information
31 Dec 2022
Total number of shares issued
20,000,000
Highest closing price (in 2022)
EUR 82.0
Lowest closing price (in 2022)
EUR 52.4
Closing price as at 30 December 2022
(i)
EUR 62.4
NLB Group book value per share
EUR 114.1
NLB Group earnings per share (EPS)
EUR 22.3
Price/NLB Group book value (P/B)
0.55
Dividend per share (for the previous business year)
EUR 5.0
Market capitalisation
(i)
EUR 1,248,000,000
(i) No market on 31 December 2022.
Indices
The Bank’s shares are included in several indices: the SBITOP
index, SBITOP TR index, and ADRIA prime index of the Ljubljana
Stock Exchange, the FTSE Frontier Index, MSCI Frontier, and
MSCI Slovenia, the S&P Eastern Europe BMI, S&P Emerging
Frontier Super Composite BMI, S&P Extended Frontier 150, S&P
Frontier BMI, S&P Frontier Ex-GCC BMI, S&P Slovenia BMI, as
well as the STOXX All Europe Total Market, STOXX Balkan Total
Market, STOXX Balkan Total Market ex-Greece & Turkey, STOXX
EU Enlarged Total Market, STOXX Eastern Europe 300, STOXX
Eastern Europe 300 Banks, STOXX Eastern Europe Large 100,
STOXX Eastern Europe Total Market, STOXX Eastern Europe
Total Market Small, STOXX Global Total Market, and STOXX
Slovenia Total Market, among others.
NLB Shares and GDRs
The Investor Relations’
function
The Bank participated in varied forms of engagement, such
as investor meetings, calls, conferences, and roadshows, to
meet the requirements of the Bank’s ownership. Transparent
communication with investors and analysts allowed for
dialogue on strategic developments, as well as on the financial
performance of the Group. The Bank promoted greater
awareness and understanding of operating businesses,
developments, and events which have an influence on the
performance of the Bank’s share price. Performance of the
Bank is covered by analysts from EFG Hermes, JP Morgan,
Deutsche Bank, Wood & Company, Citi, InterCapital, Raiffeisen
Bank International and Ilirika BPH.
In May 2022, the Bank organised its first ever Investor
Day. The event took place in Beograd, Serbia with the key
message: “Welcome to our home, welcome to our region of
opportunities!”
During the inaugural Investor Day the Group communicated
several KPIs for the year 2025, i.e. regular profit to exceed EUR
300 million, EUR 100 million contribution from Serbian market,
EUR 500 million total capital return through cash dividends
between 2022 and 2025, tactical M&A capacity of EUR 1.5 billion
RWA, and ROE to exceed 12%.
8
IR presentations, financial reports, and important information
are available on the Bank’s website in line with IR’s
Financial
Calendar
.
In December 2022, the Ljubljana Stock Exchange awarded
the IR team as having the best investor relations among listed
companies.
8
Further information is available in the chapter
Risk Factors and Outlook
,
the subchapter
Outlook
.
18
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Ljubljana Stock Exchange
awarded NLB as:
the
Best Investor
Relations
Expanded
Analyst
Coverage
In 2022, the list of respectable analysts covering
NLB has further expanded with initiation of the
report by EFG Hermes, helping us share our
equity story to a larger investor universe
In 2022, the momentum from the 2021 rebound started to
wane as the global economy was forced to deal with supply
bottlenecks, a war in Ukraine, and rising inflation. High
energy prices and the highest interest rates in 15 years cooled
growth and sentiment indicators substantially in the second
half, resulting in a low growth environment towards the
year’s end.
The global and European
economy
Year 2022 opened with inflation above 5% and rising. The
pace of the sequential GDP expansion slowed notably
at the close of 2021. Momentum seemingly remained
subdued at the outset of 2022. The spread of the Omicron
variant and the highest inflation rate since the 1990s took
a toll on the tertiary sector, as showed by deteriorating
Purchasing Managers’ Index (PMI). Consumer sentiment
in February 2022 showed first signs of deterioration, while
hawkish signals from the ECB and Russia’s invasion of
Ukraine have put bond rates in the countries of Southern
Europe under pressure. The following months saw global
real GDP contract modestly in China, Russia, and the
US, as well as sharp slowdowns in Eastern European
countries most directly affected by the war in Ukraine
and international sanctions aimed at pressuring Russia to
end hostilities. During 2022, the key trends were steadily
slowing growth, a tightening labour market, and growing
inflation. Private consumption was the main driver of
growth, causing the savings rates to decrease and the
appetite for loans to increase. The loan growth rates were
surprisingly marginally impacted by the growing interest
rates that eventually started restraining global demand,
causing the retail indexes and sentiments to drop. In the
second half of the year, supply constraints eased off and
commodities prices began falling. Large firms reported
a contraction in profit margins due to higher costs, while
downward pressures to global earnings growth appeared
to be gaining momentum. In small firms, bankruptcies have
already started to increase in major advanced economies,
as these firms are more affected by rising borrowing costs
and declining fiscal support. China’s abrupt reversal of its
‘COVID Zero’ policy resulted from the domestic backlash
and pushed economic activity in December 2022 to its
slowest pace since February 2020 as infections increased
and kept people at home which prompted businesses to
close. This pent-up demand is set to be released once
the sentiment improves. China’s reopening has already
elevated commodity prices and could rekindle pressures
just as the year end brought some relief to the still elevated
inflation and producer price indexes. Global manufacturing
has been in decline most of the year, and its movement
could hold the key whether the world will see stagflation or
a “soft landing.”
Momentum in the euro area remained subdued in the first
months. Industrial production was weak in the period,
weighed down by soaring commodity prices and supply
constraints. The services sector suffered from surging
inflation and souring consumer sentiment. More positively,
the unemployment rate continued to fall amid easing
COVID-19 restrictions. In Q2, robust PMI readings suggested
solid activity, a resumption of some services sector activity,
and a healthy early tourism season. However, pessimistic
consumer sentiment and elevated inflation have started
weighing on household spending. In July, inflation climbed
further, while consumer sentiment tanked, pointing to
consumer spending slowing its pace. Moreover, the PMI
started contracting, due to slowing services sector activity
and shrinking manufacturing output. Electricity prices
hit new highs in August, amid the war in Ukraine and a
prolonged heatwave, prompting the closure of European
smelters and the adoption of energy-saving measures.
Many countries of the Euro area have chosen to cut energy
taxes and excise duties. The ECB started raising interest
rates in July to cool demand. The slowdown came amid
higher inflation, energy prices, and interest rates. Business
and consumer sentiment tumbled due to the impact of the
war in Ukraine and global headwinds. The manufacturing
and services PMIs contracted further in October 2022,
while economic sentiment slipped again, pointing to a
further weakening in activity. Both industrial production
and retail sales fell. The low number of new manufacturing
orders, shortening of suppliers’ delivery times, and
contracting manufacturing PMIs suggest/indicate that the
eurozone industrial sector moved into a cyclical downturn
nearing the year end. Supply bottlenecks started easing
off noticeably by year’s end, as household consumption
The Macroeconomic
Environment
started retreating due to persisting inflation and rising
interest rates that also hurt real wages. Energy prices
have risen to such an extent that they have also become
visible in other goods and services. This effect was most
pronounced in food prices that continued going strong
and rising further even though the end of the year could be
categorised as disinflationary.
The sharp rebound from the COVID recession has turned
in the prospect of low growth in 2023. It had an effect on
the headline inflation and hence the calibration of the
monetary policy by central banks, which has tightened
much more than the CBs themselves had anticipated at
the beginning of the year. The FED set the stage for the
hiking cycle at the January meeting, providing a hint that a
first hike would be seen in March. The hiking cycle brought
the federal funds rate in 2022 from 0.25%-0.50% up 4 p.p.
As the FED started raising the interest rates before the
ECB, the dollar gained in value and pushed the euro to
fall below parity for the first time since December 2002.
However, the euro eventually appreciated, trading at 1.07
dollars at the close of the year. The FED now foresees a
higher peak in rates, at 5.0% by the end of 2023. The ECB
started hiking the key interest rates in July 2022, to rise from
-0.75% to 2% at the end of the year in order to, according
to its mandate, bring inflation down. The last inflation rates
19
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3.5%
economic growth in the
Euro-area in 2022
of the year offered positive reinforcement to the ECB’s
endeavours, however, core inflation never eased in 2022.
That was the key message from the December 2022 ECB
meeting, when President Lagarde struck an unusually
hawkish tone. The December 2022 HICP figures supported
this view, while markets cheered another marked decline
in headline inflation. It is lower energy prices and the
resulting base effects, as well as government interventions
that are pushing down headline inflation. In August,
the Governing Council decided to reinvest the principal
payments from maturing securities purchased under
the Pandemic Emergency Purchase Programme until at
least the end of 2024. Their decision also ended full APP
reinvestments in March 2023 and the decline with a pace of
EUR 15 billion per month until June 2023. The pace beyond
that is still to be determined. Such a reduction in the
central banks’ demand could potentially translate into less
potential to absorb shocks and therefore higher liquidity
premiums and lower market liquidity. Consequently, the
ECB approved the Transmission Protection Instrument (TPI)
to ensure the uniform monetary policy transmission by
alleviating prospective excessive pressures on sovereign
bonds’ credit spreads.
Global activity should remain muted in 2023. Private
consumption will be weighed on by stubbornly high
inflation, tighter financing conditions, and depleted
savings. Additionally, global economic headwinds will hit
the external sector. Elevated interest rates, heavy public
debts, and volatile commodity prices pose risks. The
price pressures will decrease due to combined effects of
increased key rates and quantitative tightening signalled
by central banks. The labour markets are predicted to
balance a little due to stagnation, and so pressures on
wage growth should ease. Global trade should experience
no additional supply shocks in energy and commodities.
Political tensions are expected to remain, but will stay
regionally contained. The GDP growth rate in 2024 and
beyond should be supported by declining interest rates and
positive expectations regarding investments and durable
goods consumption.
A relatively warm winter, energy savings, and fiscal support
measures helped to alleviate fears of imminent energy
shortages in the euro area. Production levels will benefit
from improving supply conditions and declining energy
and commodity prices. The inflation rate will decrease as
the expected Central Bank balance sheet reduction and
the increased interest rates will push it down. Deteriorating
retail sales data in the euro area, even with declining
fuel prices, suggest that private consumption will remain
subdued in 2023 as increasing uncertainty, declining
purchasing power, and rising political risk that will remain
regionally contained, indicate a slowdown. We see the
euro area economy stagnating in 2023, the tightness of
the labour market should decrease. Finally, the monetary
policy tightening works with long and variable lags, and so
past and upcoming rate hikes and tightening of financial
and bank lending conditions will continue to impact the
economy.
The economy
in the Group’s region
Private consumption has been the main driver of growth
in 2022 as it has dwarfed government consumption. It
has been spurred by surprisingly resilient and strong
credit growth, remittances, and tourism, joined by strong
export demand from the EU propping up the growth of
regional economies. Fixed investment, which rebounded
sharply after abrupt drops in 2021 for Montenegro and N.
Macedonia, also helped drive growth. The trend was the
opposite in BiH and Serbia where investments diminished
rapidly compared to 2021. The relatively high inflation rate
can be explained by both relatively large price increases
in energy and food, as well as those items’ relatively large
share in the consumer basket. Higher energy prices have
translated directly into larger import bills, a wider current
account, and generated sizable fiscal costs in several
Table 5:
Movement of key macroeconomic indicators in the Euro area and NLB Group region
GDP
(real growth in %)
Average inflation
(in %)
Unemployment rate
(in %)
2020
2021
2022
2023
2024
2020
2021
2022
2023
2024
2020
2021
2022
2023
2024
Euro area
-6.3
5.3
3.5
0.0
1.6
0.3
2.6
8.4
6.1
3.0
8.0
7.7
6.7
7.0
7.3
Slovenia
-4.3
8.2
5.4
0.6
2.2
-0.1
1.9
9.3
6.8
3.9
5.0
4.7
4.2
4.0
4.2
Serbia
-0.9
7.5
2.3
1.8
3.1
1.6
4.1
12.0
10.1
5.4
9.7
11.0
9.4
9.5
9.2
N. Macedonia
-4.7
3.9
2.1
1.6
3.0
1.2
3.2
14.1
8.5
3.6
16.4
15.7
14.4
13.9
13.7
BiH
-3.3
7.1
3.8
1.0
2.0
-1.1
2.0
14.0
8.0
3.0
15.9
17.4
15.6
15.2
15.1
Kosovo
-5.3
10.5
3.3
2.4
3.5
0.2
3.3
11.6
7.0
3.5
26.0
20.8
17.0
16.5
16.0
Montenegro
-15.3
13.0
6.1
2.6
3.2
-0.3
2.4
13.0
7.5
2.6
17.9
16.6
14.8
13.7
13.3
Source: Statistical offices, Focus Economics.
Note: NLB Forecasts are highlighted in grey.
countries because of fossil fuel subsidies, price caps,
and support to households and firms. The EU accession
reforms, and investment mitigate the negative effects of
high energy and food prices, disruptions to trade and
investment flows, and spillovers from the slowdown in the
euro area. However, there is significant political uncertainty
about the risk that parliamentary impasses will create
delays in the implementation of reforms, and thus prevent
efficient absorption of related funds (BiH, Montenegro,
N. Macedonia). Regional instability due to the rekindled
conflict between Serbia and Kosovo also poses a risk.
20
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5.4%
economic growth in
Slovenia in 2022
A macroeconomic snapshot
for the NLB Group’s region
In
Slovenia
, the driver of growth was household
consumption expenditure which started to lose steam as
inflation persisted and sentiment deteriorated. Growth
rates outperformed those of the euro area, and confirmed
the presence of accumulated savings and consumers’
spending inclination. After lagging behind imports in H1
2022, exports improved in Q3 2022, and in last months of
the year decreased the deficit accumulated throughout the
year. Prices remained elevated throughout 2022, easing
off only marginally in the final two months. Household
final consumption expenditures increased significantly
due to the persistent growth of gross disposable income
in nominal terms and the higher essential costs of living.
For the first time in more than a decade, households in
Slovenia in the Q3 2022, generated a deficit, mainly due to
the significant decrease in gross savings and an increase
in gross investments. The turning point in consumer survey
was in April 2022 when indicators about major purchases,
savings, and the financial situation in households began
declining and stayed below average for the rest of the year.
In
BiH
, the economy performed well in 2022. Domestic
demand was the key growth factor. Investment activity
was robust due to infrastructure works, while private
consumption rose, driven by the double-digit rise in
nominal wages and higher remittances. Real export growth
outpaced that of imports, but the net external contribution
was still negative at the half-year mark. Despite the robust
nominal growth in exports, the overall external balance
deteriorated, due to a similar surge on the import side.
Remittances inflow remained solid. On the financing side,
net FDI slowed down. In the second half of 2022, activity
started to wane. As real wages remained subdued by
inflation, retail activity started decelerating. Headline
inflation surged this year as food prices continue to soar,
contributing roughly 50% of headline inflation at the close
of the year, given its relatively high share in the consumer
basket. BiH subsidized household electricity prices, so the
cost was much lower than on the international markets.
In
North Macedonia,
moderate growth from 2021 continued
with a soft pace into 2022 and was mainly driven by
services. Investments rose significantly, reflecting stocking
in inventories. Household demand grew at a stable pace,
causing the demand to be served by surging imports,
leading net exports into negative territory. The inflationary
environment and underlying energy crisis continue to
put the economy under pressure. Economic activity is
correlated to the euro area, which is a key source of
demand for the country’s goods and a source of investment
and remittances. The inflation rate reflected the consecutive
hikes in the regulated energy tariffs, full passthrough of
fuel prices, no VAT rate reductions on food and fuel prices,
and a large amount of food in the consumption basket.
The energy crisis and deteriorating external demand are
creating a balance of payment pressures. The temporary
tax cuts on food and fuel products that were implemented
following Russia’s invasion of Ukraine were not extended
Table 6:
Movement of the balance of payment and fiscal indicators in the Euro area and NLB Group region
Current account balance
(% GDP)
Fiscal balance
(% GDP)
Public debt
(% GDP)
2020
2021
2022
2023
2024
2020
2021
2022
2023
2024
2020
2021
2022
2023
2024
Euro area
1.6
2.3
0.0
0.5
1.1
-7.0
-5.1
-3.7
-3.6
-3.1
97.0
95.4
94.1
93.5
92.9
Slovenia
7.6
3.8
-0.8
0.5
0.9
-7.7
-4.7
-3.5
-4.3
-2.7
79.6
74.5
70.0
69.5
68.1
Serbia
-4.1
-4.2
-7.0
-6.5
-5.9
-8.0
-4.1
-3.3
-2.8
-2.1
57.0
56.5
53.4
53.4
51.9
N. Macedonia
-3.0
-3.1
-6.0
-4.9
-4.1
-8.2
-5.4
-4.5
-4.0
-3.4
51.9
51.8
50.9
51.0
51.5
BiH
-3.2
-2.3
-4.1
-4.5
-3.9
-4.7
0.7
0.5
0.0
0.2
36.5
35.4
31.0
29.2
28.1
Kosovo
-7.0
-8.7
-9.4
-7.9
-7.6
-7.1
-0.9
-1.6
-2.0
-1.8
22.4
21.9
21.2
22.4
23.4
Montenegro
-26.1
-9.2
-11.6
-11.2
-10.6
-10.2
-2.0
-5.3
-4.9
-4.4
103.5
83.3
77.5
75.3
74.6
Source: Statistical offices, Focus Economics.
Note: Consensus Forecasts are highlighted in grey.
in May 2022. A new organic budget law was adopted in
September 2022.
In
Montenegro
, the economy exhibited strong growth in the
first half of 2022, courtesy of robust private consumption,
inventory build-up, and solid export performance. Tourism,
as the most important sector, exceeded expectations.
Tourist arrivals in November YtD almost reached the 2019
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3.8%
economic growth in
the Group’s region in 2022
level, missing the mark by roughly 10%, with the months
of July and August exceeding it. A reform of the tax
code had a noticeable effect on real wage growth and
further lowered unemployment. By May, exports recorded
strong growth of both - goods and services. At the same
time, strong domestic demand pushed imports higher.
Secondary accounts rose due to remittances, and FDIs
exhibited solid growth in 2022. Inflationary pressures
continue to weigh on the economy, with the most important
driver being food and non-alcoholic beverages. High
energy prices presented a unique opportunity, as the
strong electricity generating capacity enabled energy
exports to more than double in 2022, compared YoY.
In
Serbia,
the net external demand contributed strongly to
growth. The drought during the summer months caused
agriculture to underperform, as it hurt hydro electricity
generation which Serbia usually exports. The coverage of
imports by exports decreased significantly, reflecting the
much higher yearly growth rates of imports compared to
exports. The current account deficit increased sharply in
2022, mainly due to higher costs of energy imports. The
realised net foreign direct investments were lower than in
2021. Inflation never eased off during the year, with food
being the most important driver. Core inflation rose further,
hurting the disposable income and dampening private
consumption. The increase of gross and net salaries and
wages translated to growth in real terms. The total public
debt increased, as did total public revenues in real terms
due to growth in most revenue categories - particularly
in corporate income taxes, VAT, and custom duties, while
excises revenues decreased.
In
Kosovo
, services spurred by the diaspora’s demand,
credit growth, and public transfers were the main drivers
of growth. Trade deficit widened and final consumption
expenditure was strong. The growth rate soon halved,
driven by a notable contraction in construction and capital
formation. Inflation started picking up in March 2022,
peaked in July, and remained elevated thereafter, but lower
than most other countries of the region. Food become an
increasingly important driver. The second part of the year
saw further moderation in most activities. The total amount
of General Government revenues picked up in the second
part of the year (VAT, income tax).
The macroeconomic outlook
for NLB Group’s region
In
Slovenia
, on the fiscal side, the 2023 budget deficit target
is suggesting a more accommodative stance, with the
expected widening of the gap reflecting the government’s
efforts to tackle the energy crisis. The government is
planning measures worth nearly EUR 5 billion to fight
the energy crisis in 2023. The slowdown is to be induced
by weaker external demand, still elevated inflation, and
greater uncertainty, which are expected to weigh on
private consumption and investment growth. The labour
market will be slightly less tight, muting the pressures of
wage demands. Inflation should ease off due to a tighter
monetary policy.
In
BiH
, electricity price pressures are likely to be contained,
as BiH has one of the largest electricity generations in
the region and limited gas usage. Investments in energy
and infrastructure will continue to add to overall growth,
although to a lesser extent than in the last two years.
Indirect effects stemming from destabilizing global
commodity and financial markets negatively impact
external account and domestic growth prospects. Inflation
will ease in 2023, albeit remaining high in historical terms.
The unemployment rate is expected to decline slightly in
2023 with stabilization of the international situation.
In
Kosovo
, the gradual projected decline in commodity
prices should bring relief, with expansionary fiscal policy
contributing to activity. A slowdown in investments and
private consumption is to be expected. Remittances should
slow down as well as the current account. In addition, FDI
and external lending will be key sources of financing for the
current account.
In
North Macedonia
, however, growth should be supported
by planned investments in infrastructure and capacity
expansion of the export sector. External demand will
weaken, wage pressures will become more pronounced,
and a further tightening of financial market conditions
pose downside risks. Inflation should ease in 2023 as
import prices will fall. The labour market should get
slightly tighter. The opening of EU accession talks could
boost capital inflows and momentum for reforms. Tighter
financial conditions, and the withdrawal of wage subsidies
is expected to weigh on consumer spending and business
investments.
In
Montenegro
, growth should be subdued in 2023, but
amongst the highest in the region. Private consumption
will slow down. The current account deficit should remain
amongst the highest in the region. Higher energy prices
support its reduction as the growing capacities are used
for energy exports. Together with exports, tourism, and
transport services should aid in reducing the current
account deficit. Further development of electricity-
generating capabilities, together with tourism revenue, has
the potential to improve country’s external equation.
In
Serbia
, the economy is set to soften in 2023. Private
spending growth will decelerate due to high inflation
eroding real incomes, while a slowing global economy
will see export growth cool. Regional instability and
elevated inflation amid commodity price swings and gas
supply disruptions represent downside risks. The current
account deficit is set to increase. The inflation growth rate
is expected to stay elevated in 2023, as we see it as the
highest and most persistent in the region. The contribution
of net exports to growth is expected to improve due to
decelerating imports and an increased export capacity
supported by the FDIs. Serbia remains an attractive
destination for “nearshoring.”
The Group’s region is expected to grow at a rate of 1.3% in
2023. Regional growth will cool significantly this year. A weaker
Euro Area economy, elevated inflation, declining real wages,
geopolitical volatility, and the war in Ukraine will restrain
household spending, industrial production, and exports. In
addition, tighter financing conditions should further subdue
activity in most countries of the region. Performance will depend
upon the euro area, with remittances and exports waiting upon
the outlook to improve. Since tourism rebounded in 2022, 2023
could be beneficial for tourism-dependent countries. Current
accounts are mostly set to deteriorate in 2023. Growth should
start picking up towards the end of the year. A reduction in
inflation should happen in the second half of the year, providing
some relief to real income and household consumption. The
effect of the electricity prices pass-through waned in the second
part of the year, after core inflation pressures were still rising
in the beginning of the year. China’s reopening unsettled the
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commodity markets, caused prices to rise again, and didn’t
bode well for industrial production. Growing wages will induce
additional price pressures. Labour markets should continue
with rising employment rates and the unemployment rate
should reduce for the most part. Loan appetite in the region
should cool amid tightened monetary policies and rising food
prices, slowing down demand. Geopolitical tension remains
a strong possible constraint on growth and on a predictable
business environment.
The banking system in
the Group’s region
Since the population of the region amassed notable savings
since the COVID pandemic, consumption was amongst the
most notable drivers of growth. As a result, the loan appetite
of corporates and households alike remained very robust
throughout the region, slowing down slightly towards the year
end. Corporate loans were particularly in high demand and
grew notably due to a turbulent year, with supply bottlenecks,
high producer prices, higher commodity prices, and stock
refilling. Kosovo, Slovenia, Montenegro, and N. Macedonia
saw corporate credit grow in double digits, with Serbia and
BiH ending the year in mid-single digits. The household loans’
segment grew at a little softer pace in comparison, but was still
fuelled by private consumption and exhibited higher growth
rates than expected. The dynamics were very similar to the
corporates. Likewise, Slovenia, Kosovo, Montenegro, and N.
Macedonia saw the strongest growth, with Serbia growing at
a slightly slower pace. BiH followed with a similar growth rate
as in the corporate sector. The NPLs fell in all countries of the
Group’s region, except for Montenegro.
The corporate deposit growth was in double digits in Kosovo,
BiH, Serbia, and particularly in Montenegro, which saw notable
growth. In N. Macedonia, the rate was subdued, while in
Slovenia the growth was nearing the 8% mark. The growth of
household deposits was much less pronounced as savings were
being used to sustain consumption. Considering the macro
circumstances Slovenia, Kosovo, N. Macedonia, and Serbia
saw solid growth, with Montenegro as an outlier, exceeding the
other rates by a big margin. BiH was the only country to register
a contraction.
Table 7:
Movement of key banking systems indicators in the NLB Group region, 2022
Corporate loans
Household loans
Corporate deposits
Household deposits
Net interest margin
NPL
CAR
in EUR
millions
∆ % YoY
in EUR
millions
∆ % YoY
in EUR
millions
∆ % YoY
in EUR
millions
∆ % YoY
2021, in %
2022, in %
in %
∆ pp YoY
in %
∆ pp YoY
Slovenia
10,487
12.8
12,138
7.8
9,710
7.9
25,784
7.6
1.4
1.6
1.1
-0.1
17.0
(i)
-1.5
Serbia
13,641
5.8
11,904
6.2
13,233
12.7
17,864
2.9
2.7
2.9
(ii)
3.2
(i)
-0.4
19.5
(i)
-1.3
N. Macedonia
3,349
11.5
3,495
7.3
2,319
3.7
5,253
5.8
3.0
3.0
(i)
2.9
-0.3
17.7
0.4
BiH
4,681
4.3
5,613
5.2
3,142
11.0
7,452
-0.8
2.3
1.7
(i)
4.9
-0.6
19.2
0.0
Kosovo
2,689
15.2
1,632
16.7
1,175
19.0
3,647
8.3
4.5
3.9
2.0
-0.3
14.8
-0.5
Montenegro
1,413
10.7
1,588
9.1
2,321
43.7
2,458
12.6
4.0
4.0
(i)
5.9
(i)
0.3
18.4
(i)
-0.1
Source: Statistical offices, CBs, NLB.
Note: Net interest margin calculated on interest-bearing assets; Residential deposits and loans for Montenegro; (i) Data for Q3 2022; (ii) Data for 30 November 2022.
Figure 2:
LTD ratio in the Euro area and NLB Group region
Source: ECB, National CBs, NLB.
Note: LTD for Slovenia and BiH is from Q3 2022, and for Serbia for 30 November 2022.
2021
2022
Euro area
Slovenia
Serbia
N. Macedonia
BiH
Kosovo
Montenegro
94.4%
95.4%
66.1%
69.1%
79.4%
85.8%
82.6%
86.1%
75.7%
76.5%
76.5%
78.3%
80.0%
70.1%
23
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Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
The net interest margin was not moving uniformly in the
Group region. It grew in Serbia and Slovenia, reflecting the
interest rate hikes by respective central banks, the growth
of lending, and price effects. It fell in BiH and in Kosovo,
reflecting a competitive environment. In Montenegro and N.
Macedonia, the margin saw no change YoY.
The capital adequacy ratio mostly saw slight negative
change in Slovenia, Serbia, Montenegro, and in Kosovo. In
N. Macedonia, the ratio improved. Despite a turbulent year,
the banks in the Group remain solid and well-capitalized.
The LTD ratio increased in all countries, except in
Montenegro where the growth of deposits was the highest.
For the rest of the countries, the ratio movement reflects
the growth of loans outpacing the growth of deposits.
The profitability of the banking systems of the NLB
group improved in all countries except in Slovenia and
N. Macedonia, where slight decreases were noted.
Loans potential outlook
for the Group’s region
Loans to non-financial corporations and household
loans as a percentage of GDP levels of the Group’s region
suggest that the whole group has further potential for
expansion, as compared to the same categories in the Euro
area. This is so especially in the household loans sector
where the growth in the euro area has been much more
pronounced, as the households seemed more at ease with
taking on additional debt. However, seeing that private
consumption is expected to slow down in 2023, this does
not bode well for new household credit origination. Private
consumption is the most important driver of GDP growth
and is expected to range between 0.7% in Slovenia and
2.5% in Serbia. Fixed investment is expected to range from
a contraction of -0.7% in BiH, and a growth of 4.3% in N.
Macedonia. Banking sector loan growth is expected to
slow down in 2023, however, in most of NLB Group home
markets loan growth rates will likely stay positive in low
to mid single-digit range for both, corporate and retail
sectors.
Figure 3:
ROE ratio in the Euro area and NLB Group region
Source: ECB, National CBs.
Note: Return on average equity (ROAE) used for BiH; Q3 2022 data for BiH and the Euro area. November 2022 data for Serbia.
2021
2022
Euro area
Slovenia
Serbia
N. Macedonia
BiH
Kosovo
Montenegro
Figure 4:
Loans to non-financial corporations and household loans (% GDP) in the Euro area and NLB Group region in 2022
Source: National CBs, National Statistical Offices.
Note: Q3 2022 annualised data for BiH and Kosovo. Residential loans for Montenegro.
Loans to non-financial corporations, % GDP
Household loans, % GDP
Euro area
Slovenia
Serbia
N. Macedonia
BiH
Kosovo
Montenegro
5.3%
4.8%
11.4%
10.7%
7.5%
10.6%
12.9%
12.2%
9.6%
12.6%
19.5%
20.6%
5.9%
14.3%
44.3%
58.9%
18.1%
18.3%
22.8%
19.7%
26.4%
28.0%
20.8%
24.7%
30.6%
18.4%
21.7%
26.7%
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Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
During 2022, more than 100 changes in the EU and Slovenian
regulatory environments were adopted with material effects
on the Bank and the Group. The Group strives to be fully
compliant with the existing and new requirements. Disclosure
of the most relevant changes in legislation and regulation
which influence the Group is presented herein.
The regulatory environment
in Slovenia
The Bank is subject to capital adequacy and liquidity rules
imposed by the EU (CRR/CRD), which govern the activities in
which banks may engage and are designed to maintain the
safety and soundness of banks, as well as limit their exposure
to risk. The CRD V was further transposed into the new Banking
Act (ZBan-3). In October 2021, the European Commission
adopted a further package of a review of the CRR and CRD.
One core aspect of that package (Regulation (EU) 2022/2036
which introduces targeted adjustments to improve the
resolvability of banks) has already been finalised and published
in the Official Journal in December 2022.
As a financial institution offering benchmark-based products,
the Bank meets its obligations under the Regulation 2016/1011
(BMR) and regularly monitors developments in this area by
adapting its operations to the requirements of regulators and
industry.
Due to the constant care for the interests of its customers,
especially the protection of their data, the legislation in the field
of personal data protection is also important to the Bank. The
Bank strictly adheres to its obligations imposed on it by GDPR in
both Slovenia and the Group. The new Slovenian Personal Data
Protection Act (ZVOP-2) was adopted in December 2022, and is
in the process of implementation in the Bank’s operations.
In the field of financial markets, there were no significant
changes in the regulatory environment in 2022. The Bank
complies with the provisions of MiFIR/MiFID II and EMIR
regarding financial markets transactions, enhanced investor
protection, transparency, and reporting obligations.
The Regulatory
Environment
The Group also considers and complies with the regulations
in the field of preventing money laundering and terrorist
financing (AML/CTF). In April 2022, the new Prevention of Money
Laundering and Terrorist Financing Act (ZPPDFT-2) entered
into force and replaced the law in force at the time. The new
Act has implemented the provisions of Directive (EU) 2019/1153,
of Directive (EU) 2019/2177, and of Regulation (EU) 2018/1672
into Slovenia's legislation. In addition, an Amendment and
supplements to the Act on Prevention of Money Laundering and
Terrorist Financing (ZPPDFT-2A) was published in the Slovenian
Official Gazette
in November 2022. Due to the aforementioned
regulatory changes, several activities were carried out by the
Group to ensure compliance with new AML/CFT requirements.
Concerning the changed geopolitical environment related
to the Russian aggression in Ukraine, the Group regularly
monitors and manages all newly introduced financial sanctions
stemming from all relevant regimes.
In the field of payment and settlement systems, there were
no significant changes in the regulatory environment in 2022.
The Bank meets its obligations under PSD2, the respective
regulatory technical standards and Payment Services, Services
for Issuing Electronic Money and Payment Systems Act
(ZPlaSSIED). New regulatory requirements imposed by the
regulator are constantly monitored and managed, also taking
into account what constitutes the best user experience.
In light of the EBA Guidelines on outsourcing arrangements,
the Group has undertaken a continuous effort to adhere to
regulatory requirements. This has entailed the revision of
internal policies and the modification of contracts with external
(service) providers.
In the EU’s policy context under the European Green Deal,
“sustainable finance” is understood as finance to support
economic growth while reducing pressures on the environment,
and taking into account social and governance aspects. The
Bank formed a comprehensive sustainability governance
structure and adopted the NLB Group Sustainability framework.
In 2022, substantial effort was made in implementing EU
Taxonomy regulation in the Group financing process. The Group
has also performed stress-testing using the ECB’s adverse and
severe scenarios.
In the field of consumer protection, the new Consumer
Protection Act (ZVPot-1) was adopted by Slovenia's National
Assembly in October 2022.
In December 2022, the Digital Operational Resilience Act
(DORA) Regulation was published in the EU’s Official Journal
alongside the revised directive on the security of network and
information systems (NIS2). The new framework introduces a
comprehensive set of rules concerning the information and
communications technologies (ICT), risk management of
financial sector firms to strengthen their digital operational
resilience, and prevents and mitigates cyber threats.
The regulatory environment
in the Group’s region
The regulatory environment in the rest of the region where the
Group operates was dominated by actions to ensure the stable
functioning of financial systems.
In
Serbia
throughout 2022, there were numerous regulatory
changes adopted by the National Bank of Serbia with the
intention to minimise the consequences of the COVID-19
pandemic on the economy and the financial sector (e.g.,
the agreement concluded between the National Bank of
Serbia and the banks in 2020, which, among other things,
contains restrictions on the payment of dividends), as well as
to determine and define the support of the citizens (e.g., to
facilitate Access to Financing for Natural Persons, Adequate
Management of Credit Risk in Agricultural Loans Portfolio in
Conditions of Aggravated Agricultural Production). To protect
citizen standards regarding payment services needed for
everyday activities, the National Bank of Serbia adopted
the Decision on the Payment Account with Basic Features.
The National Bank of Serbia has also adopted the Decision
Amending the Decision on Risk Management by Banks to
provide an additional bank supervisory mechanism and ensure
transparent and clear conduct of banks in the case of intended
increases in fees for the provision of payment services and in
the case of an introduction of new fees.
In
North Macedonia
, the past year was marked by a significant
change in the regulation that includes the adoption of two
systemically important laws. The Law on Payment Services and
Payment Systems, harmonised with European legislation in the
relevant area – which includes liberalisation of the payment
services market through entry of non-banking institutions
such as payment institutions and electronic money institutions.
Furthermore, it ensures transparency and comparability of fees
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Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
for payment services, and enables the opening of an account
with basic functions. Also, it limits the maximum charge for
natural person accounts and the introduction of an obligatory
number of transactions free-of-charge for vulnerable social
categories. The Law on the Prevention of Money Laundering
and Financing of Terrorism, harmonised with European
legislation in the field of fighting organised crime. This law
strengthens the analysis measures that banks should apply
when there is a high risk, when cross-border correspondence
is established, when the person is not physically present for
the purposes of identification, when the client is a politically
exposed person, in a business relationship, or in a transaction
that is involved in a high-risk state.
In the
Federation of BiH,
the most important decision of
the regulator in 2022 was the new decision for managing
outsourcing arrangements in the bank, which includes: activities
and conditions for outsourcing, applications within the banking
group, materially significant activities, risk assessment, duties
and responsibilities of the bank’s Management and Supervisory
Board, conflict of interests, the outsourcing register, contracting,
supervision, and the powers and procedures of the regulator.
The new decision represents an alignment of local regulations
with EBA outsourcing standards.
In the
Republic of Srpska
, the most significant activity relates
to the adoption of the Law on Amendments to the Law on
National Payment Transactions in April 2022 by the Ministry
of Finance of the Republic of Srpska, with the aim of greater
transparency of payment services, greater financial inclusion
of individuals through the use of a basic payment account,
introduction of safe deposit boxes for individuals and business
entities, and the Law on Inter-banking Fees for Payment Card
Transactions. In addition, other significant regulatory changes
refer to the adoption of several bylaws related to the number
of eligible deposits, temporary measures to mitigate the risk
of interest rate growth, outsourcing of arrangements, and
a new accounting framework for banks and other financial
organisations.
In
Kosovo,
three regulations were adopted by the Central Bank
of Kosovo. The regulation on the liquidity coverage ratio, the
regulation on the net stable funding ratio, and the regulation
on access to payment accounts with basic services. The Law on
Implementation of Targeted International Financial Sanctions
was adopted concerning the prevention and combating against
terrorism, terrorist financing, and the proliferation of weapons
of mass destruction, etc., in accordance with the Resolutions
of the UN Security Council, and the European Union Acts. As
foreseen by the Law on Electronic identification and Trust
Services in Electronic Transactions, 10 bylaws were adopted by
the end of December 2022.
In
Montenegro
, the main activities in 2022 were dedicated to
the implementation of the new law on comparability of fees
associated with consumer payment accounts, the transfer of
consumer payment accounts, and payment accounts with
basic services. The amendments to the Law on Payment
Transactions were published in October 2022. Pursuant to
the amendments to the Law on Tax Administration, banks are
obliged to implement the new instruction on a way of reporting
data to the administrative body responsible for taxation. This
instruction includes reporting under the Foreign Account Tax
Compliance Act (FATCA) and the Common Reporting Standard
(CRS). The Bank continued to regularly apply the decisions on
the introduction of international restrictive measures in relation
to activities that undermine or threaten the territorial integrity,
sovereignty, and independence of Ukraine.
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SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
The record results in 2022 are just the tip of
NLB
Banka, Banja Luka
successful operations over
the past few years. We reached many important
milestones and improved our market share. For
the fifth year in a row, we received the Golden BAM
award as the bank with the highest ROA and ROE
in BiH.
We intertwined the commitment to a better quality
of life and ESG principles in all segments of our
operations. Environmental and social actions
supported responsible activities and initiatives
through sponsorships and donations, supporting
ecology, digitalization
, energy efficiency, inclusion,
and equality. Our focus on youth segment and
digital channels
created better footprints
for today
and made data-based decisions for the future.
Our business results are a solid basis for successful
transformation to a modern digital bank that
is ready for whatever may come, preserving
the potential of our home region, and utilizing
opportunities of sustainability.
Pictured: NLB Banka, Banja Luka employees
Despite the challenging and uncertain economic
environment, the Group has continued to duly execute its
medium-term strategy. This includes focusing on protecting
and strengthening its market position in its home region,
actively participating in the growth and consolidation of
the market, and promoting the Environmental, Social, and
Governance (ESG) agenda. Digitalization, client centricity, and
cost efficiency remain some of key strategic orientations to
ensure delivery of the Group’s vision.
Be a regional champion
The Group aims to further strengthen its role as a systemically
important financial institution in the SEE region. To achieve
this, it strives to become a market leader in all its markets and
to have a prominent role in the region’s development. The
Group believes there is significant value to be unlocked by
facilitating further development of the region and increasing
its standard of living. This will be further accelerated by
promoting advanced environmental, sustainability, and
corporate governance agendas. The Group is accelerating its
efforts to adhere to all modern standards, as well as catalyse
their adoption throughout its client base and markets. It has
created novel green financial products for financing clients’
green transformation, as well as invested significant efforts and
resources to reduce the carbon footprint of the Group’s own
business operations. For information on environmental risks
that may affect the Group’s business results, please refer to the
chapter
Risk Factors
below.
As one of the most important players in the region’s financial
system, the Group is carrying its share of responsibility for
building a stable banking system. The 2022 acquisition of
N Banka in the wake of Russia’s attack on Ukraine is an
example of the Group’s resolve to commit capital in turbulent
times for the benefit of all stakeholders. By stopping the run on
the bank in fast cooperation with the regulator, the Group has
safeguarded unsecured deposits of retail and even more so of
corporate customers. This endeavour brought not only stability
to the Slovenian banking sector, but also enabled the Group to
remain a leading player.
Put clients first
The Group is driving its customer-centricity agenda by starting
with the client’s financial needs and looking for ways to improve
and streamline its products and services to fulfil them to the
utmost extent. One way the Group does this is by digitizing its
distribution channels, allowing clients to access its products and
services from anywhere at any time. This makes it easier for
clients to manage their finances and take care of their banking
needs at their own convenience without having to visit a physical
branch.
The Group is committed to adding new financial solutions to
meet unmet and new needs of its clients. By staying on top of
the latest trends, needs, and technologies, it will stay competitive
and provide the best possible banking experience.
Strategy
Accelerating the development
of the SEE region
Promoting the ESG agenda
Supporting stability of
the banking sector
Digitalizing distribution channels
Adding new financial solutions
as per clients' needs
Offering strong customer support
Growing client market share
Creating value for shareholders
Offering a great place to work
Finding inorganic expansion
opportunlties
Establishing horizontally
diversified businesses
Finishing integration of N Banka
Continuing strategic transformation
Put
clients
first
Grow our
market
position
Be a regional
champion
Monetize
opportunities
and synergies
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SB Statement
Key Highlights
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Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Ensuring strong customer support remains one of the Group’s
key focuses. It requires that its customer service team is
knowledgeable, friendly, and always ready to assist clients with
their questions or concerns, wherever they may be.
Digitalization
The Group continues to implement substantial efforts and
resources toward digital distribution channels and operating
models. The customers’ preference for an increased share
of digital business interactions has remained even after
normalization since the COVID-19 pandemic. Effective and safe
digital distribution channels require novel operating models
and automated processes to minimise response times and
costs. The focus on digitalization is to enable quicker and better
customer service, a higher level of internal processes efficiency,
and consequently, additional cost savings.
The Group will continue to invest substantially in IT
infrastructure and its digital capabilities and roles. The focus
will be on improving the speed of IT delivery by adopting agile
methodology principles, provision, and implementation of the
best online experience for customers in the SEE, and enhancing
capabilities for processing data, modelling, and relevance of
services to clients. One such example is the establishment of
technological hub NLB DigIT in Beograd that develops solutions
for the whole Group. For more information on NLB DigIT please
refer to the chapter
Strategic Foreign Markets
.
Due to the positive effects of working remotely during the
pandemic, the Group has developed a hybrid working model
(combination of work-from-home and work from the office)
initiative, thus offering more flexibility to its workforce and
achieving cost and carbon footprint benefits at the same time.
Grow our market position
The Group is working to protect and strengthen its market
position as a systemic player in its home region. To do this, the
Group is monitoring how well it is adding value to three types of
its main stakeholders: shareholders, customers, and employees.
With respect to its shareholders, the Group views its decisions
through a lens of maximising its return on equity. With respect
to its customers, market shares and Net Promoter Scores
(NPS) are tracked. With respect to its employees, an employee
engagement metric is measured and analysed. In addition,
other supporting indicators and benchmarks are tracked to
continually revaluate current projects and utilise those insights
for future decisions.
The Group regularly engages with its stakeholders in defining
what is material to both them and the Group. A variety of
communication channels are used for an open and transparent
dialogue on sustainability-related issues. Some of the most
important channels for communications with the stakeholders
(in addition to the regular publicly available periodic reports,
presentations, and webcasts on the Group performance) are
the NLB Group Sustainability Report, the Corporate Social
Responsibility (CSR) and Sustainability e-mail box, the corporate
website, and social media channels.
The Group’s employees represent its key resource and are
one of its main drivers for creating value. Through the focus
on recruitment, management, and continual development of
employees, they are given the opportunity to thrive by making
the most of their talent and experiences. They are encouraged
to act in a responsive, respectful, and result-driven manner. The
ambition is to also involve the whole organisation in realising
the Group’s sustainability ambitions.
Monetize opportunities
and synergies
The Group is monitoring additional M&A opportunities (within
consolidation processes in banking sectors in the SEE) that
could add value to the Bank’s shareholders. It makes sense to
actively participate in the ongoing growth and consolidation
of the banking markets. The Group is fully engaged in re-
establishing some key financial services (leasing, factoring, etc.)
across all its markets, thus also diversifying its services on a
horizontal level.
The Group is moving closer to the fintech ecosystem to find
new and better ways of solving customers’ financial needs.
To achieve this, it has established a corporate venture team
eNLaB, for building business cooperation with ambitious fintech
players, to accelerate the Group’s efforts in bringing novel use
cases and business solutions to the market. It is looking into
opportunities in the areas of credit underwriting, payments
and digital banking services, financial enterprise technology,
regulatory technology, web 3.0 and blockchain technology, and
personal finance and asset management.
Significant strategic business efforts have been undertaken to
achieve business synergies across the Group, both in costs and
operational efficiency. The Group believes these can help offset
the negative economic effects the rising inflation will have on
the Group’s clients. In Slovenia, further synergies are expected
after full integration of N Banka in 2023.
The increased importance
of leasing – A new business
opportunity
In the Group Strategy, leasing activities represent a significant
part of the Group’s business mix. Leasing operations in Slovenia
(NLB Lease&Go, Ljubljana) are gaining momentum with
increased total assets, while new leasing operations have been
added in North Macedonia and Serbia.
Management and governance structures are being set up
in new leasing Group members, with full implementation of
the Group’s corporate governance principles, including two
members of NLB Management Board being Chair and Co-chair
of NLB Lease&Go, Ljubljana Supervisory Board.
The Group expects leasing will once again become a significant
part of its business operations. It is planned that in its mature
phase, leasing will contribute more than EUR 1 billion to the total
assets of the Group, through organic and potentially inorganic
growth. For more information on leasing operations expansion
in SEE please refer to the chapter
Strategic Foreign Markets
.
Continuing transformation
To facilitate the continuous transformation in an everchanging
environment, the Group is following comprehensive plan
to deliver its mission and financial targets. The Group has
identified a series of projects and initiatives, and has dedicated
considerable resources for their implementation. All major
running change efforts are channelled into one overall strategic
transformation programme.
The backbone of the strategy is strengthening customer-
centricity by establishing customer-based market management,
improving the understanding of clients, reimagining digital
client journeys, and accelerating innovation to provide lifestyle
and value chain services to strengthen relationships.
The transformation programme also focuses efforts into
increased operational efficiency, cost management, and the
improved utilisation of the Group’s capital. Simultaneously,
overall operational capabilities are being enhanced by
improving human capital, optimising IT infrastructure,
digitalizing internal processes, and leveraging information
capital. To drive the transformation, a new change
management platform has been set up.
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SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
A good client relationship is the main foundation for a
stable and growing deposit base, while wholesale funding is
primarily driven by fulfilment of minimum requirement of own
funds and eligible liabilities (MREL) and further strengthening
and optimizing the capital. The latter drives the average
cost of funding higher, however, the total cost of funding
remains low for now due to a comfortable high and stable
deposit base and the inelasticity of the sight deposit pricing.
Figure 5:
Average cost of funding (quarterly data)
Q1 2022
Q2 2022
Q3 2022
Q4 2022
0.12%
0.12%
0.24%
0.32%
Deposit strategy
Deposits from customers represent the main funding source
for the Group, and each bank within the Group has established
processes that enable prudent strategic deposits management
that is aligned with business targets and regulatory
requirements. Regular monitoring of deposits and its structure
enables timely reactions whenever necessary due to business
or regulatory-related reasons. Events that caused significant
economic and even political disturbances in 2022 proved that
the deposit base of the Group is robust and liquidity position
strong – the LTD ratio evolution in recent years that include
the COVID pandemic, as well as turbulent 2022 regime was still
confined to a healthy liquidity zone below 70%.
A leading Group market position and a responsive relationship
with clients are important factors for a stable deposit base,
and besides that, proper deposit pricing plays a pivotal role in
risk management and business decision-making. Established
funds pricing, aligned with international liquidity pricing
Funding Strategy and
MREL Compliance
standards, is regularly part of the Group business process. Year
2022 underlined the importance of proper liquidity pricing for
business stability in the uncertain environment.
Group retail deposits represent a majority in the structure and
are the most stable funding source with around 80% being
insured by the Deposit Guarantee Scheme. Despite turbulent
business environment, Group retail deposits recorded an
increase in 2022. Sight deposits represent around 90% of retail
deposits and witnessed stable growth in recent years. This
supports the stable business of the Group in the region, even
during the volatile times on the wholesale funding markets.
Corporate sector deposits, albeit representing a smaller share
in the deposit structure of the Group, are an important source
of liquidity, as well. Corporations are offered various deposit
products to manage their liquidity position in a flexible way,
supporting young and small businesses, as well as already
established large firms in all sectors of the regional economy.
As the funding structure of the Group relies mostly on non-
banking sector deposits, the Group’s average funding costs was
still relatively low.
Wholesale funding
and MREL
Wholesale funding activities in the Group are conducted with the
aim of achieving diversification, improving structural liquidity and
capital position, and fulfilling regulatory requirements, especially
ensuring compliance with the MREL requirement.
The MREL requirement for the Group is based on the Multiple
Point of Entry (MPE) approach.
As at 1 January 2022, NLB must comply with MREL requirement
on a consolidated basis at resolution group level (i.e., NLB
Resolution Group), which amounts to:
•
28.69% of Total Risk Exposure Amount (TREA) (consisting of
(i)
25.19% of TREA and
(ii)
3.5% of Combined Buffer Requirement
(CBR)),
•
8.03% of Leverage Ratio Exposure (LRE).
NLB has to ensure a linear build-up of own funds and eligible
liabilities towards the MREL requirement applicable as at 1
January 2024, which amounts to:
•
31.38% of TREA + applicable CBR,
• 9.97% of LRE.
The NLB Resolution Group consists of NLB as the resolution
entity and other non-banking members. The entities and their
contribution to the NLB Resolution Group are presented in the
Table 8.
Table 8:
Composition of NLB Resolution Group by TREA
in EUR millions
Entity
31 Dec 2022
NLB
6,679
NLB Lease&Go, Ljubljana
146
NLB Skladi, Ljubljana
53
NLB Interfinanz - in liquidation
15
TARA HOTEL, Budva
14
REAM d.o.o., Beograd
13
Other
49
TREA total
6,968
On 31 December 2022, the MREL ratio amounted to 36.32% and
was well above the required level.
The composition of the own funds and eligible liabilities items
by which the Bank met the MREL requirement was as presented
in the table below.
Table 9:
Composition of the own funds and eligible liabilities of NLB
Resolution Group
in EUR millions
Own funds and eligible liabilities items
31 Dec 2022
CET1
1,451
Additional Tier 1 instruments
82
Tier 2 instruments
508
Unsecured and unsubordinated claims
arising from debt instruments
490
Total
2,531
To support the Group’s growth capacity and comply with MREL,
the Bank was very active on the debt capital markets in 2022 with
the issuance of EUR 300 million Senior Preferred notes in July
2022, EUR 82 million Additional Tier 1 notes in September 2022,
and EUR 225 million Tier 2 notes in November 2022. In addition,
the Bank attracted EUR 114 million in eligible deposits and
concluded loans in the amount of EUR 30 million. All mentioned
instruments are MREL-eligible, while subordinated instruments
also strengthened the capital position and the Bank’s rating.
The Bank expects to be active on debt capital markets in 2023 by
issuing approximately EUR 300 million of new senior notes that
count for MREL. This will lead to the Bank comfortably meeting
the binding MREL requirement, applicable as at 1 January 2024.
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Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Risk Factors
and Outlook
Risk factors
Risk factors affecting the business
outlook are (among others):
•
The economy’s sensitivity to a potential slowdown in the euro
area or globally
• Widening credit spreads
• Potential liquidity outflows
•
Worsened interest rate outlook / Persistence of high inflation
•
Energy and commodity price volatility
• Increasing Unemployment
• Potential cyber-attacks
•
Regulatory, other legislative, and tax measures impacting the
banks
• Geopolitical uncertainties
In 2022, the Group’s region continued to grow on the back of
the revival in private and investment consumption after being
affected by the pandemic in the past period. Higher prices of
energy, commodities, raw materials, and food as a result of
the war in Ukraine, have and will further impact the economic
momentum. As a result, a gradual slowdown in economic
growth can be expected. The Group’s region is still expected
to grow moderately, though the inflationary pressures might
suggest a further slowdown, namely in the area of private
consumption. However, it is not possible to assume with a high
degree of confidence that the positive economic momentum will
further continue.
Lending growth in the corporate and retail segments is
expected to remain relatively moderate, especially in the current
circumstances. With regards to credit portfolio quality, the
Group carefully monitors the most affected client segments with
the intention to detect any significant increase in credit risk at
a very early stage. The Group’s direct and indirect exposures
towards Russia and Ukraine in 2022 was rather limited,
additionally in February 2023 all remaining outstanding Russian
government bonds were sold.
Credit risk usually considerably increases in times of economic
slowdown. In light of increasing energy prices, inflationary
pressures, and a forecast of a decrease in economic growth,
the Group has thoroughly analysed potential impact on the
credit portfolio. The Group closely monitors the circumstances
in the most affected credit portfolio segments and makes the
necessary adjustments. The length and intensity of the war
in Ukraine might cause additional spill-over effects in the
mid-term period, such as raising the price of energy sources
or their availability, which might at a later period also have
some impact on other segments of the credit portfolio. These
adverse developments could affect the evolution of the cost of
risk and NPLs. Notwithstanding the established procedures in
the Group’s credit risk management, there can be no certainty
that they will be sufficient to ensure the Group’s quality of credit
portfolio or the corresponding impairments will remain at the
adequate level in the future.
The investment strategy of the Group, referring to the Group’s
bond portfolio kept for liquidity purposes, adapts to the
expected market trends in accordance with the set risk appetite.
The war in Ukraine has led to quite considerable volatility in the
financial markets, in particular shifts in credit spreads, rising of
interest rates and foreign exchange rates fluctuations. Special
attention is given to the markets in the Balkans, neighbouring
countries to Ukraine and Russia and international banks with
operations in Russia. The Group is closely monitoring its major
bond portfolio positions, mostly sovereigns, by incorporating
adequate early warning systems. Since the beginning of the
crisis, the Group has been observing credit spreads widening,
which impacted FVOCI positions.
No material movements were observed so far regarding the
Group’s major FX positions. Current developments, market
observations, and potential mitigations are very closely
monitored and discussed. While the Group monitors its liquidity,
interest rate, credit spread, FX position and corresponding
trends, impacts of credit spread, interest rate and FX
fluctuations on its positions, any significant and unanticipated
movements on the markets or variety of factors, such as
competitive pressures, customer confidence or other certain
factors outside the Group’s control, could adversely affect the
Group’s operations, capital, and financial condition.
Special attention is paid to the continuous provision of services
to clients, their monitoring, health protection measures, and
the prevention of cyber-attacks and potential fraud events. The
Group has established internal controls and other measures to
facilitate their adequate management. However, these measures
may not always fully prevent potential adverse effects.
The Group is subject to a wide variety of regulations and
laws relating to banking, insurance, and financial services.
Respectively, it faces the risk of significant interventions by a
number of regulatory and enforcement authorities in each of
the jurisdictions in which it operates.
The SEE region is the Group's most significant geographic area
of operations outside of the RoS and the economic conditions
in this region are therefore important to the Group’s results
of operations and financial condition. The Group's financial
condition could be adversely affected as a result of any
instability or economic deterioration in this region.
In this regard, the Group closely follows the macroeconomic
indicators relevant to its operations:
• GDP trends and forecasts,
• Economic sentiment,
• Unemployment rate,
• Consumer confidence,
• Construction sentiment,
•
Deposit stability and growth of loans in the banking sector,
•
Credit spreads and related future forecasts,
•
Interest rate development and related future forecasts,
• FX rates,
• Energy and commodity prices,
• Other relevant market indicators.
During 2022, the Group reviewed IFRS 9 provisioning by
testing
a set of relevant macroeconomic scenarios
to adequately
reflect the current circumstances and the related impacts in the
future. The Group established and developed multiple scenarios
(i.e., baseline, mild, and severe) on the level of an Expected
Cred Losses (ECL) calculation. The baseline scenario presents
a common forecast macroeconomic view for all countries
of the Group. This scenario is constructed with the purpose
to culminate various outlooks into a unified projection of
macroeconomic and financial variables for the Group. This is in
line with the concept that the bank has a consolidated view on
the future of economic development in SEE. The IFRS 9 baseline
scenario is based on the most recent official and professional
forecaster outputs, with additional specific adjustments for
individual countries of the Group.
The macroeconomic rationale behind the alternative
scenarios is related to a range of plausible drivers of economic
development in the next three years. The narrative for the
alternative scenarios combines statistical techniques with
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expert knowledge as a means of the concept and validation
of outputs. The Group developed both alternative scenarios
through the lens of possible expected impact on the regional
economic activity. In general, the mild scenario is a demand-
driven optimistic scenario, where limited supply disruption
factors and an active role from the central banks help to
brighten the economic conditions and economic subjects'
confidence. This scenario narrates stronger economic growth,
while the severe scenario envisions zero real economic growth
for all Group home countries. Namely, the severe one is a
supply-driven pessimistic scenario, where both upside inflation
risk and downside growth risk materialize. The Bank includes
these scenarios in calculating expected credit losses in the
context of IFRS 9.
The Group formed three probable scenarios with an
associated probability of occurrence for forward-looking
assessment of risk provisioning in the context of IFRS 9. These
IFRS 9 macroeconomic scenarios incorporate the forward-
looking and probability-weighted aspects of ECL impairment
calculation. Both features may change when material changes
in the future development of the economy are recognised and
not embedded in previous forecasts.
The monitoring process of the macroeconomic environment
revealed that uncertainties remain high in the global
economy due to the energy crisis, inflation, and the war
in Ukraine. The current economic situation led to sluggish
growth projections, persistent inflationary pressures, and
interest rate hikes. Increased uncertainty and changes in
expectations of macroeconomic development affected
forecasts for some economies in the Group. Material decreases
in growth projections for Slovenia and Serbia for 2023 was
noticed. Hence, an executive decision was taken to adjust
risk expectations using the scenario’s weight. The scenario
probability weighting was changed to 0%-10%-90% where
severe and baseline scenarios reflect the likelihood of relevant
future economic conditions for them. The likelihood of
occurrence for the pessimistic scenario was derived to 90%,
whereby the baseline scenario received a weight of 10%. Minor
changes were also applied in other countries based on the
latest available forecast.
The Group established a comprehensive internal
stress-testing
framework
and
early warning systems
in various risk areas
with built-in risk factors relevant to the Group’s business model.
The stress-testing framework is integrated into Risk Appetite,
Internal Capital Adequacy Assessment Process (ICAAP),
Internal Liquidity Adequacy Assessment Process (ILAAP), and
the Recovery Plan to determine how severe and unexpected
changes in the business and macro environment might affect
the Group’s capital adequacy or liquidity position. Both the
stress-testing framework and recovery plan indicators support
proactive management of the Group’s overall risk profile in
these circumstances, including capital and liquidity positions
from a forward-looking perspective.
Risk Management actions that might be used by the Group
are determined by various internal policies and applied when
necessary. Moreover, the selection and application of mitigation
measures follows a three-layer approach, considering the
feasibility analysis of the measure, its impact on the Group’s
business model, and the strength of the available measure.
Outlook
The indicated outlook constitutes forward-looking statements
which are subject to a number of risk factors and are not
a guarantee of future financial performance. The Group is
pursuing a range of strategic activities to enhance its business
performance. The interest rate outlook is uncertain given the
adaptive monetary policy of the ECB and local central banks
to the general economic sentiment. The Bank is committed to
delivering sound financial performance.
Based on current and expected rates environment, growth
outlook, strict costs control supported by IT/digital solutions and
successful implementation of the Group’s strategy and initiatives,
the 2023 outlook and guidance for 2025 have been revised and
further improved. During the inaugural Investor Day which took
place in May 2022, the Group communicated several KPIs for
the year 2025, i.e., regular profit will exceed EUR 300 million, a
EUR 100 million contribution from the Serbian market, EUR 500
million total capital return through cash dividends between 2022
and 2025, tactical M&A capacity of EUR 1.5 billion RWA, and ROE
will exceed 12%. The Group remains committed to deliver on
these KPIs, moreover it is improving the outlook for regular profit
(to be around EUR 400 million), tactical M&A capacity (to EUR 2
billion RWA), and ROE (to exceed 13%).
The measures and potentials outlined in the above strategy
are reflected in the Group’s outlook for the 2023-2025 period
(Table 10).
Table 10:
Market performance and outlook for the period 2023-2025
Last Guidance
for 2022
Actual 2022
Performance
Last Guidance
for 2023
Revised Guidance
for 2023
Last Outlook
for 2025
Revised Outlook
for 2025
Regular income
~ EUR 750 million
EUR 779 million
> EUR 850 million
~ EUR 900 million
> EUR 1 billion
Costs
~ EUR 460 million
EUR 460 million
~ EUR 490 million
~ EUR 490 million
Flat on 2023
level or below
Cost of risk
Below 30 bps
14 bps
30-50 bps
30-50 bps
30-50 bps
Loan growth
Low double-digit
organic growth
(ii)
14%
(ii)
(23% with N Banka)
Mid single-digit
Mid single-digit
High single-digit
Dividends
EUR 100 million
EUR 100 million
EUR 110 million
EUR 110 million
EUR 500 million
(2022-2025)
EUR 500 million
(2022-2025)
ROE a.t.
~ 10% w/o NGW,
(ROE normalized
(i)
:
12% w/o NGW)
20%,
12% w/o NGW
(ROE normalized
(i)
:
16% w/o NGW)
> 10%,
(ROE normalized
(i)
:
> 12%)
~11%,
(ROE normalized
(i)
:
~14%)
> 12%
> 13%,
(ROE normalized
(i)
:
> 17%)
Regular profit
> EUR 300 million
~ EUR 400 million
Contribution from
Serbian market
EUR 100 million
> EUR 100 million
M&A potential
Tactical M&A
capacity of
EUR 1.5 billion RWA
Tactical M&A
capacity of
EUR 2 billion RWA
(i) ROE normalized = Result a.t. divided by Average risk adjusted capital. Average risk adjusted capital calculated as Tier 1 requirement of average Risk Weighted Assets (RWA)
reduced for minority shareholder capital contribution.
(ii) Without N Banka.
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Outlook 2023
Macroeconomic
A warmer-than-expected winter, energy savings, and fiscal
support measures helped to alleviate fears of imminent
energy shortages in the euro area. Production levels should
benefit from improving supply conditions, while energy and
commodities markets are not expected to experience any
additional supply shocks. The inflation rate growth should
decrease, but remain elevated, due to the combined effects of
higher interest rates, tighter financial conditions, and alleviated
inflationary pressures stemming from commodities prices.
Private consumption should remain subdued in 2023 due to
declining purchasing power, as core inflation is to become the
predominant inflation driver. Muted private consumption and
uncertainty, stemming from continued although regionally
contained political tensions, are expected to be the main drag
on economic growth. The labour market tightness should
slightly decrease due to the stagnating economy, which
is expected to result in less pressure on wage growth and
consequently fewer second round effects driving inflation.
Overall, we see the euro area economy stagnating in 2023,
while the Group’s region economies are expected to grow 1.3%
on average in 2023. However, the Group’s region growth is set
to cool notably this year with the weaker euro area economy,
elevated inflation, declining real wages, geopolitical volatility,
and the war in Ukraine restraining household spending,
industrial production, and exports. On top of this, tighter
financing conditions could further subdue activity in most
countries of the region. More information is available in the
chapter
Macroeconomic Environment,
and the subchapter
Loans potential outlook for the Group’s Region
.
Revenues
Interest income growth is expected to be primarily driven by
loan production, higher rates, and the productive use of liquid
assets. Moderate growth of net fee and commission income is
expected for 2023, mainly on the account of basic services such
as payments and cards, but also bancassurance and asset
management products. The continued increase of digital sales
activities, cross-sell, and new client acquisition should further
support the growth of net fee and commission income going
forward. Based on these expectations, the outlook for regular
income increased from the previously communicated of more
than EUR 850 million to around EUR 900 million in 2023.
Costs
The Group continues to pursue a strong cost containment
agenda addressing both employee and other cost elements.
Total costs continue to be impacted by the business
environment with a visible cost inflation throughout the region.
Additionally, the Group continues with its investment activities
into information technology upgrades amid the growing
relevance of digital banking. Moreover, integration costs
associated with N Banka will contribute to the total costs in
2023. All this will increase the costs, with the expectation for the
cost base of around EUR 490 million in 2023.
Loan growth and portfolio quality
The Group expects mid-single digit organic loan growth in 2023.
Slower loan growth is foreseen for 2023 after exceptionally high
new corporate and retail loan origination across all markets in
2022 that is also influenced by expectations of higher interest
rates.
In light of the war in Ukraine, increasing energy prices,
inflationary pressures, and a forecast of a decrease in economic
growth, the Group has thoroughly analysed potential impacts
on its credit portfolio and made the necessary adjustments.
The Group’s direct and indirect exposures toward Russia and
Ukraine are quite limited. The most affected industries are
carefully monitored with the intention to detect any additional
significant increase in credit risk at a very early stage. Increased
and prolonged inflationary pressures might cause some
deterioration of the credit portfolio quality in the retail segment,
though its impact should not be too excessive. As a result, the
Group strengthened the early warning system for this segment.
The Group remains very prudent in identifying any increase in
credit risk, as well as proactive in the area of NPL management.
Consequently, a well-diversified and stable quality of credit
portfolio is expected in 2023. Based on assessed environment,
the expected cost of risk in 2023 will be between 30 to 50 bps.
Liquidity
From a liquidity perspective, deposits at the Group level grew
in 2022, and it is expected they will continue to grow in the next
period. The liquidity position of the Group is expected to remain
very robust even if a highly unfavourable liquidity scenario
materialises, as the Group holds sufficient liquidity reserves
mostly in the form of high-quality liquid assets.
As major part of liquidity reserves, the Group closely monitors
its major bond portfolio positions, mostly sovereigns. Since
beginning of the crisis, the Group has been observing the rising
yield environment and the widening of credit spreads, which
materially impacted FVOCI positions in 2022. Consequently,
the Group will continue to carefully manage the structure and
concentration of liquidity reserves in order to limit the potential
sensitivity of regulatory capital.
Capital and MREL
The capital position represents a strong basis to cover all
regulatory capital requirements, including capital buffers and
other currently known requirements, as well as the Pillar 2
Guidance.
Wholesale funding in 2023 will be driven by the MREL
requirement, for this purpose the Bank intends to issue new
senior MREL eligible notes of approximately EUR 300 million.
This will lead to the Bank comfortably meeting binding MREL
requirement applicable as of 1 January 2024.
The Bank will become more frequent issuer on capital markets
in the following years, mainly for the purpose of MREL
compliance. The annual anticipated issuance / re-financing size
will be in the area of EUR 300 million.
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Dividends
The Bank’s general intention is to distribute dividends on a
yearly basis, while at the same time fulfilling all regulatory
requirements, including the Pillar 2 Guidance and risk appetite.
The Group aims to maintain stable dividend growth and at the
same time have room to support organic growth and potential
M&A opportunities.
In the period between 2022 and 2025, the Bank envisages a
total capital return through cash dividends of EUR 500 million.
Dividends in the amount of EUR 100 million were paid in
2022, while for the year 2023 the Bank anticipates a dividend
payment in the amount of EUR 110 million.
M&A opportunities
The Group’s drive to deliver value to the shareholders is subject
to organic growth and the capacity to engage in further value
accretive M&A opportunities. Such opportunities for inorganic
growth will be subject to a diligent analysis of strategic,
financial, and other resource utilisation.
Sustainability
In 2023, the Group will continue to implement its sustainability
agenda in all three pillars of its Sustainability Framework. In the
Sustainable Financing Pillar, the primary focus of the Group will
be in the development and implementation of net-zero business
strategy and financing, as well as measurement of portfolio
emissions. The first targets related to reducing its footprint in
carbon-intensive industries will be published by the end of 2023.
In the Sustainable Operations Pillar, the Bank will continue to
adhere to high standard of corporate governance, which are
the foundation of sustainable operation, and will maintain
long-term relationships with key stakeholders. The Group will
also take measures to lower energy and resources consumption
and to increase energy efficiency, disclose all relevant ESG data
and further implement the EU Taxonomy. Focus will also be on
analysis and implementation of the newly adopted Corporate
Sustainability Reporting Directive, as well as the upcoming
Corporate Sustainability Due Diligence Directive. In the third
pillar, the Group will continue with its active CSR programme
contributing to development of local communities and society
in all regions where the Group operates. Our sponsorship,
donations, and partnership projects will continue to be based
on supporting and following the UN Sustainable Development
Goals (UN SDG).
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In 2022, the world was once again confronted with additional
new challenges, as the war in Ukraine had unprecedented
effects around the globe. The impact of the Russian invasion
in Ukraine is still present and will continue to affect the
economies to various degrees.
The impact on the global
economy and SEE region
The consequences of the war in Ukraine reached far beyond
the Ukrainian-Russian border as the conflict had a lasting
effect globally. Even prior to the beginning of the war in
Ukraine, commodity prices had risen substantially, and global
supply chains were strained. The start of the war exacerbated
these trends. The global economy was impacted by the war
through significant disruptions in trade, food, and fuel price
shocks, decelerating global economic activity and intensifying
inflationary pressures. The EU is among the most exposed
economies due to geographical proximity to the war and
heavy dependence on imports of fossil fuels from Russia.
Reduced exports from Russia have affected fossil fuel trade
and contributed to the steep increase in natural gas prices,
as the EU needed to refill gas storages by diversifying energy
suppliers. What is more, the wholesale price of electricity
in the EU’s internal market is directly linked to the price of
gas resulting in skyrocketing gas and electricity prices. High
energy prices affected the profitability of energy-intensive
firms, while inflationary pressures resulted in a sharp erosion
of households’ purchasing power and deteriorated consumer
sentiment. Real income losses, deteriorating economic
sentiment, and heightened uncertainty resulted in worsened
confidence also in the business sector amid high production
costs, supply bottlenecks, and tighter financing conditions. In
response to the cost-of-living crisis, European governments
implemented a range of policy measures at national and
The Impact on
Operations of the
Russian invasion
in Ukraine
supranational levels with policies tackling the impact of higher
costs on consumers and businesses, and policies aiming at
stabilisation and reduction of wholesale prices and ensuring
energy security. Countries of the Group’s region are in general
largely dependent on energy and food commodities imports. As
a consequence, globally rising prices resulted in a widening of
the current account deficits and double-digit inflation. The latter
weighed on households’ purchasing power and consumption
habits. To cope with the rising-cost-of-living crisis, governments
implemented different measures that were to lessen the burden
of the rising prices for households and businesses.
Impact on credit portfolio
In the light of the war in Ukraine, increasing energy prices,
inflationary pressures, and a forecast of a decrease in
economic growth, the Group has thoroughly analysed the
potential impact on the credit portfolio. Increasing prices
of raw materials, commodities, and energy may represent
an important factor for certain corporate clients. Additional
effects can be related to a potential gas shortage for certain
corporate clients with high dependency on the production cycle
mainly from steel, aluminium, glass, mineral, stone, chemicals,
and the paper industry. The Group is closely monitoring the
circumstances in the most affected industries (energy, transport,
automotive, construction, and food production) and is in close
communication with key clients to identify any changes in
business circumstances. The Group performed stress-testing
by applying adverse and severe scenarios, and the potential
estimated losses are perceived as sustainable. In contrast,
the inflation pressure and prices of energy sources may limit
the credit capabilities in the retail segment. To enable early
identification of a significant increase in credit risk (SICR), the
Group strengthened the early warning system for the retail
segment in Q3 2022.
At the beginning of the war in Ukraine, the Group had limited
exposure to Russian government bonds in the notional amount
of USD 22.0 million. In May 2022, Russian government bonds
in the notional amount of USD 14.0 million were fully repaid.
Therefore, on 31 December 2022, the Group had very limited
exposure to Russian government bonds with the notional
amount of USD 8.0 million, maturing in September 2023. In
February 2023, these bonds were sold. Further information is
available in
Note 5.4.
of the financial part of this report.
The Bank’s response to
clients’ needs
After the war started in Ukraine, the international market
environment has become strongly unpredictable and a higher
demand for and utilisations of working capital facilities was
recognised. With the emerging of energy crisis, the Bank rapidly
responded to its clients’ needs and organised the arrangement
of new syndication financing to the respective energy sector.
In March 2022, the Bank decided to help refugees coming from
Ukraine. These customers received the management of the NLB
Basic package account free-of-charge for three months after
opening. For more information, see chapters
Retail Banking in
Slovenia
and
Corporate and Investment Banking in Slovenia
.
Impact on payment
transactions
The execution of payments to banks that were excluded from
the SWIFT area were stopped and all other payments to
other banks to Russia and Belarus were also stopped. This
action made these payments only possible after preliminary
consideration and obtained a positive opinion from the
authorities (compliance). The exchange of Russian rubles was
suspended.
N Banka – NLB's
contribution to financial
stability
NLB as a systemic institution responded responsibly and
decisively to the sudden challenge to the financial stability of
the Slovenian banking sector due to the Russian invasion. As a
complement to NLB’s Slovenian franchise, and as contribution
to the financial stability of the Slovenian banking system,
NLB acquired Slovenian Sberbank in March 2022. With the
acquisition, NLB helped to provide certainty for Sberbank’s
customers and strengthen the stability of the Slovenian banking
sector.
After the stabilisation period and rebranding to N Banka,
the integration process started. The integration of N Banka
is running on track, targeting completion of the legal and
technical merger in September 2023.
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Acquisition
27 Feb 2022
SRB determines Sberbank Europe failing or likely to fail
1 Mar 2022
BoS Decision to utilize a resolution tool
1 Mar 2022
Decision to transfer all shares to NLB taken
2 Mar 2022
All the necessary approvals obtained
On 1 March 2022, NLB acquired 100% shareholding in
Sberbank, Ljubljana (subsequently renamed to N Banka) in the
course of the regulatory resolution procedure led by the Single
Resolution Board (SRB) and the BoS. By that NLB contributed
on one side to the financial stability of the Slovenian banking
sector, however, on the other side it also further improved NLB’s
market position in Slovenia.
Following the acquisition, NLB worked on the corporate image
of the new member of the Group that from 12 April 2022 now
operates under the name of N Banka. NLB took over the control
over the bank’s operations by setting a new Supervisory Board
of the bank on 30 June 2022, and also engaged in the process
of harmonisation with the Group standards, that finalised in Q3
2022.
In addition to contributing to the stability of the Slovenian
banking sector, there were also strategic and financial
rationales behind the acquisition, namely:
•
Strategic Rationale: The key rationale motivating the
acquisition of N Banka was the optimisation of business
performance on one market. N Banka was running a
subscale operation (68% CIR, 53,000 clients, relatively
capped revenue base, costs increasing by approximately
12% in the last four years); considering the additional
capex investments needed to modernise the business and
keep up with the technology development in the coming
years, it would be difficult to maintain a satisfactory level
of profitability of N Banka on a standalone basis. The
transaction would complement NLB’s existing franchise
in Slovenia, particularly in the corporate and Small and
Medium-sized Enterprises (SME) segments which accounted
for app. 56% of Sberbank’s net customer loans at the end
of 2021. Additionally, the planned merger would also bring
several benefits from the clients’ perspective, since they would
be able to receive a full range of products and services, and
so at the quality at the level of other NLB clients.
•
Financial rationale: Integration of two banks would improve
market share in terms of total assets to 30.2% in the Slovenian
banking system as per the end of 2022. NLB's capital position
has been strengthened by the inclusion of negative goodwill
(EUR 172.8 million) from the N Banka acquisition. From the new
production perspective, the acquisition was anticipated to
be earnings accretive already in 2023. Run rate synergies are
estimated at a level exceeding EUR 14 million by 2025. Total
integration costs are expected to be covered by synergies by
the end of 2025.
The integration process
NLB conducted a detailed post-acquisition review, and in line
with the Management Board’s resolution of March 2022 started
the process for the merger of the bank with NLB. The defined
target operating model confirmed NLB’s commitment to keep
its clients’ satisfaction as a clear priority. By the acquisition
N Banka’s clients were given the access to the Group benefits.
To ensure smooth and successful merger of N Banka, the Group
established a comprehensive and well-structured integration
project, that allows strong oversight of all integration initiatives,
implementation of all necessary tasks according to agreed plan,
and protection of the Group and its key stakeholder interests.
A complete and comprehensive integration of N Banka into
the organisational structure of NLB requires a merger to be
conducted on two levels – legal and operational. According
to the plan, they are going to be executed simultaneously –
in September 2023.
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Financial performance
Table 11:
Key performance indicators of N Banka
(i)
in EUR thousands
2022
Key performance indicators
Net interest income
25,270
Net non-interest income
10,453
Total costs
-22,976
Impairments and provisions
925
Result before tax
13,672
Result after tax
11,085
Financial position statement indicators
Total assets
1,293,280
Net loans to customers
939,238
Gross loans to customers
955,035
Deposits from customers
898,768
Equity
186,423
Key financial indicators
Total capital ratio
21.4%
Net interest margin
2.0%
CIR
64.3%
NPL volume
23,633
NPL ratio (internal def.: NPL/Total loans)
1.9%
Market share by total assets
2.6%
LTD
104.5%
(i) Data on a stand-alone basis for the period March-December as included in the
consolidated financial statements of the Group. For year 2021, comparable data are
not available. N Banka internal calculation of net interest margin and total capital
ratio.
Since N Banka is in procedure of integration, the bank
is running its business under special circumstances. The
contribution of N Banka to NLB Group total assets and loans to
customers amounted to 5% and 7% respectively at the end of
2022. Loans portfolio was decreasing in 2022 as per integration
plan and transferring of business clients from N Banka to NLB.
Deposit base also decreased, however cash position and
financial assets sum up to around 20% of the total assets and
represents liquid assets which could be transferred to cash
fast, if need for liquidity arises. Contribution to revenues and
cost to the Group was approximately 5% in 2022. Full potential
contribution is expected in 2025 when run-rate synergies kick
in from employee optimization, IT synergies, head quarter
synergies and other general and administrative expenses.
Business performance
Retail banking
Clients are the core focus of the Group. Therefore, in the
merging process, special attention to client retention is paid,
aiming at the smallest possible churn rate. At the end of the
year, N Banka had 40,068 clients in the private individuals’
segment, of which 86% were active clients. In future, we expect
a strong commercial push to activate the remaining idle
customer base, to increase the cross sales of clients, for loan
penetration, e/-m-bank usage, and bancassurance penetration.
Corporate banking
With the executed acquisition and initiated integration process
with the Bank, the corporate segment of N Banka was primarily
focused on the following goals:
•
active integration of business and clients in the Group;
•
continued active financing of all existing corporate clients,
primarily in the SME segment with working capital facilities;
•
continue executing project financing deals;
•
active processing of new financing products under special
schemes from “Slovenski podjetniški sklad” and from “Sklad
skladov” in cooperation with the SID bank.
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Client care and responsible risk management are
key to success; however, our results are foremost an
indicator of the dedicated work of our whole team.
In 2022,
NLB Banka, Sarajevo
was recognized as
the second most desirable employer in the financial
sector in BiH, which further confirmed our efforts to
promote human-cantered values, the development
of human potential, prosperity, and continuous
learning and trust.
We are also proud of other recognitions, for
example of the Golden BAM award for the most
successful bank in the category growth in loan
market share; and the Best Business Move
in Tourism by Indikator.ba for the project of
developing winter tourism.
We believe that the best is yet to come, look forward
to the upcoming challenges and the
footprints we
will create
continuing to justify the trust given to us
by shareholders, partners, and clients.
Pictured: NLB Banka, Sarajevo employees
An important part of our mission – besides taking care for our
customers with our commitment, knowledge, and innovative
solutions – is to create a better life and a better future for
us all. That is why the Group has embarked on the path of
intensive integration of sustainability into its operations and
business model. In the broadest sense, the Group understands
sustainability as its operations that meet the needs of this
generation and simultaneously preserve the opportunities of
future generations.
Implementation of
sustainability into the
Group’s business model
In 2022, the world, and especially Europe, was faced with
impactful geopolitical changes which had direct influence on
the role of sustainability not only in business, but in our every-
day lives as well. The shift towards net-zero became ever more
important, and in the EU the sustainable agenda received
strong regulatory support with the adoption of the Corporate
Sustainability Reporting Directive. Being aware of the changes
and their far-reaching consequences, the Group has made
important steps forward in implementing Sustainability into its
operations and business model, and has also received its first
external ratings for its endeavours.
Sustainability Framework
In 2022, the Group continued to implement the activities as
outlined in the
NLB Group Sustainability Framework
. Substantial
progress has been made in all three pillars (Sustainable
finance, Sustainable operations, and Contribution to society)
alongside with implementation of public targets as announced
in
Sustainability report 2021
. Special attention was given to
implementation within the Group, having a direct effect on the
improved level of comprehensiveness of sustainability.
Net-zero Banking Alliance
After successful feedback on the Banks’ first self-assessment
report on implementing the United Nations Environment
Programme Finance Initiative’s Principles for Responsible
Banking (UNEP FI PRB), the Group has committed itself to
contributing to a climate-positive future. In May 2022, NLB
(as the first bank from Slovenia) officially became a member
of the United Nations-Convened Net-Zero Banking Alliance.
With this step, the Bank made a pledge to align the bank’s
lending and investment portfolio with net-zero emissions by
2050, and published its first target, which will focus on priority
sectors where the Bank can have the most significant impact,
i.e., the most GHG-intensive sectors within their portfolios.
For this purpose, the Group started with a portfolio emissions
measurement and formed its net-zero business strategy.
ESG Rating
In December 2022, NLB received an ESG Risk Rating of 17.7 and
was assessed by Sustainalytics to be at low risk of experiencing
material financial impacts from ESG factors, due to its medium
exposure and strong management of material ESG issues.
NLB’s efforts in the field of sustainability encompass the
environmental, social, and management aspects.
Carbon Footprint
After last year, the Group calculated its first operational carbon
footprint for the years 2019–2021, special attention was given to
reduction measures in 2022. In the field of energy consumption,
the Group (where energy market rules allow) was supplied with
electricity from zero-carbon sources. Extensive activities went
on in the following areas:
•
energy efficiency – possibilities for the continuation of energy
consumption (electricity and heating) decreasing were
reviewed,
•
renewable energy production – a review of the Group’s
premises for setting up solar power plants and a review of
renewable power purchase agreements,
•
transformation of the NLB car fleet – NLB Group Sustainable
Car Fleet Management and Company Car Policy was
successfully adopted and marks the start of the replacement
of ICE vehicles for electric and hybrid,
• office space-demand optimisation.
For the purpose of calculation of GHG Protocol Category 15
(credit portfolio GHG emissions), several important activities
started in 2022. For larger corporate clients, the Bank
initiated direct Scope 1, Scope 2, & Scope 3 data gathering
processes, whereas for the SME and micro segments the Bank
developed its own proxies. In residential mortgages, the most
important input for GHG calculation are the buildings’ energy
performance certificates. By end of 2022, the Bank formed the
emission calculation for the Slovenian market, whereas in the
Region this process will continue and will be developed in 2023.
Sustainability
Sustainable Financing
The Group successfully started to fulfil its publicly announced
target
to generate at least EUR 785 million of new sustainable
corporate financing by 2030. In 2022, the Group strengthened
its activities in ESG financing and achieved EUR 166.9 million
of new loans, out of which EUR 105.5 million in Slovenia. The
purpose of financing throughout the region was to support
wind farms, solar projects, biomass projects, energy efficient
buildings. The Group arranged and co-arranged several larger
projects financings, including major residential real estate in
Bosnia and Hercegovina and a large renewables project in
Serbia. The Bank upgraded its Green loan offer with two new
loans for legal entities – the NLB Green loan for investments
in energy efficiency of business buildings, and the NLB Green
loan for reducing carbon footprint. Besides that, the Bank
signed a partnership contract with two providers of the Green
partner loan, covering renewable energy and energy efficiency
purposes for private individuals and legal entities. A substantial
amount of time was dedicated to training our employees,
whereas sustainability has been the central topic in all our
regional events with our clients.
EU Taxonomy
To determine the eligibility of the portfolio, the Bank followed
a sector approach (based on Statistical Classification of
Economic Activities in the European Community (NACE) codes).
In such manner, EU Taxonomy was implemented in the credit
process where credit application was amended with display
of listed/not listed activity based on NACE and SKD activity.
Representatives of the Bank are also actively involved in EU
Taxonomy Task Force at the Slovenian Bank Association.
ESG Risk Management
In 2022, the Group continued with the implementation and
upgrading of its environmental and social risk management
requirements in line with ECB and EBA guidelines, showing
in enhancement of the existing stress-testing framework and
integration of ESG risks into the existing risk-management
framework. As a systemically important institution, the Group
successfully participated in the 2022 ECB Climate Stress test
exercise. Being part of the Bank Association of Slovenia working
groups, NLB experts participated in the preparation of ESG
questionnaires on client & transaction levels, which result in an
internal ESG rating. In recent years, the Bank signed Framework
Agreements with the EBRD and the Contract of Guarantees
with Multilateral Investment Guarantee Agency (MIGA), whereas
environmental and social performance requirements were
implemented within the loan approval process (preparation
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Financial Report
of manuals & process instructions and their implementation
throughout the Group). More information is available in the
Risk
Management
chapter of this report.
Sustainability Training
With the goal to enhance and further develop the skills and
knowledge of employees, strong focus was given to different
levels and manners of sustainability training, namely:
•
external (expert) ESG training programmes,
•
internal workshops to facilitate the upgrading of employee
skills in the ESG area (ESG Documentary Framework –
Commitments & Regulatory Requirements with Overview of
Environmental and Social Management System (ESMS) in
NLB and NLB Group),
•
workshops where comprehensive integration of ESG
elements into the Group’s risk management framework and
corresponding data requirements were presented,
•
regular training for NLB Group Supervisory Board members,
•
providing essential information on sustainability and its
implementation to the Group to competence lines and
working groups in the Group.
NLB Group Sustainability Governance Structure
With the adoption of the NLB Sustainability Programme at
the end of 2020, and the implementation of the
NLB Group
Sustainability Framework
in the fall of 2021, the Group
accelerated implementation of sustainability elements into its
business model and upgraded sustainable operations of the
Bank. Sustainability is centrally managed by a coordination
team in NLB, which regularly reports to the Management and
Supervisory Board. The sustainability team closely works with
regional ESG coordinators and ESMS Officers, who manage
the topic on the Group level. All relevant internal stakeholders
(Management board of NLB and the Group members,
designated directors, ESG coordinators, and ESMS officers)
convene on a quarterly basis at the Sustainability Committee
chaired by the CEO, which serves as a forum to address the
most relevant sustainability topics. In 2022, four regular and one
ad hoc sessions were carried out. For more information, please
refer to the chapter
Corporate Governance
and the
NLB Group
Sustainability Report 2022
.
NLB Group Sustainability Day
For its employees, the Bank organised its first Group-wide
sustainability awareness event – ‘NLB Group Sustainability
Day.’ The main goal was to increase awareness, understanding,
and the impact of sustainable development and sustainable
financing among employees within the Group in order to
successfully integrate ESG factors in the Bank’s operations.
Other Sustainability-related Topics
Many of these outcomes reflect ongoing, long-term challenges,
but at the same time they reflect the Group’s ability to reach
tangible results in this area. It should be mentioned that in
2022 several other sustainability-related topics were regularly
addressed, such as:
• Procurement
• Remuneration policy
• Digitalization
• Diversity policy
•
CSR projects corresponding to UN SDGs
•
Talent development and caring for employees
• Partnership and capacity-building
• Innovation
Outlook
In 2023, the Group will continue to implement its sustainability
agenda in all three pillars. In the Sustainable Financing Pillar,
the primary focus of the Group will be in development and
implementation of net-zero business strategy and measurement
of portfolio emissions. First targets related to reducing its
footprint in carbon-intensive industries will be published
by the end of 2023. The Group will continue its engagement
in contributing to sustainable finance by incorporating
environmental, social, and governance risks into its business
strategies, risk management framework, and internal
governance in accordance with ECB and EBA guidelines and
best banking practises. The Group aims to improve its ESG
rating and will finalize implementation of EBRD environmental
and social performance requirements in its business model. The
Group will continue to support its clients in their green transition
– fine tuning its products and expanding its green financing.
In the Sustainable Operations Pillar, the Group will disclose all
relevant ESG data and further implement the EU Taxonomy.
Focus will also be on analysis and implementation of the newly
adopted Corporative Sustainability Reporting Directive, as
well as the upcoming Corporate Sustainability Due Diligence
Directive. The Bank will further strengthen sustainability
governance and will put extra effort in standardisation of
sustainability throughout the Group. On the operational
side, the Group will continue to lower its carbon footprint
by implementing energy efficiency and energy resources
management. NLB will sign the Commitment to respect Human
rights in business, which is part of the
National Action Plan on
Business and Human Rights of the Republic of Slovenia
, and
appoint a Human Rights Custodian to monitor and manage
human rights compliance. The Bank will continue to offer
regular (internal and external) sustainability trainings to all
its employees and new activities to the related well-being of
employees and in line with the Full Family Friendly Company
certificate. A NLB Procurement team will upgrade all relevant
internal acts for the inclusion of ESG criteria in the supply chain.
The Group will continue with its contributions to local
communities. To raise the level of sustainability awareness
among employees, the Bank will again organising the
NLB Group Sustainability Day, which aims at presenting
sustainability-related topics, holding lectures by prominent
sustainability experts and other educational activities. Our
sponsorship and donations will continue to be based on
supporting and following the UN Sustainable Development
Goals.
For more information, please refer to:
• the chapter
Risk Management
, subchapter
Incorporating ESG
Risks
• the Chapter
Corporate Governance
•
Note 6
of the financial part of the report
• the chapter
Statement of Management of Risk
• the
NLB Group Sustainability Report 2022
• the
Pillar 3 Disclosures
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Corporate Social
Responsibility
The Group remains determined in its intention to create better
footprints in its home region. It strives to increase the share of
CSR activities that pursue the UN SDG every year. The Group’s
target for 2022 – at least 40% of all CSR activities in every bank
member should be aligned with UN SDG – was achieved, even
more, it was even exceeded. More information is also available
in
NLB Group Sustainability Report 2022
.
Environmental care – #FrameOfHelp focused
on sustainable ideas
In 2022, the Group continued with the #FrameOfHelp project
for the third consecutive year, this time offering opportunity to
regional companies that prioritise sustainable ideas. As many
as 300 companies participated in the project with which the
Group sought sustainable solutions to challenges of the future.
Among 60 finalists, three regional winners were selected and
awarded sponsorship funds and professional consulting on
the successful introduction of sustainable business into the
company's strategic and operational processes. The awarded
companies presented solutions on circular economy with
artificial intelligence being the key, water consumption and food
production, and modern technology to face the threat of fires.
Support for professional and youth sports
The Group's socially responsible operations are traditionally
focused on the strong promotion of sports. Its goal is to raise
awareness about the importance of physical exercise for
preserving health, which during the previous years was a
common concern and focused public's attention on the positive
impact that sport has on rehabilitation, socialisation, and
inclusion. The Group is particularly proud of the long tradition
of NLB Youth Sports project in Slovenia (in 2022, the project
continued for the eighth consecutive year with NLB supporting
65 sports clubs) and NLB Wheel – an International Wheelchair
Basketball League.
Culture and protection of cultural heritage
Most of the Group's efforts in protection of cultural heritage in
2022 were concentrated on Bankarium, the Slovenian Banking
Museum. Founded by NLB, it is the first and only banking
museum in the country. Visitors can walk through a 5,000-year-
old history of world banking in a multimedia introduction,
explore the 200-year-old banking heritage on the Slovenian
territory, learn about all the currencies that were valid here
during this period, as well as different economic systems, a
major banking institution, and key personalities of the Slovenian
banking system.
Business and financial literacy
As a financial mentor, the Group is dedicated to counselling in
the field of financial literacy. Bankarium is therefore not just a
museum – it is also a financial literacy centre where visitors,
mostly schoolchildren, can play digital games and quizzes,
and learn or check their financial literacy in a playful way.
Furthermore, NLB Banka, Podgorica helps customers with
a special web platform within the web portal, offers advice
and knowledge on social networks, and teaches courses at
elementary schools and preschool institutions. NLB Banka,
Sarajevo supports the Youth Business Camp – a project that
educates and implements workshops with young people who
want to develop in the business world.
Humanitarian activities -
End of the year charitable donation
The Group concluded 2022 with charitable donations in all
of the markets of its operations in a total amount of more
than EUR 500,000 to various associations, humanitarian
organisations, and groups, chosen by employees.
Inclusiveness – EBRD Support Program
"Women in Business"
NLB Banka, Podgorica, the bank of primary choice for more
than 32% of registered businesses managed by women in
Montenegro, is the first commercial bank in this country that
joined the EBRD Support Program "Women in Business", with
the aim of supporting the potential of female entrepreneurs,
providing access to financing, but also to the knowledge
needed for business growth.
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Overview of Financial
Performance
The Group achieved a profit after tax in the amount of EUR
446.9 million, 89% or EUR 210.5 million more than the year
before (2021: EUR 236.4 million), with the EUR 184.1 million
contribution of N Banka.
The Group’s result is based on the following key drivers:
•
Acquisition of N Banka, with a positive effect from negative
goodwill in the amount of EUR 172.8 million.
•
EUR 2,493.9 million YoY increase of the Group’s gross loans
to customers, with EUR 953.7 million increase due to the
acquisition of N Banka; impressive new loan production with
increasing interest rates supported growth of net interest
income.
•
An increase of the deposit base of the Group, EUR 2,386.9
million YoY, of which EUR 898.5 million due to the acquisition
of N Banka.
•
Net interest income increased EUR 69.8 million YoY without N
Banka’s contribution mostly due to a higher volume of loans.
Interest rates on loans and on central bank balances were
also increasing in the second half of the year - which had
positive influence on interest income.
•
Net fee and commission income increased 12% YoY without N
Banka’s contribution; the increase was recorded in all banks
of the Group, in the Bank by EUR 9.6 million due to higher fees
from cards, payments, investment funds and bancassurance
products, and income from high balance deposit fee, which
was cancelled in August. This cancellation negatively affected
net fee and commission income, but was compensated with
positive evolution of the interest income for central bank
balances.
•
Total costs increased YoY in most Group banking members,
due to increasing employee costs and other general and
administrative expenses, mostly related to the overall inflation
in the region.
•
The Group established net impairments and provisions for
credit risk in total amount of EUR 17.5 million, with portfolio
development along with the portfolio growth being the key
factors for the establishment, while the impact was partially
offset by releases of provisions from successful collection of
Figure 6:
Profit after tax of NLB Group – evolution YoY (in EUR millions)
25.7
8.1
-22.8
1.1
0.1
172.8
28.1
-38.7
-2.6
69.8
-1.9
1.8
-22.1
-0.3
0.5
0.0
184.1
-9.1
2021
236.4
95.6
36.2
-0.1
-44.9
-37.6
-0.3
172.9
-11.7
0.5
446.9
Net interest income
Net fee and
commission income
Other net non-
interest income
Total costs
Impairments and
provisions
Gains and
losses
(i)
Negative goodwill
Income tax
Result of non-
controlling interests
2022
NLB Group w/o N Banka
N Banka
(i) Gains less losses from capital investments in subsidiaries, associates, and joint ventures.
previously written-off receivables. Other impairments and
provisions were net established in the amount of EUR 11.4
million.
•
ROE a.t. stood at 19.9% or 12.2% without inclusion of negative
goodwill (N Banka EUR 172.8 million, NLB Lease&Go Leasing,
Beograd EUR 0.1 million).
•
Cost of risk was 14 bps, with good asset quality trends and a
decisive workout approach.
•
A strong Total Capital Ratio (TCR) of 19.2%, mainly due to
inclusion of negative goodwill from N Banka, partial inclusion
of 2022 result, and new AT1 and Tier 2 notes.
•
The multi-year declining trend of the non-performing credit
portfolio stock continued, mostly due to repayments, cured
clients, collection, and the sale of claims. The combination
of successful resolution of NPL and credit growth of a high-
quality portfolio resulted in the decrease of gross NPL ratio
(EBA def.) from 3.4% to 2.4% YoY, and the NPE ratio (EBA def.)
by 0.4 p.p. YoY to 1.3%.
•
Unencumbered liquidity reserves portfolio amounted to
EUR 9,187.5 million (39.0% of total assets).
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Recurring profit before impairments and provisions of the
Group totalled EUR 318.7 million, EUR 93.2 million or 41%
higher YoY, with a EUR 9.6 million contribution from N Banka.
In Q2 2022, the result before impairments and provisions was
influenced by a one-time yearly payment of regulatory costs
in the Bank (EUR 2.1 million Single Resolution Fund (SRF) and
EUR 7.6 million Deposit Guarantee Scheme (DGS)), while in Q4
various non-recurring effects were recorded (e.g., volatility of
financial markets, exchange rate differences, and the valuation
of real estates).
Figure 7:
Result before impairments and provisions of NLB Group
(in EUR millions)
2021
2022
(i) Result for 2021 for NLB Banka, Podgorica includes also result of Komercijalna Banka, Podgorica (merger in November 2021).
NLB
N Banka
NGW EUR 172.8 million
NLB Komercijalna
Banka, Beograd
NLB Banka,
Skopje
NLB Banka,
Banja Luka
NLB Banka,
Sarajevo
NLB Banka,
Prishtina
NLB Banka,
Podgorica
(i)
-31%
YoY
120.5
83.3
184.1
+192%
YoY
22.7
66.2
-3%
YoY
34.1
33.1
+6%
YoY
18.3
19.4
+14%
YoY
9.7
11.1
+33%
YoY
20.0
26.6
+329%
YoY
3.9
16.6
Figure 8:
Profit after tax by company – contribution (in EUR millions)
NLB Banka, Beograd
Komercijalna Banka, Beograd
22.7
66.2
18.4
64.0
2.2
4.3
All banks reported a profit on stand-alone basis and positively
contributed to the Group’s result. The largest contribution of
EUR 184.1 million came from N Banka due to negative goodwill
from the acquisition, followed by contribution of the Bank and
NLB Komercijalna Banka, Beograd with EUR 83.3 million and
EUR 66.2 million, respectively. The YoY contribution of the Bank
was lower due to higher total costs, higher net impairments and
provisions, and the positive effects from non-recurring items
in 2021. However, it was partially neutralized by higher regular
income. SEE banks contributed 39% to the Group result with
growth achieved in all banks, except NLB Banka, Skopje. For
more information on banks’ operations, please refer to chapter
Strategic Foreign Markets
.
260.6
-35.1
100.7
95.6
81.5
77.0
354.9
-36.1
2021
2022
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Result before impairments and provisions w/o non-recurring income and regulatory costs
Non-recurring net non-interest income
Regulatory costs
+34%
YoY
251.5
-6.7
-16.4
-6.5
-6.5
1.5
2.4
2.6
13.0
338.3
71.8
67.6
91.7
107.2
26.0
19.5
2021
2022
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EUR
172.8
million
negative goodwill
from the N Banka
acquisition
EUR
446.9
million
of net profit
Balance sheet volume of the Group totalled to EUR
24,160.2 million at the end of the year, with an 83% share
of the total funding represented by customers’ deposits to
support lending activity with LTD ratio at 65.3%.
Figure 9:
Balance sheet structure of NLB Group on
31 December 2022 (in EUR millions)
Deposits from
customers
20,028
Net loans
to customers
13,073
Cash equivalents
& placements
with banks
5,494
Financial assets
4,877
Other assets
715
Total equity
2,422
State loans
2.3%
State deposits
2.6%
Corporate
loans
47.0%
Corporate
deposits
27.8%
LTD
65.3%
Individual
loans
50.7%
Individual
deposits
69.6%
20,028
13,073
24,160
24,160
Deposits from banks and
central banks & Borrowings
388
Other debt
securities in issue
307
Subordinated
debt securities
509
Other liabilities
507
Assets
Liabilities
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Income statement
Table 12:
Income statement of NLB Group and NLB
NLB Group
in EUR millions
2022
2021
Change YoY
Q4 2022
Q3 2022
Q2 2022
Q1 2022
o/w N Banka
contribution
Net interest income
504.9
409.4
95.6
25.7
23%
151.8
126.7
118.6
107.8
Net fee and commission income
273.4
237.2
36.2
8.1
15%
69.2
70.5
69.1
64.5
Dividend income
0.2
0.2
0.0
0.0
9%
0.0
0.1
0.1
0.0
Net income from financial transactions
36.6
38.4
-1.8
-7.0
-5%
12.6
10.3
8.5
5.2
Net other income
-16.6
-18.3
1.7
8.8
9%
1.2
-2.0
-12.7
-3.0
Net non-interest income
293.6
257.6
36.1
9.9
14%
83.0
78.9
65.0
66.7
Total net operating income
798.5
666.9
131.6
35.6
20%
234.9
205.6
183.6
174.5
Employee costs
-257.7
-231.3
-26.3
-14.2
-11%
-71.2
-63.7
-65.2
-57.5
Other general and administrative expenses
-155.2
-137.5
-17.7
-6.8
-13%
-44.2
-38.3
-39.0
-33.7
Depreciation and amortisation
-47.4
-46.5
-0.9
-1.9
-2%
-12.2
-11.9
-11.8
-11.5
Total costs
-460.3
-415.4
-44.9
-22.8
-11%
-127.7
-113.9
-116.0
-102.7
Result before impairments and provisions
338.3
251.5
86.7
12.7
34%
107.2
91.7
67.6
71.8
Impairments and provisions for credit risk
-17.5
35.8
-53.3
-1.6
-
-25.0
9.8
1.6
-4.0
Other impairments and provisions
-11.4
-27.1
15.7
2.6
58%
-6.3
0.2
-4.9
-0.4
Impairments and provisions
-28.9
8.8
-37.6
1.1
-
-31.2
10.0
-3.3
-4.4
Gains less losses from capital investments in
subsidiaries, associates, and joint ventures
0.8
1.1
-0.3
0.0
-30%
-0.4
-0.4
1.0
0.6
Negative goodwill
172.9
0.0
172.9
172.8
-
0.1
0.0
0.0
172.8
Result before tax
483.1
261.4
221.7
186.6
85%
75.7
101.3
65.2
240.8
Income tax
-25.2
-13.5
-11.7
-2.6
-86%
-4.2
-10.4
-5.4
-5.2
Result of non-controlling interests
11.0
11.5
-0.5
0.0
-4%
2.4
0.1
4.3
4.1
Result after tax
446.9
236.4
210.5
184.1
89%
69.1
90.8
55.5
231.5
46
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
NLB
in EUR millions
2022
2021
Change YoY
Q4 2022
Q3 2022
Q2 2022
Q1 2022
Net interest income
177.0
139.1
37.9
27%
57.2
42.3
39.7
37.9
Net fee and commission income
129.1
119.6
9.6
8%
31.3
33.7
32.3
31.8
Dividend income
56.0
79.6
-23.6
-30%
21.6
0.8
24.2
9.5
Net income from financial transactions
9.1
19.0
-9.9
-52%
3.3
2.7
1.9
1.1
Net other income
-5.1
4.2
-9.3
-
2.1
2.0
-7.5
-1.7
Net non-interest income
189.2
222.4
-33.2
-15%
58.4
39.2
50.9
40.6
Total net operating income
366.2
361.5
4.7
1%
115.6
81.5
90.6
78.5
Employee costs
-117.3
-107.0
-10.3
-10%
-32.9
-28.4
-29.5
-26.5
Other general and administrative expenses
-73.6
-59.1
-14.5
-24%
-22.9
-17.4
-17.9
-15.4
Depreciation and amortisation
-17.0
-17.5
0.5
3%
-4.2
-4.2
-4.3
-4.3
Total costs
-207.9
-183.6
-24.3
-13%
-60.0
-49.9
-51.6
-46.3
Result before impairments and provisions
158.3
177.9
-19.6
-11%
55.5
31.6
39.0
32.3
Impairments and provisions for credit risk
-14.7
26.1
-40.8
-
-8.0
-2.8
-4.6
0.8
Other impairments and provisions
20.4
7.5
13.0
173%
20.5
0.0
-0.1
0.0
Impairments and provisions
5.8
33.6
-27.8
-83%
12.5
-2.9
-4.7
0.8
Result before tax
164.1
211.5
-47.4
-22%
68.1
28.7
34.3
33.0
Income tax
-4.5
-3.0
-1.4
-47%
-2.7
-1.4
-0.1
-0.4
Result after tax
159.6
208.4
-48.8
-23%
65.4
27.3
34.2
32.7
Net interest income
Figure 10:
Net interest income of NLB Group (in EUR millions)
477.8
-68.5
161.6
134.6
125.7
120.2
542.2
-63.0
2021
2022
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Interest income
N Banka interest income
Interest expenses
N Banka interest expenses
+23% YoY
+17% w/o
N Banka
409.4
-1.9
-0.3
-0.8
-0.3
-0.5
-15.0
-14.5
2.8
8.1
7.9
27.6
8.7
-15.5
-18.0
504.9
107.8
118.6
126.7
151.8
Net interest income of the Group accounted for 63% of the
Group’s total net revenues (2021: 61%) and totalled EUR 504.9
million. Out of the EUR 95.6 million increase, EUR 25.7 million
was contributed by N Banka.
Not considering the contribution of N Banka, a higher level of
interest income was achieved YoY, as a result of higher volumes,
increase of key ECB and reference interest rates, and repricing
of new loan production as a response to the rising inflation
environment.
Interest expenses were influenced by the Bank's repayment of
Targeted Longer-Term Refinancing Operations (TLTRO)
financing with the ECB at a very favourable interest rate of -1%
p.a. in June, issue of MREL-eligible Senior Preferred notes in
the amount of EUR 300 million in July, and subordinated Tier
2 notes in the aggregate nominal amount of EUR 225 million
in November. These new issues increased interest expenses
for EUR 8.8 million in second half of the year. In contrast, the
interest expenses for deposits in SEE banks decreased due to
the decrease of interest rates.
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Net interest margin
Operational business margin
3.32%
2.07%
3.45%
2.16%
3.60%
2.27%
3.87%
2.65%
Figure 11:
Net interest margin and Operational business margin of NLB
Group
(i)
(quarterly data)
(i) Calculated on the basis of average interest-bearing assets.
Consequently, the annual net interest margin of the Group was
improved by 0.23 p.p to 2.30% in 2022. The annual operational
business margin was 3.57%, 0.29 p.p. higher YoY, due to net
interest income and net fee and commission income growth.
The increase in last quarter was solely due to the net interest
income growth.
47
Contents
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SB Statement
Key Highlights
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Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
EUR
798.5
million
of total net operating
income
237.2
26.0
66.2
66.0
69.6
63.5
265.3
19.5
Net non-interest income
Figure 12:
Net non-interest income of NLB Group (in EUR millions)
The net non-interest income reached EUR 293.6 million, of
which EUR 9.9 million was contributed by N Banka. A major
part of the net non-interest income has been derived from the
net fee and commission income, which grew YoY, mostly in the
Bank (higher fees from investment funds and bancassurance
products, high balance deposit fee, and higher fees from cards
and payment services).
No major one-offs that influenced net non-interest income
were recorded in the current year, just various smaller ones,
in the total amount of EUR 19.5 million, the majority of which
occurred in Q4 (e.g., volatility of financial markets, exchange
2021
2022
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Net fee and commission income
N Banka net fee and commission income
Dividend income
Recurring other net non-interest income
Non-recurring other net non-interest income
+14% YoY
+10% w/o
N Banka
-5.9
-6.6
0.2
0.2
1.1
2.9
0.1
3.2
13.0
0.9
2.4
0.6
0.1
5.7
0.8
2.6
1.5
0.5
8.1
257.6
293.6
66.7
65.0
78.9
83.0
rate differences, valuation of real estates). At the same time, the
2021 result was positively affected by non-recurring valuation
income in the amount of EUR 14.8 million from the repayment
of exposure classified as non-performing, EUR 9.0 million of
other operation income from the settlement of a legal dispute,
and negatively affected by a EUR 8.1 million loss from the sale of
Komercijalna Banka, Banja Luka.
In Q3, two important effects on net fee and commissions were
observed, the cancellation of the high balance deposit fee, and
the Serbian central bank decision to contain retail fees for a
limited period.
48
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Sustainability
Performance Overview
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Events After 2022
Financial Report
Total costs
Figure 13:
Total costs of NLB Group (in EUR millions)
Total costs amounted to EUR 460.3 million of which EUR 22.8
million from N Banka. Without the N Banka contribution, the
costs increased YoY by EUR 22.1 million due to an increase in
the Bank and in most of the SEE banking members. The Group
is affected by the inflation and rising employee, material, and
energy costs, but has successfully kept them under control.
The largest YoY increases were recorded on employee costs
(EUR 12.2 million without N Banka contribution) and general
and administrative expenses (EUR 10.9 million without N Banka
contribution) with increasing marketing costs, especially in the
Bank related to the acquisition of N Banka and merger of the
2021
2022
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Employee costs
Other general and administrative expenses
Depreciation and amortisation
N Banka employee costs
N Banka other general and administrative expenses
N Banka depreciation and amortisation
(i) Further information available in the
Note 4.9.
of the financial part of the report.
+11% YoY
+5% w/o
N Banka
1.9
1.4
4.7
4.2
3.9
0.9
2.6
2.5
0.8
0.2
0.6
0.6
0.6
11.3
11.2
11.3
11.7
6.8
}
415.4
460.3
102.7
116.0
113.9
127.7
56.1
59.5
60.5
67.3
231.3
243.5
137.5
14.2
46.5
43.4
35.8
36.4
32.8
148.4
45.5
Group banks in Serbia (NLB Banka, Beograd and Komercijalna
Banka, Beograd), electricity costs (EUR 4.3 million higher YoY),
and software maintenance (EUR 2.7 million due to the N Banka
acquisition).
Distribution of costs throughout the year was regular, with
higher share occurring in the last quarter of the year (28% of
total costs in current and previous year).
The Group is undertaking several strategic initiatives (channel
strategy, digitalization, going paperless, lean process, branch
network optimisation, etc.) to keep costs low. However,
given the circumstances and economic situation, significant
inflationary pressures have been noticed across all cost
categories consuming much of the successful efficiency
measures across the Group, and specifically in Serbia.
Combined with further planned investments into technology
enhancements across the Group, upward cost trends are
expected for 2023 which will still be a transition year with regard
to integration processes in Serbia and Slovenia.
CIR stood at 57.6%, a 4.6 p.p. decrease YoY.
Breakdown of Other general
and administrative expenses
(i)
49
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Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Other costs
6%
Material
4%
Communications
7%
Buildings &
equipment
21%
Services
30%
Marketing
10%
Technology
21%
EUR 155.2 million
-8.9
-25.0
4.9
35.8
-8.6
-8.9
9.8
-6.3
-27.1
-4.9
-11.4
The Group established net impairments and provisions
for credit risk in the amount of EUR 17.5 million. Portfolio
development along with the portfolio growth during 2022
was the key factor contributing to the establishment of net
provisions. At the same time, expected 12-month credit losses
were recognised at the acquisition date for the performing
portfolio of N Banka (EUR 8.9 million). As a result of less
favourable macroeconomic forecasts and risk, parameters
deteriorated, and additional impairments and provisions were
formed in Q3 and Q4 2022. The positive effects derived also
from a successful collection of previously written-off receivables
due to successful NPL resolution, mostly in the corporate
segment.
2021
2022
Q1 2022
Q2 2022
Q3 2022
Q4 2022
Impairments and provisions for credit risk
Other impairments and provisions
N Banka 12 month expected credit losses recognised at acquisition date
Impairments and provisions
Figure 14:
Impairments and provisions of NLB Group (in EUR millions)
CoR
(bps)
8.8
-28.9
-4.4
-3.3
10.0
-31.2
-0.4
1.6
-0.2
Other impairments and provisions were established in the
amount of EUR 11.4 million, of which EUR 4.6 million and EUR
5.7 million for the reorganisation in NLB Komercijalna Banka,
Beograd and N Banka, respectively. In contrast, EUR 8.4 million
provisions for contingent liabilities, which were recognised at
the acquisition of N Banka, where released in December, when
the possible obligation ceased to exist.
The Group’s cost of risk settled at 14 bps.
-41
14
50
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SB Statement
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Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Statement of financial position
Table 13:
Statement of financial position of NLB Group and NLB
(i) Excluding funding provided by NLB in the amount of EUR 64.0 million.
NLB Group
in EUR millions
31 Dec 2022
31 Dec 2021
Change YoY
31 Dec 2022
30 Sep 2022
30 Jun 2022
31 Mar 2022
o/w N Banka
ASSETS
Cash, cash balances at central banks, and
other demand deposits at banks
5,271.4
202.4
(i)
5,005.1
266.3
5%
5,271.4
4,911.4
4,321.1
4,865.4
Loans to banks
223.0
0.0
140.7
82.3
58%
223.0
210.7
176.8
162.8
Net loans to customers
13,073.0
937.9
10,587.1
2,485.9
23%
13,073.0
12,925.3
12,620.2
12,108.7
Gross loans to customers
13,397.3
953.7
10,903.5
2,493.9
23%
13,397.3
13,244.0
12,944.2
12,434.6
- Corporate
6,345.7
589.3
4,996.0
1,349.7
27%
6,345.7
6,321.7
6,213.5
5,884.6
- Individuals
6,743.4
363.6
5,621.1
1,122.4
20%
6,743.4
6,635.5
6,445.0
6,242.1
- State
308.2
0.8
286.3
21.8
8%
308.2
286.9
285.7
307.9
Impairments and valuation of loans to customers
-324.4
-15.8
-316.3
-8.0
-3%
-324.4
-318.7
-324.0
-325.9
Financial assets
4,877.4
62.1
5,208.3
-330.9
-6%
4,877.4
4,765.1
4,919.5
5,219.9
- Trading book
21.6
0.0
7.7
13.9
181%
21.6
21.3
14.9
10.9
- Non-trading book
4,855.8
62.1
5,200.6
-344.8
-7%
4,855.8
4,743.8
4,904.6
5,209.0
Investments in subsidiaries, associates, and joint ventures
11.7
0.0
11.5
0.2
1%
11.7
11.9
13.1
12.1
Property and equipment
251.3
7.9
247.0
4.3
2%
251.3
255.8
252.6
254.0
Investment property
35.6
1.0
47.6
-12.0
-25%
35.6
37.4
45.3
48.2
Intangible assets
58.2
1.5
59.1
-0.8
-1%
58.2
55.2
55.3
57.8
Other assets
358.6
16.2
271.1
87.5
32%
358.6
325.0
326.3
290.2
TOTAL ASSETS
24,160.2
1,229.0
21,577.5
2,582.7
12%
24,160.2
23,497.8
22,730.3
23,019.1
LIABILITIES
Deposits from customers
20,027.7
898.5
17,640.8
2,386.9
14%
20,027.7
19,573.1
19,151.1
18,525.8
- Corporate
5,565.6
447.4
4,463.7
1,101.9
25%
5,565.6
5,387.4
5,091.8
4,934.8
- Individuals
13,948.7
409.6
12,680.8
1,268.0
10%
13,948.7
13,569.2
13,498.1
13,097.3
- State
513.4
41.5
496.4
17.1
3%
513.4
616.5
561.2
493.6
Deposits form banks and central banks
106.4
0.0
71.8
34.6
48%
106.4
108.3
138.0
115.0
Borrowings
281.1
116.2
932.6
-651.5
-70%
281.1
322.0
326.8
1,241.0
Subordinated debt securities
508.8
0.0
288.5
220.3
76%
508.8
290.4
287.8
287.0
Other debt securities in issue
307.2
0.0
0.0
307.2
-
307.2
302.6
0.0
0.0
Other liabilities
506.7
33.0
427.6
79.1
18%
506.7
504.3
507.6
474.3
Equity
2,365.6
181.3
2,078.7
286.9
14%
2,365.6
2,339.8
2,195.6
2,254.4
Non-controlling interests
56.7
0.0
137.4
-80.7
-59%
56.7
57.2
123.5
121.6
TOTAL LIABILITIES AND EQUITY
24,160.2
1,229.0
21,577.5
2,582.7
12%
24,160.2
23,497.8
22,730.3
23,019.1
51
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SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Balance sheet volume of the Group increased by EUR 2,582.7
million YoY totalling to EUR 24,160.2 million, mainly due to the
acquisition of N Banka (EUR 1,229.0 million). The strong inflow
of deposits (EUR 2,386.9 million, of which EUR 898.5 million
from N Banka) enabled substantial growth of gross loans to
customers (EUR 2,493.9 million, of which EUR 953.7 million from
N Banka).
There was a decrease of borrowings totalling EUR 651.5
million, due to TLTRO early repayment (EUR 750 million) and
SID repayment (EUR 70 million) in the Bank in June, but there
was an increase of debt securities with the issuance of MREL
eligible Senior Preferred notes in the amount of EUR 300 million
at 6% coupon rate in July, and subordinated Tier 2 notes in the
aggregate nominal amount of EUR 225 million in November.
Issued subordinated Additional Tier 1 notes in the amount of
EUR 82 million increased the equity of the Bank in September.
52
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SB Statement
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Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
NLB
in EUR millions
31 Dec 2022
31 Dec 2021
Change YoY
31 Dec 2022
30 Sep 2022
30 Jun 2022
31 Mar 2022
ASSETS
Cash, cash balances at central banks, and
other demand deposits at banks
3,339.0
3,250.4
88.6
3%
3,339.0
3,019.1
2,368.6
3,127.4
Loans to banks
350.6
199.3
151.3
76%
350.6
278.2
300.9
406.6
Net loans to customers
6,062.3
5,153.0
909.3
18%
6,062.3
5,931.7
5,655.5
5,327.7
Gross loans to customers
6,157.4
5,250.4
907.0
17%
6,157.4
6,024.8
5,753.0
5,426.8
- Corporate
2,947.1
2,411.1
536.0
22%
2,947.1
2,868.5
2,722.9
2,499.6
- Individuals
3,084.3
2,694.4
390.0
14%
3,084.3
3,026.4
2,901.9
2,791.9
- State
126.0
144.9
-18.9
-13%
126.0
129.9
128.2
135.3
Impairments and valuation of loans to customers
-95.1
-97.4
2.2
2%
-95.1
-93.1
-97.5
-99.1
Financial assets
2,960.7
3,034.3
-73.6
-2%
2,960.7
2,966.1
3,121.1
3,171.5
- Trading book
21.7
7.7
14.0
182%
21.7
20.9
10.7
8.1
- Non-trading book
2,939.0
3,026.6
-87.6
-3%
2,939.0
2,945.2
3,110.4
3,163.4
Investments in subsidiaries, associates, and joint ventures
908.6
786.0
122.6
16%
908.6
871.4
809.2
791.1
Property and equipment
78.6
86.1
-7.5
-9%
78.6
78.8
79.5
81.5
Investment property
6.8
9.2
-2.4
-26%
6.8
6.8
9.0
9.1
Intangible assets
30.4
29.5
1.0
3%
30.4
27.6
28.0
28.2
Other assets
202.3
151.7
50.6
33%
202.3
178.5
185.9
132.0
TOTAL ASSETS
13,939.3
12,699.5
1,239.8
10%
13,939.3
13,358.3
12,557.7
13,075.1
LIABILITIES
Deposits from customers
10,984.4
9,659.6
1,324.8
14%
10,984.4
10,604.9
10,296.6
9,914.5
- Corporate
2,874.9
2,436.7
438.2
18%
2,874.9
2,804.7
2,592.2
2,547.1
- Individuals
7,916.2
7,078.9
837.3
12%
7,916.2
7,616.5
7,603.0
7,254.7
- State
193.3
144.0
49.3
34%
193.3
183.8
101.4
112.6
Deposits form banks and central banks
212.7
109.3
103.3
95%
212.7
257.8
169.5
258.2
Borrowings
57.5
873.9
-816.4
-93%
57.5
45.9
44.6
857.8
Subordinated liabilities
508.8
288.5
220.3
76%
508.8
290.4
287.8
287.0
Other debt securities in issue
307.2
0.0
307.2
-
307.2
302.6
0.0
0.0
Other liabilities
265.9
216.3
49.6
23%
265.9
271.5
263.1
213.1
Equity
1,602.9
1,551.9
50.9
3%
1,602.9
1,585.1
1,496.1
1,544.6
TOTAL LIABILITIES AND EQUITY
13,939.3
12,699.5
1,239.8
10%
13,939.3
13,358.3
12,557.7
13,075.1
Assets
Figure 15:
Total assets of NLB Group – structure (in EUR millions)
Figure 16:
Total assets of NLB Group by country (in %)
(i)
Slovenia
Serbia
North Macedonia
BiH
Kosovo
Montenegro
Other
54.3%
57.7%
22.2%
19.3%
8.1%
7.6%
7.4%
7.4%
4.3%
4.5%
3.6%
3.4%
0.1%
0.1%
31 Dec 2021
31 Dec 2022
(i) The geographical analysis includes a breakdown of items with respect to the
country in which individual NLB Group members are located.
57.7% of the total assets were related to Group members
located in Slovenia (2021: 54.3%) and 19.3% in Serbia (2021:
22.2%).
31 Dec 2021
31 Dec 2022
31 Dec 2022
w/o N Banka
Cash equivalents, placements with banks and loans to banks
Net loans to customers
Financial Assets
Other Assets
+12% YoY
+6% w/o
N Banka
5,291.9
5,494.3
5,145.7
12,135.1
13,073.0
10,587.1
4,815.3
4,877.4
5,208.3
21,577.5
636.3
715.5
688.9
24,160.2
22,931.2
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3,084.3
The lending activity continued with enviable growth in all the
banks in 2022. The highest increases were recorded in Slovenia,
with a 20% YoY increase of gross loans to corporate and state
(43% with N Banka) and a 14% YoY increase of gross loans to
individuals (28% with N Banka). Strategic foreign markets also
achieved strong growth, with 12% and 11% YoY increase of gross
loans to individuals and corporate and state, respectively.
Gross loans to individuals in the Bank grew mostly due to an
increasing volume of housing loans (EUR 358.4 million YoY, with
high new production of EUR 726.6 million contractual value
in 2022, compared to EUR 558.3 million in the previous year)
related to generally positive economic sentiment and successful
marketing campaigns. The volume of consumer loans was
on the same level YoY, however, the new production in 2022
amounted to EUR 254.7 million and was higher compared to the
previous year (EUR 229.3 million).
Gross loans to corporate and state in the Bank recorded a
EUR 517.1 million growth YoY, where growth derived from the
corporate segment (EUR 536.0 million), while the state segment
exposures shrank by EUR 18.9 million. New production was
high, with over EUR 1.5 billion of new loans approved in 2022.
Since the war started in Ukraine, the international market
environment has become strongly unpredictable, and a higher
demand for and utilisations of working capital facilities was
recognised. With the emerging of energy crisis, the Bank rapidly
responded to its clients’ needs and organised the arrangement
of new syndication financing to the respective energy sector.
The volume of gross loans to customers in Strategic Foreign
Markets also increased, with even higher new production in
consumer loans compared to the more than successful previous
year, with all the Group member banks recording high YoY
growth in outstanding loan balances.
Figure 17:
NLB Group gross loans to customers dynamics (in EUR millions)
NLB Group
Slovenia
(i)(ii)
Strategic foreign markets
(i)(iii)
+20% YoY
+26% YoY
+28% YoY
+14% w/o
N Banka
+43% YoY
+20% w/o
N Banka
+12% YoY
+11% YoY
31 Dec 2021
31 Dec 2021
31 Dec 2022
31 Dec 2022
31 Dec 2021
31 Dec 2021
31 Dec 2022
31 Dec 2022
31 Dec 2021
31 Dec 2021
31 Dec 2022
31 Dec 2022
5,621.1
4.90%
4.74%
6,743.4
5,282.4
6,653.9
2,694.4
3.84%
5.83%
5.66%
2,556.0
3,448.0
3.84%
363.6
2,877.3
2,754.9
3,220.9
Gross loans to
individuals
Gross loans to
corporate &
state
Gross loans
N Banka gross loans
Interest rates
(i) On a standalone basis.
(ii) Includes NLB and N Banka; interest rates only for NLB.
(iii) Includes only banks.
591.4
3,073.1
3,664.5
3.04%
2.19%
3.92%
3,050.3
2.98%
1.91%
3.84%
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Institutions
369
2%
Other
(iii)
550
3%
Slovenia
10,012
54%
BiH
1,412
8%
N. Macedonia
1,419
8%
Montenegro
679
4%
Kosovo
913
5%
Serbia
3,419
19%
SME
3,649
20%
Corporates
2,897
16%
Retail
consumer
2,812
15%
State
(ii)
4,746
26%
Retail mortgages
3,932
21%
EUR
83%
Other
1%
BAM
5%
MKD
5%
RSD
6%
by segment
(iv)
by currency
by geography
by interest rate
Fixed
62%
Floating
38%
Despite significant portfolio growth in all NLB Group banks in
2022, there were no major changes in the corporate and retail
loan portfolio structure. The loan portfolio remained well-
diversified, and there was no large concentration in any specific
industry or client segment. The share of retail portfolio in the
whole loan portfolio was quite substantial, with the segment
of mortgage loans still prevailing. The majority of the loan
portfolio refers to euro currency, while the rest originates from
local currencies of the Group banking members. From interest
rate type, almost 62% of the loan portfolio was linked to a fixed
interest rate, and the rest mostly to the Euribor reference rate.
Figure 18:
Loan portfolio
(i)
by segment, geography, currency, and rate type (in EUR millions)
(i) Loan portfolio also includes account balances and required reserves at CBs, as well as demand deposits at banks.
(ii) State includes exposures to CBs.
(iii) The largest part represents EU members.
(iv) Segmentation in accordance with the company size defined in the Companies Act of an individual country in the region.
EUR 18.4 billion
EUR 18.4 billion
EUR 18.4 billion
EUR 18.4 billion
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Liabilities
Figure 19:
Total liabilities and equity of NLB Group – structure (in EUR
millions)
19,129.2
816.0
2,241.0
20,027.7
816.0
2,422.3
17,640.8
1,004.4
2,216.1
31 Dec 2021
31 Dec 2022
31 Dec 2022
w/o N Banka
Deposits from customers
Borrowings and Deposits from banks and central banks
Subordinated liabilities and Other debt securities in issue
Other liabilities
Total equity
+12% YoY
+6% w/o
N Banka
21,577.5
288.5
506.7
473.7
271.3
387.5
427.6
24,160.2
22,931.2
Total liabilities of the Group increased and amounted to
EUR 21,737.9 million. The Group’s funding base is dominated by
customer deposits accounting for 83% in which sight deposits
prevail (87%, same as at the end of 2021). The majority of
customer deposits were from individuals (70%). 59% of deposits
were collected in Slovenia (55% at 2021 YE), 18% in Serbia
(22% at 2021 YE), and the rest in other Group banking members
in SEE.
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Deposits from customers increased by 8% YoY, without the
N Banka contribution. The largest increase of 19% was recorded
in the corporate and state deposits in the Bank, due to various
reasons, i.e., the increase of balances in investment and
pension funds, and inflows from takeovers on the market. The
precautionary savings of households have contributed to a 12%
YoY increase in deposits from individuals in the Bank, due to the
Figure 20:
NLB Group deposits from customers dynamics (in EUR millions)
uncertainty of rising prices and the expected impact on their
financial situation in the future.
In Strategic Foreign Markets, deposits from corporate and state
recorded 6% growth, while deposits from individuals stayed on
the same level YoY. The main reason for this were the outflows in
Q1 as a response to the Ukraine war and its influence on prices
and consumer behaviour, while slow growth was perceived in
the remaining year in most members, with further outflow in
the second half of the year in the Serbian market, mostly due to
attractive offers with higher interest rates from competitors.
NLB Group
Slovenia
(i)(ii)
Strategic foreign markets
(i)(iii)
+10% YoY
+23% YoY
+18% YoY
+12% w/o
N Banka
+38% YoY
+19% w/o
N Banka
0% YoY
+6% YoY
31 Dec 2021
31 Dec 2021
31 Dec 2022
31 Dec 2022
31 Dec 2021
31 Dec 2021
31 Dec 2022
31 Dec 2022
31 Dec 2021
31 Dec 2021
31 Dec 2022
31 Dec 2022
12,680.8
13,948.7
4,960.1
6,079.0
7,078.9
341.6
335.5
302.9
295.3
238.8
106.7
250.4
2,580.7
8,325.8
5,601.9
2,433.3
5,623.0
Deposits from
individuals
Deposits from
corporate &
state
3,557.4
2,588.5
12,283.4
10,960.2
1,665.3
1,720.5
7,620.9
6,737.3
4,359.6
4,222.9
1,263.3
1,378.9
4,358.9
5,102.6
976.4
601.2
2,648.0
2,245.2
420.2
2,282.2
2,159.1
306.2
274.1
Sight deposits
N Banka sight deposits
Term deposits
N Banka term deposits
Interest rates
(i) On a standalone basis.
(ii) Includes NLB and N Banka; interest rates only for NLB.
(iii) Includes only banks.
0.16%
0.13%
0.11%
0.03%
0.05%
0.22%
0.18%
0.10%
0.04%
0.32%
0.17%
0.05%
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The LTD ratio (net) was 65.3% at the Group level; a 5.3 p.p. YoY
increase, as a result of the acquisition of N Banka, with a higher
LTD, as well as a higher increase of gross loans compared to
deposits.
Figure 22:
NLB Group's LTD ratio movement
Figure 23:
Off-balance sheet items of NLB Group (in EUR millions)
12,108.7
31 Mar 2022
30 Jun 2022
30 Sep 2022
31 Dec 2022
65.4%
18,525.8
65.9%
12,620.2
66.0%
65.3%
19,151.1
12,925.3
13,073.0
19,573.1
20,027.7
LTD
Net loans (in EUR millions)
Deposits (in EUR millions)
91.0%
80.8%
9.0%
19.2%
Term deposits
Sight deposits
International
Slovenia
Figure 21:
Deposits from customers in NLB Group by type as at
31 December 2022
31 Dec 2021
31 Dec 2022
Guarantees
Letters of credit - risk bearing
Commitments to extend credit and other risky commitments
Derivatives
+17%
YoY
35.6
35.0
4,655.3
5,449.5
1,496.0
1,490.8
2,407.1
1,892.2
1,511.3
1,236.7
Off-balance sheet items of the Group amounted to EUR 5,449.5
million and were comprised of guarantees (28%), letters of
credit (1%), commitments to extend credit and other risky
commitments (44%), and derivatives (27%).
Commitments to extend credit and other risky commitments
were divided between loans (99% corporate), overdrafts (58%
retail and 42% corporate), and cards (89% retail). A majority of
the Group's derivatives were concluded by the Bank either for
the hedging of the banking book or trading with customers.
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Capital and capital
adequacy
Capital
31 Dec 2020
31 Dec 2021
31 Dec 2022
Tier 1
Tier 2
Figure 24:
NLB Group capital (in EUR millions)
2,296
1,966
1,768
511
287
297
2,065
2,252
2,806
In 2022, the Overall Capital Requirement (OCR) for the Group
was 14.10%, consisting of:
•
10.60% Total SREP Capital Requirement (TSCR) (8.00% Pillar 1
Requirement and 2.60% Pillar 2 Requirement
9
) and
•
3.50% CBR (2.50% Capital Conservation Buffer, 1.00% O-SII
Buffer
10
and 0.00% Countercyclical Buffer).
Pillar 2 Guidance (P2G) amounts to 1.0% of Common Equity
Tier 1 (CET1).
On 29 April 2022, the BoS issued a new Regulation on
determining the requirement to maintain a systemic risk
buffer for banks and savings banks, which will on 1 January
2023, introduce the systemic risk buffer rates for the sectoral
exposures:
•
1.00% for all retail exposures to natural persons secured by
residential real estate in Slovenia,
•
0.50% for all other exposures to natural persons in Slovenia.
Additionally, in December 2022, the BoS announced that due
to growing uncertainties in the economic environment and
systemic risks, the countercyclical buffer for exposures to the
Republic of Slovenia is raised from 0% to the level of 0.5%
of the total risk exposure amount. Banks have to meet the
requirement by 31 December 2023.
9
As of 1 January 2023, the Pillar 2 Requirement decreased by 0.2 p.p. to 2.40%, as
a result of better overall SREP assessment.
10 As of 1 January 2023, the O-SII Buffer amounts to 1.25%.
16.63%
14.25%
15.25%
15.10%
15.25%
14.25%
14.10%
14.12%
17.78%
15.47%
19.15%
15.07%
31 Dec 2020
31 Dec 2021
31 Dec 2022
Total capital ratio
CET1 ratio
OCR = MDA threshold (Total capital)
OCR+P2G (Total capital)
Figure 25:
NLB Group capital ratios and regulatory thresholds (in %)
2.00%
2.65%
2.65%
1.50%
0.65%
1.99%
3.50%
1.00%
1.99%
4.50%
0.49%
5.96%
10.46%
1.46%
8.00%
Pillar 1
Pillar 2
TSCR
P2G
OCR+P2G
(Total capital)
Combined Buffer
CET1
AT1
T2
2.60%
10.60%
15.10%
Figure 26:
NLB Group capital requirements as at 31 December 2022
OCR
14.10%
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Table 14:
NLB Group Capital Requirements and buffers
2022
2021
2020
Pillar 1 (P1R)
CET1
4.5%
4.5%
4.5%
AT1
1.5%
1.5%
1.5%
T2
2.0%
2.0%
2.0%
Pillar 2 (SREP req. - P2R)
CET1
1.46%
1.55%
1.55%
Tier 1
1.95%
2.06%
2.06%
Total Capital
2.60%
2.75%
2.75%
Total SREP Capital requirement (TSCR)
CET1
5.96%
6.05%
6.05%
Tier 1
7.95%
8.06%
8.06%
Total Capital
10.60%
10.75%
10.75%
Combined buffer requirement (CBR)
Conservation buffer
CET1
2.5%
2.5%
2.5%
O-SII buffer
CET1
1.0%
1.0%
1.0%
Countercyclical buffer
CET1
0.0%
0.0%
0.0%
Overall capital requirement (OCR) = MDA threshold
CET1
9.46%
9.55%
9.55%
Tier 1
11.45%
11.56%
11.56%
Total Capital
14.10%
14.25%
14.25%
Pillar 2 Guidance (P2G)
CET1
1.0%
1.0%
1.0%
CET1
10.46%
10.55%
10.55%
OCR + P2G
Tier 1
12.45%
12.56%
12.56%
Total Capital
15.10%
15.25%
15.25%
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As at 31 December 2022, the TCR for the Group stood at 19.2%
(or 1.4 p.p. increase YoY), and the CET1 ratio stood at 15.1% (0.4
p.p. decrease YoY). The higher total capital adequacy derives
from higher capital (EUR 553.9 million YoY), which compensated
the increase of the RWA (EUR 1,985.7 million YoY). The Group
increased the capital with the inclusion of negative goodwill
from the acquisition of N Banka in retained earnings (EUR 172.8
million), a partial inclusion of 2022 profit (EUR 161.5 million),
additional Tier 1 notes issued in September (EUR 82 million),
and subordinated Tier 2 notes issued in November (EUR 222.9
million
11
). In accordance with the CRR ‘Quick fix’ from June 2020,
temporary treatment of FVOCI for sovereign securities was
implemented by the Group in September 2022, which increased
the capital by EUR 61.6 million (i.e., accumulated other
comprehensive income amounted EUR -98.5 million instead of
EUR -160.1 million). This temporary measure ceased to apply as
of 1 January 2023.
The capital calculation does not include a part of the 2022 result
in the amount of EUR 110 million, which is envisaged to be paid
as the dividend distribution in 2023.
Dividend pay-out
The dividend pay-out in 2022 was split into two tranches. The
first instalment in the amount of EUR 50.0 million was paid in
June 2022, while the second was paid in the same amount of
EUR 50.0 million in December 2022, thereby contributing to the
2022 cumulative pay-out of EUR 100.0 million.
11 T2 notes were issued in the amount of EUR 225 million, amount included in the
capital was EUR 222.9 million (due to issuance below par).
2,252
173
161
-88
82
223
n.a.
2,806
17.8%
19.2%
TCR
31 Dec 2021
NGW
Result
OCI
AT1 notes
Tier 2 notes
RWA impact
TCR
31 Dec 2022
1.4%
1.3%
-0.7%
0.7%
1.7%
-3.0%
Figure 27:
Capital of NLB Group
– evolution YoY (in EUR millions)
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Total risk exposure dynamic
Table 15:
Total risk exposure for NLB Group
in EUR millions
31 Dec 2022
31 Dec 2021
Change YoY
Total risk exposure amount (RWA)
14,653.1
12,667.4
1,985.7
RWA for credit risk
11,797.9
10,205.2
1,592.7
Central governments or central banks
1,109.2
1,158.5
-49.2
Regional governments or local authorities
101.2
99.8
1.4
Public sector entities
57.9
47.0
10.9
Institutions
292.0
310.2
-18.2
Corporates
3,520.3
2,748.7
771.6
Retail
4,371.0
4,171.0
200.0
Secured by mortgages on immovable property
987.7
453.0
534.7
Exposures in default
156.4
179.4
-23.0
Items associated with particularly high risk
642.4
442.5
199.9
Covered bonds
31.5
41.1
-9.6
Claims in the form of CU
17.9
19.4
-1.5
Equity exposures
90.1
88.5
1.6
Other items
420.1
446.0
-25.9
RWA for market risk + CVA
1,445.1
1,218.2
226.9
RWA for operational risk
1,410.1
1,244.0
166.1
In 2022 (YoY), the RWA of Group for credit risk increased by
EUR 1,592.7 million, where EUR 747.1 million of the increase
relates to the acquisition of N Banka (on the purchase day the
contribution of N Banka to NLB Group was EUR 858.9 million).
The remaining part of the RWA increase in the amount of
EUR 845.6 million was mainly the consequence of ramping
up lending activity in all Group banks, the most in the Bank
and NLB Komercijalna Banka, Beograd. The RWA growth was
partially mitigated by CRR eligible real estate collaterals from
BiH, Serbia, and North Macedonia. Higher RWA for high-risk
exposures was the result of higher project finance exposure.
Furthermore, the RWA decrease was observed for liquidity
assets mainly due to the maturity of some non-EU sovereign
bonds (mainly Serbia, Kosovo and Russia). The lower exposure
to institutions also resulted in the RWA reduction, the most in
NLB Komercijalna Banka, Beograd, banks from BiH, the Bank,
and NLB Banka, Skopje. At the same time, lower exposure
to the covered bonds in the Bank also reduced the RWA. The
repayments, as well as the upgrade of some clients, additional
impairments and provisions recognised, and the package
sale of NPLs from Serbia contributed to a lower RWA for the
exposures in default.
The increase in RWAs for market risks and Credit Value
Adjustments (CVA) in the amount of EUR 226.9 million YoY was
the result of a higher RWA for FX risk in the amount of EUR 139.4
million (mainly the result of more opened positions in domestic
currencies of non-euro subsidiary banks), higher RWA for
CVA risk in the amount of EUR 73.8 million (a consequence of
an adjustment of calculating exposure in the CVA calculation
due to the change of a methodology from a mark to market
method to the Original Exposure Method (OEM), and due to
the conclusion of longer term and higher size of derivatives by
the Bank) and higher RWA for Traded Debt Instruments (TDI)
risk in the amount of EUR 13.7 million (a consequence of new
derivatives businesses).
The increase in the RWA for operational risks (EUR 166.1 million
YoY) derives from the higher three-year average of relevant
income, as defined in Article 316 of CRR, which represented the
basis for the calculation. The main reasons for the increase
were a generally higher income base in most Group members,
and the acquisition of N Banka in March 2022.
Further information on capital and capital adequacy is
available in the
Note 5.23.
of the financial part of the report and
in
Pillar 3 Disclosures
.
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Liquidity position
The Group’s liquidity remains strong, with a high level of
unencumbered liquidity reserves in total assets (39.0%) that is
reflected in the LCR ratio standing at 220.3% (31 December 2021:
252.6%). The Group holds a comfortable liquidity position, with
liquidity ratios standing well above the risk appetite limit at the
Group and individual banking member level.
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
in EUR millions
31 Dec 2021
31 Mar 2022
30 Jun 2022
30 Sep 2022
31 Dec 2022
ECB eligible credit claims
Cash & CB reserves
Trading book debt securities (market value)
Banking book debt securities (market value)
8,280.6
8,131.7
8,049.8
8,645.4
9,187.5
43.8%
42.2%
37.1%
43.9%
43.1%
49.4%
51.7%
57.4%
55.1%
55.9%
1.0%
1.0%
5.5%
6.1%
6.8%
0.0%
0.0%
0.0%
0.0%
0.0%
Figure 28:
LCR quarterly dynamic of NLB Group
Figure 29:
Evolution of NLB Group unencumbered liquidity reserves (in EUR millions)
As at 31 December 2022, the Group’s unencumbered liquidity
reserves corresponded to EUR 9,187.5 million (2021: EUR 8,280.6
million) comprised of cash, balances with CB without minimum
reserve requirement, the debt securities portfolio, and credit
claims eligible for CB-secured funding operations. Among
others, these liquidity reserves provided the basis for future
strategic growth. Encumbered liquidity reserves, used for
operational and regulatory purposes, were excluded from the
liquidity reserves portfolio and amounted to EUR 123.0 million
(excluding obligatory reserves; 31 December 2021: EUR 877.6
million). The decrease of the encumbered liquidity reserves was
due to the early repayment of additional financing via the CB
secured funding at the end of H1 2022.
6,028
5,772
5,325
5,690
5,367
2,737
2,641
2,500
2,440
2,125
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
in EUR millions
300.0%
250.0%
200.0%
150.0%
100.0%
50.0%
0.0%
31 Dec 2021
31 Mar 2022
30 Jun 2022
30 Sep 2022
31 Dec 2022
Stock of HQLA
Net liquidity outflow
LCR
252.6%
233.3%
213.0%
218.5%
220.3%
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Segment Analysis
Table 16:
Segments of NLB Group
Core Segments
Non-Core Segment
Retail Banking
in Slovenia
Corporate and
Investment Banking
in Slovenia
Strategic Foreign
Markets
12
Financial Markets
in Slovenia
Other
Non-Core Members
includes banking with
individuals and micro
companies (the Bank
and N Banka), asset
management (NLB
Skladi), a part of NLB
Lease&Go, Ljubljana
that includes operations
with retail clients, and
the contribution to the
result of the associated
company Bankart.
includes banking with Key
Corporate Clients, SMEs,
Cross-Border Corporate
financing, Investment
Banking and Custody,
Restructuring and
Workout in the Bank and
N Banka and a part of the
NLB Lease&Go, Ljubljana
that includes operations
with corporate clients.
include the operations
of strategic Group
banking members in the
strategic markets (North
Macedonia, BiH, Kosovo,
Montenegro, and Serbia),
investment company
KomBank Invest, Beograd,
NLB DigIT, Beograd, to
which IT services from
NLB Banka, Beograd
were transferred in 2022,
the newly established
leasing company NLB
Lease&Go, Skopje and
in 2022 the purchased
company NLB Lease&Go
Leasing, Beograd.
include treasury activities
and trading in financial
instruments, while
they also present the
results of asset and
liabilities management
(ALM) in both, the
Bank and N Banka.
accounts in the Bank
and N Banka for the
categories whose
operating results cannot
be allocated to specific
segments, including
negative goodwill from
the acquisition of N Banka
in March 2022, as well as
subsidiaries NLB Cultural
Heritage Management
Institute and Privatinvest.
includes the operations of
non-core Group members,
i.e., REAM and leasing
entities in liquidation, NLB
Srbija, and NLB Crna Gora.
NLB Group
in EUR millions
Profit b.t.
483
47
52
187
34
172
-9
Contribution to Group’s profit
b.t.
100%
10%
11%
39%
7%
36%
-2%
Total assets
24,160
3,677
3,372
10,179
6,514
356
62
% of total assets
100%
15%
14%
42%
27%
1%
0%
CIR
57.6%
68.1%
61.9%
53.4%
20.2%
79.1%
268.4%
Cost of risk (bps)
14
58
-42
7
/
/
/
NLB Group’s main indicator of a segment’s efficiency is
net profit before tax. No revenues were generated from
transactions with a single external customer that would
amount to 10% or more of the Group's revenues.
12 Komercijalna banka, Banja Luka was sold outside the NLB Group on
9 December 2021; its operations till that date are included in the result
of the segment for the year 2021.
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Retail Banking
in Slovenia
Financial performance
Table 17:
Performance of the Retail Banking in Slovenia segment
in EUR millions consolidated
2022
2021
Change YoY
o/w N Banka
contribution
Net interest income
104.8
79.5
25.3
9.3
32%
Net interest income from Assets
(i)
95.8
82.7
13.1
8.0
16%
Net interest income from Liabilities
(i)
9.1
-3.1
12.2
1.3
-
Net non-interest income
106.7
91.5
15.2
6.4
17%
o/w Net fee and commission income
113.2
96.6
16.7
6.4
17%
Total net operating income
211.5
171.0
40.4
15.7
24%
Total costs
-144.0
-116.5
-27.5
-16.3
-24%
Result before impairments and provisions
67.4
54.5
12.9
-0.6
24%
Impairments and provisions
-21.4
-6.7
-14.8
-3.3
-
Net gains from investments in
subsidiaries, associates, and JVs'
0.8
1.1
-0.3
-30%
Result before tax
46.8
49.0
-2.2
-3.8
-4%
31 Dec 2022
31 Dec 2021
Change YoY
Net loans to customers
3,586.5
2,731.6
855.0
31%
Gross loans to customers
3,641.0
2,769.7
871.3
31%
Housing loans
2,173.9
1,815.5
358.4
20%
Interest rate on housing loans
2.35%
2.34%
0.01 p.p.
Consumer loans
640.9
635.6
5.3
1%
Interest rate on consumer loans
7.11%
6.70%
0.41 p.p.
N Banka, Ljubljana
446.1
NLB Lease&Go, Ljubljana
69.0
40.4
28.6
71%
Other
311.1
278.2
32.8
12%
Deposits from customers
9,085.8
7,703.6
1,382.1
18%
Interest rate on deposits
(ii)
0.05%
0.03%
0.02 p.p.
N Banka, Ljubljana
502.0
Non-performing loans (gross)
67.7
58.1
9.6
17%
2022
2021
Change YoY
Cost of risk (in bps)
58
26
32
CIR
68.1%
68.1%
0.0 p.p.
Interest margin
(ii)
1.70%
1.55%
0.15 p.p.
(i) Net interest income from assets and liabilities with the use of Fund Transfer Pricing (FTP).
(ii) Interest margins and interest rates only for NLB.
Knowing customers’ needs and with clients’ experience
being our focus, the Bank strengthened its position as market
leader in retail banking. The trigger to acquire new clients
and to activate existing ones is to tailor its product and
service offering to the needs of different segments. The Bank
is available through its traditional branch offices, a unique
mobile branch on wheels, and its wide ATM network. As the
main goal is to be a bank that can compete in the digital
world and can make the best use of strategic assets – through
transformation of the sales process and improving of user
experience. The Bank’s services are available to clients 24/7
via the Contact Centre and digital banking.
Figure 30:
Contribution to NLB Group
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10%
Result b.t.
21%
Net interest income
36%
Net non-interest income
Net interest income
The net interest income from loans to individuals was EUR 25.3
million higher YoY (EUR 9.3 million contributed by N Banka), due
to the higher volume of housing loans and overdrafts and the
key ECB interest rate increase in the second half of the year that
also impacted higher net interest income after use of FTP on
clients’ deposits.
Net non-interest income
Higher net non-interest income in the amount of EUR 15.2
million YoY was due to EUR 16.7 million higher net fee and
commission income, of which EUR 6.4 million came from N
Banka. The growth derived from all categories, in large part
from card business, due to higher volume and active cost
management, but also from payments, asset management,
bancassurance products, and the income from the high balance
deposit fee.
Total costs
Higher costs by EUR 11.3 million without N Banka’s contribution,
mostly due to higher operating costs resulting from inflationary
pressures.
Net impairments and provisions
Net impairments and provisions were established in the amount
of EUR 21.4 million, due to increase of loan volume and changes
in risk parameters as a response to worsened macroeconomic
projections.
Loans to customers
The high production of new housing loans in the Bank
continued (EUR 726.6 million in 2022) and resulted in the
increase of the portfolio by 20% YoY. However, the new
production stabilised in the last quarter due to an increased
interest rate environment.
Retail part of NLB Lease&Go, Ljubljana successfully continued
with a steady growth pace and concluded approximately EUR
47 million new deals (of which in 97% subject of financing was
passenger vehicle, while in remaining 3% light commercial
vehicles were largely presented).
Deposits from customers
The deposits base increased by EUR 1,382.1 million (18%)
YoY, with EUR 502.0 million from N Banka, as a result of
precautionary savings of households, due to the uncertainty
of rising prices and the expected impact on their financial
situation in the future.
Business performance
The market leader in retail banking
in Slovenia
Market share in loans to customers
Market share in deposits from customers
Market share in housing loans
Market share in consumer loans
31 Dec 2020
31 Dec 2021
31 Dec 2022
Figure 31:
NLB’s market share in Retail Banking in Slovenia
31.3%
26.4%
23.4%
22.5%
30.7%
26.9%
24.7%
24.4%
31.9%
26.6%
26.2%
26.6%
Leader in Slovenia
The Bank continued to strengthen its leading position with a
market of 26.2% in retail lending (31 December 2021: 24.7%), and
31.9% deposit-taking (31 December 2021: 30.7%).
Market shares in the category of housing loans increased,
specifically in portfolio to 26.6% (31 December 2021: 24.4%), and
in new production, as a result of the historic record sales of new
housing loans, to 32.5% (2021: 32.2%).
A well-established branch network and the largest ATM
network (31 December 2022: 538) with the only Slovenian 24/7
banking Contact Centre are other factors establishing the Bank
as the market leader.
The Bank retains its role as a market leader in payments by
being a reliable and trustworthy provider of services and a
positive user experience.
The private banking arm of the Bank has been positioned as a
leader in this segment in Slovenia for over 20 years.
NLB Skladi has been strengthening its position for several years
as a leading asset management company with the highest
market share and annual net inflows among its peers.
Ways to the Client
Branch network
The Bank’s main sales channel remains its branch network
in Slovenia with 71 branches, however the preferences of our
clients are changing with increasing use of digital solutions in
their interaction with the Bank, those being more simple, more
convenient, and available wherever and whenever. The focus
for the future is in a more advisory role, thus educating clients
about self-service on digital channels.
Comprehensive renovation of branch offices, which was stalled
by the pandemic, continued in 2022. An important milestone in
N Banka’s integration was achieved with the smooth transfer
of seven branch offices to a kiosk-type of office, which are now
part of the NLB respective branches.
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30%
annual growth of new housing
loans production
26.6%
market share in housing loans
Only 24/7 available banking service in Slovenia
The Contact Centre is positioned as a service and sales channel,
transforming to a retail virtual bank for almost all of the Bank’s
products like consumer and housing loans with straightforward
collateral, overdrafts, insurance products, deposits, savings,
and onboarding of e-bank and m-bank. In 2022, its share of
concluded basic financing products of the Bank (consumer
loans and overdrafts) was 11%. This part of Retail banking has
an important role as a standalone sales and advisory remote
channel, and at the same time offering very much support to
customers of m-bank and branch network 24/7.
The Contact Centre further strengthened its role of a proactive
customer outbound calling centre and processed 27% more
video calls YoY. With the new support for contact management,
customers can now also use the “Call back" option and
also give a customer experience rating for telephone
communication.
An average NPS for a video call was 75, and the first Customer
Experience (CX) measurement on telephone communication
achieved an NPS of 62.
Figure 32:
NLB Contact Centre number of contacts (in thousands)
100
158
201
999
1,113
1,308
2020
2021
2022
2020
2021
2022
Video call
Total contacts
27% YoY
18% YoY
Digital banking
The number of digital users in 2022 increased by 14% YoY. The
rate of m-bank Klikin and e-bank NLB Klik users YoY increase
remains stable at 16% (66,018 new users) and 6% (23,619 new
users), respectively, which is also clearly proven by the digital
penetration of active clients (see the figure below). The latter is
also an enabler for decreasing cash and transactional business
in branches.
The total volume of payments processed digitally through
e-bank and m-bank increased by 16% YoY. Moreover, products
with contracts are finalized with digital signing of documents in
m-bank Klikin, contributing to paperless operations.
31 Dec 2020
31 Dec 2021
31 Dec 2022
E-bank
M-bank
Digital
34%
45%
52%
42%
19%
17%
15%
48%
54%
Figure 33:
Digital penetration of active clients
Active clients' base increase
Constant activities in attracting new clients in 2022 resulted in
the acquiring of 36,196 new clients, of which 20% are returning
clients. However, with proper measures the retention of clients
is also at high level and contributed to growth of the client base.
The focus of client acquisition is primarily on the segment which
presents the Bank’s future client pool – young citizens. Several
activities, also in cooperation with relevant companies, are
reflected in adjusting products that are most suitable for this
segment.
Package Digital onboarding for new clients was upgraded with
key advantages including an adjusted view that provides better
user experience and automated processes, some of which are
now possible due to regulatory changes.
With the acquisition and retention of clients, constant activity is
also an activation of existing client pools, resulting in growing
the base of active clients. In 2022, the number of active clients
increased by 1.7% YoY (+10,645 clients).
Micro segment
The Bank expects to increase the volume of business in the
segment, and consequently gain market share through
adopting high standards and expertise. With the merging of N
Banka’s client base, the Bank will be able to use cross-selling
and upselling, which will lead to better product penetration of
the client portfolio.
Private banking
Leading private banking provider in Slovenia
The Bank was the first in Slovenia to have a clear vision of
an exclusive offer of asset management for high net-worth
individuals and families. Today, 20 years later, this successful
story of private banking is an integral part of the offer, with
more than EUR 1.3 billion assets under management (11% YoY
growth) for 2,000 clients (11% increase YoY).
By offering carefully selected and tailored products and
services, the Bank demonstrates that it can take good care
of their clients’ wealth. Comprehensive wealth management
brings a combination of banking and financial products and
the whole spectrum of advisory services.
More than 36,000
new clients
acquired
Increased
digital
penetration
by 6 p.p.
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As the global markets significantly changed in 2022, the sale
of gold was introduced for the clients of private banking, with
first encouraging results being achieved for this new investment
offering.
Figure 34:
Assets under management and the number of private
banking clients
31 Dec 2018
31 Dec 2019
31 Dec 2020
31 Dec 2021
31 Dec 2022
AuM (in EUR millions)
# of Clients
753
911
1,075
1,243
1,377
1,231
1,309
1,580
1,800
2,000
Client satisfaction
is our focus
High level of client satisfaction
The Bank measures client satisfaction on two levels,
each serving a specific purpose for customer experience
management and offers improvements. In our Client
Satisfaction Survey (CSS), a long-term relationship with the
clients through the indicator Customer Satisfaction Index (CSI)
is measured. The indicator of transactional satisfaction after
completed service with a focus on processes and attitude
towards clients is the NPS.
The Bank maintained a high level of client satisfaction, as
measured with CSI remaining stable and well above the
competition. Furthermore, clients express a higher level of
satisfaction with our advisors. Kindness and competence are
valued the most and are the main reasons for higher client
satisfaction (84 vs. 74 for the competition; 2022 Valicon Client
Satisfaction Survey). Also, the NPS for 2022 shows a high level
of satisfaction with value 62 (the benchmark for the financial
sector in 2022 is 49; SurveyMonkey global benchmark), which
was mostly influenced by the high satisfaction with consultancy.
Figure 35:
Satisfaction with the attitude towards customers
Competitor banks' average 2022
NLB 2022
NLB 2021
NLB 2020
NLB 2019
74
84
81
83
77
Source: 2022 Valicon Client Satisfaction Survey.
Financing products
Dedicated sales teams and successful marketing campaigns
played important roles in contributing to the excellent sales
results.
To enable our clients’ management of unexpected costs or
higher monthly expenses (car insurance, paying for vacations,
buying school supplies, etc.), the Bank developed a solution of
postponing the payment of one monthly instalment of the loan.
Without giving a reason, the client can once in each calendar
year freeze one payment, with the loan repayment period being
extended for the period of payment deferrals. This option can
be used after six months of regular loan repayments.
A gradual reduction of the overdraft with automatic renewal
was very well accepted by clients who can decrease the
amount of the overdraft every month by a pre-agreed amount
until it’s paid off. Since the overdraft is automatically renewed, it
can be paid off over several years.
Sustainability
Environmental and social sustainability are important goals
of the Group. They are also being incorporated in the Group
with our growing ESG product portfolio. Different financing
products help customers implement sustainability measures in
developing their own lasting environmental solutions. An ESG-
oriented offer includes the NLB Green housing loan to finance
construction or purchase of a passive house, and finance the
purchase of solar panels, heat pumps, and central ventilation
also in cooperation with vendors. Connecting with partners to
help our clients in their transition to energy efficiency resulted
in the offer of the NLB Green partner loan as an end-to-end
solution. In 2022, the Bank provided more than EUR 53 million in
ESG-related loans.
The Bank teams organised the workshops entitled, "Modern
Banking" for the elderly, where the use of modern digital
banking services was presented. In addition to the excellent
response and positive feedback, digital products were
activated. With the participation of students working for the
Contact Centre, this was a true intergenerational event.
Stable card portfolio
In 2022, Mastercard’s personal debit card was introduced
in digital form only, enabling the card and PIN to be issued
instantly, and can be used immediately after the client digitizes
its card in the NLB Pay m-wallet.
The contactless payment limit with no PIN needed was raised to
EUR 50 for NLB cards, as well. With green awareness in mind, a
receipt is issued only on demand.
Individual debit and credit card volumes and the number of
payment transactions and cash withdrawals, YoY increased by
18% or 16%, respectively.
Mobile wallet - NLB Pay
From May onwards, online purchases have no longer been
possible without strong authentication. Therefore, the use and
download of NLB Pay m-wallet is even more important and
proven with the continued increase of usage at a significant
pace. With NLB Pay solution, the Bank was also among the
first complying with the modern security standards of the EU
directive.
Further strengthening
of the market position in
lending,
deposits,
and asset
management
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The Flik solution is incorporated in NLB Pay, enabling client’s
P2P (person to person) money transferring among all Slovenian
bank clients, P2M (person to merchant) payments as purchase
on NLB POS terminals, and on Point of Sale (POS) terminals
of some other Slovenian banks which have upgraded their
POS. The Bank is the first on the market also for Person to
e-Merchant
(P2eM) for online purchases.
Use of m-wallet NLB Pay increased at a significant pace with
the number of users and volume of transactions YoY, increasing
by 67% and 63% YoY, respectively.
Figure 36:
NLB Pay in numbers
18,402
44,097
73,711
12,577
36,218
58,924
2020
2021
2022
2020
2021
2022
# of users
Volume of transactions (in EUR thousands)
67% YoY
63% YoY
Added value in ancillary
businesses
NLB Skladi – Slovenia’s largest asset
management company
The conflict in Ukraine and higher energy costs, which led to
a further increase in inflation, higher interest rates and lower
purchasing power of the population had a significant impact on
the mutual funds market in 2022. Despite that, the market share
of NLB Skladi increased to 39.1% (31 December 2021: 37.3%).
With EUR 115.3 million of net inflows in 2022, the company again
ranked first among its peers in Slovenia, accounting for 55.2%
of all net inflows in the market.
The total assets under management nevertheless experienced
a YoY drop of 7.9% and amounted to EUR 1,960.4 million (31
December 2021: EUR 2,128.0 million) of which EUR 1,536.2 million
consisted of mutual funds (31 December 2021: EUR 1,610.4
million) and EUR 424.2 million of the discretionary portfolio (31
December 2021: EUR 517.6 million).
Bancassurance
The Bank is the top sales channel among Slovenian banks with
spectrum of life and non-life insurance products in its offer.
In the Bank’s sales channels bancassurance products of the
insurance companies Vita and GENERALI Zavarovalnica are
sold.
The insurance company Vita remains the Bank’s strategic
partner with products such as savings and investment
insurance products, risk, and health insurance products being
included in the Bank’s offer.
Despite challenging circumstances, excellent results for
Generali’s products of car insurance and home insurance were
achieved, namely gross written premiums increased YoY by 13%.
Figure 37:
Active clients’ penetration of ancillary business
31 Dec 2019
31 Dec 2020
31 Dec 2021
31 Dec 2022
NLB Skladi
Vita
Generali
1.9%
8.4%
16.5%
16.8%
17.1%
17.4%
9.4%
10.3%
10.6%
2.2%
2.5%
2.6%
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Corporate and
Investment Banking
in Slovenia
The Bank reconfirmed its role of a leading and systemic
player in its home region and supporting corporate clients
with daily banking and tailor-made comprehensive solutions,
including trade finance, corporate finance, and cross border
financing. Customer centricity and sustainability are the basis
of what we do.
Figure 38:
Contribution to NLB Group
Financial performance
Table 18:
Performance of the Corporate and Investment Banking in Slovenia segment
in EUR millions consolidated
2022
2021
Change YoY
o/w N Banka
contribution
Net interest income
52.9
35.7
17.2
5.5
48%
Net interest income from Assets
(i)
53.7
41.1
12.6
5.1
31%
Net interest income from Liabilities
(i)
-0.8
-5.4
4.6
0.4
86%
Net non-interest income
52.3
65.8
-13.5
3.3
-21%
o/w Net fee and commission income
43.6
38.9
4.7
3.2
12%
Total net operating income
105.2
101.5
3.7
8.7
4%
Total costs
-65.1
-45.1
-20.0
-12.9
-44%
Result before impairments and provisions
40.1
56.4
-16.3
-4.2
-29%
Impairments and provisions
12.2
30.5
-18.3
4.6
-60%
Result before tax
52.3
86.8
-34.6
0.4
-40%
31 Dec 2022
31 Dec 2021
Change YoY
Net loans to customers
3,370.1
2,332.4
1,037.7
44%
Gross loans to customers
3,424.6
2,390.7
1,033.9
43%
Corporate
3,311.5
2,258.5
1,052.9
47%
Key/SME/Cross Border Corporates
2,623.2
2,110.6
512.5
24%
Interest rate on Key/SME/Cross
Border Corporates loans
1.95%
1.79%
0.16 p.p.
Investment banking
0.1
0.1
0.0
-4%
Restructuring and Workout
60.8
88.2
-27.5
-31%
N Banka, Ljubljana
506.7
NLB Lease&Go, Ljubljana
120.7
59.6
61.1
103 %
State
112.9
131.9
-19.0
-14%
Interest rate on State loans
2.59%
2.07%
0.52 p.p.
Deposits from customers
2,731.0
1,938.2
792.8
41%
Interest rate on deposits
(ii)
0.07%
0.03%
0.04 p.p.
N Banka, Ljubljana
396.5
Non-performing loans (gross)
67.6
72.5
-4.9
-7%
2022
2021
Change YoY
Cost of risk (in bps)
-42
-141
99
CIR
61.9%
44.4%
17.4 p.p.
Interest margin
(ii)
1.80%
1.76%
0.05 p.p.
(i) Net interest income from assets and liabilities with the use of FTP.
(ii) Interest margins and interest rates only for NLB.
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11%
Result b.t.
10%
Net interest income
18%
Net non-interest income
Net interest income
The interest income from loans to corporate and state was
EUR 7.5 million higher YoY without N Banka’s contribution. The
interest margin from loans in the Key, SME and Cross-Border
Corporates in the Bank was EUR 5.2 million higher YoY, mostly
due to higher volumes in all sub-segments. However, the
interest rates also started to increase due to the key ECB interest
rate hikes which impacted both, loans and deposits.
Net fee and commission income
Higher net fee and commission income YoY, mostly due
to higher income from cards, payment transactions, and
guarantees. A high balance deposit fee was cancelled from
August on and influences fee income by approximately EUR 0.8
million each month, but was compensated with the net interest
income after the user of FTP on clients’ deposits.
Total costs
Higher costs by EUR 7.1 million without N Banka’s contribution,
mostly due to higher operating costs resulting from inflationary
pressures.
Net impairments and provisions
Net impairments and provisions were released in the amount of
EUR 12.2 million, mostly due to repayments of previously written-
off receivables, which offset the establishment of impairments
and provisions due to higher exposures and changes in risk
parameters as a response to worsened macroeconomic
projections.
Loans to customers
The volume of loans increased by EUR 1,033.9 million YoY,
with N Banka contributing EUR 506.7 million, with the growth
distributed in all sub-segments. With a EUR 61.1 million increase
in the portfolio, the contribution of the NLB Lease&Go, Ljubljana
to the segment is growing.
Deposits from customers
The volume of deposits increased for EUR 792.8 million YoY, of
which EUR 396.5 million contributed N Banka, due to various
reasons, i.e., the increase of balances in investment and pension
funds, and inflows from takeovers on the market.
Investment Banking and Custody
The total value of assets under custody increased YoY and
amounted to EUR 16.4 billion (31 December 2021: EUR 15.9
billion).
Business performance
Market leader focusing
on customer needs
Figure 39:
NLB’s market share in Corporate Banking in Slovenia
Market share in deposits from customers
Market share in guarantees and letters of credit
Market share in loans to customers
31 Dec 2020
31 Dec 2021
31 Dec 2022
31.4%
17.3%
17.0%
31.5%
18.9%
18.3%
33.5%
20.8%
19.8%
Main achievements of 2022
With deep and strong local and regional presences, the Bank
further increased its corporate client base to over 10,000
clients, and not only confirmed its leading role in all areas of
corporate banking, but again reinforced its commitments to
understanding and supporting the economy and the clients.
The Bank approved over EUR 1.5 billion new financing volume
to corporate and state clients, which generated an increase in
loan volume by 21.9% YoY, and further strengthened their loan
market share to customers to 19.8% (31 December 2021: 18.3%).
Loan growth was realised in all business segments, specifically
with large corporates enjoying a 17.2% increase YoY, with SME
a 31.1% increase YoY, and in the cross border segment a 29.8%
increase YoY. The market share of deposits also increased and
reached 19.4% at the end of the year (31 December 2021: 18.9%)
confirming its strong systemic position and trust from its broad
client base.
After the war started in Ukraine, the international market
environment became unpredictable with a higher demand for
working capital facilities. With the emerging of energy crisis,
the Bank rapidly responded to its clients’ needs and arranged
EUR 285 million of new syndication financing for the respective
energy sector, with EUR 105 million of own participation. In
addition, the Bank provided certain bilateral facilities, with all
this confirming its position as a systemic bank and a strong
supporter of the economy.
The Bank further improved its leading position in trade finance
products, supporting clients with letters of guarantees, letters of
credit, and purchases of receivables, which are also available
through digital channels in a safe and fast way.
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Arranging
EUR
961.1
million
of syndicated loans
22%
annual growth in corporate
loans volume w/o N Banka
contribution
Activities of the Bank in organising syndicated facilities
continued with the total annual amount of EUR 961.1 million.
In these transactions, the Bank acted as the mandated lead
arranger, as an agent and as the leading bank with a EUR
306.0 million participation.
Having a unique regional position with a local presence
enabled the Bank to further expand cross-border financing
activities and increased its portfolio by up to EUR 500 million
of financing volume, including financing in the Group’s home
region and across European Economic Area (EEA) with sound
diversification in terms of geography and industry.
Sustainability has been at the centre of the Bank’s activities,
where the Bank also introduced new green products for
corporate clients, addressing the client needs at lower financing
costs. In 2022, the Bank approved more than EUR 105 million in
new financing in the ESG area.
Strategic priorities
The Bank remains fully devoted to its strategic priorities:
•
Remaining the leading and best preferred bank among
all corporate clients, offering them best in class products
and solutions, and enabling our clients to improve their
international business and footprint.
•
Keeping deep customer relationships and continuing to
improve customer satisfaction and experience, also by
product and process digitalization.
•
Maintaining a leading position in Slovenia in the areas of
trade finance, project finance, loan syndications, and M&A
finance, aiming to further expand that role in the SEE region,
while maintaining disciplined risk management.
•
Working closely with companies to help them transition
towards net zero emissions and confirming the Bank’s
commitment to sustainability finance by supporting new
green projects in a broader region and contributing to
society.
•
Focusing on profitability, also by improving fee business and
strengthening our focus on capital light product solutions.
Comprehensive solution offering
Trade finance solutions
Strong market position
The Bank is a leading Slovenian bank in the field of trade
finance with products that support domestic and international
trade economy. The trade finance product range and tailor-
made solutions are comprehensive and included traditional
trade finance products to other modern structures which
provide safe financing throughout the supply chains. As a
member of the Factor Chain International, the Bank also aims
to offers exporters and importers the international purchase of
receivables.
In all product fields (guarantees, letter of credit and purchase
of receivables) the Bank realised over 30% volume growth YoY.
Despite already strong market position in Slovenia, market
shares were further improved, namely in guarantees and letter
of credits to 33.5% (2021: 31.5%).
We further enriched our offer with reverse factoring, which
represents a safe and quick way of supplier finance, and the
Bank can process the transactions in modern digital way.
Special attention has been given to letter of guarantees
and counter-guarantees by which the Bank supports major
infrastructure and ESG projects in Slovenia and the wider home
region. A strong market position reflects the Group’s active
advisory approach towards its customers.
Investment banking and securities services
Arranger of several transactions
In 2022, the Bank organised six syndicated facilities in the
total amount of EUR 961.1 million, where it also acted as the
mandated lead arranger, as an agent, and as the leading bank
with participation of EUR 306.0 million.
The Bank was also very active in the field of issuing new
financial instruments by arranging the issuance of both
long-term and short-term instruments in the total amount of
EUR 621.7 million on debt capital markets.
The Bank was regionally active in M&A and other financial
advisory engagements (organising and coordinating M&A
procedure, advising on optimal capital structure, organising
takeover bids, etc.).
Brokerage services and Financial Instruments
In the brokerage services in 2022, the Bank executed clients’
buy and sell orders in the total amount of EUR 1.09 billion (2021:
EUR 902.9 million), while in dealing in financial instruments, the
Bank executed foreign exchange spot deals in the total amount
of EUR 1.38 billion (2021: EUR 946.6 million) and for EUR 433.2
million (2021: EUR 382.5 million) worth of transactions involving
derivatives.
Economic conditions in 2022 resulted in more activities of the
clients in foreign, non-Euro markets. Consequently a 20%
increase was recorded in the number of clients concluding FX
deals.
Custodian services
The Bank remains one of the top Slovenian players in custodian
services for Slovenian and international customers. The total
value of assets under custody on 31 December 2022, was
together with the fund administration services EUR 16.4 billion
(31 December 2021: EUR 15.9 billion).
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33.5%
market share in guarantees
and letters of credit
Cross Border Financing
Financing within the Group home region
Excess liquidity, a rather limited Slovenian market, and the
desire to expand operations with existing and new clients are
the main reasons why cross-border financing has become
increasingly important.
At the end of 2022, the portfolio of approved cross-border
transactions in the Bank reached EUR 500 million (thereof EUR
360 million already drawn). Adding the participating shares
of the Group subsidiaries, with the approved transactions
amount exceed EUR 700 million. It is notable that in most
cases approvals also meant that local Group subsidiaries can
retain or increase their fee business and expand cross-selling
potential with our clients.
The overreaching theme of cross-border financing was
continuous support of our key clients and involvement in the
financing of some of the key projects in our home region. On
the corporate finance side, this has meant a dominant focus on
supporting energy and telecommunication industries, while on
the project finance and real estate side, the Group has arranged
and co-arranged several key financings, including major
residential real estate in BiH, large renewables project in Serbia,
and office and residential real estate projects in Serbia.
Further potential in the home region can especially be observed
in corporate financing, renewable energy, infrastructure,
and residential/office real estate. Special focus is foreseen in
financing renewable projects - as the Group’s priority, especially
given the exceptional potential and opportunities which our
home region offers in this respect.
Corporate lending in EEA
The Bank is also active in different EU markets and diversified
its cross-border portfolio across the EEA. Most notable
transactions in the portfolio were concluded in Luxemburg,
Germany, France, Austria, and the Netherlands.
Deals are primarily made through participation in syndicated
international facilities or through participation in Schuldschein
loans, which also include some of world-renowned brands and
leaders in their industries. The EEA lending part of cross-border
portfolio exceeds EUR 160 million and is expected to grow
further due to very well-established relationships with some of
the European partnership banks. The focus remains profitable
investments in stable EEA markets (with lower expected
inflation and higher credit ratings) which significantly contribute
to the further diversification of the investment portfolio of cross-
border financing.
Leasing financing within NLB Lease&Go, Ljubljana
NLB Lease&Go, Ljubljana potential
Leasing activity is and has been since the second half of 2020,
again the Group core activity. In 2022, it successfully continued
its market progress, with a steady growth pace. Concluded
new business totalled approximately EUR 120 million in deals
with legal entities. In almost 44% of the deals, the subject
of financing was a passenger vehicle (where used vehicles
presented 64%), followed by almost 36% on heavy commercial
vehicles (where new vehicles presented 73%), 14% represented
equipment and the remaining 6% largely concentrated on
new light commercial vehicles. The vast majority of respective
production consisted of financial leasing, including stock
financing. As per the latest publicly available data (outstanding
as per 31 December 2022), the company had approximately 10%
of the market share in segment in the legal entities.
In March 2022, the Bank obtained permission from the BoS to
intermediate in leasing transactions for corporate clients to the
affiliated company NLB Lease&Go, Ljubljana with the aim of
offering bank clients comprehensive financing solutions and
customer experience.
Transaction Banking and Payments
Basic products
After opening business account or any business package
Mastercard’s business debit card is available in digital form
only, enabling the card and PIN to be issued instantly. It can
be used immediately after the client digitizes its card in the
NLB Pay m-wallet with no visit to any Bank’s premises. This
is possible also to all authorised card’s holders and most
importantly, the green issue with less plastic.
Mobile wallet NLB Pay
The Bank’s mobile wallet NLB Pay application enables clients
to make contactless, simple, fast, and secure payments on the
contactless POS (in Slovenia and abroad) with the NLB Business
debit Mastercard and NLB Business pay later Mastercard.
A leader in merchant-acquiring
The Bank is a leader in merchant-acquiring by accepting all
major payment cards, the local Flik instant payment scheme
and has a modern contactless POS network.
NLB E-commerce, a modern payment platform, enables secure
and simple card payments, and enables competitive edge to
providers, and good user experience to their clients.
Figure 40:
Transaction volume in acquiring (in EUR millions)
47
55
76
2,348
2,535
2,865
2020
2021
2022
2020
2021
2022
e-commerce
POS
38% YoY
13% YoY
Instant payments
The Bank was the leading bank in the introduction of
instant payments on the Slovenian market and is the only
bank enabling users of m-banks to automatically send out
transactions as instant payments - every day of the year both in
Slovenia and in the SEPA area.
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30%
annual growth in cross
border financing volumes
Flik payments
Flik P2P (person to person) enables money transfer among all
Slovenian banks’ clients, while Flik P2M (person to merchant)
payments enable purchase on NLB POS terminals and on POS
terminals of some other Slovenian banks which have upgraded
their POS. The Bank is among the first banks on the market
also offering instant payments P2eM for online purchases to
merchants.
Global Payments Innovation (GPI)
The Group, as a first banking group in the SEE, enables services
arising from the SWIFT Global Payment Initiative, which is
international payments service enabling banks to transfer
money faster and more safely worldwide. At the same time,
it enables full tracking of payment orders and monitoring of
related costs.
Digital banking
NLB Trading
The new platform, ‘NLB Trading,’ is a modern way to facilitate
the order of financial instruments to any of the Bank’s
brokerage client. There are several advantages of NLB Trading
which, among others, enable the overview of the portfolio with
the possibility to review various options, placing and managing
orders for sell or purchase at Ljubljana Stock Exchange, real
time monitoring of trading by each instrument, and simple
overview of transactions and concluded deals.
M-bank Klikpro
The number of m-bank Klikpro users continue to increase (YoY
by 16%), proving that clients are more and more prone to digital
banking. With included possibility of digital signing, this will
further ease clients’ operations.
Sustainable Finance
ESG offer
Climate change is happening, with banks also playing their
part with appropriate financing for the transition to a more
sustainable future. A NLB Green loan for reducing the carbon
footprint is offered within the existing offer of NLB loans,
exclusively for purposes where a sufficient positive impact on
the environment has been proven. To complement the ESG
offer, a NLB Green Investment loan for energy efficient business
premises with additional benefits included was implemented.
Connecting with partners to help our clients in their transition
to energy efficiency resulted in the NLB Green partner loan
to provide an end-to-end solution. The Bank will continue to
create green products, and in such a way makes clients aware
of the sustainable aspect.
#FrameOfHelp
After two successful projects during the pandemic, the
Group's #FrameOfHelp under the slogan ‘Looking for a New
Tesla’ started for the third time, offering an opportunity to
regional companies giving priority to sustainable ideas. The
Bank’s attention is focused on the future of this region, on the
opportunities that are opening for it and that the Group can
support with decisions and services.
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2022 was the most successful year for
NLB Banka,
Podgorica
so far. Our team of motivated and
ambitious professionals kept its focus on clients.
We also started the transformation of our bank
into an agile organization to speed up business
processes and decision-making and thus become
not only a better partner for our clients, but also
a most desirable employer for top bankers and
professionals in the region.
Our success was recognized by two renowned
media houses: Euromoney and the Financial
Times, who awarded us the prestigious awards
Best Bank in Montenegro 2022 and Bank of the
Year in Montenegro 2022. Through responsible
environmental and societal actions, we
created
better footprints
and once again confirmed our
commitment and contribution to a better quality
of life in South-Eastern Europe, our home region.
Pictured: NLB Banka, Podgorica employees
Strategic Foreign
Markets
With the merger of two banks in Serbia, the establishment
of an IT hub, and enlarging the leasing activities in the
region, the core part of the Group in foreign markets now
consists of six banks, one investment fund company, an IT
company, and two leasing companies. The Group banking
subsidiaries are locally strongly embedded as important
financial institutions and market leaders in various business
segments. All Group subsidiary banks have a stable market
position and strong reputation. The market shares by total
assets of subsidiary banks exceed 10% in five out of six
markets. The banks in the Group strategic foreign markets
offer a full range of financial services to retail and corporate
clients. In 2022, the global rising inflation pressures impacted
the Group’s region of operations, however, loan demand
remained strong, especially in the H1 2022. Thus, Group banks
marked remarkable double-digit growth of gross loans to
customers, above the local market average, especially in the
retail segment thereby contributing to the overall economic
development of local countries households.
Figure 41:
Contribution to NLB Group
Contribution to NLB Group
The Group banks ESG and CSR activities were continuously
upgraded by supporting the financial literacy of clients,
the #FrameOfHelp project for small entrepreneurs, tree
planting activities, and many more events, stated in the Group
Sustainability report.
In 2022, the Group banks accelerated their digital
transformation by automating processes and offering various
digital solutions to clients, thus further boosting digital
penetration by almost doubling the number of digital users.
Financial performance
Table 19:
Results of the Strategic Foreign Markets segment
in EUR millions consolidated
2022
2021
Change YoY
Net interest income
298.0
266.8
31.2
12%
Interest income
322.8
299.6
23.2
8%
Interest expense
-24.8
-32.8
8.1
25%
Net non-interest income
129.5
95.1
34.3
36%
o/w Net fee and commission income
118.7
101.6
17.2
17%
Total net operating income
427.5
361.9
65.6
18%
Total costs
-228.1
-227.9
-0.2
0%
Result before impairments and provisions
199.4
134.0
65.4
49%
Impairments and provisions
-12.3
-20.8
8.5
41%
Negative goodwill (NLB Lease&Go Leasing, Beograd)
0.1
0.1
-
Result before tax
187.1
113.2
73.9
65%
o/w Result of minority shareholders
11.0
11.5
-0.5
-4%
31 Dec 2022
31 Dec 2021
Change YoY
Net loans to customers
6,077.5
5,441.9
635.7
12%
Gross loans to customers
6,271.4
5,632.2
639.2
11%
Individuals
3,221.0
2,877.3
343.7
12%
Interest rate on retail loans
(i)
5.66%
5.83%
-0.18 p.p.
Corporate
2,869.0
2,613.5
255.4
10%
Interest rate on corporate loans
(i)
3.84%
3.96%
-0.11 p.p.
State
181.4
141.4
40.0
28%
Interest rate on state loans
(i)
3.65%
3.35%
0.30 p.p.
Deposits from customers
8,171.2
7,998.8
172.4
2%
Interest rate on deposits
(i)
0.17%
0.29%
-0.12 p.p.
Non-performing loans (gross)
160.6
191.7
-31.1
-16%
2022
2021
Change YoY
Cost of risk (in bps)
7
-11
19
CIR
53.4%
63.0%
-9.6 p.p.
Interest margin
(i)
3.14%
2.86%
0.29 p.p.
(i) Changed methodology.
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39%
Result b.t.
59%
Net interest income
44%
Net non-interest income
Net interest income
Net interest income increased by EUR 31.2 million (12%) YoY, due
to the high increase of loan volumes.
Net non-interest income
Net non-interest income increased EUR 34.3 million YoY, of
which net fee and commission income EUR 17.2 million. The
largest increase was recorded in NLB Komercijalna Banka,
Beograd due to the repricing of services in Q2, but the growth
did not continue in Q3, since the Serbian central bank decided
to contain retail fees for a limited period.
Total costs
Total costs stayed on the same level YoY.
Net impairments and provisions
Net impairments and provisions were established in the
amount of EUR 12.3 million, mainly due to impacts arising from
successful NPL resolution, and despite additional provisions for
reorganisation in NLB Komercijalna Banka, Beograd (EUR 4.6
million).
Gross loans to customers
Gross loans to customers increased by EUR 639.2 million (11%)
YoY, with slightly higher growth to individuals (12%) than to
corporate (10%). The increase of the loan portfolio was visible in
all of the banking members. New loan production continued its
enviable growth, especially in consumer loans.
Deposits from customers
Deposits from customers recorded only 2% YoY growth, due
to outflows in Q1 as a response to the Ukraine war and its
influence on prices and consumer behaviour, while slow growth
was perceived in the remaining year in most members, with
further outflow in the second half of the year in the Serbian
market, mostly due to attractive offers with higher interest rates
from competitors.
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The market shares
(by total assets) of subsidiary
banks exceed
10%
in five out of six markets
Profit before tax
EUR 187.1
million
65% higher compared
to last year
Six
subsidiary banks,
two
leasing companies,
one
IT services company,
and
one
investment fund
company
In 2022, Komercijalna Banka, Beograd and NLB Bank,
Beograd were successfully merged with a crucial goal of
minimising potential disturbance of clients’ operations.
Despite the demanding integration, the bank also managed
to significantly increase lending activities in all segments and
throughout almost the whole year achieved growth higher
than the market growth, while simultaneously improving the
quality of the loan portfolio.
After the integration, NLB Komercijalna Banka, Beograd
opened a new chapter, a complete transformation of the
business model by introducing an agile, simple, and fast
work model, digitalizing products and services, and putting
a sustainability concept at the centre of business decisions.
Financial performance
Table 20:
Key performance indicators of NLB Komercijalna Banka,
Beograd
(i)
in EUR thousands
2022
2021
Change YoY
Key performance indicators
Net interest income
124,269
88,570
40%
Net non-interest income
58,805
40,110
47%
Total costs
-102,137
-87,979
-16%
Impairments and provisions
-11,801
-7,637
-55%
Result before tax
69,136
33,064
109%
Result after tax
66,014
34,818
90%
Financial position statement indicators
Total assets
4,670,405
4,165,249
12%
Net loans to customers
2,589,222
1,795,882
44%
Gross loans to customers
2,624,735
1,818,793
44%
Deposits from customers
3,692,213
3,424,633
8%
Equity
737,972
634,643
16%
Key financial indicators
Total capital ratio
24.6%
28.6%
-3.9 p.p.
Net interest margin
3.0%
2.4%
0.6 p.p.
ROE a.t.
9.6%
5.5%
4.0 p.p.
ROA a.t.
1.5%
0.9%
0.6 p.p.
CIR
56.6%
68.4%
-11.7 p.p.
NPL volume
32,519
36,343
-11%
NPL ratio (internal def.:
NPL/Total loans)
1.0%
1.4%
-0.4 p.p.
Market share by total assets
10.0%
9.7%
0.4 p.p.
LTD
70.1%
52.4%
17.7 p.p.
(i) Data on a stand-alone basis as included in the consolidated financial statements
of the Group. In April 2022 NLB Banka, Beograd merged with Komercijalna Banka,
Beograd. Key financial indicators (ROE a.t., ROA a.t., CIR and net interest margin)
calculated for merged bank.
NLB Komercijalna Banka,
Beograd
Table 21:
Key performance indicators of NLB Banka, Beograd
(i)
in EUR thousands
2022
2021
Change YoY
Key performance indicators
Net interest income
7,295
23,359
-69%
Net non-interest income
2,456
6,954
-65%
Total costs
-7,242
-22,170
67%
Impairments and provisions
-38
-3,202
99%
Result before tax
2,471
4,941
-50%
Result after tax
2,197
4,293
-49%
Financial position statement indicators
Total assets
715,375
Net loans to customers
511,693
Gross loans to customers
520,518
Deposits from customers
449,476
Equity
77,918
Key financial indicators
Total capital ratio
19.2%
Net interest margin
3.4%
ROE a.t.
5.5%
ROA a.t.
0.6%
CIR
73.1%
NPL volume
9,489
NPL ratio (internal def.:
NPL/Total loans)
1.5%
Market share by total assets
1.7%
LTD
113.8%
(i) Data on a stand-alone basis as included in the consolidated financial statements
of the Group. In April 2022 NLB Banka, Beograd merged with Komercijalna Banka,
Beograd.
Business performance
Retail banking
The retail segment operated in a challenging environment, and
the bank continued to provide stable support for households in
2022. Through a number of initiatives, such as #FrameOfHelp
project, Awards for the best Organic agriculture projects, Real
Opportunity to Live on Your Own campaign (housing loan
campaign for young population), the bank continued to build
a relationship based on trust and keeping its customer base of
around 1 million active customers, stable and strong.
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EUR
69.1
million
Result b.t.
14%
Contribution to
NLB Group’s
result b.t.
10.0%
Market share
by total assets
4
th
Largest bank
in the country
New production in 2022 reached record levels regarding loans
to individuals, and retail banking recorded a significant YoY
growth in gross loans (11%), which is over the market average
growth and driven mostly by the growth in housing loans (16%
YoY). The key drivers of income growth were housing and cash
consumer loans, but also fees from payment transactions and
current accounts. The bank continued to gain the growth of
the market share in cash consumer loans to almost 10% and in
housing loans over 12%.
Corporate banking
The corporate segment in 2022 marked a 10% growth in gross
loans and 26% growth in documentary business. The bank
aimed to build a strong value preposition for all products
and services in the cross- & upselling program, which also
brought added value to customers. The bank achieved growth
in financing, as well as non-interest income, which was an
additional stable revenue generator, with further focus on
capital light products (trade finance products) and transaction
business (payments, investment banking services, acquiring). In
the agro segment, the bank confirmed the leading position in
the market with almost 30% of the market share.
Growth of the portfolio was based on acquisition efforts, short
and mid-term financing of working capital, and financing of
ongoing investments through increased borrowing to high-
rated clients. The Bank participated in the project financing
of the first large wind farm development (windfarm Krivača
in the amount of EUR 10.5 million) based on the corporate
power purchase agreement, thus confirming its commitment
to the green agenda and ESG targets through the support of
the increase of renewable energy in Serbia. The bank also
approved several project financings for important real estate
developments and sovereign financing for road infrastructure
development in the amount of EUR 136 million for the financing
of Dunavska magistrala.
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NLB Banka, Skopje
The Bank is a leading banking institution on the local market,
and is identified as a systemically important bank. In 2022,
its success was once again confirmed and recognised by
receiving the prestigious award “Bank of the Year” by the
financial magazine,
The Banker
, for the 11
th
consecutive year,
followed by “The Best Bank in Macedonia” at the Europe
Banking Awards, and also won the award from “Finance
Central Europe,” the award for best automated chatbot
tool, three recognitions from Visa, Inc. for exceptional
performance and partnership, and the certificate for Fair
financial services for consumers. As a support to outstanding
user experience, one new branch was opened, and another
was fully renovated, both equipped according to the most
modern security, architectural, and technological standards.
Several improvements were made to mobile and electronic
banking, which were mostly aimed at increasing security
during their use, as a response to the increased risk and
the generally growing trend of cyber-attacks. The bank
made improvements to the loans approved through mobile
banking, enabling better service for its clientele, and
increased throughput and sales of the product.
Financial performance
Table 22:
Key performance indicators of NLB Banka, Skopje
(i)
in EUR thousands
2022
2021
Change YoY
Key performance indicators
Net interest income
53,932
50,386
7%
Net non-interest income
21,948
18,043
22%
Total costs
-31,778
-28,619
-11%
Impairments and provisions
-2,434
3,244
-
Result before tax
41,668
43,054
-3%
Result after tax
37,874
39,000
-3%
Financial position statement indicators
Total assets
1,847,521
1,770,587
4%
Net loans to customers
1,170,692
1,084,075
8%
Gross loans to customers
1,234,343
1,144,420
8%
Deposits from customers
1,462,015
1,399,501
4%
Equity
265,844
243,267
9%
Key financial indicators
Total capital ratio
18.2%
18.0%
0.2 p.p.
Net interest margin
3.1%
3.1%
0.0 p.p.
ROE a.t.
15.0%
15.9%
-0.9 p.p.
ROA a.t.
2.1%
2.4%
-0.2 p.p.
CIR
41.9%
41.8%
0.1 p.p.
NPL volume
54,549
59,728
-9%
NPL ratio (internal def.:
NPL/Total loans)
3.6%
4.3%
-0.7 p.p.
Market share by total assets
16.3%
16.9%
-0.6 p.p.
LTD
80.1%
77.5%
2.6 p.p.
(i) Data on a stand-alone basis as included in the consolidated financial statements
of the Group.
Business performance
Retail banking
Significant growth in gross loans of 9% YoY was recorded,
which was above the level of the market growth for 2022, and
driven by the growth in housing loans (11%) and consumer loans
(9%). The highest amounts of disbursed loans so far in the retail
segment led to an increase in the market share to 22%.
The retail loan portfolio was dominated by consumer loans
(54% of gross loans), while housing loans occupied 38% of
gross loans. The deposit base increased 6% YoY. The interest
margin in the retail segment was still high, but under strong
pressure from competition. The key drivers of income growth
were the portfolio increase, foreign payment operations,
account management, and card operations.
Corporate banking
The corporate segment recorded a YoY growth of 6% in gross
loans YE. The key drivers of income growth were long-term
loans, investment, loans for working capital, and the liquidity
needs of companies, as well as domestic and foreign payment
operations and account management.
As at 31 December 2022, the bank had a market share of 14% in
corporate gross loans. It increased the portfolio, especially in
the segment of long-term financing of high creditworthy clients,
securing a stable portfolio and revenue generation. The bank
had a total outstanding balance of EUR 46 million in project
financing, and almost EUR 27 million outstanding balance of
loans approved for investments in renewable sources and
energy efficient investments. Additionally, the bank supported
the business of the clients with documentary business
instruments, which enabled them to adapt to the changed
macroeconomic circumstances.
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EUR
41.7
million
Result b.t.
9%
Contribution to
NLB Group’s
result b.t.
16.3%
Market share
by total assets
3
rd
Largest bank
in the country
NLB Banka, Banja Luka
In 2022, the bank is the second most important bank in the
Republic of Srpska market. The market share in loans to
individuals increased by 1.3 p.p. to 19.7%. The predominant
strength of the Bank was its market position in the corporate
and retail segments, and a very strong deposit base. The
bank received a “Golden BAM” award for the highest ROA
and ROE on the local market for several consecutive years.
Financial performance
Table 23:
Key performance indicators of NLB Banka, Banja Luka
(i)
in EUR thousands
2022
2021
Change YoY
Key performance indicators
Net interest income
23,594
20,087
17%
Net non-interest income
14,941
13,128
14%
Total costs
-17,293
-15,182
-14%
Impairments and provisions
-280
1,379
-
Result before tax
20,962
19,412
8%
Result after tax
19,281
18,180
6%
Financial position statement indicators
Total assets
995,308
927,152
7%
Net loans to customers
523,238
471,144
11%
Gross loans to customers
540,533
488,672
11%
Deposits from customers
796,668
759,915
5%
Equity
96,237
97,149
-1%
Key financial indicators
Total capital ratio
16.0%
16.9%
-0.9 p.p.
Net interest margin
2.6%
2.4%
0.2 p.p.
ROE a.t.
20.2%
17.0%
3.2 p.p.
ROA a.t.
2.0%
2.1%
0.0 p.p.
CIR
44.9%
45.7%
-0.8 p.p.
NPL volume
8,272
9,371
-12%
NPL ratio (internal def.:
NPL/Total loans)
1.1%
1.3%
-0.1 p.p.
Market share by total assets
(ii)
20.1%
19.1%
1.0 p.p.
LTD
65.7%
62.0%
3.7 p.p.
(i) Data on a stand-alone basis as included in the consolidated financial statements
of the Group.
(ii) Data for 2022 as at 30 September 2022.
Business performance
Retail banking
Retail banking recorded excellent double-digit YoY growth in
gross loans (15%), while deposits grew by 5% YoY. Consumer
loans increased by 21% and housing loans by 10% YoY. Housing
loans still dominated in retail loans (51% of gross retail loans),
while consumer loans represented 46%. The market share in
retail loans was 1.3 p.p. higher and reached 19.7%, while the
market share in retail deposits also increased by 2.2 p.p. and
was 27.2%. The key drivers of income growth were interest
income from new loan production and income from payments
processing.
The focus remains in further growth of the retail portfolio,
with special emphasis on introducing additional services for
customers, especially in the field of digitalisation.
Corporate banking
Corporate banking recorded YoY growth in deposits (17%),
as well as in gross loans (12%). The market share in loans
consequently increased by 1.1 p.p. to 15.4%. The focus remains
on cross-selling activities and raising awareness about
environmentally responsible business. A Group project,
#FrameOfHelp was successfully implemented in 2022, and had
a great impact on the market of the bank's image as the “Bank
supporting Sustainability.”
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EUR
21.0
million
Result b.t.
4%
Contribution to
NLB Group’s
result b.t.
20.1%
Market share
by total assets
2
nd
Largest bank
in the Republic
of Srpska
NLB Banka, Sarajevo
In 2022, the bank marked solid performance and remarkable
loan growth of 15% by boosting the bank's market share. The
predominant strength of the bank was in consumer lending
and the development of innovative retail products, largely
contributing to the high share of net non-interest income
(34% of net fee and commission income in total net operating
income). Improving customer experience was achieved with
the introduction of new digital products and robotic process
automation (RPA) solutions.
Financial performance
Table 24:
Key performance indicators of NLB Banka, Sarajevo
(i)
in EUR thousands
2022
2021
Change YoY
Key performance indicators
Net interest income
19,524
17,795
10%
Net non-interest income
12,152
10,256
18%
Total costs
-18,304
-16,183
-13%
Impairments and provisions
-982
-920
-7%
Result before tax
12,390
10,948
13%
Result after tax
11,436
10,012
14%
Financial position statement indicators
Total assets
838,117
727,860
15%
Net loans to customers
521,326
452,977
15%
Gross loans to customers
542,001
473,118
15%
Deposits from customers
673,402
593,026
14%
Equity
90,608
87,838
3%
Key financial indicators
Total capital ratio
16.5%
16.9%
-0.4 p.p.
Net interest margin
2.6%
2.8%
-0.1 p.p.
ROE a.t.
12.5%
10.7%
1.8 p.p.
ROA a.t.
1.5%
1.5%
0.0 p.p.
CIR
57.8%
57.7%
0.1 p.p.
NPL volume
16,986
19,046
-11%
NPL ratio (internal def.:
NPL/Total loans)
2.3%
3.1%
-0.7 p.p.
Market share by total assets
(ii)
5.9%
5.5%
0.4 p.p.
LTD
77.4%
76.4%
1.0 p.p.
(i) Data on a standalone basis as included in the consolidated financial statements
of the Group.
(ii) Data for 2022 as at 30 September 2022.
Business performance
Retail banking
Retail banking recorded YoY growth in gross loans (18%), driven
by growth of housing and consumer loans. Significant growth of
housing loans of 28% YoY was the result of increased demand,
many campaigns, and increased engagement of employees.
The share of housing loans in total retail loans increased by 1.8
p.p., to 22.3%. The average interest rate in the retail segment
decreased (2022: 5.37%; 2021: 5.73%).
The bank continued with activities aimed to increase the active
number of e- and m-banking users, with 133% increase in 2022,
while the number of transactions increased by 39% YoY.
Corporate banking
The corporate banking segment recorded YoY growth in gross
loans (11%). Focus was on increasing the client loan portfolio with
acquisition of new creditworthy clients. Also, a positive trend was
recorded in the volume of guarantees portfolio, mainly due to
the introduction of a new product ‘Guarantee Line.’
Corporate deposits recorded YoY growth of 32%, with a change
in the maturity structure, namely the share of corporate term
deposits increased by 10% YoY.
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EUR
12.4
million
Result b.t.
3%
Contribution to
NLB Group’s
result b.t.
5.9%
Market share
by total assets
6
th
Largest bank in
the Federation
of BiH
NLB Banka, Prishtina
In 2022, the bank was a leader in terms of profitability
and ranked as the second biggest bank in Kosovo. The
predominant strength of the bank was in providing a full
spectrum of financial services to retail and corporate clients,
and being a market leader in innovations in the local banking
sector. A noticeable boost has been observed in e-banking
usage that translates to an increased number of e-banking
users by 27% YoY The bank received the EBRD award “Most
Active Local Bank in Using TFP Line” for several consecutive
years.
Financial performance
Table 25:
Key performance indicators of NLB Banka, Prishtina
(i)
in EUR thousands
2022
2021
Change YoY
Key performance indicators
Net interest income
39,844
34,459
16%
Net non-interest income
8,547
7,374
16%
Total costs
-14,348
-13,546
-6%
Impairments and provisions
2,052
-1,064
-
Result before tax
36,095
27,223
33%
Result after tax
32,402
24,436
33%
Financial position statement indicators
Total assets
1,083,638
930,545
16%
Net loans to customers
740,775
634,529
17%
Gross loans to customers
777,202
672,376
16%
Deposits from customers
894,242
798,790
12%
Equity
113,844
98,856
15%
Key financial indicators
Total capital ratio
15.7%
17.3%
-1.6 p.p.
Net interest margin
4.1%
3.8%
0.2 p.p.
ROE a.t.
29.2%
22.4%
6.7 p.p.
ROA a.t.
3.3%
2.7%
0.6 p.p.
CIR
29.7%
32.4%
-2.7 p.p.
NPL volume
15,705
15,614
1%
NPL ratio (internal def.:
NPL/Total loans)
1.7%
1.9%
-0.3 p.p.
Market share by total assets
16.7%
16.3%
0.4 p.p.
LTD
82.8%
79.4%
3.4 p.p.
(i) Data on a standalone basis as included in the consolidated financial statements
of the Group.
Business performance
Retail banking
In 2022, the bank recorded YoY growth in gross loans (18%)
and deposits (7%). The retail loan portfolio was dominated
by housing loans (68%), while consumer loans occupied 32%
of gross loans. Growth was recorded in housing 14% and in
consumer loans 28% YoY with the key drivers of income growth
being consumer loans.
The growth in retail was mainly driven by an increase in loan
demand and a further increase of the general consumption
pattern. This has resulted in the price increase of real-estate
driven by inflation. In addition, the bank has signed several
partnership agreements with construction and trade companies
to finance their products, and boost the performance
committed by the sales department.
Corporate banking
Corporate banking recorded YoY growth in gross loans (14%),
which was mainly driven by the disruption of the normal supply
chain (external factors) and the cross-selling of products
through existing corporate clients targeting new retail and
SME clients, as well. Optimisation of bank’s liquidity structure
was highlighted by a 27% YoY increase in the deposits. The key
drivers of income growth were working capital loans, credit
lines, and overdrafts.
The bank offers fast, safe, and reliable execution of payments,
and competitive pricing led to an increased number of
payments contributing to the non-interest income growth.
Cooperation on the Group level resulted in the financing of
the construction of a major locally recognised project that
contributed largely to clean energy production from renewable
sources.
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EUR
36.1
million
Result b.t.
7%
Contribution to
NLB Group’s
result b.t.
16.7%
Market share
by total assets
2
nd
Largest bank
in the country
NLB Banka, Podgorica
After the merger of Komercijalna Banka, Podgorica and
NLB Banka, Podgorica in 2021, the merged bank became the
second largest financial institution in Montenegro. On its local
market, the bank is categorised as one of the systemically
important banks. The predominant strength of the bank was
seen in housing and consumer loans, where the bank was an
important player on the local market. The year was marked
with numerous campaigns for housing loans and innovations
with regard to improving the offer for individual clients and
for legal entities as well, such as developing a modern call
centre and investing in digital channels. In July 2022, the
Bank received the recognition 'The Best Bank in Montenegro’,
awarded by the world most influential financial magazine
"Euromoney.”
Financial performance
Table 26:
Key performance indicators of NLB Banka, Podgorica
(i)
in EUR thousands
2022
2021
Change YoY
Key performance indicators
Net interest income
29,607
21,953
35%
Net non-interest income
7,720
6,161
25%
Total costs
-20,252
-17,351
-17%
Impairments and provisions
1,165
613
90%
Result before tax
18,240
11,376
60%
Result after tax
16,613
10,050
65%
Financial position statement indicators
Total assets
851,630
751,351
13%
Net loans to customers
532,254
491,579
8%
Gross loans to customers
552,470
514,308
7%
Deposits from customers
692,872
609,792
14%
Equity
106,937
92,643
15%
Key financial indicators
Total capital ratio
18.4%
16.3%
2.0 p.p.
Net interest margin
4.0%
4.0%
0.0 p.p.
ROE a.t.
16.7%
13.1%
3.6 p.p.
ROA a.t.
2.1%
1.7%
0.4 p.p.
CIR
54.3%
61.7%
-7.5 p.p.
NPL volume
32,610
42,166
-23%
NPL ratio (internal def.:
NPL/Total loans)
4.6%
7.0%
-2.4 p.p.
Market share by total assets
13.3%
14.1%
-0.8 p.p.
LTD
76.8%
80.6%
-3.8 p.p.
(i) Data on a standalone basis as included in the consolidated financial statements
of the Group.
Business performance
Retail banking
Retail banking recorded YoY growth in gross loans (9%) and
deposits (9%). A major part of the retail loan portfolio was
dominated by consumer loans (50%), while housing loans
occupied 48%. Growth in gross loans was recorded mainly
by the increase in consumer loans volume by 14% YoY, and
housing loans by 7% YoY. Consumer loans growth was affected
by salary increase through the state program “Europe now”,
thus boosting higher demand.
The bank was the first bank in the market that expanded
its offer by introducing video calls to the market for
communication with clients. The bank also offered usual
products such as ‘Credit on the Spot,’ which enables purchases
on credit in cooperation with partner merchants, without the
need to come to the bank. NLB Credit on the Spot involves
quick and simple approval of an interest-free loan at more than
30 merchants in Montenegro,
in just two minutes
. The credit is
approved when making a purchase at selected merchants, on
the spot.
Corporate banking
The corporate banking segment recorded YoY growth in
gross loans (8%) and deposits (26%). The loan portfolio
predominantly consisted of the large corporates’ portfolio,
which increased by 11% YoY. Record new production was
recorded in both segments, large corporate and SME.
The bank presented a new, innovative, practical, and cost-
effective bank service that enriched its offer for companies. It is
a fiscal cash register where it is possible to pay by card like on a
standard POS terminal, and was a novelty for the local market.
This device can be used simultaneously for cash payments
and digital payments such as card payments and via the
mobile phone. As with a standard POS terminal, it is possible
for customers to make payments using mobile wallets or other
mobile devices that support payment using NFC technology.
The bank was the first bank on the local market to introduce an
online account opening service for legal entities to the market,
which significantly simplified and accelerated the account
opening process, directly on the bank's website. Companies use
a special platform to enter the necessary documentation for
opening a business account.
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EUR
18.2
million
Result b.t.
4%
Contribution to
NLB Group’s
result b.t.
13.3%
Market share
by total assets
2
nd
Largest bank
in the country
NLB DigIT
On May 2022, NLB DigIT was officially established as an IT
service company to act as a regional hub supporting the
Group members and delivering digital transformation projects.
The company was built on the resource pool of the Group
Competence Centre of NLB Banka, Beograd, and additional
external staff onboarding.
NLB DigIT’s primary focus is to deliver services for Group
entities with a high level of quality in domains where IT
resources and expertise are scarce throughout the region. NLB
DigIT provides services mostly in key areas such as IT security
setup for all the banks, IT delivery, data management, and
others.
Leasing operations
expansion in SEE
In 2022, the Group started to gradually expand its leasing
operations in the region of operations by establishing a
presence in North Macedonia and Serbia.
In North Macedonia, the company NLB LIZ&GO DOO Skopje
was established in September 2022, and was afterwards
renamed to NLB Lease&Go, Skopje. NLB Lease&Go, Ljubljana
became the owner of Zastava Istrabenz Lizing in Serbia in
November and later renamed it to NLB Lease&Go Leasing,
Beograd.
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Financial Markets
in Slovenia
The segment is focused on the Group’s activities on
international financial markets, including treasury operations.
In the changed interest rate environment, continuous focus
was on prudent liquidity reserves management. In 2022, the
Bank was very active on the wholesale market, with three
bond issuances in different asset classes (AT1, Tier 2, and SP
notes) for a total of EUR 607 million.
Figure 42:
Contribution to NLB Group
Contribution to NLB Group
Financial performance
Table 27:
Performance of the Financial Markets in Slovenia segment
in EUR millions consolidated
2022
2021
Change YoY
o/w N Banka
contribution
Net interest income
47.3
26.4
20.9
8.9
79%
o/w ALM
(i)
31.1
17.1
14.0
7.6
82%
Net non-interest income
-0.7
-2.3
1.6
-0.2
69%
Total net operating income
46.6
24.1
22.5
8.7
93%
Total costs
-9.4
-8.6
-0.8
-0.2
-9%
Result before impairments and provisions
37.2
15.5
21.7
8.6
140%
Impairments and provisions
-3.4
0.3
-3.7
2.6
-
Result before tax
33.8
15.8
18.0
11.2
114%
31 Dec 2022
31 Dec 2021
Change YoY
Balances with Central banks
3,373.7
2,982.2
391.4
13%
Banking book securities
2,993.3
2,977.5
15.9
1%
Interest rate
(ii)
0.74%
0.68%
0.06 p.p.
Borrowings
160.5
873.5
-713.0
-82%
Interest rate
(ii)
-0.72%
-0.46%
-0.26 p.p.
Subordinated liabilities (Tier 2)
508.8
288.5
220.3
76%
Interest rate
(ii)
4.16%
3.70%
0.46 p.p.
Other debt securities in issue
307.2
307.2
-
Interest rate
(ii)
6.00%
6.00 p.p.
(i) Net interest income from assets and liabilities with the use of FTP.
(ii) Interest rates only for NLB.
Net interest income
Net interest income was EUR 20.9 million (79%) higher YoY, of
which EUR 8.9 million was due to the N Banka contribution.
Excluding N Banka, net interest income increased primarily due
to the changed FTP policy, which in H1 partially transferred the
costs of placing the excess liquidity from treasury to retail and
the corporate segment to de-stimulate the deposit collection,
while in H2 net interest income growth was driven by higher
yields on treasury investments.
Net non-interest income
Net non-interest income was negative, mostly due to the
negative effect from securities divestments and higher premium
for RWA optimisation measures.
Balances with central bank
There was an increase in balances with central banks (EUR
391.4 million YoY), due to the piling up of non-banking sector
deposits and issues of new bonds for MREL purposes
outweighing the early prepayments of wholesale funding.
Wholesale funding
For meeting MREL requirement, the Bank issued new EUR
300 million Senior Preferred notes in July 2022. In contrast, the
subordinated Tier 2 debt increased by EUR 220 million due to
the subordinated Tier 2 notes issuance on the international
market in Q4 2022 (the Bank holding four outstanding
subordinated notes). Borrowings decreased by EUR 713.0
million YoY mainly due to early prepayment of TLTRO (EUR 750
million) and certain credit lines (EUR 70 million) in H1.
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7%
Result b.t.
9%
Net interest income
Business performance
13
The Group’s ALM
Focus
The purpose of the Group’s ALM process is to strategically
manage the Group’s balance sheet with respect to the
interest rate, currency, and liquidity risk considering the
macroeconomic environment and financial markets
development.
Organisation
Monitoring and management of the Group’s exposure to
market risk is decentralised. Uniform guidelines and limits for
each type of risk are set for individual Group members. The
exposure of an individual Group member is regularly monitored
and reported to the Group ALCO.
Balance sheet management
From the interest rate risk perspective, the surplus liquidity
position of the Group contributed to further growth of fixed
interest rate loans, mostly housing loans, and investments
in high quality debt securities. In terms of funding, the non-
banking sector deposits continued to increase in the form of
sight deposits and savings accounts, and partly as a result of
the acquisition of N Banka. The Group manages its positions
and stabilises its interest margin by actively adjusting pricing
policy for loans and by strict pricing of its stable deposit base,
whereas for managing interest rate risk exposure the Group
keeps outstanding plain vanilla derivatives. Active profitability
management has been supported by a highly disciplined
deposit pricing policy, enabling the response to a very
competitive loan market all over the Group’s strategic markets.
13 This business overview includes the operations of the Group's ALM, due to more
comprehensive presentation of the operations on the group level.
The Group’s FX risk is measured and managed with the use
of a combination of a sensitivity analysis, VaR, and stress test
scenarios. In terms of the liquidity risk management, each
Group member is responsible for ensuring adequate liquidity
via the necessary sources of funding and their appropriate
diversification, and for managing liquid assets and fulfilling the
requirements of regulations governing liquidity.
Liquidity management
Focus
The Group’s liquidity management focuses on ensuring a
sufficient level of liquidity reserves to settle all due liabilities,
minimising the cost of maintaining liquidity and optimising
the structure of liquidity reserves. To ensure an appropriate
level of liquidity for different situations, emergencies and crisis
conditions are anticipated and therefore described in the
liquidity contingency plan (LCP).
Organisation
Liquidity management in the Group is decentralised and
therefore each Group member manages its own liquidity on
operational and strategic levels.
Liquid assets
For settling due liabilities, the Group uses its liquid assets, which
are comprised of liquidity reserves (see the subchapter
Liquidity
Position
in the chapter
Overview of Financial Performance
) and
other liquid assets. The latter includes funds held on accounts
with other banks and money market placements which,
according to LCR calculation, are treated as inflows. Likewise,
liquid assets are managed by each Group member on its own.
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2.7
years
average duration of the
Group’s banking book
securities portfolio
78%
government securities
in the Group’s banking
book securities portfolio
Banking book securities portfolio
The purpose of the banking book securities is to provide
liquidity, along with stabilisation of the interest margin, and
interest rate risk management. At year-end, the banking book
debt securities portfolio constituted 19.7% of the Group’s total
assets (20.7% of Bank’s total assets).
In the rising interest rate environment of 2022, the value of the
portfolio partially diminished on the account of bonds valued
at fair value through other comprehensive income (FVOCI). This
portfolio at year-end represented 59.7% of total Group and
44.7% of Bank securities portfolio with the average duration
of 2.0 and 2.6 years respectively. Negative valuation of FVOCI
Group portfolio during 2022 amounted to EUR 168.6 million
(net of hedge accounting effects). As of 31 December 2022,
total accumulated other comprehensive income for FVOCI
debt securities was negative in the amount of EUR 144.6 million
(
Note 5.4.(c)
of the financial part of this report), consisting of
EUR 168.7 million negative valuation and EUR 24.1 million of
related deferred taxes and impairments. Approximately 60%
of accumulated other comprehensive income for FVOCI debt
securities (EUR 82,913 thousand) was as at 31 December 2022
already absorbed by the capital, with 40% of the valuation
result for sovereign exposures exempt from the deduction in
the capital due to the use of temporary treatment for FVOCI
for sovereign securities. As of January 2023, the so-called
‘quick fix’ from June 2020 ceased to apply. As and when these
exposures are repaid (more than 70% of them mature over the
next 3 years) all deductions from capital will be reversed. New
FVOCI investments are typically placed at durations of 1 year
maximum. Further information is available in
Notes 6.1. (j), 6.1. (o)
and
6.5. (e)
of the financial part of this report.
Since the beginning of the bank stress and market turmoil, the
financial institutions’ credit spreads widening and overall risk-
free rates decrease were observed, which is currently positively
impacting the Group’s FVOCI positions. Further information
is available in the Chapter
Events After the End of the 2022
Financial Year
.
Characteristics of the banking book
securities portfolio
The portfolio is well diversified from the geographical, asset
class and maturity profile perspective. In 2022, due to the
Ukraine-Russia conflict, some exposures to the neighbouring
countries were lowered, while the nominal value of EUR 20.6
million in Russian sovereign bonds exposure on the day of the
Russian invasion, was partially left to mature (exposure EUR 13.1
Table 28:
Maturity profile of NLB Group and NLB banking book securities as at 31 December 2022
in EUR millions
NLB Group
NLB
2023
2024-
2025
2026-
2027
2028+
Total
2023
2024-
2025
2026-
2027
2028+
Total
Domestic securities
(the Group’s strategic markets)
597.7
824.9
481.1
341.3
2,245.0
57.2
208.1
211.5
248.7
725.5
- Slovenia
64.7
222.1
167.8
237.6
692.2
44.9
184.9
167.8
237.6
635.2
- Other SEE
533.0
602.8
313.3
103.7
1,552.8
12.3
23.2
43.7
11.1
90.3
International securities
741.2
647.5
581.1
541.7
2,511.5
481.7
632.7
577.0
517.8
2,209.3
Total
1,338.9
1,472.4
1,062.1
883.1
4,756.5
538.9
840.8
788.6
766.5
2,934.8
Figure 43:
Banking book securities portfolio of NLB Group and NLB by geographical structure and asset class as at 31 December 2022 (in EUR millions)
Geographical structure
Asset class distribution
NLB Group
NLB
NLB Group
NLB
the Netherlands
Finland
Austria
BiH
Belgium
Germany
N. Macedonia
France
Slovenia
Serbia
Other
Corporate bonds
Subordinated debt
Multilateral bank bonds
GGB
Covered bond
Bank senior unsecured bonds
Government bonds
157
13
Total NLB: EUR 2,935 million
Total NLB Group: EUR 4,757 million
Total NLB: EUR 2,935 million
Total NLB Group: EUR 4,757 million
170
22
142
31
172
31
148
138
175
138
7
154
185
154
185
277
223
277
185
430
244
435
70
1,894
324
318
354
635
692
4
924
1,085
1,292
3,700
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million, maturing in April 2022, settled in May 2022). The other
part, the EUR 7.5 million exposure which matures in September
2023 was considered as a technical default at the end of
2022. This exposure was sold and successfully settled at the
beginning of February 2023. Further information is available in
Note 5.4.
of the financial part of this report.
As the Group actively works on incorporating ESG in its
business profile, the portfolio reflects the growing market of ESG
bonds. Currently, these bonds (EUR 191.2 million) have a share
of 4.0% in the Group banking book securities portfolio (5.7% in
the Bank’s), and it grows simultaneously with the share of ESG
reinvestments.
The average duration of the Group banking book securities is
approximately 2.7 years as at year-end (3.4 years of the Bank’s).
The average yield achieved in 2022 on the Group’s banking
book securities portfolio was 1.11% (2021: 1.01%), 0.74% of the
Bank’s (2021: 0.68%).
Table 29:
Overview of outstanding securities
in EUR millions
Type of bond
ISIN code
Issue Date
Maturity
First call date
Interest Rate
Nominal Value
Tier 2
SI0022103855
6 May 2019
6 May 2029
6 May 2024
4.2% p.a.
45
Tier 2
XS2080776607
19 November 2019
19 November 2029
19 November 2024
3.65% p.a.
120
Tier 2
XS2113139195
5 February 2020
5 February 2030
5 February 2025
3.40% p.a.
120
Senior Preferred
XS2498964209
19 July 2022
19 July 2025
19 July 2024
6.0% p.a.
300
Additional Tier 1
SI0022104275
23 September 2022
Perpetual
between
23 September 2027
and 23 March 2028
9.721% p.a.
82
Tier 2
XS2413677464
28 November 2022
28 November 2032
28 November 2027
10.750% p.a.
225
Wholesale funding
Purpose
Wholesale funding activities in the Group are conducted with
the aim of achieving diversification, improving structural
liquidity and capital position, and fulfilling regulatory
requirements, especially ensuring compliance with the MREL
requirement.
The Bank was active on the wholesale market with the issuance
of EUR 300 million Senior Preferred notes in July, EUR 82 million
Additional Tier 1 notes in September, and EUR 225 million Tier
2 notes in November. All instruments are MREL eligible, while
Additional Tier 1 and Tier 2 notes also improve the capital
position.
The Bank also optimised its funding structure by exercising an
early repayment of the EUR 70 million credit line facility.
NLB Group members were also active on the wholesale market.
More specifically, they obtained funding from international
financial institutions in a total amount of EUR 10 million, which
will be used for NLB Banka, Sarajevo for meeting its future
MREL requirement.
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3
bond issuances on international
capital markets in different asset
classes (AT1, Tier 2, and SP notes)
Non-Core Members
The Non-Core Members segment includes the operations
of non-core Group members. The main objective in the non-
Core segment remains a rigorous wind-down of all non-
core portfolios and the consequent reduction of costs. The
implementation of the wind-down has been pursued with
a variety of measures, including the sales of portfolios, sales
of non-core entities, sales of individual assets, the collection
or restructuring of individual assets, and active management
of real-estate assets.
Financial performance
Table 30:
Results of the Non-Core Members segment
in EUR millions consolidated
2022
2021
Change YoY
Net interest income
0.3
1.3
-1.1
-80%
Net non-interest income
4.4
5.9
-1.5
-25%
Total net operating income
4.7
7.2
-2.5
-35%
Total costs
-12.6
-11.4
-1.2
-11%
Result before impairments and provisions
-7.9
-4.1
-3.8
-91%
Impairments and provisions
-0.8
5.4
-6.2
-
Result before tax
-8.7
1.3
-10.0
-
31 Dec 2022
31 Dec 2021
Change YoY
Segment assets
61.5
95.9
-34.4
-36%
Net loans to customers
13.8
24.3
-10.5
-43%
Gross loans to customers
35.4
53.9
-18.4
-34%
Investment property and property &
equipment received for repayment of loans
39.6
65.6
-26.0
-40%
Other assets
8.1
6.0
2.1
36%
Non-performing loans (gross)
32.3
45.0
-12.8
-28%
Result before tax
The segment recorded a EUR 8.7 million loss before tax.
Total assets
A decrease of the total assets of the segment YoY (EUR 34.4
million) was in line with the divestment strategy of the non-core
segment.
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EUR
18.4
million
reduction of gross loans
to customers in 2022
Business performance
The wind-down of the Non-Core
Members segment
The wind-down of the Non-Core Members segment in 2022
included:
•
divestment of non-core Group members
•
active management of real-estate assets
Divestment of non-core Group
members
Liquidation process
A liquidation process is ongoing in all non-core leasing and
trade finance subsidiaries and some real estate subsidiaries.
The divestment process has been running with thoughtful cost
management and well-established collection procedures.
Decrease of non-core portfolio
New business has been suspended in all non-core Group
members which that are in the process of being wound down.
The decrease of the cumulative non-core subsidiaries’ portfolio
remains ongoing through regular repayments and collection
measures.
Active management
of real estate assets
Divestment process
The divestment process of the still remaining NPL exposures
at the Bank or at the non-core subsidiaries’ level is being
facilitated through a specialised team for repossessing,
managing, and divesting collateral real estate. Real estate
expertise and services are offered to the Group members
assisting them in implementation of the most efficient
divestment manner of the remaining non-performing portfolio
or the repossession of the collateral real estates.
Value-preserving strategies
The main task is to ensure value-preserving strategies for the
real estate management, respectively the collateral value of
NPL claims by either temporarily repossessing real-estate or
ensuring a value-preserving divestment process of the real-
estate or a claim. From 2015 to 2022, real-estate transactions
with a total sales value of EUR 242.1 million were executed or
supported, and directly or indirectly contributed to a EUR 646.5
million in NPL reduction, of which EUR 23.9 million in 2022 alone.
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EUR
48.3
million
the total sales value
of real-estate transactions
executed or supported by the
real-estate team in 2022
Pictured: NLB Banka, Prishtina employees
Our objectives are set prudently and strategically,
focusing on the innovative, higher recurring
growth financial products, and addressing digital
innovation.
In
NLB Banka, Prishtina
we started 2022 with a
sense of optimism, confidence, and trust in what
we do. We took brave decisions promoting loan
demand, supporting our clients towards their
investments, contributing to economic recovery,
and actively supporting wider socio-economic
development and a better quality of life through
our CSR activities with commitment to different
groups of society. The remarkable performance
led to a record high profit and rank our bank as the
first in the market in terms of profitability. The bank
also received the EBRD award “Most Active Local
Bank in Using TFP Line” for several consecutive
years.
We remain fully dedicated and confident of
achievements on our journey towards delivering
our vision and
creating better footprints
for all.
Risk Management
The self-funded model, strong liquidity, and a solid capital
position continued in 2022, demonstrating the Group’s
financial resilience. Efficient management of risks and
capital is crucial for the Group to sustain long-term profitable
operations. A robust Risk Management framework is
comprehensively integrated into decision-making, steering,
and mitigation processes within the Group, with the aim
of proactively supporting its business operations. The
Group is engaged in contributing to sustainable finance by
incorporating environmental, social, and governance risks
into its business strategies, risk management framework, and
internal governance arrangements.
The Group has a well-diversified business model. In accordance
with its strategic orientations, it intends to be a sustainably
profitable; predominantly working with clients on its core
markets; providing innovative, but simple customer-oriented
solutions; and actively contributing to a sustainable, more
balanced, and inclusive economic and social system. Efficient
managing of risks and capital is crucial for the Group to sustain
long-term profitable operations. Risk Management in the Group
is in charge of managing, assessing, and monitoring risks within
the Bank as the main entity in Slovenia, and the competence
centre for seven banking subsidiaries.
Figure 44:
Risk profile of NLB Group as at 31 December 2022
2.4%
1.9%
64.7%
3.8%
10.2%
8.9%
8.2%
Credit risk
Concentration risk
Credit spread risk
Interest rate risk in banking book
Operational risk
Market risk
Business and Strategic risk
Based on the Group’s business strategy, credit risk is the
dominant risk category, followed by credit spread and
interest rate risk in the banking book, and operational risk.
Management of credit risk focuses on moderate risk-taking,
striving to assure a diversified credit portfolio, adequate credit
portfolio quality, the sustainable cost of risk, and optimal return
considering the risks assumed. The Group has limited exposure
to other aforementioned risks, while market risk and other non-
financial risks are less important from a materiality perspective.
The Group integrates and manages ESG risks within the existing
types of risks, such as credit, liquidity, market, and operational
risk, as part of its risk management framework. These risks are
estimated as low, except for transition risk in the area of credit,
which is assessed as low to medium. Liquidity risk tolerance is
low. The Group must maintain an appropriate level of liquidity
at all times, and also pursue an appropriate structure of the
sources of financing.
Table 31:
NLB Group’s Key Risk Appetite indicators (KRIs)
KRIs
31 Dec 2022
Total capital ratio
19.2%
CET1 ratio
15.1%
LCR
220.3%
NSFR
183.0%
Cost of Risk
14 bps
NPL ratio (EBA definition)
2.4%
NPE (EBA definition)
1.3%
Interest rate risk (EVE)
-5.1%
In 2022, the war in Ukraine did not have a meaningful direct
impact on the quality of the credit portfolio, nor on the liquidity
of the Group. The Group’s credit portfolio quality remained
solid, with a stable rating structure, portfolio diversification,
and lower level of NPLs. In the light of increasing energy prices,
inflationary pressures, and a forecast of a decrease in economic
growth, the Group has thoroughly analysed potential impacts
on its credit portfolio and made necessary adjustments. The
most affected industries or segments are carefully monitored
with the intention to detect any additional significant increase in
credit risk at a very early stage.
The Group experienced high new corporate and retail loan
origination across all markets in 2022, also influenced by
expectations of the higher interest rate. The current economic
situation led to sluggish growth projections, persistent
inflationary pressures, and interest rate hikes. Based on that,
slower lending growth in all segments is foreseen for 2023.
During the year, the Group reviewed IFRS 9 provisioning
by testing a set of relevant macroeconomic scenarios to
adequately reflect the current circumstances and the related
impacts in the future. Increased uncertainty and the changes
in expectations of macroeconomic development affected
forecasts for some economies in the NLB Group. Hence, an
executive decision was made to adjust risk expectations
by shifting the scenario's weights to reflect more severe
development. The cost of risk remained at a relatively low level,
at 14 bps, mainly due to further positive development in NPL
resolution in the whole region.
Though the war in Ukraine, coupled with its implications on
the business environment, the Group faced a stable liquidity
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1.3%
NPE (EBA def.)
position and managed to stay well capitalised in both the
Group and banking member levels. The Group is still perceived
as a safe heaven, and therefore, in H2 2022 again faced
growing liquidity, while the impacts of the crisis did not cause
any material liquidity outflows. Significant attention was put
into the structure and concentration of liquidity reserves by
incorporating early warning systems, while keeping in mind
the potential adverse negative market movements. Raising the
interest rate environment and corresponding increased market
demand for fixed interest rate products resulted in moderate
interest rate risk exposure, which stayed within the risk appetite
tolerance.
In 2022, the Group was included into the ECB Climate Stress
test exercise, consisting of three modules. The exercise was
conducted in the first half of 2022 and the aggregate results
were published in July 2022. By performing this exercise,
the ECB assessed how banks are prepared for dealing with
financial and economic shocks stemming from climate risk. The
Group’s overall results were within the range of average peer
results. Additionally, in 2023, the Group will be included into
the regular EBA EU-wide/ECB SSM Stress test exercise. This
EU-wide stress test is designed to provide valuable input for
assessing the resilience of the European banking sector in the
current uncertain and changing macroeconomic environment.
The Bank is, as a systemic bank, involved in the
Single Supervisory Mechanism (SSM)
.
Supervision is under the jurisdiction of the
Joint Supervisory Team (JST) of:
ECB regulations are followed by the Group, where the Group
subsidiaries operating outside Slovenia are compliant with
the rules set by the local regulators. Third party equivalents
are approved in Serbia, BiH, and North Macedonia, resulting
in alignment of the local regulation with CRR rules.
Across the Group, risks are assessed, monitored, managed,
or mitigated in a uniform manner, as defined in the Group’s
Risk management standards, also considering the specifics of
the markets in which individual Group members operate.
ECB
BoS
Risk Management and control is performed through a clear
organisational structure with defined roles and responsibilities.
The organisation and delineation of competencies is designed
to prevent conflicts of interest, and to ensure a transparent and
documented decision-making process that is subject to an
appropriate upward and downward flow of information.
Competence line Risk Management in NLB is, by encompassing
several professional areas, in charge of:
•
formulating and controlling the Group’s
Risk Management policies,
• setting limits,
• overseeing the harmonisation,
•
regular monitoring of risk exposures and limits based on
centralised reporting at the Group level.
Harmonization of risk management framework of N Banka,
which was acquired in March 2022, was fully implemented.
Completion of the merger process is expected within this year.
The Group puts great emphasis on the risk culture and
awareness across the entire Group. The Group’s Risk
Management framework is forward-looking and tailored to its
business model and corresponding risk profile. The main risk
principles and limits are set forth by the Group’s Risk Appetite
and Risk Strategy, and designed in accordance with its business
strategy. The Group performs the risk identification process on
a regular basis, as part of the ICAAP and ILAAP frameworks.
In this process, all topical risks, including ESG-related ones,
are comprehensively assessed, monitored, and mitigated
where necessary. Special focus is placed on the inclusion of
risk analysis into the decision-making process at strategic and
operating levels, diversification to avoid large concentration,
optimal capital usage and allocation, appropriate risk-
adjusted pricing, and overall compliance with internal rules and
regulations.
Risk Management focuses on managing and mitigating
risks in line with the Group’s Risk Appetite and Risk Strategy,
representing the foundation of the Group’s Risk Management
framework. Within these frameworks, the Group monitors a
range of risk metrics to assure the Group’s risk profile is in
line with its Risk Appetite. In addition, the Group is constantly
enhancing its Risk Management system, where consistent
incorporation of ICAAP, ILAAP, the Recovery plan, and other
internal stress-testing capabilities into the Risk Management
system is essential. Moreover, the Group puts great emphasis
on their integration into the overall Risk Management system to
assure proactive support for informed decision-making.
Figure 45:
NLB Group’s Risk Management framework
Business strategy
ICAAP
&
ILAAP
inputs
Risk identification
Risk Appetite (Limit system)
Capital and Financial planning
Results
Recovery plan
Assessment of liquidity and capital
(significant deterioration)
ILAAP
• Economic and
normative assessment
of liquidity
• Stress tests
• Liquidity contingency
plan (LCP)
ICAAP
• Economic and
normative
assessment of
capital
• Stress tests
The uniform stress-testing programme, which includes
internally developed models, stress scenarios, and sensitivity
analysis, was further complemented. In 2021, the Group
established an internal ESG stress-testing concept to identify the
most relevant financial vulnerabilities stemming from climate
risk, which will be further enhanced by considering available
ESG-related data. Such a stress-testing framework is the subject
of a regular internal validation cycle and related procedures
where the Group established a comprehensive validation
framework. That is to say, the Group supports a strong
validation governance process and controls over applied and
selected risk approaches and internal models.
The business and operating environment, relevant for the Group
operations is changing, with trends such as sustainability, social
responsibility, governance, changing customer behaviour,
emerging new technologies and competitors, actively
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contributing to a more sustainable, balanced, and inclusive
economic and social system, as well increasing new regulatory
requirements. It should be noted that Risk Management is
continuously adapting with the aim of detecting and managing
new potential emerging risks.
Proactive Risk Management
in 2022
Prudent capital level position and
achieved interim MREL targets
One of the key aims of Risk Management is to preserve a
prudent level of the Group’s capital position. The Group
monitors its capital position at the Group and individual
subsidiary bank level in accordance with the Risk Appetite, also
incorporating normative and economic perspectives as part
of the established ICAAP process. As at 31 December 2022, the
Group had a very solid capital position and TCR of 19.2% (1.4 p.p.
YoY increase). The CET1 ratio, representing capital of the highest
quality, stood at 15.1% (0.4 p.p. YoY decrease).
The capital is higher mainly due to the inclusion of the negative
goodwill from the acquisition of N Banka in retained earnings in
the amount of EUR 172.8 million, a partial inclusion of 2022 profit
in the amount of EUR 161.5 million, additional Tier 1 notes issued in
September in the amount of EUR 82 million, and subordinated Tier
2 notes issued in November in the amount of EUR 222.9 million,
14
which compensated the negative revaluation adjustments on
FVOCI securities (EUR -98.5 million YoY). An increase of RWA in
NLB Group for credit risk relates to the acquisition of N Banka and
lending activity in all NLB Group banks. RWA growth was partially
mitigated by CRR eligible real estate collaterals from BiH, Serbia,
and North Macedonia. The increase in RWAs for market risks and
CVA is the result of higher RWA for FX risk and higher RWA for CVA
risk. The main effect of an increase in the RWA for operational risks
refers to the acquisition of N Banka.
As at 31 December 2022, the Group meets all fully loaded
regulatory requirements. Moreover, enhanced overall corporate
governance in recent years led to a lower P2R, which decreased
from 2.60% applicable in 2022 to 2.40% applicable from
1 January 2023, while Pillar 2 Guidance remains at a low level
of 1%.
14 T2 notes were issued in the amount of EUR 225 million, amount included in the
capital was EUR 222.9 million (due to issuance below par).
Figure 46:
NLB Group’s Pillar 2 Requirement evolution
2018
2019
2020
2021
2022
2023
2.40%
2.60%
2.75%
2.75%
3.25%
3.50%
MREL requirement forms part of the Group’s risk appetite,
whereby its fulfilment is regularly analysed and monitored.
NLB complies all interim targets. More information on MREL
is available in the chapter
Funding Strategy and MREL
Compliance
.
Maintaining a solid level and
structure of liquidity
Maintaining a solid level and structure of liquidity represents
the next very important risk target. The liquidity position of the
Group remained stable, and the impacts of the war in Ukraine
and its overall economic implication did not cause any material
liquidity outflows. Strong liquidity positions are held at the
Group and individual subsidiary bank levels. Group LCR slightly
decreased to 220.3% (by 32.3 p.p. YoY), but remained well above
the risk appetite limit (130%). The level of the unencumbered
eligible liquid reserves remained at a high level, representing
39.0% of total assets. The Group has sufficient liquidity reserves
in the form of placements with the ECB, prime debt securities,
and money market placements. Even in the event of the
combined adverse stress scenario, the Group would survive
at least three months under such stress conditions. The core
funding base of the Group predominately represents retail
customer deposits with a very stable and constantly growing
base. LTD increased to 65.3% (31 December 2021: 60.0%),
remaining at very comfortable level.
Maintaining adequate credit
portfolio quality
Maintaining adequate credit portfolio quality is the most
important goal, with the focus on cautious risk-taking and
quality of new loans leading to a diversified portfolio of
customers. The Group is constantly developing a wide range of
advanced approaches in the segment of credit risk assessment
in line with best banking practices to further enhance the
existing risk management tools, while at the same time enabling
greater customer responsiveness. The restructuring approach
in the Group is focused on the early detection of clients with
potential financial difficulties and their proactive treatment.
The Group is actively present on SEE markets by financing
existing and new creditworthy clients. The Group’s lending
strategy focuses on its core markets of retail, SME, and selected
LCR NLB Group
300%
280%
260%
240%
220%
200%
180%
160%
140%
120%
100%
31 Dec 2021
31 Jan 2022
28 Feb 2022
31 Mar 2022
30 Apr 2022
31 May 2022
30 Jun 2022
31 Jul 2022
31 Aug 2022
30 Sep 2022
31 Oct 2022
30 Nov 2022
31 Dec 2022
Figure 47:
NLB Group’s LCR
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corporate business activities within the region and EU. On
the Slovenian market, the focus is on providing appropriate
solutions for retail, medium-sized companies, and small
enterprise segments, whereas on the corporate segment, the
Bank established cooperation with selected corporate clients
(through different types of lending or investment instruments).
All other banking members in the SEE region where the Group
is present are universal banks, mainly focused on the retail,
medium-sized companies, and small enterprise segments. Their
primary goal is to provide comprehensive services to clients by
applying prudent Risk Management principles.
A
B
C
D
E
63%
65%
60%
63%
62%
30%
28%
33%
32%
4%
33%
3%
3%
3%
3%
2%
2%
2%
1%
1%
2%
2%
2%
1%
1%
31 Dec 2019
31 Dec 2020 w/o KB
31 Dec 2020
31 Dec 2021
31 Dec 2022
Highest
quality
Default
NPLs
EUR 18.4 billion
(i) Loan portfolio also includes reserves at CBs and demand deposits at banks.
(ii) Rating A, B, and C are performing exposures. Rating A: investment grade clients with high financial stability; Rating B: clients with high ability to repay their obligations, a
significant aggravation of the economic environment would cause problems to them; Rating C: performing clients with increased level of risk who may encounter problems with
settlement of liabilities in the future; Ratings D and E are NPLs: Default clients (article 178 of CRR), including clients in delay >90 days and other clients considered ‘unlikely to pay’
with delays below 90 days. The numbers may not add up to 100% due to rounding.
(iii) State includes exposures to CBs.
Lending growth was observed in the corporate, as well as in
the retail segments in 2022. In the circumstances of the growing
EURIBOR, there was a certain transfer to fixed interest rates,
especially in the housing loans market, which led to increased
new production and the general increase in the volume of
retail exposures. In the corporate segment, the Bank seized
opportunities to finance some of the top corporate clients in
the region, while keeping the focus on SME as its key segment.
The current structure of credit portfolio (gross loans) consists
of 36.6% retail clients, 15.7% large corporate clients, and
19.8% SMEs and micro companies, while the remainder of the
Institutions
369
SME
3,649
Corporates
2,897
Retail
consumer
2,812
State
(iii)
4,746
Retail housing
3,932
Retail
consumer
42%
Retail
housing
58%
Retail sector
Corporate sector
EUR 6.7 billion
Table 32:
Overview of NLB Group loan portfolio by industry as at 31 December 2022
in EUR millions
Corporate sector by industry
NLB Group
%
∆ 2022
∆ 2022 w/o N Banka
Accommodation and food service activities
216.7
3.3%
60.4
4.9
Administrative and support service activities
79.8
1.2%
-28.4
-33.5
Agriculture, forestry and fishing
326.2
5.0%
15.5
14.7
Arts, entertainment and recreation
23.7
0.4%
1.0
-4.3
Construction industry
569.8
8.7%
135.1
97.9
Education
13.9
0.2%
0.6
-0.7
Electricity, gas, steam and air conditioning
550.5
8.4%
232.4
180.8
Finance
224.7
3.4%
104.5
93.3
Human health and social work activities
46.8
0.7%
8.9
2.3
Information and communication
314.9
4.8%
70.8
63.5
Manufacturing
1,458.8
22.3%
367.7
197.9
Mining and quarrying
54.2
0.8%
3.8
-0.6
Professional, scientific and techn. act.
187.1
2.9%
11.8
-59.8
Public admin., defence, compulsory social.
188.7
2.9%
16.3
15.5
Real estate activities
312.8
4.8%
61.5
20.2
Services
16.8
0.3%
4.8
-0.6
Transport and storage
629.5
9.6%
56.2
28.7
Water supply
51.4
0.8%
7.5
-1.7
Wholesale and retail trade
1,278.0
19.5%
234.9
157.1
Other
1.3
0.0%
0.8
0.6
Total Corporate sector
6,545.6
100.0%
1,366.1
776.2
portfolio consists of other liquid assets. The credit portfolio
remains well diversified, and there is no large concentration in
any specific industry or client segment. The share of the retail
portfolio in the whole credit portfolio is quite substantial, with
mortgage loans as the still prevailing segment.
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Figure 48:
NLB Group structure of the credit portfolio
(i)
(gross loans) by segment (in EUR millions) and rating
(ii)
Approximately 50% of the NLB Group corporate and retail
loan portfolio is linked to a fixed interest rate, and the rest
to a floating rate (mostly to the Euribor reference rate). The
corporate segment is dominated by floating interest rates.
In the retail segment, more than 60% of the loan portfolio is
linked to a fixed interest rate, which is a result of considerable
growth predominately of housing loans in 2022 and activities of
changing the type of contractual interest rates for existing loans
at the request of the client.
Retail
37%
Stage 2
3%
Stage 1
95%
Stage 3
2%
FVTPL
0%
State
27%
Corporate
34%
Figure 50:
NLB Group loan portfolio by stages as at 31 December 2022
Figure 49:
NLB Group corporate and retail loan portfolio by interest
rates as at 31 December 2022
The majority of the Group’s loan portfolio is classified as Stage 1
(94.9%), the remaining portfolio as Stage 2 (3.4%), and Stage 3
and FVTPL (1.8%). The portfolio quality remains very stable, with
increasing Stage 1 exposures and a relatively low percentage
of NPLs. The percentage of the Stage 1 loan portfolio remains
almost at the same level as at the end of
2021, i.e., at 95.2% in
the retail segment, while in the corporate segment, despite the
adverse economic conditions, improved to the level of 90.4%,
which is a result of cautious lending policy and successful
closure of NPL. The volume of Stage 2 exposures increased in
the retail segment as a result of the changed macroeconomic
conditions and improved Early Warning System (EWS) in the
subsidiary banks, nevertheless the increase remains relatively
low compared to the entire portfolio volume.
Fix
Float
Corporate (incl. SME)
Consumer
Housing
64%
36%
60%
64%
40%
36%
in EUR millions
Credit portfolio
Provisions and FV changes for credit portfolio
Stage1
Stage2
Stage3 & FVTPL
Stage1
Stage2
Stage3 & FVTPL
Credit
portfolio
Share of
Total
YTD change
Credit
portfolio
Share of
Total
YTD change
Credit
portfolio
Share of
Total
YTD change
Provision
Volume
Provision
Coverage
Provision
Volume
Provision
Coverage
Provisions &
FV changes
Coverage with
provisions and
FV changes
Total NLB Group
17,457.5
94.9%
2,819.6
618.3
3.4%
85.9
328.1
1.8%
-43.4
92.5
0.5%
45.0
7.3%
187.4
57.1%
o/w Corporate
5,920.1
90.4%
1,394.5
425.7
6.5%
13.5
199.9
3.1%
-41.9
59.3
1.0%
31.1
7.3%
110.6
55.3%
o/w Retail
6,423.0
95.2%
1,051.9
192.6
2.9%
72.4
128.0
1.9%
-1.7
31.3
0.5%
13.9
7.2%
76.6
59.8%
o/w State
4,745.6
100.0%
543.2
-
-
-
0.1
0.0%
0.1
1.8
0.0%
-
-
0.1
99.1%
o/w Institutions
368.9
100.0%
-170.0
-
-
-
0.1
0.0%
0.1
0.1
0.0%
-
-
0.1
96.3%
NLB-G w/o N Banka
16,379.6
95.0%
1,741.6
558.9
3.2%
26.5
304.7
1.8%
-66.8
85.5
0.5%
39.8
7.1%
183.6
60.3%
o/w Corporate
5,394.7
90.6%
869.1
377.3
6.3%
-34.9
183.7
3.1%
-58.0
53.6
1.0%
26.8
7.1%
108.2
58.9%
o/w Retail
6,077.4
95.3%
706.3
181.6
2.8%
61.4
120.9
1.9%
-8.8
30.1
0.5%
13.0
7.2%
75.3
62.3%
o/w State
4,538.6
100.0%
336.2
-
-
-
0.1
0.0%
0.1
1.8
0.0%
-
-
0.1
99.1%
o/w Institutions
368.9
100.0%
-170.0
-
-
-
-
-
-
0.1
0.0%
-
-
-
-
Table 33:
NLB Group loan portfolio by stages as at 31 December 2022
Institutions
2%
Figure 51:
NLB Group Corporate and Retail loan portfolio (valued at amortised cost) by stages
+31%
YoY
+20%
YoY
3,207
3,170
4,136
4,526
5,920
3,822
3,936
5,371
427
6,423
412
367
426
427
104
133
133
120
193
286
324
359
242
200
87
111
117
130
128
4,779
Stage 1 by segment
(in EUR millions)
Stage 2 by segment
(in EUR millions)
Stage 3 by segment
(in EUR millions)
31 Dec 2019
31 Dec 2020 w/o KB
31 Dec 2020
31 Dec 2021
31 Dec 2022
Corporate
Corporate
Corporate
Retail
Retail
Retail
+3%
YoY
+60%
YoY
-1%
YoY
-17%
YoY
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The Russia – Ukraine conflict did not have a meaningful
impact on the bank portfolio quality. The government adopted
intervention laws that contributed to a mitigation of fluctuations
in energy prices for end users while large energy consumers
in the corporate segments set different strategies to eliminate
any material impact. The bank is closely monitoring any clients
whose activity may be affected by the current situation on the
energy and commodity prices.
New NPLs formation and NPL
management
In March 2022, the Bank acquired N Banka, their NPE were
included in the Group portfolio based on fair value. In 2022,
NPL formation amounted to EUR 127 million or 0.7% of the total
loan portfolio. Nevertheless, the total amount of NPL decreased
during 2022.
During the year, the Group reviewed IFRS 9 provisioning
by testing a set of relevant macroeconomic scenarios to
adequately reflect the current circumstances and applied
necessary adjustments. Notably, the cost of risk remained at
a relatively low level, more specifically due to further positive
development in NPL collection in the whole region.
Figure 52:
NLB Group gross NPL formation (in EUR millions)
51
70
58
80
78
2018
2019
2020
2021
2022
Formation / gross loans (stock)
12
10
16
20
60
35
36
64
5
7
56
148
143
127
Corporate
SME
Retail
0.7%
0.9%
1.1%
0.6%
0.7%
Precisely set targets and various proactive workout approaches
facilitated the management of the non-performing portfolio.
The Group’s approach to NPL management puts a strong
emphasis on restructuring and the use of other active NPL
management tools, such as foreclosure of collateral, the sale
of claims, and pledged assets. In 2022, the multi-year declining
trend of the non-performing credit portfolio stock continued,
mostly due to repayments, cured clients, and the collection, and
sale of claims. The non-performing credit portfolio stock in the
Group decreased at the end of 2022 in comparison with the end
of 2021 to EUR 328.3 million (the end of 2021: EUR 367.4 million).
The combined result of contraction in the non-performing credit
portfolio stock and credit growth of a higher quality portfolio
led to 1.8% of NPLs, while the internationally more comparable
NPE ratio, based on the EBA methodology, stood at 1.3%. The
Group’s indicator gross NPL ratio, defined by the EBA, is equal
to 2.4%.
Figure 53:
NLB Group NPL, NPL ratio and Coverage ratio 1
(i)
(in EUR
millions)
2,000
1,500
1,000
500
0
100
90
80
70
60
50
40
30
20
10
0
31 Dec
2018
31 Dec
2019
31 Dec
2020
31 Dec
2021
31 Dec
2022
Coverage ratio 1
NPL ratio
NPLs
77.1%
622
6.9%
89.2%
375
3.8%
81.8%
475
3.5%
86.1%
367
2.4%
98.9%
328
1.8%
(i) By internal definition.
Due to extensive experience gained in the last few years
in dealing with clients with financial difficulties, resulting
primarily from legacy portfolios, the Group has developed an
extensive knowledge base both in the prevention of financial
difficulties for clients, to restructure viable clients in case of
need, and to efficiently work out exposures with no realistic
recovery prospects. This extensive knowledge base is available
throughout the Group, and risk units, as well as restructuring
and workout teams are properly staffed and have the capacity
to deal, if needed, with considerably increased volumes in a
professional and efficient manner.
An important Group strength is the NPL coverage ratio 1
(coverage of gross NPLs with impairments for all loans),
which remains high at 98.9%. Furthermore, the Group’s NPL
coverage ratio 2 (coverage of gross NPLs with impairments
for NPL) stands at 57.1%, which is well above the EU average
as published by the EBA (44.1% for Q3 2022). As such, it
enables a further reduction in NPLs without significantly
influencing the cost of risk in the coming years. NPL coverage
indicators were influenced by the special treatment of NPLs
from the acquired entities. NPLs of NLB Komercijalna Banka,
Beograd and N Banka are initially recognised at fair value,
without any additional credit loss allowances. The latter is
also reflected in the lower coverage ratio CR2 than the NLB
Group banks average at the end of 2022 in NLB Komercijalna
Banka, Beograd and NLB Banka, Podgorica, which merged
with Komercijalna Banka, Podgorica in November 2021, and
N Banka.
Table 34:
NPL, NPL ratio
(i)
and Coverage ratio by NLB Group members
in EUR millions
NLB Group member
NPL
31 Dec 2022
% NPL
31 Dec 2022
NPL CR 1
31 Dec 2022
NPL CR 2
31 Dec 2022
NLB, Ljubljana
111.2
1.1%
86.1%
58.1%
NLB Banka, Skopje
54.5
3.6%
116.9%
70.9%
NLB Banka, Banja Luka
8.3
1.1%
211.3%
60.7%
NLB Banka, Sarajevo
17.0
2.3%
122.6%
87.7%
NLB Banka, Prishtina
15.7
1.7%
232.8%
87.7%
NLB Banka, Podgorica
32.6
4.6%
62.1%
45.1%
NLB Komercijalna Banka, Beograd
32.5
1.0%
110.4%
34.5%
N Banka, Ljubljana
23.6
1.9%
67.3%
16.2%
Total NLB Group banks
295.4
1.6%
102.7%
56.4%
Total NLB Group
328.3
1.8%
98.9%
57.1%
(i) By internal definition
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The Group strives to ensure the best possible collateral for long-
term loans, namely mortgages in most cases. Thus, the real-
estate mortgage is the most frequent form of loan collateral for
corporate and retail clients. At the corporate loans, government
and corporate guarantees are also common types of collateral.
In retail loans, the other most frequent types of loan collateral
are loan insurances by insurance companies and guarantors.
The Group follows the ECB guidelines to banks on NPLs with
regard to the evaluation of collateral. The establishment of
market values for collateral for NPLs is by means of individual
evaluation when NPL status is established. The value of
collateral is then regularly monitored on a yearly level and
updated by either independent evaluation (over prescribed
threshold) or with the use of statistical re-evaluation for
smaller values of NPL. For statistical re-evaluation, the indexes
from the government agency or other relevant official data
sources are used. The value of collateral is with the statistical
approach always updated downwards, never upwards. Only
if the individual appraisal shows a higher value of collateral,
the upward re-evaluation would be performed. If the data
from statistics would show significant decline in the real estate
market, individual evaluations for such types of real estate
would be performed and values corrected accordingly.
Low market risk in the trading book
Regarding market risks in the trading book, the Group pursues
a low-risk appetite for market risk in the trading book. The
exposure to trading (according to the CRR) is only allowed to be
carried by the parent Bank as the main entity of the Group and
is very limited.
The Group carries its main business activities in euros, and the
subsidiary banks, in addition to their domestic currencies, also
operate in euros, which is the reporting currency of the Group.
The Group’s net open FX position from transactional risk is
low, and at 1.1%
of capital. Regarding structural FX positions
on a consolidated level, assets and liabilities held in foreign
operations are converted into euro currency at the closing FX
rate on the balance sheet date. FX differences of non-euro
assets and liabilities are recognised in the other comprehensive
income, and therefore affect shareholder’s equity and CET1
capital.
Proactive management of interest
rate risk in the banking book
The exposure to interest rate risk is moderate and derives
mostly from the banking book positions. Bonds and loans with
a fixed interest rate contribute the most to the interest rate
risk exposure in terms of the Economic Value of Equity (EVE)
indicator. In contrast, exposure is managed with core deposits
which present the most important and material element of the
interest rate risk management. To a lesser extent, the Group
uses also plain vanilla derivatives for hedging the risk.
The exposure to interest rate risk remains modest, within the
risk appetite limits. For NLB Group, the worst-case regulatory
scenario is in the case of a parallel shock of IR by + 200 bps.
From the EVE perspective, the estimated capital sensitivity in the
case of a parallel shock is + 200 bps equals -5.1% of the Group’s
T1 capital.
Figure 54:
NLB Group’s EVE evolution
-7.4%
-6.4%
-7.1%
-6.3%
-5.1%
-7.3%
-8.1%
-7.1%
-5.6%
31 Dec 2020
31 Mar 2021
30 Jun 2021
30 Sep 2021
31 Dec 2021
31 Mar 2022
30 Jun 2022
30 Sep 2022
31 Dec 2022
Robust operational risk
management
In the area of operational risk management, where the Group
has established robust operational risk culture, the main
qualitative activities refer to the reporting of loss events and
identification, assessment, and management of operational
risks. On this basis, constant improvements of control activities,
processes, and/or organisation are performed. Besides that,
the Group also focuses on proactive mitigation, prevention,
and minimisation of potential damage. Special attention is
dedicated to the stress-testing system, based on a scenario
analysis referring to the potential high severity, low frequency
events, and modelling data on loss events. For modelling, the
Bank uses the gamma distribution technique which proved
to be the most suitable. From an economic perspective, the
aim is to assure the necessary capital for materially important
risks which could happen extremely rarely. Consequently, data
on realised loss events are used with a confidence interval of
99.9%. Moreover, some add-ons are added for specific current
and significant risks. In a normative view, a 90% confidence
level is used for more plausible, but still severe events, which
would be absorbed through P&L.
Apart from losses that are already included in the loss
event database, the Bank could also experience one-off
and unpredictable extreme events. The list of such potential
events is updated yearly, based on current risks in the Bank's
environment or past realised events in the banking industry.
For those possible and topical events, scenario analyses are
prepared by the Bank's experts. In 2022, 13 such scenarios were
defined. The results show that the biggest loss could derive
from the following potential events: external fraud events, major
earthquake, legal risk, and cyber-attack. For these scenarios,
existent controls were additionally revised, while for identifying
potential deficiencies, mitigation measures were defined.
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Furthermore, key risk indicators, servicing as an early warning
system for the broader field of operational risks (such as HR,
processes, systems, and external conditions) are regularly
monitored, analysed, and reported with the aim of improving
the existing internal controls and enabling on-time reactions.
The Group supports proactive discussion of operational risks
on all hierarchical levels. Every employee has the possibility
to report loss events. The biggest/most important operational
risks are escalated in a short-time period and discussed at the
Operational Risk Committee sessions, while implementation of
the mitigation measures is closely monitored.
In addition, the Group was also diligently managing other,
non-financial risks, referring to the Group’s business model
or arising from other external circumstances, within the
established ICAAP process.
Incorporating ESG risks
The Group is engaged in contributing to sustainable finance
by incorporating ESG risks into its business strategies,
risk management framework, and internal governance
arrangements. With the adoption of the NLB Group
Sustainability programme, the Group implemented the main
sustainability elements into its business model. The NLB Group
Sustainability Committee oversees the integration of ESG
factors into the NLB Group business model. Thus, sustainable
finance integrates ESG criteria into the Group’s business and
investment decisions for the lasting benefit of the Group’s clients
and society.
ESG risks do not represent a new risk category, but rather one
of the risk drivers of the existing type of risks, such as credit,
liquidity, market, and operational risk. The Group integrates
and manages them within the established risk management
framework in the areas of credit, liquidity, market, and
operational risk. The management of ESG risks follows ECB and
EBA guidelines, following the tendency of their comprehensive
integration into all relevant processes. The availability of ESG
data in the region where the Group operates is still lacking.
Nevertheless, the Group made significant progress in the
process of obtaining relevant ESG-related data from its clients,
being the prerequisite for adequate decision-making and the
corresponding proactive management of ESG risks. For the
purpose of calculating credit portfolio GHG emissions, several
important activities started in 2022. For larger corporate clients,
we initiated direct Scope 1 & 2 & 3 data-gathering processes,
whereas for the SME and micro segments, we developed
our own proxies in cooperation with an external expert. In
residential mortgages, the most important input for GHG
calculation are the buildings’ energy performance certificates.
By end of 2022, we formed the emission calculation for the
Slovenian market, whereas in the Region this process will
continue and will be developed in 2023. Besides the emissions,
the Group collected, analysed, and used different relevant
historical data for physical risk and publicly available climate
change studies relevant for its region.
The Group conducts a materiality assessment, as part of its
overall risk identification process, to determine the level of
transitional and physical risk to which the Group is exposed. In
this process, identification of environmental risk factors, relevant
transmission channels, and their materiality and impact to the
Group’s financial performance in the short- and long-term
period are assessed. From the perspective of physical risk,
the most relevant natural disasters are drought and floods,
while hail and windstorm are also frequent, but less material.
Despite this, we can expect that its impact will increase in the
long run if no adequate policy changes are implemented in
a timely manner. Chronic risk is not determined as material
risk. Transition risks already arise in the short term due to
determination of the EU to reduce carbon emissions, according
to its ambitious net zero strategy by 2050. With implementation
of the Net Zero Strategy of NLB Group in 2023, it is expected that
its impacts will gradually diminish in the long run. Nevertheless,
the Group assessed them more materially than physical risk.
In recent years, the Bank signed Framework Agreements
with the EBRD, such as the Contract of Guarantees with
MIGA, and committed to the UN Principles of Responsible
Banking. Consequently, the Group established a mechanism
for environmental and social screening of current or potential
financing applications against the MIGA and EBRD Exclusion List,
and applicable environmental and social laws. The management
of ESG risks is incorporated into the Group’s overall credit
approval process and the related credit portfolio management.
Sustainable financing is implemented in accordance with the
Group’s ESMS. In addition to addressing ESG risks in all relevant
stages of the credit-granting process, relevant ESG criteria were
also considered in the collateral evaluation process.
In the process of the transaction approval, collecting ESG data
at the KYC stage was established. A regulatory compliance
check represents a next important step that includes verification
that a client is adhering to the applicable laws, regulations, and
standards. If the transaction is classified with a high E&S risk,
a strict deviation management process is in place that ensures
further enhanced risk assessment. During a project’s lifetime,
ESG risk monitoring is established to assess the impact of each
risk, as well as the creation of a strategy for their mitigation.
With that, is the Group ensures that the risks are being
adequately addressed and that any changes or newly emerged
risks are identified and addressed promptly.
The Group is analysing and monitoring its credit portfolio by
using heat maps. For the purpose of heat maps, the Group
aggregates single risks by using predefined weights for
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the determination of a final risk score. Such an approach
enables different views over the Group’s corporate portfolio
from physical and transition risk perspectives. With regard to
physical risk, some negative historical events in the past years
in the Region were observed on the public infrastructure and
agriculture, but they were reimbursed to a large extent by
the government or insurances. Consequently, there were no
material impacts on Group’s portfolio quality or liquidity. On
portfolio level, the Group does not face any large concentration
towards specific NACE industrial sectors exposed to climate
risk, whereby the role of transitional risk is more prevailing.
Based on industry segmentation of portfolio and corresponding
emissions, the Group has a relatively low exposure to emission-
intensive sectors in its corporate client’s business. More
exposed industries represent energy, transportation, industry,
and agriculture, though the exposure to the clients with high
emissions in these branches is rather limited. As part of its
strategy, the Group does not finance companies that extract
fossil fuels or operate coal-fired power plants.
The Group carefully considers potential reputation and liability
risks which could arise from sustainable financing of its clients.
Special attention is given to the approval of new products and
monitoring of the fulfilment of relevant criteria by the clients.
Additional key risk indicators have been addressed, servicing
as an early warning system in the area of ESG risks. Besides,
physical risks, as part of ESG risks in the area of operational
risk, are addressed in the Group’s business continuity
management (BCM). As such, BCM is carried out to protect
lives, goods, and reputation. Business continuity plans included
relevant ESG risks. They are prepared to be used in the event of
natural disasters, IT disasters, and the undesired effects of the
environment to mitigate their consequences.
In 2021, the Group established an internal ESG stress-testing
concept to identify the most relevant financial vulnerabilities
stemming from transitional and physical climate risks, which will
be further enhanced by considering disposable ESG-related
data. The results of the climate stress tests showed no material
impacts on the Group’s capital and liquidity positions.
As a systemically important institution, the Group was included
into the 2022 ECB Climate Stress test exercise, which consisted
of three modules. The exercise was conducted in the first half
of 2022, and the aggregate results were published in July 2022.
By performing this exercise, the ECB assessed how banks
were prepared for dealing with financial and economic shocks
stemming from climate risk. The Group’s overall results were
within the range of average peer results.
NLB obtained in 2022 for the first time an ESG Risk Rating.
The assigned rating reflects a low risk of experiencing material
financial impacts from ESG factors.
Further information on risk management is available in the
Note 6
of the financial part of the report,
Pillar 3 Disclosures
and
the
NLB Group Sustainability Report 2022
.
Proactive
Risk
Management
in 2022
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14 bps
low level of cost of risk
on Group level
The Group continues to provide its clients sustainable and
efficient services supported through highly reliable and
secure technology platforms. The Bank is also actively
pursuing its technology transformation programme. In line
with the upgraded IT strategy introduced in 2020, the IT
team delivered on its timelines and started the programme
of consolidating core banking systems. The IT Security, IT
Infrastructure, and IT Governance made significant progress
in the consolidation on the group level. The Bank also rolled
out additional group business solutions like the contact
centre, new product origination platform, launched the new
digital banking platform for the internal pilot in Slovenia.
Komercijalna Banka was fully integrated within group’s IT
and infrastructure simplification and streamlining, and is on
schedule with three datacentres consolidated in 2022. Due
to the increase in general cyber security risks, special focus,
extra resources, and investments were made to raise the
overall level of cyber security resilience.
IT and Cyber Security
IT infrastructure
and reliability
High performance confirmed with numbers
IT performance is monitored through a set of relevant indicators
that are linked to the Balanced Scorecard (BSC) system. The
indicators show a high performance of IT operations and
successful risk management in this area. The availability of the
information system in the Bank is at a very high level of 99.96%
(2021: 99.98%), and the share of unplanned interruptions is
very low, 0.04% (2021: 0.02%). In 2022, the number of days
without system/service interruptions was at 81.1 % (2021: 83.6%).
Harmonised Service Level Agreements (SLA) are in place with
users of the information system, which the Bank managed to
fulfil to a very high degree. High IT operational performance
was also recorded by the Group members (between 99.87%
and 99.99%).
Main IT initiatives
Transformation
The main focus is the transformation of IT in terms of
organisation, a group perspective, processes, people, and
technology. IT supported a more agile way of delivery, to
better partner with business, and as a result was more efficient
and effective. Specifically, a Group IT domain concept was
introduced, which promotes shared teams and IT solutions
across the Group. The Group’s competence centre in Serbia was
transferred from the Bank to the separated IT service company
called ‘NLB DigIt.’
Change of delivery approach
The team managed to reach important achievements in the
following new strategic directions in terms of solution delivery.
They managed to migrate a new call centre solution in Slovenia
and BiH, a new product origination platform in N. Macedonia
and Kosovo, and delivered a new Digital Banking platform to
the pilot mode in Slovenia. The team also continued to pursue a
reduction in the dependency on the mainframe, and migrated
the next set of applications from the mainframe to distributed
systems. After the N Banka acquisition, the IT team focused
on onboarding N Banka IT to the Group and preparing an
integration plan and strategy.
Core systems consolidation
IT followed the core banking system strategy and successfully
started the consolidation of core banking systems. Due to the
N Banka integration in Slovenia, the programme course was
adjusted and the N Banka consolidation strategy is now in line
with the target core banking system.
Enterprise and application architecture
Enterprise and application architecture is focused on two
key areas. The first is the focus on the Group solution, and the
majority of new solution selections are performed as a Group
standard with related Group roadmaps. New Group solutions
were selected in the areas of a digital web portal and Customer
Relationship Management.
The other is the setup of a standardised enterprise architecture
management system for which a market standard tool was
procured to enable simpler application portfolio management,
managing of risk related to software obsolescence, and IT risk
and support in defining transformation paths.
Group-wide capabilities extended
Group-wide capabilities were significantly extended and the
Group competence centre in Belgrade, Serbia was transferred
to a separate IT service company called ‘NLB DigIt.’ In the last
two years, this team has grown from 15 to 80 employees. The
datacentres consolidation programme has started, with the
successful consolidation of three datacentres in Serbia and BiH.
Data management
The Bank continues to implement a Group-wide data
management platform which encompasses an enterprise data
warehouse, advanced analytics, risk management analytics,
profitability, data governance, and consolidated Group
regulatory reporting.
Digital penetration
Digitalization focus is on using the available, ever changing
information technology tools, in order to increase the efficiency
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More than
1.5
million
digital users in the Group
Vision
Mission
Main
principles
•
increase client satisfaction in all segments with a new
digital omnichannel platform, digitize client journeys and
interactions (CRM), and achieve operational excellence;
•
have an effective IT architecture using cloud solutions
and open-source software where possible;
•
introduce a new way of agile development and DevOps
transformation leading to shorter releases cycles,
automated testing, and fewer manual tasks;
•
ensure the necessary development capacity –
hire right talents with the digital skills and who
are forward-looking to execute change;
•
introduce modern collaboration tools
and digitize internal processes;
•
leverage the investment made in the data platform;
•
assure quality, security, and availability of
the IT systems and applications;
•
have a highly motivated, effective, and satisfied IT
team working closely with the business side.
IT Strategy 2020-2024
At the end of the 2020, an upgraded IT Strategy was adopted that also incorporates the Group dimension.
Build the best digital
banking IT team in
the SEE region.
Enable the best client and
employee experiences
through reliable, effective,
secure, accessible, and
scalable IT solutions.
of the Group through more innovative, personalized, accurate
and prompt service to the clients. High growth in smart phone
penetration, that they use anyhow on daily basis, creates the
opportunity to move more customers to alternative distribution
channels. The Group strives to a wide range of 24/7 digital
solutions to come closer to clients and offering them anchor
products and the most accessible and personalized digital
services. Main target is digital penetration of active customers
with goal of 55% of clients to be active on digital channels by
2025.
Outlook
In the coming years, the Bank is expected to continue to invest
in newly adopted technologies to support the business strategy,
especially in the areas of digital, data, the cloud, and customer
relationship management (CRM), consolidating the Group’s
infrastructure, simplifying core systems, and to achieve superior
client experience in terms of quality, innovation, reliability, and
security.
56%
26%
62%
26%
24%
25%
13%
55%
24%
53%
20%
25%
18%
17%
NLB,
Ljubljana
NLB Komercijalna
Banka, Beograd
NLB Banka,
Skopje
NLB Banka,
Sarajevo
NLB Banka,
Banja Luka
NLB Banka,
Prishtina
NLB Banka,
Podgorica
Penetration (all)
Penetration (active)
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Figure 55:
Digital penetration of the Group’s banks as at 31 December 2022
99.96 %
the availability in NLB
Cyber security
Strengthening team and
implementing new solutions
The Group is giving special focus to cyber security, and
consequently assuring the confidentiality, integrity, and
the availability of data, information, and IT systems that
support banking services and products for clients. Cyber
security in the Group is constantly tested and upgraded by
security assessments, independent reviews, and penetration
testing, also regularly discussed at the Bank’s Information
Security Steering Committee, Operational Risk Committee,
and Management Board meetings. During 2022, the Group
increased its capacity in terms of human resources by hiring
specialists in different domains, and additional improvements
were made in vulnerability management where all Group
members have a unified solution and configuration. The
team has the ability to perform on-demand scans and can
stay abreast of global trends and the most recently published
vulnerabilities. This provides a more proactive approach to the
whole vulnerability remediation process in the Group. A Cloud
Web Application Firewall was introduced to the Group, and
in all Banks the migration process was initiated. The goal is
to have all publicly available applications under the same
security tool and monitoring. The biggest achievement in the
Group Cyber security team comes from the fact that almost all
Bank members in 2022 had individual on-demand requests
for different penetration testing services. More information
about cyber security is available in the chapter
Regulatory
Environment
.
All employees educated,
continuous information exchange
All employees in the Group are continuously educated about
the importance of information/cyber security, as well as social
engineering techniques. The Group banks provide employees
and customers with security notifications, especially for the
occurrence of threats in the (global) environment with potential
impact on the banks’ IT systems, services, products, and
clients. The Bank also tests the awareness of its employees
with social engineering attack simulations. Threat intelligence
data is shared by the Group team to all Group members
with information on the latest threats and recommendations
on mitigation measures. In addition to a regular phishing
simulation, the Group Cyber Security team has implemented
their own phishing platform and successfully conducted
simulation in NLB Sarajevo as a pilot for all other Members.
Regular, controlled, simulations impact employee’s awareness
on the highest level.
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Strengthening
the team and extra
investments in
cyber
security
In 2022,
NLB Banka, Skopje
confirmed its position
as a systemically significant bank with high market
share. We achieved positive business results and
announced a new chapter in our operations –
an investment in an associated company NLB
Lease&Go, Skopje.
Numerous awards and recognitions confirmed
better footprints we created
and successful
operation of our bank, for example, Best Bank in
Macedonia for 2021 by the renowned magazine
EMEA Finance; five awards in the annual ranking
of the magazine Finance Central Europe; three
recognitions from the Visa Center for a bank
that shows outstanding results, not only in North
Macedonia, but also in the whole South-Eastern
Europe, and the recognition as the Bank of the
Year from the renowned international financial
magazine The Banker for the 11
th
year in a row.
Pictured: NLB Banka, Skopje employees
Human Resources
As a market leader, the Group realises that investing in
employees is crucial. Engaged employees contribute
significantly to business goals and results. That’s why the
Group continued with its long-lasting tradition of investing
in employee development, along with searching for new
approaches, and introducing new practices to improve
organisational culture, leadership, and employee experience.
All the while also firmly trying to establish itself as a ‘Top
employer’ on the workforce market.
Employee Headcount
Number of employees
The Group continues with the optimisation of processes and
right-sizing its staffing level. Due to the acquisition of N Banka,
the number of employees rose to 8,475, but has downsized
throughout the year to reach 8,228 by the end of 2022.
Work from home
The Group continuously enables employees, whose presence
on the Group’s premises is not essential to the business process,
to work from home (remotely) (the Group: 36%, NLB: 59%). With
it we are enabling our employees, if they so choose, an option
to better balance their work-life balance.
Striving to remain
a ‘Top Employer’
‘Top Employer’
The Group continues strengthening its Human Resources
(HR) practises based on feedback from reputable institutions
and benchmarks with best-in-class HR practises. In 2022 the
Bank was once again recognised as a ‘Top Employer’ by the
Dutch Top Employer Institute for the 7
th
consecutive year,
demonstrating a high level of expertise and contribution in the
areas from people strategy, leadership, digitalization, talent
acquisition and development, performance management,
sustainability, and a lot more. The Bank will continue to ensure
an even more stimulating work environment in the future.
Continuing a longstanding
tradition of investing
in employees
Organisational culture
Organisational culture is an important driving force of company
development and success, that’s why the Group has decided to
take an active and comprehensive approach to develop it.
After measuring our organisational culture, the activities are
aimed at improving it towards more constructive behavioural
styles that will support the direction that NLB is heading in the
future. Focus groups on three main areas were done throughout
the Group at the end of 2021, through which improvement
initiatives were defined. In 2022, we also defined renewed NLB
values that were defined through workshops by employees
from all levels and throughout the Group, and launched with
several implementation initiatives. A leadership 360 feedback
measurement and assessment, and individual development
planning aimed towards improving organizational culture were
implemented.
Leadership development
Significant influence on employee satisfaction derives from
their working environment, and leaders on all levels have
a significant role in creating a productive atmosphere. The
Group is actively developing leadership competencies of
senior management to align with the activities of changing
organisational culture. In line with this we had two major
activities this year:
•
M/I and L/I 360 feedbacks on culture impact - all B and B1
were provided individual feedback and coaching sessions to
set up development plans.
•
An in-depth Leadership assessment (Boyden Assessment)
was done across the Group. Based on results, development
plans and journey in line with the strategy and culture
improvement, will be done in the following years.
Table 35:
NLB Group headcount by countries
Country
31 Dec 2022
31 Dec 2021
Changes YoY
Slovenia
2,833
(NLB: 2,418,
other: 415)
2,619
(NLB: 2,510,
other: 109)
+214
(NLB: -92,
other: +306)
Serbia
2,614
2,901
-287
North Macedonia
954
877
+77
BiH
971
942
+29
Kosovo
467
463
+4
Montenegro
380
374
+6
Germany
1
1
0
Switzerland
2
2
0
Croatia
6
6
0
Group Total
8,228
8,185
+43
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Top
Employer
in 2022 for the 7
th
consecutive year
Succession
To ensure the leadership succession pipeline, we are identifying
potential successors in all Group members.
Developing talent
Among its employees, the Group identified talents in the fields of
leadership, professional, and young talents. They are provided
additional opportunities, knowledge, and skills needed to
manage and lead in challenges of the future, as well as
individual development activities. This year the topics of change
management, technological trends, communication and data
storytelling and visualization were in focus along with individual
development activities of talents.
Mobility
We adopted a Mobility policy in all Group members to
accelerate and promote mobility within the Group. Virtual
teams were established and few job rotations and permanent
reassignments were realised inside the Group this year.
Retention
We revised our retention strategies and policies across the
Group to better address present and future challenges to better
cope with demanding workforce market.
Developing NLB Employer Brand
To attract top talent throughout the region, the Group has
identified the need to develop the Employer Brand actively. The
Group has done internal and external surveys, interviews with
stakeholders and multiple focus groups to identify the relevant
employer value proposition. Based on this development, an
employee value proposition and communication materials were
prepared.
Also, we have implemented a Group-wide focus on cooperation
with universities, to establish a connection with potential future
employees and to raise the awareness of Group as an attractive
employer.
Employment – Data science hackathon
The strategic direction of the Bank defines the employment
of new profiles needed on a Group level. In line with that, the
Group continued with the organisation of external and internal
NLB Hackathons. This year, we had two hackathons on the
subject of Data Science to find internal and external talents
from our home region and promote the Bank as a desirable
employer.
Engagement of employees
A crucial part of success is the motivation and engagement of
employees. In 2022, a total of 73% of employees participated in
the survey.
Figure 56:
NLB Group Employee Engagement 2022
Engaged
44%
Not engaged
39%
Actively
disengaged
17%
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8,228
employees in the
Group family
Prepared to Tackle
Future Challenges
Various training activities to embrace changes
The Group strives for the high-quality standards of a modern
learning organisation.
Due to the rapidly changing environment, we expanded our
offer of trainings to support new relevant topics (such as
Change management, Data analytics, Digital literacy, ESG,
M&A, etc.), that are changing our business and environment.
Our aim is to make trainings more accessible and on demand
with a wide variety of online content, while also still providing
quality in-class trainings and workshops, internally or
externally.
Trainings, e-learning
The majority of training hours in the Group are provided
through internal trainings (37 %) and internal e-learning
programmes (37 %), while external trainings (18 %) and Udemy
for business (8 %) are also utilised.
Online learning with access to 7,000+ courses
In 2022, Udemy for Business was activated across the Group to
a substantial number of employees, enabling them access to
7000+ English trainings. The aim is to empower employees over
their own development and give them opportunities to upskill
or reskill, at anytime, anywhere, to better prepare themselves
for upcoming challenges.
Well-being & Health
Creating a work environment
The Group is always committed to offering knowledge on
healthy habits, promotes activities that enhance the good
health and satisfaction of employees, and strives to create a
healthy work environment that enables quality interpersonal
relationships and work-life balance.
Because of this, we are also the owner of a family-friendly
certificate.
Promoting healthy habits and new health
and safety measures
The Group organised Health trainings focused on stress
management, healthy habits, mental health, mindfulness,
personal energy, and communication. Between May and
November, the Bank also had a Tour de NLB Group, a steps-
counting activity through a mobile app, with which employees
were encouraged to walk more for a good cause.
For an employee working in the companies within the Group, salary is composed of:
Fixed part
Determined according to the complexity of the job position for which the employee has concluded a contract of employment.
Variable part
Depends on the employee’s performance.
Employees are assessed and awarded:
- quarterly or half-yearly compensation, and
- annual rewards related to the business performance of the bank in which they work.
Performance assessment is done by the head of the employee’s organisational unit using a top-down approach to evaluate
the employee’s achievements in relation to goals set for a particular assessment period (quarter or half-year). The goals are set
according to the ‘SMART’ method, meaning that they have to be specific, measurable, achievable, relevant, and time-bound.
Remuneration policy for members
of the Supervisory Board and Management
Board of NLB
On 19 October 2022, an amended Remuneration Policy of
members of the Supervisory Board of NLB and members of the
Management Board of NLB was adopted by the Supervisory
Board of NLB. On 12 December 2022, the Remuneration Policy
was submitted to the General Assembly of NLB for voting. The
voting on the General Assembly is a consultative nature.
Members of the Supervisory Board may receive remuneration
that is compliant with the relevant resolutions of the Bank’s
General Meeting.
Members of the Management Board receive remuneration
consisting of a fixed part of the salary and a variable part of
the salary. The variable part of the remuneration for each
member of the Management Board is awarded and paid in
the form of cash if the amount of the variable part does not
exceed EUR 50,000 and is not higher than one-third of his/
her total remuneration for the respective business year. The
variable part of the remuneration for each member of the
Management Board is awarded and paid in the form of cash
and in financial instruments if the amount of the variable part
exceeds EUR 50,000 and is higher than one-third of his/her
total remuneration for the respective business year.
At least 50% of the variable part of the salary of the
Management Board member awarded for an individual
business year shall be deferred for a period of at least five
years starting on the day of payment of the non-deferred part
of the variable part of the salary.
Remuneration policy for employees
in NLB and in the Group
In ‘Remuneration Policy for Employees in the Group,’ the
basic framework of principles for rewarding employees in
the Group are presented. The remuneration policy defines
fixed and variable remuneration, the goal-setting system and
performance criteria (Key Performance Indicators (KPIs)),
and sets out the conditions for the allocation and payment
of the variable part of remuneration, including deferral,
malus, retention, and claw back of the variable part of
remuneration for identified employees, and severance pays
and compensation for the non-competition period for identified
employees and pension benefits for all employees.
The Remuneration System as a Motivation for Engaged
and Committed Employees
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On average
36 %
of the Group’s employees
worked from home
Diversity Policy
Framework
The Diversity Policy sets the framework for the Bank’s
commitments to diversity in relation to representation on
the Management Body, and senior management on certain
aspects where specific goals and implementation of these
goals related to gender structure, age structure, professional
competencies, skills and experience, continuity of composition
of the management body and senior management,
international experience, personal integrity, and geographical
provenance are defined.
Objectives
•
Cover an adequately wide range of knowledge, skills, and
expert experience of its members, and are composed with
regard to the following criteria: experience, reputation,
management of any conflicts of interest, independence,
available time, and collective suitability of the body as a
whole;
•
Diversity as regards gender representation;
•
Diversity as regards the age structure, which should reflect
the age structure in the Bank to the largest extent possible;
•
Diversity as regards international experience;
•
Continuity of composition of the management body and
senior management;
•
The highest expectations relating to personal integrity and
diversity with regard to geographical provenance.
The goals of the Policy shall also be reasonably applied to the
provision of diversity of the wider management.
Table 36:
Diversity - review of management bodies and senior management
Supervisory Board
of NLB
Management Board
of NLB
Senior Management
of NLB
2022
Plan for
2023
2022
Plan for
2023
2022
Plan for
2023
Wide range of knowledge, skills
and professional experience
High
High
High
High
High
High
International experience of the
members in different areas
Medium
High
Medium
High
Medium
High
Medium
High
Medium
High
Medium
High
Continuity of composition of
the management body
High
High
High
High
High
High
Personal integrity
High
High
High
High
High
High
Geographical provenance
Medium
High
Medium
High
Medium
High
Medium
High
Low
Low
Age structure
20-30 = 0
0
20-30 = 0
0
20-30 = 0
0
30-40 = 0
0
30-40 = 0
0
30-40 = 3
1
40-50 = 1
2
40-50 = 3
2
40-50 = 20
18
50-60 = 7
5
50-60 = 3
4
50-60 = 13
16
60+ = 2
5
60+ = 0
0
60+ = 1
2
Share of women
30%
42%
16.7%
16.7%
41%
45%
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Corporate
Governance
Corporate governance of the Bank is based on legislation of
the RoS, particularly (but not exclusively) the provisions of
the Companies Act (ZGD-1) and the Banking Act (ZBan-3), the
Decision of the BoS on Internal Governance, the Management
Body, and the Adequate Internal Capital Assessment
Procedure for Banks and Savings Banks, the relevant EBA
Guidelines on internal governance, the EBA Guidelines on the
assessment of the suitability of members of the management
body and key function holders, the EBA Guidelines on
prudent remuneration, and the relevant EU regulations
regarding sustainability issues and other relevant RoS and EU
regulations.
Apart from binding legal framework, the Bank also follows the
Slovenian Corporate Governance Code for Listed Companies
(valid since 1 January 2022). In 2022, substantive changes were
made to the mentioned Code. It applies to the Bank for the 2022
financial year. The Code defines the governance, management,
and leadership principles based on the ‘comply or explain’
principle of companies listed on the
Ljubljana Stock Exchange
.
Deviations from the recommendations of the mentioned Code
are published in the NLB Group Annual Report in the chapter
Corporate Governance Statement of NLB
. The mentioned
statement is prepared according to Article 70 (paragraph 5) of
the Companies Act (ZGD-1). The mentioned statement is also
published on the
Bank’s webpage
, as well as on the webpage
of the
Ljubljana Stock Exchange – SEOnet
.
Rules and Procedures
Corporate governance of the Bank includes the processes
through which Bank objectives are set and pursued (directed
and controlled). Lately, it is becoming an efficient way to
channel investor-driven initiatives related to sustainability. The
principles of corporate governance identify the distribution
of rights and responsibilities among different stakeholders in
the Bank (Management and Supervisory Board, shareholders,
investors, creditors, auditor, regulators, and other stakeholders),
and include the rules and procedures for making decisions in
corporate affairs. The most important rules and procedures are:
Articles of Association of NLB d.d.
In accordance with the applicable Banking Act (ZBan-3) and
Companies Act (ZGD-1), the Articles of Association of NLB: the
Bank has a two-tier governance system, according to which the
Bank is managed by the Management Board and its operations
are supervised by the Supervisory Board (
https://www.nlb.si/
corporate-governance
). Shareholders exercise their rights at
General Meetings of Shareholders.
Corporate Governance Policy of the NLB and
NLB Group Corporate Governance Policy
The corporate governance framework of the Bank, being the
Corporate Governance Policy of NLB (February 2023), is drawn
up jointly by the Management Board and the Supervisory Board
of the Bank. In this policy, the Management and Supervisory
Board publicly discloses commitments to shareholders, clients,
creditors, employees, and other stakeholders as a whole, and
explains how the Bank is managed and supervised, as well as
adopts a decision on which corporate governance code the
Bank follows (
https://www.nlb.si/corporate-governance
). The
Corporate Governance Policy of NLB should be read together
with the NLB Group Corporate Governance Policy in which the
corporate governance principles and mechanisms of the Group
members (NLB excluded) are defined and governed.
NLB Group Code of Conduct
In the NLB Group Code of Conduct, values, mission, and core
principles of conduct are defined together with set guidelines to
which the Group is committed. The Code describes the values
and the basic principles of ethical business conduct that the
Group respects, promotes, and expects to be followed in the
whole Group. Operating with integrity and responsibility is a key
element of the Group’s corporate culture. The Code demands
that every employee, regardless of their job or location of work
and every other stakeholder of the Group, complies with the
highest standards of integrity (
https://www.nlb.si/code-of-
conduct
).
ESG factors and indirect economic factors are comprehensively
recognised and managed according to GRI (Global Reporting
Initiative – Global Standards (GRI GS)) standards. Key ESG
information is published in the following chapters of this report
or other related webpages:
Environment (E):
• In the chapter
Sustainability
• In separately published
NLB Group Sustainability Report 2022
published on the Bank’s webpage
• In the chapter
Risk Management
, subchapter
Incorporating
ESG Risks
• In the chapter
Statement of Management of Risk
•
In a separate report on
Pillar 3 Disclosures
ESG Risks are
disclosed
• in
Note 6
of the financial part of the report
Social (S):
• In the chapter
Human Resources
•
In the diversity and remuneration chapters in a separate
report on
Pillar 3 Disclosures
according to Basel Standards
•
In the Remuneration policy which is public disclosed on the
Bank’s webpage.
Governance (G):
•
In this chapter of the report
• In the chapter
Corporate Governance Statement of NLB
and
on the
Bank’s webpage
and on the webpage of the
Ljubljana
Stock Exchange
110
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SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
The Bank’s Governing
Bodies
The Bank’s corporate governance is based on a two-tier system
in which the Management Board manages the Bank, while its
daily operations are supervised by the Supervisory Board.
General Meeting of Shareholders
Supervisory Board
Management Board
General Meeting of Shareholders
The shareholders exercise their rights related to the Bank’s
operations at General Meetings. The Bank’s General Meeting
passes decisions in accordance with the legislation and
the Bank’s Articles of Association. Decisions adopted by
the General Meeting include, among others: adopt and
amend the Articles of Association, use of distributable profit,
grant a discharge from liability to the Management and
Supervisory Board, changes to the Bank’s share capital,
appoint and discharge members of the Supervisory Board
(representatives of capital), remuneration of members of the
Supervisory and Management Boards, and authorisation
regarding the characteristics of the issue of securities.
There were two General Meetings of Shareholders in 2022.
Shareholders of NLB gathered at the 38
th
General Meeting
on 20 June 2022. Due to changes brought by the COVID-19
pandemic, the General Meeting was hybrid, as it was held
live and online. At the General Meeting, shareholders
acknowledged the adopted NLB Group 2021 Annual Report, the
Report of the Supervisory Board of NLB on the Results of the
Examination of the NLB Group Annual Report 2021, the Report
on Renumerations for the Business Year 2021, and the Additional
information to the Report on Remuneration for the Business
Year 2021 based on SSH’s Baselines. The shareholders also
decided on the allocation of distributable profit for 2021 and
granted a discharge from liability to the Management Board
and Supervisory Board of NLB for the previous year.
The shareholders decided on the allocation of distributable
profit for 2021. The distributable profit of the Bank as at
31 December 2021 was EUR 458,266,602.05. Shareholders
decided that the part of the distributable profit in total amount
of EUR 50 million shall be paid out to the shareholders as a
dividend, which amounts to EUR 2.50 gross per share (the first
tranche).
The General Meeting of NLB also took note of various reports
and voted on the proposal regarding the amendments and
supplements to the Articles of Association of NLB, appointed the
auditing company KPMG Slovenija, d.o.o. as the auditor of NLB
for the financial years 2023–2026 and adopted the Policy on
the provision of diversity of the management body and senior
management.
The 39
th
General Meeting of NLB Shareholders held on
12 December 2022 confirmed on additional allocation of
distributable profit for 2021, more precisely on the second
tranche of dividend payments, the payment of additional
dividends at EUR 2.50 per share, making a total dividend pay-
out in 2022 of EUR 100 million. The remaining part of the NLB’s
distributable profit will remain undistributed and represents
retained earnings.
At the General Meeting, NLB Shareholders also voted on the
Remuneration Policy for the Members of the Supervisory Board
of NLB and the Members of the Management Board of NLB,
and took note of the termination of the term of office of two NLB
Supervisory Board members - workers’ representatives, namely:
•
due to statement of Janja Žabjek Dolinšek made on 26 May
2022 regarding her termination of the function of a member
of the Supervisory Board of NLB, because she was leaving
NLB, her term of office was terminated on 8 July 2022, as the
Works Council recalled her,
•
that NLB Works Council on 12 September 2022 passed a
decision on the recall of Bojana Šteblaj from the function
of a member of the Supervisory Board of NLB, workers’
representative, based on which her term of office in the
Supervisory Board of NLB terminated on 12 September 2022.
More information on the work of the General Meeting of the
Shareholders activities is available in the chapter
Corporate
Governance Statement of NLB
, on the
Bank’s website
and the
website of the
Ljubljana Stock Exchange (SEOnet)
.
The Supervisory Board
In accordance with the Articles of Association, the Supervisory
Board consists of 12 members, of which eight members
represent the interests of shareholders, and four members
represent the interests of employees. Members of the
Supervisory Board of the Bank representing the interests of
shareholders are elected and recalled at the Bank’s General
Meeting from persons proposed by shareholders or the
Supervisory Board of the Bank. Members of the Supervisory
Board of the Bank representing the interests of employees are
elected and recalled by the Workers’ Council of the Bank. All
Supervisory Board members must be independent experts.
As at 31 December 2022:
10 (8 are
representatives of
capital, while 2 are
representatives of
workers)
(i)
3 out of 10
members
were female
(30 %)
(i)
Number of members:
Diversity:
(i) During 2022 also two additional female members were representatives of
workers, more information below.
There were two changes in the composition of the Supervisory
Board in 2022. Janja Žabjek Dolinšek on 26 May 2022 made
a statement regarding her termination of the function
of a member of the Supervisory Board of NLB–workers’
representative, based on which her term of office terminated
on 8 July 2022. The NLB Works Council on 12 September
2022 passed a decision on the recall of Bojana Šteblaj from
the function of a member of the Supervisory Board of NLB–
workers’ representative, based on which her term of office
terminated on 12 September 2022. The General Meeting of
NLB, on its session dated 12 December 2022, took note of the
termination of term of office of two members of the Supervisory
Board of NLB–workers’ representatives.
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SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Representatives of Capital
Primož Karpe, M.Sc.
Chairman
Term of office:
2016–2020,
renewed term 2020–2024
Andreas Klingen
Deputy Chairman
Term of office:
2015–2019,
renewed term 2019–2023
Link to CV
Link to CV
Membership in NLB
Supervisory Board
committees:
• Nomination Committee
(Chairman)
•
Audit Committee (Member)
•
Operations and IT
Committee (Member)
Membership in NLB
Supervisory Board
committees:
• Nomination Committee
(Deputy Chairman)
•
Risk Committee (Chairman)
•
Operations and IT
Committee (Member)
Membership in management
bodies of related or
unrelated companies:
•
Angler d.o.o. – Director
•
Aroma Global 3
Ltd.–Chairman of the
Supervisory Board
Membership in management
bodies of related or
unrelated companies:
•
Credit Bank of Moscow–
Member of the Supervisory
Board (until 14 March 2022)
•
Kyrgyz Investment and
Credit Bank CISC–Member
of the Board of Directors
•
Nepi Rockcastle N.V. –
Lead Independent Non-
Executive Director
David Eric Simon
Member
Term of office:
2016–2020,
renewed term 2020–2024
Islam Osama Zekry, Ph.D.
Member
Term of office:
2021–2025
Link to CV
Link to CV
Membership in NLB
Supervisory Board
committees:
•
Audit Committee (Chairman)
•
Risk Committee (Member)
Membership in NLB
Supervisory Board
committees:
•
Operations and IT Committee
(Deputy Chairman)
•
Risk Committee (Member)
Membership in management
bodies of related or
unrelated companies:
•
Jihlavan a.s.–Chairman of
the Supervisory Board
•
Czech Aerospace industries
sro–Legal representative
•
Central Europe Industry
Partners a.s.–Sole Member
of the Supervisory Board
Membership in management
bodies of related or
unrelated companies:
•
CIB Housing association,
Egypt–President of the
Supervisory Board
•
Egyptian AI Council
(Ministry of Communication
and Information
Technology)–Member of
the Supervisory Board
Shrenik Dhirajlal
Davda, MBA, LLB
Member
Term of office:
2019–2023
Mark William Lane
Richards, M.Sc.
Member
Term of office:
2019–2023
Link to CV
Link to CV
Membership in NLB
Supervisory Board
committees:
• Risk Committee
(Deputy Chairman)
• Remuneration
Committee (Member)
• Audit Committee
(Deputy Chairman)
Membership in NLB
Supervisory Board
committees:
•
Operations and IT
Committee (Chairman)
• Remuneration Committee
(Deputy Chairman)
•
Risk Committee (Member)
Membership in management
bodies of related or
unrelated companies:
• PJSC Ukrgasbank–
Independent Member of
the Supervisory Board
•
IPSO, UK–Lay Member of the
Board (since 8 March 2022)
Membership in management
bodies of related or
unrelated companies:
•
Vencap International pic
Ukraine (UK)–Chairman
•
Berry Palmer & Lyle Ltd.
(BPL Global) (Lloyds of
London insurance Broker)–
Non-Executive Director
•
Sheffield Haworth Ltd–
Non-Executive Director
Gregor Rok Kastelic
Member
Term of office:
2019–2023
Verica Trstenjak, Ph.D.
Member
Term of office:
2020–2024
Link to CV
Link to CV
Membership in NLB
Supervisory Board
committees:
• Remuneration Committee
(Chairman)
•
Audit Committee (Member)
•
Risk Committee (Member)
Membership in NLB
Supervisory Board
committees:
• Nomination Committee
(Member)
Membership in management
bodies of related or
unrelated companies:
• None
Membership in management
bodies of related or
unrelated companies:
•
European Union Agency for
fundamental rights, Vienna–
Member of the Management
Board (until June 2022)
Representative of Employees
Tadeja Žbontar Rems, M.Sc.
Member
Term of office:
2021–2025
Sergeja Kočar, M.Sc.
Member
Term of office:
2020–2024
Link to CV
Link to CV
Membership in NLB
Supervisory Board
committees:
•
Operations and IT
Committee (Member)
Membership in NLB
Supervisory Board
committees:
• Nomination Committee
(Member)
• Remuneration
Committee (Member)
Membership in management
bodies of related or
unrelated companies:
• None
Membership in management
bodies of related or
unrelated companies:
• None
Further information about the work and composition of the
Supervisory Board is available in the chapter
Corporate
Governance Statement of NLB
.
As at 31 December 2022, the Supervisory Board had the following members:
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Performance Overview
Risk Management
Events After 2022
Financial Report
Committees of the
Supervisory Board
The Supervisory Board appoints committees that prepare
proposals for resolutions passed by the Supervisory Board,
ensures their implementation, and performs other expert
tasks. The Bank’s Supervisory Board has five collective
decision-making and advisory committees, namely:
Further information about the work and composition of the
Committees of the Supervisory Board is available in the chapter
Corporate Governance Statement of NLB.
Audit Committee
Risk Committee
Nomination
Committee
Remuneration
Committee
Operations and
Information
Technology (IT)
Committee
David Eric
Simon
,
Chairman
Shrenik
Dhirajlal
Davda
,
Deputy
Chairman
Primož Karpe
,
Member
Gregor Rok
Kastelic
,
Member
Andreas
Klingen
,
Chairman
Shrenik
Dhirajlal
Davda
,
Deputy
Chairman
Islam Osama
Zekry
,
Member
Mark William
Lane Richards
,
Member
David Eric
Simon
,
Member
Gregor Rok
Kastelic
,
Member
Primož Karpe
,
Chairman
Gregor Rok
Kastelic
,
Chairman
Mark William
Lane Richards
,
Chairman
Andreas
Klingen
,
Deputy
Chairman
Mark William
Lane Richards
,
Deputy
Chairman
Islam Osama
Zekry
,
Deputy
Chairman
Verica
Trstenjak
,
Member
Shrenik
Dhirajlal Davda
,
Member
Andreas
Klingen
,
Member
Bojana
Šteblaj
,
Member
(until 12
September
2022)
Sergeja Kočar
,
Member
Bojana
Šteblaj
,
Member
(until 12
September
2022)
Sergeja Kočar
,
Member
Primož Karpe
,
Member
Janja
Žabjek
Dolinšek
,
Member
(until 8 July
2022)
Tadeja
Žbontar Rems
,
Member
Audit Committee
Risk Committee
Nomination
Committee
Remuneration
Committee
Operations and
Information
Technology (IT)
Committee
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SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
The Management Board
The Management Board represents the Bank and manages
its daily operations, independently and at its own discretion,
as provided for by the applicable laws and the Articles of
Association of NLB. In accordance with mentioned Articles
of Association, the Management Board has three to seven
members (the president and up to six members) which
are appointed and dismissed by the Supervisory Board.
The president and members of the Management Board
are appointed to a five-year term of office and may be
reappointed or dismissed early in accordance with the law
and Articles of Association.
As at 31 December 2022:
six members
five-year
term of office
Number of members:
Mandate:
On 20 January 2022, the Supervisory Board appointed
Hedvika Usenik, Antonio Argir, and Andrej Lasič as three new
members of the Management Board. They assumed their
functions on 28 April 2022, after receiving approval from the
regulator. They all come from NLB or the Group, have extensive
experience and a proven value-creating track record. Upon
extension, the Management Board of the Bank consists of
Blaž Brodnjak as President & CEO, Archibald Kremser as CFO,
Andreas Burkhardt as CRO, as well as Hedvika Usenik as
Chief Marketing Officer (CMO), responsible for Retail Banking
and Private Banking, Andrej Lasič as CMO, responsible
for Corporate and Investment Banking, and Antonio Argir,
responsible for Group governance, payments, and innovations.
Blaž Brodnjak
CEO
Term of office: 2012–2016, 2016–2021,
renewed term 2021–2026
(CEO since 2016)
Andreas Burkhardt
CRO
Term of office:
2013–2016, 2016–2021, renewed
term 2021–2026
Archibald Kremser
CFO
Term of office:
2013–2016, 2016–2021,
renewed term 2021–2026
Link to CV
Link to CV
Link to CV
Other important functions
and achievements:
•
More than 22 years of experience at
managerial positions on all levels
of international banking groups.
•
Named ‘Manager of the Year 2022’ by
Managers’ Association of Slovenia
•
Was a chairman or member of the
supervisory boards of 13 commercial
banks in six countries, three insurance
companies in three countries, leading
asset management company in Slovenia
and multinational production group.
Other important functions
and achievements:
•
21 years of experience in banking,
especially in Central Europe.
Other important functions
and achievements:
•
More than 22 years of experience in the
financial services industry in Austria,
CEE, and SEE focusing on finance
and asset management, strategy, and
corporate development, as well as
performance improvement assignments.
Direct responsibility:
•
Strategy and Business Development
•
Legal and Secretariat
• Communication
•
Human Resources and
Organisation Development
• Internal Audit
•
Compliance and Integrity
Direct responsibility:
• Global Risk
•
Credit Risk – Corporate
•
Credit Risk – Retail
•
Workout and Legal Support
• Restructuring
•
Evaluation and Control
•
Financial Instruments Processing
•
Corporate Customer Delivery
•
Retail Banking Processing
Direct responsibility:
•
Financial Accounting and Administration
• Controlling
• Financial Markets
•
Group Real Estate Management
• IT Architecture
• IT Delivery
• Data Management
• IT Governance
• IT Infrastructure
• IT Security
• Procurement
Membership in management or supervisory
bodies of related or unrelated companies:
•
Chairman of the Supervisory Board:
•
NLB Banka, Skopje
•
Chairman of the Board of Directors:
•
NLB Banka, Prishtina
•
Member of the Board of Directors:
•
NLB Komercijalna Banka, Beograd
•
President of the Association
of Banks in Slovenia
•
President of the Board of
Governors: AmCham Slovenia
•
Member of Executive Committee of
the Handball Federation of Slovenia
•
Member of the Board of Directors:
• Cedevita Olimpija
(from 1 February 2022 – present)
Membership in management or supervisory
bodies of related or unrelated companies:
•
Chairman of the Supervisory Board:
•
NLB Lease&Go, Ljubljana
•
NLB Bank, Banja Luka
•
NLB Bank, Sarajevo
Membership in management or supervisory
bodies of related or unrelated companies:
•
Chairman of the Supervisory Board:
•
NLB Banka, Podgorica
•
NLB Komercijalna Banka, Beograd
As at 31 December 2022, the composition of the Management Board was as follows:
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Events After 2022
Financial Report
Antonio Argir
Responsible for Group governance,
payments and innovations
Term of office: 2022–2027
Andrej Lasič
CMO (responsible for Corporate
and Investment Banking)
Term of office: 2022–2027
Hedvika Usenik
CMO (responsible for Retail
Banking and Private Banking)
Term of office: 2022–2027
Link to CV
Link to CV
Link to CV
Other important functions
and achievements:
•
Under the management of Antonio Argir,
NLB Banka Skopje marked exceptional
growth in all segments of its operations
and perceived as the most innovative
bank on the market, a significant
increase in the profitability of the bank,
and share price increased fivefold.
•
Vice President of the Economic Chamber
of North Macedonia (2018 – present)
•
Member of the Assembly of
the Macedonian Banking
Association (2018 – 2021)
Other important functions
and achievements:
•
Over 25 years of experience in
corporate and investment banking
in international banking groups
•
President of the Supervisory Board
of N Banka (2022 – present)
•
Member of the Supervisory Board,
NLB Bank, Sarajevo (2021 – present)
•
Member of the Supervisory Board, NLB
Lease&Go, Ljubljana (2020 – present)
Other important functions
and achievements:
•
Over 20 years of experience in
international banking groups, thereof more
than 16 years of managerial experience
•
President of Supervisory Board of
NLB Skladi (2021 – present)
•
Member of Supervisory Board of NLB
Banka, Banja Luka (2021 – present)
•
Member of Supervisory Board
of NLB Banka, Skopje and NLB
Banka, Prishtina (2019 – 2021)
Direct responsibility:
• Group Steering
• Cash Processing
• Payment Processing
•
Card Operations, ATM business
and payment services
Direct responsibility:
•
Capital Structure Advisory and
Cross Border Financing
• Large Corporates
•
Small and Mid-Corporates
•
Trade Finance Services
•
Investment Banking and Custody
Direct responsibility:
• Private Banking
•
Call Centre 24/7
• Distribution Network
•
Sales Development and Management
Membership in management or supervisory
bodies of related or unrelated companies:
• Vice President:
•
Economic Chamber of North Macedonia
•
Member of the Supervisory Board:
•
NLB Lease&Go, Ljubljana
Membership in management or supervisory
bodies of related or unrelated companies:
•
Chairman of the Supervisory Board:
• N Banka
•
Member of the Board of Directors:
•
NLB Bank, Sarajevo
Membership in management or supervisory
bodies of related or unrelated companies:
•
Chairman of the Supervisory Board:
• NLB Skladi
•
Member of the Board of Directors:
•
NLB Bank, Banja Luka
Further information about the work and composition of the
Management Board is available in the chapter
Corporate
Governance Statement of NLB.
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Events After 2022
Financial Report
Collective Decision-making Bodies
Different committees, commissions, boards, and working bodies
may be appointed by the Management Board for execution of
individual tasks within powers of the Management Board.
Corporate Credit Committee
Assets and Liabilities Management Committee
of the NLB Group
NLB Operational Risk Committee
The Change the Bank Committee
Chairman: CRO
Chairman: CFO
Chairman: CRO
Chairman: CEO
Number of members: 8
Number of members: equal to the number of the
appointed members of the Management Board
Number of members: 16
Number of members: equal to the number of the
appointed members of the Management Board
The Committee determines credit ratings and makes
decisions on the reclassification of clients and approves
commercial banking investment transactions and limits
that are beyond the competencies of the directors.
The Committee adopts decisions on investment
transactions in commercial banking within the statutory
powers in the areas of corporate banking in the Bank
(all companies, banks, and financial institutions),
operations with clients in intensive care, and NPL. As a
rule, committee meetings are convened once a week.
The Committee monitors conditions in the
macroeconomic environment and analyses the balance,
changes to and trends in the assets and liabilities of the
Bank and the Group companies, and drafts resolutions
and issues guidelines for achieving the structure of
the Bank’s and the Group’s balance sheet. Committee
meetings are generally convened once a month.
The Committee is responsible for monitoring,
guiding, and supervising operational risk
management in the Bank, and for transferring this
methodology to the Group members. As a rule,
the Committee meets once every two months.
The Committee is responsible for adopting decisions
related to the development portfolio with the aim
of transforming the Bank and decisions related to
adopting the development guidelines. As a rule, the
Committee meetings are convened once a month.
The Risk Committee
The Group Real Estate Management Committee
The Sales Committee
Private Individual Credit Committee
Chairman: CRO
Chairman: CFO
Chairman: CMO (responsible for
Corporate and Investment Banking)
Chairman: Director of Credit Risk – Retail
Number of members: 12
Number of members: 3
Number of members: 13
Number of members: 5
The Risk Committee monitors and periodically
reviews matters related to risk and commercial
risk and prepares materials for the Management
Board to take decisions. As a rule, committee
meetings are convened quarterly.
The Committee is in charge of giving opinions on
acquisition/purchase price of real property and
additional investments in real property provided
as collateral for NPL, the selling price of own real
property, and the acquisition/purchase price for the
real property mortgaged in the sale of receivables. As
a rule, Committee meetings are convened once a week.
The Sales Committee adopts decisions on the
management of the range of products and services and
the relations with the clients in the area of sales. As a
rule, Committee meetings are convened once a week.
The Committee decides on the approval of loans and
other investment proposals, the conditions of which
deviate from standard banking products and services,
and which represent additional risks for the Bank.
As a rule, meetings are convened when necessary.
The Management Board also appointed working
bodies that operate at a lower level:
Committee for New and Existing
Products
Group Real Estate Management
Sub Committee
Committee for Business IT
Architecture
Data Management Committee
Anti-Money Laundering
Commission
Corporate Customer Acceptability
Committee
Advisory bodies of the Bank’s Management Board
The Watch List Committee
NLB Group Non-Performing Assets Divestment Committee
NLB Group Sustainability Committee
Chairman: CRO
Chairman: Director of Workout and Legal Support
Chairman: CEO
Number of members: 7
Number of members: 7
Number of members: 17
The Watch List Committee is a body which monitors the
progress of activities for clients on the Watch list. As a
rule, committee meetings are convened quarterly.
The NLB Group Non-Performing Assets Divestment Committee
monitors operations of Non-Core Group Members and issues
opinions, recommendations, and initiatives. The Committee shall
discuss the strategies regarding optimal management of the Group
members and shall monitor realisation of their strategic objectives.
As a rule, committee meetings are convened quarterly.
Committee oversees the integration of the ESG factors to the NLB Group
business model in a focused and coordinated way across the company and
issues opinions, recommendations, initiatives, and takes relevant decisions
when needed. As a rule, committee meetings are convened quarterly.
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As the parent bank, NLB implements the corporate
governance of the Group members in compliance with EU
and BoS legislation, the local legislation, and regulatory
requirements applicable to respective Group members, while
also considering internal rules, ECB Guidelines, and other
applicable regulations.
The roles, authorisations, and responsibilities of individual
bodies and organisational units, as well as the manner to
coordinate their operations to achieve the set business goals,
are stipulated comprehensively in the NLB Group Corporate
Governance Policy. In the Bank, the Group Steering Department
is the principal partner of the Bank’s Management Board in the
governance of strategic and non-strategic Group companies,
and is responsible for appropriate corporate governance,
the alignment of strategies, and the objectives achieved by
subsidiaries.
Well-functioning Corporate Governance in the Group is of
special importance as several new companies were added to
the Group in 2022:
• N Banka, Ljubljana,
• NLB DigIT, Beograd,
• NLB Lease&Go, Skopje,
• NLB Lease&Go Leasing, Beograd.
The Group is governed:
•
In accordance with fundamental corporate rules through
various bodies of the Group members:
•
By voting at general meetings of the Group members;
•
By exercising supervision through the supervisory bodies of
the Group members;
•
With proposals for appointing the management of the
Group members;
•
With proposals for appointing representatives of the Bank
to supervisory bodies;
•
Through participation of Bank’s representatives in various
committees and commissions of the Group members.
NLB Group’s Corporate
Governance
•
Through mechanisms that ensure efficient business
monitoring and governance, such as:
•
Harmonisation of operations in accordance with the so-
called “competence line principle”;
•
Management Board of NLB for NLB Group, NLB Group
Leadership meetings, NLB Group ALCO meetings, CMO/
CFO/CIO calls, etc.;
•
Development activities carried out via cross-functional
working groups, group projects, competence centres,
centres of excellence, etc.;
•
Through additional supervision of NLB Group members
carried out by control functions (risk management, internal
audit, compliance, AML, information, and physical security)
and external supervising authorities (ECB, local regulators,
external auditors).
In recent years, the concept of corporate governance of the
Group has been upgraded, and the role of members of the
Management Board of the Bank in management of other Group
members strengthened. The target composition of supervisory
bodies in the Group members was established, the functioning
of the supervisory bodies optimised, and the reporting and
standards related to the harmonisation of operations simplified.
In line with strategic aspirations, the concept of ‘country
managers’ was fully introduced with the main goal to support
and steer the Group members, as well as to be a strong link
between Group members and the Bank. They also facilitate
best practice-sharing on different levels. Stream coordinators
were introduced to address the facilitation of more in-depth
knowledge of competence lines and greater integration
between streams and the Group members, the increasing
transmission of current information, needs, and other
requirements from the Group members, and exploitation of
synergies at the Group level.
The legal and organisational structure of the banking
group, including a description of the internal governance
arrangements, the arrangements with regard to close links and
the arrangements regarding the governance of subsidiaries,
are available on the
Bank’s webpage
.
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The Group addresses the challenges of high regulation and
strict regulatory requirements with a systematic approach
to mitigating compliance risks. It is important to ensure that
employees and decision-makers know and understand
the purpose and objectives of the regulations. The Group
is continuously strengthening the compliance function and
diligence of its operations.
A culture of compliance is integrated into the day-to day
business of the Bank to support its operations, to contribute
to its strong internal control environment, and to ensure that
compliance risks are mitigated.
Group-wide ethics and
integrity standards
Within the framework of the programme of ensuring business
compliance, the Group also deals with the ethics and integrity
of the organisation. For that reason, all of the employees are
included in yearly training and awareness-raising activities
in the areas of general ethics, anticorruption, anti-money
laundering, information security, etc. The Group’s Code
of Conduct provides guidance and principles of expected
behaviour regarding ethical conduct and requires appropriate
conduct from all employees at any level of the organisation,
including its contractors.
The regime on inside
information (MAR)
In line with the Market Abuse Regulation (MAR), and other
relevant regulations, the Bank has a system in place on the level
of the Bank and its entire Group for managing and publicly
disclosing inside information on NLB in a manner that enables
it to comply with the obligations related to inside information
identification and disclosure in accordance with the rules and
regulations applicable at any time. Also, the Bank has a system
in place implementing the market abuse prevention regime
in accordance with MAR to prevent insider trading, market
manipulation, and illegal disclosure of inside information.
Compliance and
Integrity
Prevention of Money
Laundering and Terrorism
Financing and Financial
Sanctions Compliance
The Bank complies with national regulations on Anti-Money
Laundering and Countering the Financing of Terrorism (AML/
CFT), including the EBA, BoS, and other competent authorities’
guidelines and standards. The RoS is a member of the EU, and
thus subject to the European AML/CFT Directives, the means
by which the EU transposes the
Financial Action Task Force
(FATF)
recommendations throughout the EU. For the Bank, it
is of paramount importance to effectively mitigate the risk of
money laundering, financing of terrorism, and breaches of
financial sanctions. For these reasons, the rules, procedures,
and technology in AML/CFT area are subject to strict and
unified policies and standards. The same principles are also
applied for setting out the Bank’s framework on financial
sanctions. The Bank regularly updates and enhances the
governance in line with directions set by the BoS. Through the
system of performing risk assessment, regular reporting, and
Identification,
assessment, and
management of
compliance, and
integrity risks at
the Bank and the
Group levels
Oversight,
monitoring, steering,
and managing the
Group compliance
function and
programme
(I)
Business ethics and
corporate integrity
Physical / technical
security
The
Compliance and
Integrity in the
Bank addresses
the following
risk areas:
Fit and proper
assessment
procedures (as part of
assessing reputation,
financial strength,
time availability, and
conflict of interests)
Fraud prevention
and investigation
AML/CTF
Privacy data
protection and
information
security
Conflict of interests,
gifts, and hospitality
management
Corruption
prevention
Regulatory
compliance
(i) Established by standards for compliance and integrity for the Group and implementation of monitoring by off-site data analysis and onsite visits.
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new laws, draft laws, regulations,
and other information regarding
regulatory environment of the Bank
reviewed
constant onsite and off-site control, the headquarters effectively
monitors the implementation and execution of standards
throughout the Group.
The Bank regularly performs customer due diligence, following
the risk-based approach and, in the case of enhanced
risk, performs additional measures both in the segment of
‘Know your customer,’ as well as ongoing monitoring of the
transactional activities. In the case of detected deviations,
also considering the AML/CFT indicators, the AML function
of the Bank ensures the review and, if required by AML/CFT
legislation, reports the customers and transactions to the
competent Financial Intelligence Unit. In its Acceptance Policy,
the Bank has also adopted additional measures to prevent
onboarding of customers that do not correspond to its risk
appetite. The Bank also ensures a high level of awareness on
the AML/CFT area and the area of financial sanctions with
regular training of all employees of the Bank.
Concerning the changed geopolitical environment related
to the Russian aggression in Ukraine, the Bank regularly
monitors and manages all newly introduced financial sanctions
stemming from all relevant regimes.
Information security and
personal data protection
The information security area,
inter alia
, focused on
implementation of measures for increasing the level of
information/cyber security, as well testing the cyber security
resilience of information systems (pen-tests).
Furthermore, in line with the plan, several internal assessments/
compliance checks according to ISO/IEC 27001 standard
were carried out in 2022, including assessment of information
security at 41 outsourcing providers. Special obligatory
e-trainings in the field of information security and social
engineering were prepared for all employees and executed as
part of prevention measures in this area.
In second half of 2022, the Bank detected increase in cyber
fraud attempts of the Bank clients. This prompted the Group to
respond by implementing additional controls mechanisms to
counter client abuse risk.
New information security approaches were introduced
across the Group, that improved the visibility and autonomy
of each local Chief Information Security Officer (CISO) office
in core subsidiaries. The focus was on awareness regarding
local responsibility for information security management in
accordance with the subsidiaries ‘executive management risk
appetite, organization‘s ability to build defences, and local
regulatory compliance.
The Bank is also a member of the only global cyber intelligence
sharing community solely focused on financial services. All local
CISO offices have access to intelligence exchange platform and
cyber resilience resources to anticipate, mitigate, and respond
to cyber threats.
To manage cyber risks, the Group is working on critical
intelligence access, strategies to address crisis events, and
building trusted network of relationships. In 2022, the Group
implemented cyber-attack incident response exercise and
participated at the European Cross-Border Exercise. The
exercise explored how financial institutions may coordinate
across borders with peers, public sector partners, supporting
service providers, and other major stakeholders to mitigate the
impacts of major incidents.
The Bank runs its operations in line with GDPR requirements,
including the retention and processing of personal data,
dedicated Data Privacy Officer, education, and training of
employees. The new Slovenian Personal Data Protection
Act (ZVOP-2) was adopted in 2022 and is in the process of
implementation in the Bank’s operations.
Prevention
Based on the assessment of compliance risks, so-called
‘Enterprise Compliance Risk Assessment (ECRA),’ the
management of the Bank and in particular Compliance and
Integrity can plan its activities; all with the aim to reduce
or mitigate the compliance and integrity risks. As part of
compliance programme, Compliance and Integrity is also
involved, inter alia, in risk assessments regarding new and
changed products, fit and proper assessments for key function
holders, outsourcing, and other changes materially affecting
the Bank’s business.
As a standard compliance function, several workshops
and compulsory e-education on ethics, the prevention of
corruption, conflicts of interest, protection of personal data,
AML/CFT, Information Security, Physical Security, and other
relevant topics related to everyday work were prepared. For
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issued opinions, recommendations,
and guidelines on compliance and
integrity topics
all employees, yearly e-trainings are mandatory on subjects
such as prevention of insider trading and market manipulation,
ethics, anti-corruption, mitigation of conflict of interests,
personal data protection, information security, and similar
themes. The Group seeks to promote a corporate culture that
facilitates compliance, and by continuously raising awareness,
for example through communication via its monthly compliance
newsletter, detailing not only important regulatory changes,
but also current information and case studies on different
compliance and ethics topics.
Fraud prevention and
investigation
The Group has a unified system in place for the prevention
and investigation of suspected misconduct, which allows
anyone, both internal and external stakeholders, to report
potential misconduct through several different communication
channels, including anonymously. Protection of the informant is
comprehensively governed. The Bank uses various measures to
ensure the total protection of the informant from any retaliation
she/he could endure due to well-intended reporting of a
suspicion of harmful conduct. All reports received are handled
centrally by a specialised team according to pre-established
internal procedures, and appropriate reporting mechanisms
to management bodies are in place. Significant attention is
devoted to employee awareness-raising and training for both
all employees and specific target groups according to the
identified risks.
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cases investigated
Internal Audit reviews key risks in the Group’s operations,
advises management at all levels, and deepens
understanding of the Bank’s operations. It provides
independent and impartial assurance regarding the
management of key risks, management of the Bank,
operation of internal controls, and thereby strengthens and
protects the value of the Bank.
Internal Audit is the independent, objective, and advisory
control body responsible for a systematic and professional
assessment of the effectiveness of risk management
procedures, completeness, and functionality of internal control
systems, and the management of the Group operations on
an ongoing basis. The Internal Audit provided impartial
assurance to the Management Board and Supervisory Board
on the management of risks in key areas, i.e., cyber security
governance framework and cyber security – emerging risk,
anti-money laundry, management of repossessed assets,
central vault – cash handling, ILAAP, project financing, lending
processes (loans to retail – housing and mortgages loans,
loans to small and medium corporates), IT governance, IT risk
management, operational risk management – risk appetite and
key risk indicators, cash management in branches, and others.
Performed audits
The Internal Audit performs its tasks and responsibilities on
its own discretion and in compliance with the annual audit
plan as approved by the Management Board and confirmed
by the Supervisory Board. Based on its internal methodology
and comprehensive risk analysis for 2022, Internal Audit
completed 69 audits, out of which 66 audits were planned
and covered various areas of operation of the Bank and the
Group. 21 of these assignments were branch inspections, 2
audits were conducted as joint audits with a local auditor and
one quality review in a banking subsidiary. In addition, Internal
Audit initiated and completed 3 new audits and was involved
in several strategic projects as advisor. Six planned audits
were postponed due to objective reasons. The majority of the
recommendations given in 2022 were implemented within the
agreed deadlines.
Implementation
of uniform rules
Internal Audit increases efficiency. It focuses on monitoring
the implementation of audit recommendations, training, and
education, updating the internal audit charter and manual,
Internal Audit
Banking Act (ZBan-3)
or other relevant laws
which regulate
the operations of
a Group member
Code of
Ethics of
an Internal
Auditor
Code of
Internal
Auditing
Principles
International
Standards
for the
Professional
Practice of
Internal
Auditing
advising management, and ensuring high quality and
professional operations of the internal audit function within
the Group. The Internal Audit also introduces uniform rules of
operation of the internal audit function and regularly monitors
the compliance with these rules within the Group.
The highest standards
were followed
In 2022 external quality review of internal audit function was
performed and confirmed that Internal Audit and other internal
audit services in the Group operate in accordance with the:
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planned and extraordinary
audits conducted in the Bank
30
Internal Audit
experts
The Statement
of Management’s
Responsibility
In accordance with the provisions of Article 134 (2
nd
paragraph)
of the Market and Financial Instruments Act,
15
the Management
Board hereby confirms the statements made in this business
report, which are in accordance with the attached financial
statements as at 31 December 2022, and represent the actual
and fair financial standing of the Bank and the NLB Group,
as well as their operating results in the year that ended
31 December 2022.
The Management Board confirms that the business report
gives a fair view of developments and operating results of the
Bank and the Group and their financial standings, including
their description of the key types of risks and Group companies
included in the consolidation that are exposed as a whole.
Ljubljana, 12 April 2023
15 ZTFI-1, Official Gazette of the RoS, No. 77/18, 17/19 – corr., 66/19 in 123/21.
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Management Board of NLB
Blaž Brodnjak
Chief executive officer
Andreas Burkhardt
Member
Archibald Kremser
Member
Hedvika Usenik
Member
Antonio Argir
Member
Andrej Lasič
Member
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Authorisation to Perform
Banking Services
In accordance with the provisions of Article 14 (1
st
paragraph)
of the Regulation on Books of Accounts and Annual Reports
of Banks and Savings Banks (Official Gazette of the RoS, No.
184/21) adopted by the BoS on the basis of the authorisation
from Article 109 of the Banking Act,
16
(ZBan-3), NLB hereby lists
all types of financial services which, in accordance with the
authorisation of the BoS, took place during the period for which
the business report was prepared.
NLB has the authorisation to perform banking services
pursuant to Article 5 of the ZBan-3. Banking services are the
acceptance of deposits and other repayable funds from the
public and the granting of credits for its own account.
The bank has an authorisation to perform mutually recognised
and additional financial services.
It may perform the following mutually recognised financial
services, pursuant to Article 5 of the ZBan-3, namely:
1.
Accepting deposits and other repayable funds from the
public
2.
Granting of loans, including:
•
consumer loans
•
mortgage loans
•
purchase of receivables with or without recourse
(factoring)
•
financing of commercial transactions, including export
financing based on the purchase of non-current
non-past-due receivables at a discount and without
recourse, secured by financial instruments (forfeiting)
4.
Payment services
5.
Issuing and managing other payment instruments (e.g.,
travellers’ cheques and bank bills of exchange), insofar as
such services are not included in the services referred to in
the previous point
6.
Issuing of guarantees and other commitments
7.
Trading for own account or for the account of clients:
•
in money-market instruments
•
in foreign legal tender, including currency exchange
transactions
•
in standardised futures and options
•
in currency and interest-rate instruments
•
in transferable securities
16 Official Gazette of the RoS, No. 92/21 with amendments.
8.
Participation in securities issues and the provision of
associated services
9.
Corporate consultancy regarding capital structure,
operational strategy, and related matters, and consultancy
and services in connection with corporate mergers and
acquisitions
10.
Monetary intermediation on interbank markets
11.
Advice on portfolio management
12.
Safekeeping of securities and other related services
13.
Credit rating services: collecting, analysing, and
disseminating information regarding creditworthiness
14.
Leasing of safe deposit boxes
15.
Investment services and transactions, and ancillary
investment services in accordance with the Market and
Financial Instruments Act (ZTFI)
It may perform the following additional financial services,
pursuant to Article 6 of the ZBan-3:
1.
insurance agency service pursuant to the law governing
the insurance industry
4.
custodian services according to the law governing
investment funds and management companies
5.
credit brokerage for consumer and other types of loans
6.
other services or transactions:
6.1
intermediation in financial leasing
6.2
sale and purchase of investments in gold
Authorisation to perform banking services is published on the
official
webpage of the BoS.
Corporate Governance
Statement of NLB
Pursuant to Article 70, paragraph 5, of the Companies Act
(ZGD-1)
17
NLB hereby gives the following Corporate Governance
Statement of NLB as a part of the Business Report of the NLB
Group Annual Report 2022. The main function of this statement
is the prompt informing of investors on the coherence of the
Bank’s corporate governance system.
1. COMPLIANCE WITH
THE CORPORATE
GOVERNANCE CODE
1.1. References to the Code on
Corporate Governance
The recommended best corporate governance practices
contribute to a transparent and understandable corporate
governance system, which promotes both domestic and foreign
investor confidence, as well as the confidence of employees,
other stakeholders (regulators, suppliers, etc.), and the public.
A decision on which code the Bank will follow was made jointly
by the Management Board and the Supervisory Board of the
Bank by adopting the Corporate Governance Policy of NLB.
18
In 2022, the Bank analysed changes made with a renewed
version of the Slovenian Corporate Governance Code for Listed
Companies, as it will be the first used for preparation of the
Corporate Governance Statement of NLB for the business year
2022.
Compliance with the Slovenian Corporate Governance Code
for Listed Companies is explained in this statement on ‘comply
or explain basis,’ in which the Bank provides an explanation
regarding deviations, reasoning for non-compliance with a
certain recommendation, or alternative practices performed
mostly due to stricter banking regulation. The statement
refers to the Bank’s system of corporate governance from
the beginning to the end of the financial year, which also
corresponds to the beginning and the end of the calendar year
(from 1 January until 31 December).
17 The Companies Law (ZGD- 1; Official Gazette of the RoS, No. 65/09 and
consecutive changes).
18 November 2020 and February 2023.
The Corporate Governance Statement of NLB is included in the
Business Report of the NLB Group Annual Report
and is also
published as a separate report on the Bank’s website under the
chapter on
Corporate Governance
, as well as on the
website of
the Ljubljana Stock Exchange
.
NLB strives to increase the level of its business transparency
and informs the shareholders and other expert community in
line with the Guidelines on Disclosure for Listed Companies
(Ljubljana Stock Exchange, 18 December 2020) on electronic
communications system of the
Ljubljana Stock Exchange
and
in line with Rules and Regulations of the Luxembourg Stock
Exchange, as well as in line with Rules of the London Stock
Exchange through Regulatory News Services (RNS) of the
London Stock Exchange.
NLB also has its own corporate governance code. The NLB
Group Code of Conduct is a standardised document for all
members of the Group that defines values, lays down the
standards of ethical business conduct, and serves as the
guideline for all our relationships regardless of whether
it involves clients, competitors, business partners, state
authorities, regulators, shareholders, or internal relationships
between employees. At the same time, it is the basis of the
Group values and basic principles of conduct which provide
specific conduct guidelines to its employees. The aim of this
approach is to ensure compliance with all applicable laws,
regulations, and standards. It is published on the
Bank’s
webpage
.
The Corporate Governance system of the Bank and all
relevant information on Bank’s management that exceeds the
requirements of article 70 of the Companies Act (ZGD-1) are
published in the chapter of
Risk Management
of this annual
report, where ESG Risk Management for the year 2022 is
described, as well as in the
Sustainability
chapter of this annual
report, and the
NLB Group Sustainability Report 2022
. Some
other aspects about the functioning of the Bank’s managing
bodies are described in the chapter of
Corporate Governance
of this annual report, as well as in the Corporate Governance
Policy of NLB published on the
NLB’s website
. Information on
the Diversity Policy and Remuneration Policy and ESG risks is
also described in the
Pillar 3 Disclosures
according to Basel
standards.
2. COMPLIANCE WITH THE
SLOVENIAN CORPORATE
GOVERNANCE CODE FOR
LISTED COMPANIES
The Bank does not follow or partially implement or adhere to
different, in most cases stricter, banking regulations with regard
to the following recommendations:
Recommendation 7:
The Bank's strategic document and the
overall framework for managing sustainable development is
the publicly disclosed NLB Group Sustainability Framework.
The Comprehensive Sustainability Policy of NLB and NLB
Group will be adopted in 2023. The bank also started activities
to develop the NLB Group Net Zero Business Strategy in line
with UNEP FI – Net Zero Banking Alliance (NZBA) guidance
and methodology to decarbonize its portfolios. The Net Zero
Business Strategy will be adopted by the end of 2023, and Net
Zero portfolio targets will be publicly announced.
Recommendation 7.1:
Guidelines for identifying and acting
on the bank's sustainability priorities are presented in the
NLB Group Sustainability Report. As a signatory to the UNEP
FI PRB
19
, the Bank has undertaken an impact analysis with
the aim of aligning the Bank's strategy and practices with
the UN Sustainable Development Goals (SDGs) and the
Paris Climate Agreement. The analysis includes a materiality
analysis (identification of key ESG issues that could affect the
performance of the company and its stakeholders), the context
of the Bank's business, and the specificities of the region in
which the Bank operates.
Recommendation 7.2:
The NLB Group Sustainability Framework
has been adopted by the Bank's Management Board.
Recommendation 7.4:
Human rights issues, human health
and environmental protection, fundamental labour rights, the
prevention of discrimination and inequalities and the promotion
and advancement of equal opportunities, consumer rights,
fiscal responsibility, and the prevention of corruption and other
illegal practices are included in the Human Rights Policy in the
NLB Group.
19
UNEFI PRB - United Nations Environment Programme Finance
Initiative Principles for Responsible Banking.
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Recommendation 12.1:
In assessing a candidate’s eligibility as
a Supervisory Board member, statutory criteria are applied,
however, it is not necessary for candidates to have a certificate
evidencing their specialised professional competence for
membership on a Supervisory Board, such as the Certificate
of the Slovenian Directors’ Association, or any other relevant
certificate. However, all strict conditions must be fulfilled
according to the banking legislature, including the wide range
of knowledge, skills, and experience.
Recommendation 13.1:
In 2022, Supervisory Board members
did not inform each other of the content of the statements of
independence at one of the meetings of the Supervisory Board.
However, starting in 2023 such good practice will be put in
place.
Recommendation no. 14.2:
The currently valid Rules of
Procedure of the Supervisory Board of NLB (Rules) are
prepared according to strict rules governing banks. They do
not include the list of all types of transactions for which the
Management Board needs prior approval of the Supervisory
Board, as this provision is included in the Articles of Association
of NLB. Changes to the mentioned Rules that will be adopted
in Q1 2023 will also list all tasks of the Supervisory Board. The
currently mentioned Rules also do not include the Supervisory
Board’s evaluation, education, and training of the members of
the Supervisory Board. However, the renewed Rules will also
address those issues. The Rules of Procedure of the Supervisory
Board of NLB also do not include provisions on the Agreement
on access to the archives after expiration of the term of office
of the members of the Supervisory Board, as access to the
archives after expiration of the term of office is determined
by the provisions of the Rules of Procedure of the Supervisory
Board of NLB and not a special agreement.
Recommendation no. 14.3:
The Rules of Procedure of the
Supervisory Board of NLB do not include the scope of topics
and timeframe to be respected by the Management Board in
its periodic reporting of the Supervisory Board. However, the
scope of topics and time frames of periodic reporting to the
Supervisory Board are included in annual Action Plan of the
Supervisory Board. Competent organisational units of the Bank
take care that timely information is provided to the Supervisory
Board.
Recommendation 14.6:
Access to the archives after expiration
of the term of office of the members of the Supervisory Board is
determined by the Rules of Procedure of the Supervisory Board
of NLB. Members of the Supervisory Board do not sign a special
agreement on access to the archives upon taking the position.
Recommendation 17.6:
Decisions discussed at the meeting are
always available to members of the Supervisory Board in the
bank's information system. As soon as it is possible, but no later
than three working days after the meeting of the Supervisory
Board, the Secretariat prepares copies of the decisions adopted
at the meetings of the Supervisory Board and forwards them
to the proposer and all recipients listed in each decision. An
employee of the Secretariat, who is present at the meeting,
approves the amendments to the resolutions and thereby
confirms the consistency of the content of the resolutions
adopted at the meeting.
Recommendation 19.1:
In 2022, the Supervisory Board members
(representatives of capital and representatives of workers)
did not receive attendance fees but received payments for
performing their function based on the decisions of the General
Meeting of shareholders dated 21 October 2019 and 15 June
2020. Remuneration of the members of the Supervisory Board
is regulated by the Remuneration Policy for the Members
of the Supervisory Board of NLB and the Members of the
Management Board of NLB.
20
The voting on mentioned policy
by the General Meeting of shareholders was of a consultative
nature.
Recommendation 20:
Minutes of the Supervisory Board are not
taken only by the Secretary of the Supervisory Board, but also
by certain employees of the Secretariat who are present at the
meeting.
Recommendations 23.4
and
23.5:
In 2022, NLB did not award
or pay variable remuneration in the form of NLB’s shares to
any member of the NLB Management Board, nor do stock
option plans and comparable financial instruments make up
most of the variable remuneration of any member of the NLB
Management Board. In relation to the awarding and payment
of variable remuneration in ordinary or preference shares
of NLB, or share linked instruments, or equivalent non-cash
instruments NLB complies with the Banking Act (ZBan-3).
21
In accordance with point 3 of the second paragraph of Article
190 of the ZBan-3, at least 50% of the variable remuneration
of (among other) each member of the NLB Management
20 Adopted by the Supervisory Board on 15 October 2021 and confirmed by the
General Meeting of shareholders on 16 December 2021, changes were adopted
by the Supervisory Board on 19 October 2022 and confirmed by the General
Meeting on 12 December 2022.
21
Banking Act (ZBan-3; Official Gazette of the RS, No 92/21 and 123/21).
Board shall comprise ordinary or preference shares of NLB, or
share linked instruments, or equivalent non-cash instruments
(hereinafter collectively: ‘Instruments’). This requirement applies
to both the non-deferred and the deferred part of variable
remuneration (which is different from recommendation 23.5,
which provides that variable remuneration given as shares,
as well as the execution of stock options and any other rights
to acquire shares or be remunerated based on share price
movements, must not be made possible for at least three
years after such rights were awarded). When the variable
remuneration of an individual Identified Staff for a particular
year does not exceed EUR 50,000 and does not exceed one
third of his/her total remuneration for such year, ZBan-3
allows for an exception from the requirement that a part of
variable remuneration must comprise in Instruments. On 19
October 2022, the Supervisory Board of the Bank adopted
a new (i.e., version 2 of the) Remuneration Policy for the
Members of the Supervisory Board of NLB. and the Members
of the Management Board of NLB, which was also approved
by the General Meeting of shareholders of the Bank on 12
December 2022. Voting on this policy by the General Meeting of
shareholders was of a consultative nature.
Recommendation 26.6:
The Bank maintains a list of
transactions with related persons according to Banking Act
(ZBan-3). A list of transactions with related persons is submitted
to the Supervisory Board by special demand.
Recommendation 30.4:
NLB draws up its financial calendar,
which is published on the
Banks’ website
and includes the date
of the Annual General Meeting. However, it doesn’t provide
information on the dividend payment date which is announced
in the publication of the Agenda and Proposed Resolutions
to be passed at the
Annual General Meeting
. The dividend
payment date is determined based on KDD Operations Rules
(Central Securities Clearing Corporation).
Recommendation 32.7:
NLB does not publish the rules of
procedure of its bodies (Management Board and Supervisory
Board and its committees) on its website. However, each year
the Bank discloses the composition, competences, and work of
its managing bodies in the Corporate Governance Statement
of NLB and publishes it in the NLB Group Annual Report on
the
Bank's website
, as well as on the webpage of the
Ljubljana
Stock Exchange
.
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SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
3. MAIN FEATURES OF
INTERNAL CONTROL
AND RISK MANAGEMENT
SYSTEMS IN RELATION TO
FINANCIAL REPORTING
NLB is governed by the provisions of the Capital Requirements
Regulation (CRR), with amendments, together with all
applicable delegated acts, the Banking Act (ZBan-3) and
the Regulation on Internal Governance Arrangements, the
Management Body and the Internal Capital Adequacy
Assessment Process for Banks and Savings Banks regulating,
and relevant EBA Guidelines, among others, the Bank’s
obligation to set up, maintain appropriate internal control,
and risk management systems. Due to the above, NLB has
developed a steady and reliable internal governance system
encompassing the following:
3.1. Internal control mechanisms
Suitability of the internal control mechanisms are determined by
the independence, quality, and validity of:
•
the rules for and controls of the implementation of the
Bank's organisational procedures, business procedures,
and work procedures (internal controls); and
•
the internal control functions and departments (internal
control functions).
3.1.1. Internal Controls
The policy entitled, ‘Internal Control System’ defines a system of
internal controls as set of rules, procedures, and organisational
structures. The system of internal controls in NLB is designed
to ensure that for each key risk there is a process or other
measure to reduce or manage that risk, and that the process or
measure is effective for that purpose.
The mentioned policy introduces a new description of the three
lines of defence, namely:
1.
First-level (or line) controls are implemented into business
and non-business organisational units (OU);
2.
Second-level controls are divided between Risk
Management and Compliance control functions (including
AML/CTF and Information security management) that
carry out independent controls and supervision over the
operation of the first line of defence; and
3.
The third level of controls is performed by the internal
audit function, which assesses and regularly checks the
completeness, functionality, and adequacy of the internal
control system. An internal audit is completely independent
of both the first line and the second-level control functions.
In the event of deficiencies, irregularities of breaches identified
in the process of implementation of internal controls the
breaches are discussed at the Operational Risk Committee
(which is the collective decision-making body appointed by
the Management Board of the Bank that is established for
execution of individual tasks within powers of the Management
Board of the Bank). The mentioned committee adopts decisions
so that appropriate actions are taken and informs the
Management Board of the Bank about deficiencies and actions
taken on that behalf.
3.1.2. Internal Control Functions
The internal control functions are part of the system of the
internal governance in the Bank. Internal control functions
include:
a) The Internal Audit Function
The Internal Audit function is organised according to
the Charter on the Internal Audit of NLB adopted by the
Management Board on 13 November 2018 (and supplemented
on 13 August 2019), to which the Supervisory Board of NLB gave
its approval (30 November 2018 and 6 September 2019).
The Management Board has set up an independent internal
audit function which gives assurances and advice about risk
management, internal controls system, and management of
the NLB. The mission and the principal task of the Internal
Audit is to consolidate and secure the value of the Bank
by issuing objective assurances based on risk assessment,
with consultancy and a deep understanding of the Bank’s
operations. In addition to that, the Internal Audit carries out
regular control of the quality of operation of the other internal
audit departments in the Group and takes care of constant
development of the internal auditing function.
The Supervisory Board of NLB must issue its approval of the
appointment, remuneration, and dismissal to the Head of the
Internal Audit, which ensures their independence and so, the
independence of the work of the Internal Audit.
b) The Risk Management Function
The Risk Management Function is organised according to the
Charter of the Risk Management Function of NLB adopted by
the Management Board, in agreement with the Supervisory
Board of NLB.
The risk management function represents an important part
of the overall management and governance system in the
Group. This function in NLB is organised within the Risk stream,
covered by the member of the Management Board in charge of
risk (Chief Risk Officer - CRO).
The risk management function is performed by the Global Risk
function. In accordance with the competences, authorisations,
and responsibilities, Global Risk is represented by its General
Manager. Global Risk is in functional and organisational
terms separate from other functions where business decisions
are adopted and where a potential conflict of interest may
arise with the risk management function. The head of the risk
management function has direct access to the Management
Board of the NLB, and at the same time unhindered and
independent access to the Supervisory Board of NLB and the
Risk Committee of the Supervisory Board of the NLB.
Risk management and control is performed through a clear
organisational structure with defined roles and responsibilities.
The organisation and delineation of competencies is designed
to prevent conflicts of interest, ensure a transparent and
documented decision-making process, and is subject to an
appropriate upward and downward flow of information. The
competence line Risk Management in NLB, encompassing
several professional areas, is in charge of formulating and
controlling the Group’s risk management policies, setting
limits, overseeing the harmonisation, regular monitoring of
risk exposures, and limits based on centralised reporting at the
Group level.
In the members of the Group, the risk management function
is organised according to the local legislation, considering
the bases for set-up, organisation, and activities in risk
management in the members, as defined in the document ‘Risk
Management Standards in the NLB Group.’
c) The Compliance Function, Information Security Function,
and the AML/CTF Function
Compliance and Integrity in the Group in its role as internal
control function performs control activities with respect to the
main following areas:
•
anti-money laundering and counter-terrorist financing
(separately for NLB and the Group);
•
information security and data protection;
•
personal data protection;
•
regulatory compliance management;
•
prevention of fraud and internal investigations;
•
security;
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Sustainability
Performance Overview
Risk Management
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Financial Report
•
development of compliance risk methodologies, and
setting and monitoring ethics and integrity standards;
•
harmonisation of policies and practices within the Group
(Competence line Compliance and Integrity).
Compliance and Integrity is an organisational unit of the Bank,
placed directly under the Bank’s Management Board in the
organisational structure. The Bank adopted an Integrity and
Compliance Policy of NLB and NLB Group, which regulates the
method and scope of the activities of the compliance function
in the Bank. Supervision over the compliance of operations is
within the competence of the Compliance and Integrity. This
enables the Compliance and Integrity to operate independently
from other Bank’s departments.
The director of Compliance and Integrity does not perform any
other function at the Bank that could possibly lead to conflict
of interests. To ensure his independence, the director reports
to the Management Board and to a specific member of the
Bank’s Management Board responsible for the compliance
area (including information security, personal data protection,
and AML/CTF functions), which additionally ensures the
independence of operation of the Compliance and Integrity.
As information security, AML/CTF, and Group AML functions
are organised within Compliance and Integrity, CISO for NLB,
Group CISO, DPO (Data Protection Officer), head of AML/CTF
area for NLB, and the head of Group AML are ensured full
independence through equal reporting lines as the director
of Compliance and Integrity and have direct access and a
separate reporting line to the Bank’s Supervisory Board.
Following NLB’s model, the compliance function has been
established in the core members of the Group, and as well is
based on the Group standards for the compliance and integrity
area.
3.2. Financial reporting
With the aim of ensuring appropriate financial reporting
procedures, NLB pursues the adopted Policy on Accounting
Controls. The accounting controls are provided through the
operation of the complete accounting function with the purpose
of ensuring quality and reliable accounting information, and
thereby accurate and timely financial reporting. The principal
identified risks in this area are managed with an appropriate
system of authorisations, a segregation of duties, compliance
with accounting rules, documenting of all business events, a
custody system, posting on the day of a business event, in-
built control mechanisms in source applications, and archiving
pursuant to the laws and internal regulations. Furthermore,
the policy precisely defines primary accounting controls,
performed in the scope of analytical bookkeeping, and
secondary accounting controls, i.e., checking the efficiency
of implementation of primary accounting controls. With an
efficient mechanism of controls in accounting reporting, NLB
ensures:
•
A reliable decision-making and operation support system;
•
Accurate, complete, and timely accounting data, the resulting
accounting, and other reports of the Bank;
•
Compliance with legal and other requirements.
Financial statements of NLB and consolidated financial
statements of the NLB Group are audited by the auditing
company Ernst & Young d.o.o., Ljubljana. The mentioned
auditing company was appointed as the auditor of NLB at the
General Meeting of shareholders of the Bank for the financial
years 2018 to 2022.
4. INFORMATION ON POINT
4, PARAGRAPH 5, OF THE
ARTICLE 70 OF THE ZGD-
1 regarding points 3, 4, 6,
8, and 9 of paragraph 6 of
the same article
Explanation regarding significant direct and indirect
ownership of the company’s securities in the sense of
achieving a qualified stake as determined by the act
regulating acquisitions (Point 3 of the sixth paragraph of
Article 70 of the ZGD-1)
Significant direct and indirect ownership of the company’s
securities in terms of achieving a qualifying holding as defined
in the Takeovers Act (as of 31 December 2022).
Shareholder
Number
of shares
Percentage of
shares
Nature of
ownership
RoS
5,000,001
25.00
Shares
EBRD
(i)
/
>5 and <10
GDRs
Schroders plc
(i)
/
>5 and <10
GDRs
(i) In the form of GDRs.
More information on the Bank’s Share Capital is available on
the website:
https://www.nlb.si/shares
.
Explanation regarding the holders of securities that carry
special control rights
(Point 4 of the sixth paragraph of Article 70 of the ZGD-1)
The Bank did not issue any securities carrying special
controlling rights.
Explanation regarding restrictions related to voting rights, in
particular: (i) restrictions of voting rights to a certain stake or
certain number of votes, (ii) deadlines for executing voting
rights, and (iii) agreements in which, based on the company’s
cooperation, the financial rights arising from securities are
separated from the rights of ownership of such securities
(Point 6 of the sixth paragraph of Article 70 of the ZGD-1)
The shares of the Bank are freely transferable, subject to the
provisions of the Articles of Association of the Bank which
require the approval of the Supervisory Board, namely for the
transfer of shares of the Bank by which the acquirer, together
with the shares held by the holder before such an acquisition
and the shares held by third parties for the account of the
acquirer, exceeds the share of 25% of the Bank’s voting shares.
Approval for the transfer of shares is issued by the Supervisory
Board.
The Bank rejects the request for approval of transfer shares
if the acquirer, together with the shares held by the acquirer
before the acquisition and the shares held by third parties for
the account of the acquirer, exceeded the 25% share of the
Bank with voting rights, increased by one share.
Notwithstanding the provision mentioned in the first paragraph,
approval for the transfer of shares is not required if the acquirer
of the shares has acquired them for the account of third parties,
so that it is not entitled to exercise voting rights from these
shares at its sole discretion, while at the same time committing
to the Bank, it will not exercise voting rights on the basis of the
instructions of an individual third party for whose account it has
acquired the shares if, together with the instructions for voting,
it does not receive a written guarantee from that person that
this person has shares for his own account, and that this person
is not, directly or indirectly, a holder of more than 25% of the
Bank’s voting rights.
The acquirer who exceeds the share of 25% of the Bank’s
shares with voting rights and does not require the issuance
of approval for the transfer of shares, or does not receive the
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SB Statement
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Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
approval of the Bank, may exercise the voting right from 25% of
the shares with the voting rights.
There are no restrictions other than those mentioned and those
that are regulatory.
Explanation on the (i) company’s rules on appointment or
replacement of members of the management or supervisory
bodies, and (ii) changes to company’s Articles of Association
(Point 8 of the sixth paragraph of Article 70 of the ZGD-1)
The appointment or replacement of members of the
management or supervisory bodies
The Management Board
Articles of Association define that the Management Board of
the Bank is comprised of three to seven members, one of whom
is appointed President of the Management Board of the Bank.
The number of Management Board members is determined by
a resolution of the Bank’s Supervisory Board. The President and
other members of the Management Board are appointed and
recalled by the Supervisory Board of the Bank; the President
of the Management Board may propose to the Chair of the
Supervisory Board of the Bank to appoint or recall an individual
member or the remaining members of the Management Board
of the Bank.
The President and members of the Management Board shall be
appointed for a period of five years and may be re-appointed
for another term of office. The President and members of the
Management Board may be recalled prior to the expiry of their
term of office in accordance with applicable laws and Articles
of Association. Each member of the Management Board of
the Bank may prematurely resign her/his term of office with
a period of notice of three months. A written notice shall be
delivered to the Chair of the Supervisory Board of the Bank. The
notice term may be shorter than three months if requested by
the resigning member of the Management Board of the Bank in
his/her notice and is subject to the approval of the Supervisory
Board of the Bank.
A member of the Bank’s Management Board may only be
a person who fulfils the legally prescribed conditions for a
management board member under the law on banking and
who obtained a licence from the BoS or the ECB, if executing the
competences and tasks from Item (e) of paragraph 1 of Article
4 of Regulation (EU) no. 1024/2013 for the performance of the
function of a bank’s management board member under the
law regulating banking. The Bank assesses every candidate
following the Bank’s Policy governing the Fit & Proper
assessment prior to the appointment.
The Supervisory Board
The Supervisory Board of the Bank consists of a total of twelve
members, of which eight members represent the interests of
shareholders and four members represent the interests of
employees. Members representing the interests of shareholders
shall be elected and recalled by the Bank’s General Meeting
from persons proposed by shareholders or the Supervisory
Board of the Bank and members representing the interests
of employees shall be elected and recalled by the Workers’
Council of the Bank. Members of the Supervisory Board
representing the interests of shareholders are elected by an
ordinary majority of votes cast by shareholders.
The term of office of the Supervisory Board members
commences on the day their appointment enters into force
(start of term of office) and lasts up until the end of the Bank's
Annual General Meeting of shareholders which decides on the
use of accumulated profit for the fourth business year since the
start of their term of office, unless otherwise stipulated at the
time of appointment of individual members. In this context, the
first year is deemed the business year in which the members of
the Supervisory Board of the Bank started their term of office.
The General Meeting of the Bank may dismiss an individual
or all members of the Supervisory Board (representatives of
shareholders) even before the expiration of their term of office.
A resolution on a dismissal shall be valid if adopted with at least
a three-quarter majority of all votes cast.
The Supervisory Board of the Bank shall at its first meeting after
an appointment elect from among its members a Chair and at
least one Deputy Chair of the Supervisory Board of the Bank.
A member representing the interests of employees cannot be
elected Chair or Deputy Chair of the Supervisory Board of the
Bank. All the supervisory board members shall be independent
professionals as defined by the Articles of Association.
A member of the Bank’s Supervisory Board may only be a
person who fulfils the legally prescribed conditions for a
supervisory board member under the law on banking and who
obtained a licence from the BoS or the ECB, if executing the
competences and tasks from Item (e) of paragraph 1 of Article
4 of Regulation (EU) no. 1024/2013 for the performance of the
function of a bank’s supervisory board member under the
law regulating banking. The Bank assesses every candidate
following the Bank’s Policy governing Fit & Proper assessment
prior to the appointment.
Amendments to Articles of Association
A qualified majority of at least 75% (seventy-five per cent) of the
votes cast by shareholders at the general meeting of the Bank’s
shareholders is required for the adoption of any amendments
of the Articles of Association.
Explanation regarding the authorisation of the members
of the management, particularly authorisations to issue or
purchase own shares
(Point 9 of the sixth paragraph of Article 70 of the ZGD-1)
No authorisation exists which would authorise the members of
the management to issue or purchase own shares of the Bank.
5. INFORMATION ON THE
WORK AND KEY POWERS
OF THE SHAREHOLDERS’
MEETING AND OF ITS
KEY POWERS, AND
A DESCRIPTION OF
SHAREHOLDERS’ RIGHTS,
AND THE METHOD OF
THEIR EXERCISING
The General Meeting is a body of the Bank through which
shareholders exercise their rights, which include among others:
decisions on corporate changes (amendments of the Articles
of Association, increase or decrease of share capital) and legal
restructuring (mergers, acquisitions), adopting decisions on all
statutory issues in respect of appointing and discharging members
of the Supervisory Board (representatives of shareholders), and
appointment of an auditor, distribution decisions (appropriation of
distributable profit), and the granting of discharge from liability to
the Management and Supervisory Board.
The General Meeting is convened by the Management Board.
The General Meeting may be convened by the Supervisory
Board in cases where the Management Board fails to convene
the General Meeting or where a convocation is necessary to
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Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
ensure unhindered operations of the Bank. The Supervisory
Board may amend the agenda of the General Meeting
convened in line with the bylaws.
As a rule, the General Meeting of the Bank shall be convened
at the registered office of the Bank, yet it may also be convened
at another venue specified by the convenor. The Management
Board may stipulate that shareholders may attend or vote
before or at the General Meeting by electronic means without
physical presence. The General Meeting of shareholders shall
adopt resolutions by simple majority of the votes cast, unless
the applicable laws or the Bank’s Articles of Association
stipulate a larger majority or other conditions (adoption and
amendments of the Articles of Association, issue of convertible
bonds or other equity securities, exclusion of pre-emptive
right of existing shareholders, decrease in share capital, the
status restructuring of the Bank, or liquidation of the Bank and
discharge of Supervisory Board members).
The shareholders have the right to participate at the general
meeting of the Bank, the voting right, the pre-emptive right to
subscribe for new shares in the case of a share capital increase,
the right to profit participation (dividends), the right to a share
in the surplus in the event of liquidation or bankruptcy of the
Bank, and the right to be informed.
According to Article 296 of the Companies Act, NLB informs
shareholders of their rights as shareholders in an Information
on the Rights of Shareholders that is published among the
documents for convocation of each General Meeting (i.e., on
expansion of the agenda, proposals by shareholders, voting
proposals by shareholders, and the shareholders’ right to be
informed).
There were two General Meetings of shareholders in 2022.
Shareholders of NLB gathered at the 38th General Meeting
on 20 June 2022. At the General Meeting, shareholders
acknowledged the adopted NLB Group 2021 Annual Report,
the Report of the Supervisory Board of NLB on the results of the
examination of the NLB Group Annual Report 2021, the Report
on renumerations for the business year 2021, and the Additional
information to the Report on remuneration for the business year
2021 based on SSH's Baselines. The shareholders also decided
on the allocation of distributable profit for 2021 and granted
a discharge from liability to the Management Board and
Supervisory Board of NLB for the previous year.
The shareholders decided on the allocation of distributable
profit for 2021. The distributable profit of the Bank as at 31
December 2021 was EUR 458,266,602.05. Shareholders decided
that the part of the distributable profit in total amount of EUR
50 million shall be paid out to the shareholders as a dividend,
which amounts to EUR 2.50 gross per share (the first tranche).
The General Meeting of NLB also took note on various reports
and voted on the proposal regarding the amendments and
supplements to the Articles of Association of NLB, appointed the
auditing company KPMG Slovenija, d.o.o. as the auditor of NLB
for the financial years 2023-2026, and adopted the Policy on
the provision of diversity of the management body and senior
management.
The 39th General Meeting of NLB Shareholders held on
12 December 2022 confirmed on additional allocation of
distributable profit for 2021, more precisely on the second
tranche of dividend payments, the payment of additional
dividends at EUR 2.50 per share, making a total dividend pay-
out in 2022 EUR 100 million; The remaining part of the NLB’s
distributable profit will remain undistributed and represents
retained earnings.
At the General Meeting, the NLB Shareholders also voted on
the Remuneration Policy for the Members of the Supervisory
Board of NLB and the Members of the Management Board of
NLB and took note of the termination of the term of office of two
NLB Supervisory Board members - workers’ representatives,
namely:
•
due to the statement of Janja Žabjek Dolinšek made on
26 May 2022 regarding her termination of the function
of a member of the Supervisory Board of NLB, workers’
representative, her term of office was terminated on 8 July
2022;
•
that NLB Works Council on 12 September 2022 passed
a decision on the recall of Bojana Šteblaj from the function
of a member of the Supervisory Board of NLB, workers’
representative, based on which her term of office in the
Supervisory Board of NLB terminated on 12 September 2022.
6. INFORMATION ABOUT THE
COMPOSITION AND WORK
OF THE MANAGEMENT
AND SUPERVISORY BODY
AND ITS COMMITTEES
6.1. The Management Board
At the beginning of 2022, the Management Board of the Bank
consisted of Blaž Brodnjak, CEO, Archibald Kremser, CFO,
Andreas Burkhardt, CRO. Due to new challenges brought by
the Group expansion (the acquisition of Komercijalna Banka,
intensive digitalisation, and the emphasis on top quality user
experience, as well as a commitment to sustainable operations
and development) the Supervisory Board on 20 January 2022
appointed Hedvika Usenik, Antonio Argir, and Andrej Lasič as
three new members of the Management Board. They assumed
their functions on 28 April 2022, upon receiving approval from
the regulator. They all come from NLB or the Group, and have
extensive experience and a proven value-creating track record.
With the mentioned extension, the Management Board of
the Bank consists of six members, namely: Blaž Brodnjak as
President & CEO, Archibald Kremser as Chief Financial Officer
(CFO), Andreas Burkhardt as Chief Risk Officer (CRO), as well as
Hedvika Usenik as Chief Marketing Officer (CMO) - responsible
for Retail Banking and Private Banking, Antonio Argir who is
responsible for Group governance, payments, and innovations,
and Andrej Lasič as CMO -responsible for Corporate and
Investment Banking.
Work of the Management Board
In 2022, the Management Board continued to work on the
implementation of the NLB Group Strategy and the ESG factors’
inclusion in the NLB Group business model. Even though
the tragic war in Ukraine had significant influence on prices,
consumer behaviour, and consequentially volatile capital
markets, in 2022 the Group delivered remarkable business
results. They enabled the Bank to pay out a distributable profit
for 2021 in the form of dividends in the total amount of EUR 100
million, thereby reaffirming NLB Group's stable and successful
business operations and strong capital position. The dividends
were paid in two instalments, more specifically in the amount
of EUR 50 million in June 2022 and in the amount of EUR 50
million in December 2022.
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The Bank reached important business milestones – such as the
acquisition of Sberbank banka, Ljubljana in March 2022 (later
renamed to N Banka) and the merger of two Serbian banking
subsidiaries (NLB Banka, Beograd and Komercijalna Banka,
Beograd, completed by the end of April 2022). After launching
the Lease&Go company in Ljubljana in 2020, strategic activities
of the Group were further enhanced by establishing leasing
companies in North Macedonia and in Serbia. The Group will
continue growing prudently and increasing its market shares,
above all, however, we will focus on providing our clients with
innovative solutions and an ever-improving user experience,
24/7/365. The work of the Management Board was not merely
on the business performance, but also with its’ ability to
quickly adapt to ever more complex business challenges and
opportunities within the financial industry. In this sense, another
important milestone the Group achieved, was founding the
NLB DigIT company in Belgrade. The company is dedicated
to finding and designing IT solutions for the entire Group,
to leverage the accumulated know-how and deploy the
underlying common tech solutions across the Group’s markets.
In June 2022, NLB officially joined the Net-Zero Banking
Alliance (NZBA), the UN-convened alliance of banks worldwide,
committed to aligning their lending and investment portfolios
with net-zero emissions by 2050 or sooner, as set by the
most ambitious targets of the Paris Climate Agreement.
The
Management Board is deeply aware of the banks’ vital role in
fighting climate change by supporting the global transition of
the real economy towards net-zero, which is why we not only
strive to reinforce, accelerate, and support the implementation
of decarbonisation, but also want to lead by example. Besides
environmental issues, the Management Board is equally active
about addressing social and governance topics, we advocate
equal opportunities, as well as independent and professional
corporate governance. To that extent, the Management Board
was extremely proud of receiving very good first ESG rating in
December 2022 assessed by Sustainalytics.
Detailed information on the composition of the Management
Board can be found in
Appendix C.1
of this statement.
6.2. The Supervisory Board
At the beginning of 2022, the Supervisory Board of NLB
consisted of 12 members, of which eight were representatives
of shareholders (in addition to Primož Karpe, President and
Andreas Klingen, Deputy members were also Mark William
Lane Richards, Shrenik Dhirajlal Davda, Islam Osama Zekry,
David Eric Simon, Gregor Rok Kastelic, and Verica Trstenjak),
and four were representatives of employees (Sergeja Kočar,
Bojana Šteblaj, Janja Žabjek Dolinšek, and Tadeja Žbontar
Rems as a member of the Supervisory Board of the NLB – the
representative of the workers).
Due to the statement of Janja Žabjek Dolinšek made on 26 May
2022 regarding her termination of the function, because she
was leaving NLB, her term of office was terminated on 8 July
2022- as the NLB Works Council recalled her. The Works Council
passed a decision on 12 September 2022 on the recall of Bojana
Šteblaj from the function, based on which her term of office as
a member of the Supervisory Board – Workers' Representative
was terminated on 12 September 2022. The General Meeting
of shareholders took note of the resignations of members of
the Supervisory Board – Workers’ Representative in its session
dated 12 December 2022.
Statement of Independence of the Members of the
Supervisory Board
In accordance with Article 16 of the Articles of Association of
NLB, all Supervisory Board members must be independent
experts. Persons representing the interests of employees in the
Supervisory Board of the Bank are considered independent
despite the existence of an employment relationship with the
Bank upon fulfilling certain terms and conditions.
A statement of independence, in which they declare themselves
on their meeting of the criteria of conflict of interest, is provided
by a candidate for a function as a member of the Supervisory
Board, upon each change that would mean change of his/her
independence status once yearly. It is published on the
Bank’s
webpage
.
Work of the Supervisory Board
In 2022, the Supervisory Board met at eight regular and 12
correspondence sessions. Upon receiving reports from its
committees, the Supervisory Board acquainted itself or adopted
the following most important decisions:
•
NLB Group Strategy Progress Update; NLB Payments Strategy
update;
•
Annual NLB Group Report for 2021; E&Y report after the final
audit of 2021 financial statements; Report of the Supervisory
Board of NLB on the Results of Examining the Annual NLB
Group Report for 2021; Corporate Governance Statement
of NLB; Risk Management Statement; Annual Report of
Internal Audit for 2021; Comprehensive Opinion of the Internal
Audit for 2021; and Review of the remuneration report by an
external auditor;
•
Proposals to convene the General Meeting of shareholders
for 20 June 2022 and 12 December 2022;
•
Proposed appointment of three new members of the
Management Board of the NLB; Nomination of candidates for
members of the Supervisory Board;
•
Collective F&P assessment suitability of the members of the
Management Board and the Supervisory Board; Supervisory
Board self-assessment; Audit Committee Self-assessment
2021; Achievements of the goals of the Management Board in
2021 and proposed goals for 2023;
•
Proposed goals of the NLB Group; Annual assessment of the
identified staff; Awarding of variable pay to the Management
Board members and heads of control functions; Development
plan for three new members of the Management Board;
Training for the members of the Supervisory Board in 2022;
Reappointment of the Internal Audit Director;
•
Selection of statutory auditor for financial years from 2023
onwards;
•
Periodic reports on the status of information security in NLB
and the NLB Group; Annual Report for the 2021 ECRA –
general risk assessment regarding integrity, and compliance
operations at NLB and the Group level;
•
NLB Group Financial Plan 2023 and financial projections
2024–2026; Interim Reports on the NLB Group Operations;
Financial Calendar 2024;
•
Regular risk reports for NLB and NLB Group; Information
on Pillar III Disclosures for 2021; NLB Group Recovery Plan
for 2022; Report on the Top 50 groups of clients by exposure
in the NLB Group, Top 20 restructurings; Reputation Risk
Management;
•
Internal Audit’s Annual Report for 2021; Internal Audit Plan
(2023 & long-term plan), Action Plan for Compliance &
Integrity for 2023; Regular periodic reports on Internal Audit;
Compliance and Security, and on Information Security in NLB;
•
Report of the progress and implementation of the
sustainability factors in the NLB Group; Report on the
progress in the implementation of sustainability factors in the
NLB Group;
•
Reports on the documents received from the BoS and the
ECB and reports on implementation of deficiencies; ECB and
on the implementation of the requirements; ECB review and
evaluation process (SREP);
•
Review of the Diversity Policy; Changes to the Remuneration
Policy of the Members of Supervisory Board of NLB and
the Management Board of NLB; Remuneration Policy for
Employees of NLB and NLB Group – annual review; Annual
Review of the Diversity Policy; Amendment of the Policy to
assess the suitability of the Management and Supervisory
Board members;
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•
IT integration plan for N Banka; Implementation of IT
Strategy; Status of IT – periodic Reports; Information on the
achievement of goals for 2022 in the area of Information
Technology in the Group;
•
Acquisition of the Sberbank banka; Merger of N Banka
(former Sberbank banka) to NLB; merger of Serbian banks;
Information on Project Afina; Foundation of a new IT
company in Serbia; Management of the largest exposures
to clients in restructuring procedures; write-offs of claims,
approvals of transactions with persons in special relations
with the Bank; Prior consent to legal transaction with MIGA,
Prior consent for borrowing of NLB in the form of Senior
Preferred notes; Large exposures, Approvals of transaction
with persons in special relation with the bank; Sale of
receivables, Merger of companies in Serbia, Information on
loan agreements in Swiss Francs, etc.
Composition of the Supervisory Board members is described in
the
Appendix C.2
of this statement.
6.3. The Supervisory Board
Committees
All five Committees of the Supervisory Board function as
consulting bodies of the Supervisory Board of NLB and discuss
the material and proposals of Management Board of NLB for
the Supervisory Board meetings related to a particular area.
The Supervisory Board has the following committees:
•
The Audit Committee
•
The Risk Committee
•
The Nomination Committee
•
The Remuneration Committee
•
The Operations and IT Committee.
Committees are composed of at least three members of the
Supervisory Board. The Worker’s Council can nominate one
Supervisory Board member – a representative of the workers
into each committee. The member of the Committee may only
be appointed from among the members of the Supervisory
Board. The term of office of Chair, the Deputy Chair, and
members of the Committee should not exceed their term of
office as Supervisory Board members. The responsibilities of
committees are defined in Rules of Procedure of the Committees
of the Supervisory Board of NLB.
6.3.1. The Audit Committee of the Supervisory
Board of NLB
The Audit Committee monitors and prepares draft resolutions
for the Supervisory Board on accounting reporting, internal
control and risk management, internal audit, compliance
of operations, and external audit, and as well monitors the
implementation of regulatory measures.
At the end of 2022, the composition of the committee was
as follows: David Eric Simon (Chairman), Shrenik Dhirajlal
Davda (Deputy Chairman), Primož Karpe, Gregor Rok Kastelic
(members). Changes in membership of the committee
that occurred during the year are reflected in the chart on
Supervisory Board Committees (
C2
below).
There were six regular, one extraordinary, and three
correspondence sessions of the Audit Committee in 2022. The
following is a summary of key topics considered by the Audit
Committee:
•
NLB Group 2021 Annual Report, Key Performance
Indicators; Comprehensive Opinion of Internal Audit for
2021; Internal Audit Annual Report for 2021;Corporate
Governance Statement of NLB; Statement on Management
of Risk of the NLB, The NLB Group Sustainability Report
for 2021; Annual Report for the 2021 ECRA – general risk
assessment regarding integrity and compliance operations
at NLB and NLB Group; Audit planning for 2022 financial
statements; Confirmation of the services of the auditor to
perform services to review the report on remuneration;
•
Regular interim reports on the operations of the NLB
Group, Business Performance Indicatory for NLB and
NLB Group, Quarterly Internal Audit Reports, Compliance
and Integrity Reports, Reports on Information security
assurance in NLB; Assessment of the NLB Group identified
employees in control functions for 2021; Approval of the
payment of deferred variable part for Directors in control
functions;
•
Audit Plan 2022, Internal Audit Plan (2023 & long-term),
Action Plan for Compliance and Integrity for 2023;
Initiation of procurement process for selection of statutory
auditor; Selection of statutory auditor for 2023 onwards;
Reappointment of the Internal Audit Director;
•
Regular reports on overdue material recommendations
of the Internal Audit; Reports on the documents received
from the BoS and ECB and on the implementation of the
requirements of the BoS and ECB; Policy of the Internal
Controls System; Rules of Procedure of the NLB Group
Sustainable Committee; Report on the court proceedings
exceeding EUR 0.5 million;
•
Self-assessment of the Audit Committee for 2021.
6.3.2. The Risk Committee of the Supervisory
Board of NLB
The Risk Committee monitors and drafts resolutions for the
Supervisory Board in all risk areas relevant to the Bank’s
operations. It is consulted on the Group’s current and future risk
appetite, the corresponding risk profile and risk management
strategy, and helps carry out control over senior management
concerning implementation of the risk management strategy.
At the end of 2022, the composition of the committee was
as follows: Andreas Klingen (Chairman), Shrenik Dhirajlal
Davda (Deputy Chairman), Islam Osama Zekry, Mark
William Lane Richards, Gregor Rok Kastelic, and David Eric
Simon (members). Changes in membership of the committee
that occurred during the year are reflected in the chart on
Supervisory Board Committees (
C2
below).
There were five regular and one extraordinary sessions of the
Risk Committee in 2022. Following is a summary of key topics
considered by the Risk Committee:
•
Statement of Management of Risk of the NLB;
•
Regular quarterly risk reports of NLB and the NLB
Group; Pillar III Disclosures of the NLB Group for 2021 and
Acknowledgement of quarterly Pillar III Disclosures;
•
Risk Management Strategy of the NLB Group; Risk Appetite of
the NLB Group;
•
Internal liquidity adequacy process (ILAAP), The Internal
Capital Adequacy Assessment Process (ICAAP) in NLB Group;
•
NLB Group Recovery plan for 2022;
•
Top exposure to corporate client in NLB and NLB Group;
NLB Group Non-Performing Exposure and Foreclosed Assets
Strategy for the period 2022-2024;
•
Quarterly Information on status of information security in NLB
and NLB Group;
•
Report on Top 50 groups of clients by exposure in the NLB
Group; Report on Top 20 largest restructuring cases
•
Information of the assessment of the NLB Group and NLB
results and identified employees in control function for the
year 2021; Approval of the payment of the deferred variable
part of the salary for the Director of the Global Risk;
•
Acquisition of Sberbank banka, Ljubljana; Proposals for the
issuance of prior consent of the Supervisory Board of NLB
for a legal transaction based on Banking Act (ZBan-3); prior
consent to conclude legal deal with MIGA, consents to early
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repayments; approval of overdraft on business account of a
client and final write-offs of receivables over 1 million EUR;
•
Legal framework of sanctions; War between Russia and
Ukraine – credit risk assessment; Analysis of scenarios in
Serbia;
•
Report on the material court proceedings for NLB and the
Group members.
6.3.3. The Nomination Committee of the
Supervisory Board of NLB
The Nomination Committee drafts proposed resolutions for
the Supervisory Board concerning the appointment and
dismissal of the Management Board members; recommends
candidates for Supervisory Board members; recommends
to the Supervisory Board the dismissal of members of
the Management Board and the Supervisory Board
(representatives of capital); prepares the content of executive
employment contracts for the President and members of
the Management Board; evaluates the performance of the
Management Board and the Supervisory Board; and assesses
the knowledge, skills, and experience of individual members of
the Management Board and Supervisory Board and the bodies
as a whole.
At the end of 2022, the composition of the committee was as
follows: Primož Karpe (Chairman), Andreas Klingen (Deputy
Chairman), Verica Trstenjak, Sergeja Kočar (members).
Membership of Bojana Šteblaj was terminated on 12 September
2022. Changes in membership of the committee that occurred
during the year are reflected in the chart on Supervisory Board
Committees (
C2
below).
There were six regular sessions of the Nomination Committee
in 2022. The following is a summary of key topics considered by
the Nomination Committee:
•
Annual review of attendance of educational events and
knowledge obtained by in individual Supervisory Board
member;
•
Development Plan for Three New Members of the
Management Board;
•
Amendment of the Policy on the provision of diversity of the
management body and senior management; Amendment
of the Policy to assess the suitability of the Management and
Supervisory Board members; Annual Review of the Diversity
Policy;
6.3.4 The Remuneration Committee of the
Supervisory Board of NLB
The Remuneration Committee carries out expert and
independent assessments of the remuneration policies and
practices and formulates initiatives for measures related to
improving the management of the Bank’s risks, capital, and
liquidity; prepares proposals for remuneration-related decisions
of the Supervisory Board; and supervises the remuneration
of senior management performing the risk management and
compliance functions.
At the end of 2022, the composition of the committee was as
follows: Gregor Rok Kastelic (Chairman), Mark William Lane
Richards (Deputy Chairman), Shrenik Dhirajlal Davda and
Sergeja Kočar (members). Membership of Bojana Šteblaj was
terminated on 12 September 2022. Changes in membership of
the committee that occurred during the year are reflected in the
chart on Supervisory Board Committees (
C2
below).
There were six regular and three correspondence sessions
of the Remuneration Committee in 2022. The following is
a summary of key topics considered by the Remuneration
Committee:
•
Proposed goals of the Group for 2022 for the members of the
Management Board of the NLB;
•
Confirmation of financial goals of the NLB Group, financial
goals of NLB and goals for each member of the Management
Board of NLB for 2022;
Confirmation of the assessment
of the Group and NLB results and identified employees in
control function for the year 2021; Annual self-assessment of
identified staff in accordance with the Remuneration Policy;
•
Awarding of variable pay to the Management Board
members for financial years 2019 and 2020 in instruments;
•
Proposal for the introduction of an instrument for the
allocation of part of variable remuneration to employees
performing special work; Awarding and payment of the
variable pay for 2021 for members of the Management Board
and payment of the deferred part of the variable pay for
2018 for members of the Management Board and employees
performing special work in the control function;
•
Proposal for aligning and proposal for signing employment
contracts with the members of the Management Board of
NLB;
•
Report on the implementation of the NLB remuneration policy
to the Group members;
•
Report on remunerations – audit report;
•
Amendment of the contract of members of the Management
Board;
6.3.5. The Operations and IT Committee of the
Supervisory Board of NLB
The Committee monitors and prepares draft resolutions
for the Supervisory Board, whereby the main tasks that it
performs are the following: monitors the implementation of
the IT Strategy, Information Security Strategy, and Operations
Strategy; monitors key operations and IT KPIs and service
quality indicators; monitors key operations and IT projects and
initiatives; monitors operating risks in the area of Operations,
IT and Security; monitors the recommendations for ensuring
and increasing the level of information/cyber security issued
by CISO, addresses the report on potential violations, events,
and incidents in the area of IT security; and monitors the Target
Operating Model implementation in the areas of IT, the Security
Operating System, Competence Centre, and Operations.
At the end of 2022, the composition of the committee was as
follows: Mark William Lane Richards (Chairman), Islam Osama
Zekry (Deputy Chairman), Andreas Klingen, Primož Karpe, and
Tadeja Žbontar Rems (members). The membership of Janja
Žabjek Dolinšek was terminated on 8 July 2022. Changes in
membership of the committee that occurred during the year
are reflected in the chart on Supervisory Board Committees (
C2
below).
There were five sessions of the Operations and IT Committee
2022. The Operations and IT Committee acknowledged itself
with:
•
IT Strategy - progress report on strategic initiatives other than
BIT and OMNI;
•
Key performance indicators in IT; Review of IT KPIs and
interim Goals & Objectives; Report on process metrics;
•
Information on the achievement of goals for 2022 in the area
of Information Technology in the Group;
•
New NLB Group target IT operating model;
•
Payment IT strategy update; Payment transactions – analysis
of process of optimisation;
•
BIT project rollout; OMNI project; Web project readiness
assessment;
•
Procurement in 2021 and future plans;
• Software-defined mainframe;
•
IT integration plan of N Bank.
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7. DESCRIPTION POLICY
ON THE PROVISION
OF DIVERSITY OF THE
MANAGEMENT BODY AND
SENIOR MANAGEMENT
The Policy on the Provision of Diversity of the Management
Body and Senior Management was adopted by the General
Meeting of shareholders on 10 June 2019, and was amended
in June 2022 according to EBA Guidelines on assessing the
suitability of members of the management body and holders
of key functions, amendments to the Slovenian Corporate
Governance Code, and EBA Guidelines on Internal Governance.
The Diversity policy was amended in a way that in addition
to already existing goals (gender structure, age structure,
professional competences skills and experience, international
experience) new goals have been added (continuity in the
composition of the body, personal integrity, and geographical
provenance). Regarding gender, the Bank has set a quantitative
goal by defining a period for achieving this goal. NLB respects
and follows the initiative 40/33/2026 of the Slovenian Directors’
Association for voluntary achievement of the goal of sexual
diversity by the end of 2026: 40% for members of supervisory
boards and a total of 33% for members of supervisory boards
and management boards of the underrepresented sex in listed
companies and state-owned companies.
The Diversity policy sets out the targets to be pursued in terms
of representation on the supervisory board, management
board, and senior management according to different diversity
goals in order the management body is composed in such a
way that, as a whole has the knowledge, skills, and experience
necessary for an in-depth understanding of the Bank's strategy
and challenges and the risks to which it is exposed. The policy
is annually reviewed by the Nomination Committee of the
Supervisory Board.
The Bank implements the principles of the Diversity policy
through other policies and procedures, namely the Policy on the
selection of suitable candidates for members of the Supervisory
Board, and the Policy on the selection of suitable candidates for
members of the Management Board, as well as the procedures
of the Nomination Committee of the Supervisory Board.
In order to achieve the objectives of this diversity policy, one of
the measures that influences the selection process is also: if two
candidates for the position of a member of the Management
Board or a member of the Supervisory Board meet all the
required tender criteria and at the same time the target gender
representation is not achieved in a certain body, the candidate
of the underrepresented sex shall be selected.
Implementation and the results achieved by the diversity
policy during the reporting period:
a) The Supervisory Board
It is estimated that the goals for 2022 were achieved, as the
members of the Supervisory Board as a whole covers an
adequately wide range of knowledge, skills, and professional
experience of its members, and is composed with regard to
the following criteria: experience, reputation, management of
potential conflicts of interest, independence, available time, and
collective suitability.
Also, the Supervisory Board has a suitable ratio between the
existing and the new members, considering when appointing
new members to the Supervisory Board the ratio between
existing and new members is not below 70%. The members of
the Supervisory Board have a high level of personal integrity,
a suitable share of members of the Supervisory Board have
international experience, and have suitable geographical
experience as set in the plan for the year 2022.
Regarding the gender structure, the goal for the members of
the Supervisory Board has not been achieved since the plan
set up for the year 2022 assumed a 42% share of women on the
Supervisory Board, but taking into account two resignations
by Supervisory Board members (employee representatives),
the proportion of women dropped down to 30%. In order to
increase the proportion of women on the Supervisory Board,
it is suggested that all stakeholders endeavour to form an
appropriate group of candidates in the recruitment process,
taking into account appropriate representation of the less
represented gender.
Regarding the age structure of the Supervisory Board, it is also
considered appropriate, according to the plan set up for 2022,
as members of the Supervisory Board are represented in the
age groups from 40 to 60+.
b) The Management Board
We estimate that the goals for 2022 have been achieved, as
members of the Management Board as a whole meet the
high level of requirements related to the set goals, namely
age structure, gender structure, professional competencies,
skills and experience, and requirements related to relevant
international experience in various fields, personal integrity,
and geographical provenance.
With the extension of the members of the Management Board
in 2022, also the gender structure meets the expectations due to
the share of women increasing to 16.7%, or one woman.
In 2022, regarding the age structure, with additional members
being elected to the Management Board, the representation in
the age group of 51 to 60 increased (from 0 to 3) and stayed at
the same level of 3 members in the age group for 41 – 50.
c) Senior Management
For 2022, we estimate that the goals were achieved, as senior
management at a high level met the requirements relating to
the range of knowledge, skills, and professional experience.
Regarding the requirements related to international experience
in various fields, it is estimated that senior management has
largely relevant international experience. It is also estimated
that the share of 41% of women in senior management is
appropriate.
Regarding the age structure, it is also considered appropriate,
as senior management in the age structure is very dispersed
and is thus represented in all age groups from 20 to 60 years.
Additional information on the framework, objectives, and
chart with set goals of the Diversity Policy can be found in the
chapter,
Human Resources
of this annual report.
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Statement on changes that occurred between the end of
accounting period up to the publication of this statement
In accordance with Guidelines on Disclosure for Listed
Companies, point 6.3.2 (Ljubljana Stock Exchange, 18 December
2020) NLB hereby states that no changes occurred between the
end of accounting period up to the publication of this statement.
Ljubljana, 12 April 2023
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Management Board of NLB
Supervisory Board of NLB
Primož Karpe
Chairman
Blaž Brodnjak
Chief executive officer
Andreas Burkhardt
Member
Archibald Kremser
Member
Hedvika Usenik
Member
Antonio Argir
Member
Andrej Lasič
Member
Table 37:
Composition of Management in financial year 2022 (C.1)
Name and
Surname
Position held
(President,
Member)
Area of work
covered within the
Management Board
First appointment
to the position
Conclusion of the
position/
term of office
Citizenship
Year of birth
Qualification
Professional
profile
Membership in
supervisory bodies in
companies not
related to the
company
Blaž Brodnjak
President
CEO
6 July 2016
(i)
6 July 2026
Slovene
1974
MBA
Banking/Finance
Banks' Association
of Slovenia,
AmCham Slovenia,
Handball Federation
of Slovenia,
Cedevita Olimpija
Antonio Argir
Member
Responsible for
Group governance,
payments and
innovations
28 April 2022
28 April 2027
Macedonian
1975
MBA
Banking/Finance
Economic Chamber
of North Macedonia
Andreas Burkhardt
Member
CRO
18 September 2013
6 July 2026
German
1971
MBA
Banking/Finance
Archibald Kremser
Member
CFO
31 July 2013
6 July 2026
Austrian
1971
MBA
Banking/Finance
Andrej Lasič
Member
CMO (responsible
for Corporate and
Investment Banking)
28 April 2022
28 April 2027
Slovene
1970
Bachelor’s degree
Banking/Finance
Hedvika Usenik
Member
CMO (responsible for
Retail Banking and
Private Banking)
28 April 2022
28 April 2027
Slovene
1972
MBA
Banking/Finance
(i) Member of the Management Board since 2012.
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Table 38:
Composition of Supervisory Board and Committees in financial year 2022 (C.2)
Name and
Surname
Position held
(Chairman,
Deputy
Chairman,
Member)
First
appointment to
the position
Conclusion of
the position /
term of office
Representative
of the
company's
capital
structure /
employees
Attendance at
SB session in
regard to the
total number
of SB session
(for example
5/7) applicable
on his/her
mandate
Gender
Citizenship
Year of birth
Qualification
Professional
profile
Independence
under Article
23 of the Code
(YES/NO)
Existence of
conflict of
interest, in the
business year
(YES/NO)
Membership
in supervisory
bodies in other
companies or
institutions
Primož Karpe
Chairman
10 February
2016
2024
Representative
of the
company's
capital structure
8/8
male
Slovenian
1970
MSc
Banking/
Finance
YES
YES
Angler d.o.o,
Aroma Global
3 Ltd.
Andreas
Klingen
Deputy
Chairman
22 June 2015
2023
Representative
of the
company's
capital structure
8/8
male
German
1964
University
Degree
Banking/
Finance
YES
NO
Kyrgyz
Investment,
Credit Bank
CISC, Credit
Bank of
Moscow
(i)
, Nepi
Rockcastle N.V.
David Eric
Simon
Member
4 August 2016
2024
Representative
of the
company's
capital structure
8/8
male
British
1948
Higher
National
Diploma in
Business
Studies
Banking/
Finance
YES
NO
Jihlavan
a.s., Czech
Aerospace
industries
sro, Central
Europe Industry
Partners a.s.
Mark William
Lane Richards
Member
10 June 2019
2023
Representative
of the
company's
capital structure
8/8
male
British
1966
MSc
Banking/
Finance
YES
NO
BPL Global
(Lloyds of
London
insurance
Broker),
Sheffield
Haworth
Ltd, Vencap
International pic
Ukraine (UK)
Shrenik
Dhirajlal Davda
Member
10 June 2019
2023
Representative
of the
company's
capital structure
8/8
male
British
1960
MBA, LLB
Finance
YES
NO
PJSC
Ukrgasbank,
IPSO, UK
(ii)
Gregor Rok
Kastelic
Member
10 June 2019
2023
Representative
of the
company's
capital structure
8/8
male
Slovenian
1968
MSc
Banking/
Finance
YES
NO
Verica
Trstenjak
Member
15 June 2020
2024
Representative
of the
company's
capital structure
8/8
female
Slovenian
1962
PhD
Law
YES
NO
EU Agency for
Fundamental
Rights, Vienna
(iii)
Sergeja Kočar
Member
17 June 2020
2024
Representative
of the
company’s
employees
8/8
female
Slovenian
1968
MSc
Management
YES
NO
Bojana Šteblaj
Member
17 June 2020
12 September
2022
Representative
of the
company’s
employees
4/6
female
Slovenian
1962
MSc
Management
YES
NO
Janja Žabjek
Dolinšek
Member
20 November
2020
8 July 2022
Representative
of the
company’s
employees
5/5
female
Slovenian
1957
MSc
IT
YES
NO
Tadeja Žbontar
Rems
Member
22 January 2021
2025
Representative
of the
company’s
employees
5/5
female
Slovenian
1968
MSc
IT
YES
NO
Islam Osama
Zekry
Member
14 June 2021
2025
Representative
of the
company's
capital structure
7/8
male
Egyptian
1977
PhD
IT
YES
NO
CIB Housing
association,
Egypt, Egyptian
AI Council
(Ministry of
Communication
and Information
Technology)
(i) Until 14 March 2022.
(ii) Since 8 March 2022.
(iii) Until June 2022.
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Name and Surname
Membership in committees (audit,
nominal, income committee, etc.)
First appointment
to the position
Conclusion of the position/
term of office
Chairman/Deputy Chairman/
Member
Attendance at sessions of SB's
Committees in regard to the total
number of SB's session (applicable
on his/her mandate)
(i)
Shrenik Dhirajlal Davda
Remuneration Committee
28 June 2019
2023
Member
6/6
Gregor Rok Kastelic
Remuneration Committee
28 June 2019
2023
Member/Chairman
6/6
Mark William Lane Richards
Remuneration Committee
26 June 2020
2024
Deputy Chairman
6/6
Bojana Šteblaj
Remuneration Committee
8 April 2021
12 September 2022
Member
3/3
Sergeja Kočar
Remuneration Committee
26 June 2020
2024
Member
6/6
Primož Karpe
Nomination Committee
15 April 2016
2024
Chairman
6/6
Andreas Klingen
Nomination Committee
19 February 2016
2023
Deputy Chairman
6/6
Verica Trstenjak
Nomination Committee
26 June 2020
2024
Member
6/6
Sergeja Kočar
Nomination Committee
26 June 2020
2024
Member
6/6
Bojana Šteblaj
Nomination Committee
8 April 2021
12 September 2022
Member
2/4
David Eric Simon
Audit Committee
7 April 2016
2024
Chairman
6/6
Primož Karpe
Audit Committee
15 April 2016
2024
Member
6/6
Shrenik Dhirajlal Davda
Audit Committee
28 June 2019
2023
Member/Deputy Chairman
6/6
Gregor Rok Kastelic
Audit Committee
28 June 2019
2023
Member
5/6
Andreas Klingen
Risk Committee
19 February 2016
2023
Chairman
6/6
Shrenik Dhirajlal Davda
Risk Committee
8 July 2021
2025
Deputy Chairman
6/6
David Eric Simon
Risk Committee
7 April 2016
2024
Member
6/6
Mark William Lane Richards
Risk Committee
28 June 2019
2023
Member
6/6
Gregor Rok Kastelic
Risk Committee
26 June 2020
2023
Member
6/6
Islam Osama Zekry
Risk Committee
8 July 2021
2025
Member
5/6
Mark William Lane Richards
Operational and IT Committee
28 June 2019
2023
Chairman
5/5
Andreas Klingen
Operational and IT Committee
28 June 2019
2023
Member
5/5
Primož Karpe
Operational and IT Committee
15 April 2016
2024
Member
5/5
Tadeja Žbontar Rems
Operational and IT Committee
8 April 2021
2025
Member
5/5
Janja Žabjek Dolinšek
Operational and IT Committee
8 April 2021
8 July 2022
Member
3/3
Islam Osama Zekry
Operational and IT Committee
8 July 2021
2025
Deputy Chairman
4/5
(i) There were also extraordinary sessions of the committees that are not reflected in this table.
External member in committees (audit, nominal, income committee, etc.) - The Banking Act (ZBan-3) contains provision stipulating that, irrespective of provision of Companies Act (ZGD-1) only members of the Supervisory
Board can be appointed to Supervisory committees.
Name and Surname
Attendance at sessions of SB's Committees in regard to
the total number of SB's session (for example 5/7)
Gender
Qualification
Year of birth
Professional profile
Membership in supervisory bodies in companies
not related to the company
none
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MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Statement of Management
of Risk
NLB’s Management Board and Supervisory Board provide
herewith a concise statement of the risk management
according to Article 17 of the Decision on Internal Governance
Arrangements, the Management Body and the Internal Capital
Adequacy Assessment Process for Banks and Savings Banks
(Official Gazette of the RS, no. 73/15 and 115/2021), Regulation
(EU) 575/2013, article 435 (Risk Management Objectives and
Policies), point (e) and (f), as well as the EBA Guidelines on
Internal Governance (EBA/GL/2021/05) and EBA Guidelines on
Disclosure Requirements (EBA GL/2016/11).
Risk management in the Group, representing an important
element of the Group’s overall corporate governance, is
implemented in accordance with the set strategic guidelines,
established internal policies, and procedures which take into
account the European banking regulations, the regulations
adopted by the BoS, the current EBA guidelines, and the
relevant good banking practices. EU regulations are followed
by NLB Group, where the Group subsidiaries operating
outside Slovenia are also compliant with the rules set by the
local regulators. The Group gives high importance to the risk
culture and awareness of all relevant risks within the entire
Group. Maintaining risk awareness is engrained in the business
and risk strategy of the Group. The business and operating
environment relevant for the Group’s operations is changing
with trends such as sustainability, social responsibility,
governance, changing customer behaviours, emerging new
technologies and competitors, as well as increasing new
regulatory requirements. Respectively, risk management is
continuously adapting with the aim to detect and manage new
potential emerging risks.
The Group uses the ‘three lines of defence framework’ as an
important element of its internal governance, whereby the risk
management function acts as a second line of defence. The
Group’s has enhanced overall corporate governance which is
reflected in lower SREP requirement in recent years. Robust and
comprehensive Risk Management framework is defined and
organised with regards to the Group's business and risk profile,
based on a forward-looking perspective to meet internally
set strategic objectives and all external requirements. The
proactive risk management and control system is primarily
based on Risk appetite and Risk strategy, which are consistent
with the Group’s Business strategy, and focused on early risk
identification and efficient risk management. Set governance
and different risk management tools enable adequate oversight
of the Group’s risk profile, proactively support its business
operations and its management by incorporating escalation
procedures and using different mitigation measures when
necessary. In this respect, the Group is constantly enhancing
and complementing the existing methods and processes in all
risk management segments.
The Group is engaged in contributing to sustainable finance
by incorporating environmental, social, and governance (ESG)
risks into its business strategies, risk management framework,
and internal governance arrangements. With the adoption
of the NLB Group Sustainability programme, the Group
implemented main sustainability elements into its business
model. The goal of this strategic, organisation-wide initiative
is to ensure sustainable financial performance of the Group by
considering ESG risks and opportunities in its operations, and to
actively contribute to a more balanced and inclusive economic
and social system. Thus, sustainable finance integrates ESG
criteria into Group’s business and investment decisions for the
lasting benefit of Group’s clients and society. The NLB Group
Sustainability Committee oversees the integration of the ESG
factors to the Group business model. The management of
ESG risks addresses the Group’s overall risk management
framework, namely the credit approval process and related
credit portfolio management. It follows ECB and EBA guidelines,
with tendency of their comprehensive integration into all
relevant processes. The availability of ESG data in the region
where Group operates is still lacking. Nevertheless, the Group
made significant progress in the process of obtaining relevant
ESG-related data from its clients, as it is a prerequisite for
adequate decision-making.
The Group plans a prudent risk profile, optimal capital usage,
and profitable operations in the long run considering the
risks assumed. The Business strategy, the Risk appetite,
the Risk strategy and the key internal risk policies of the
Group, approved by the Management Board and the
Supervisory Board of NLB, specify the strategic objectives
and guidelines concerning risk assumption, the approaches
and methodologies of monitoring, measuring, mitigating and
managing all types of risk at different relevant levels. Moreover,
main strategic risk guidelines are consistently integrated into
the regular business strategy review, budgeting process, and
other strategic decisions, whereby informed decision-making
is assured. The Group regularly monitors its target risk appetite
profile and internal capital allocation, representing the key
component of proactive management. Risk limits usage and
potential deviations from limits or target values are regularly
reported to the respective committees and/or the Management
Board of the Bank, the Risk Committee of the Supervisory
Board, and the Supervisory Board of the Bank.
Additionally, the Group established a comprehensive stress-
testing framework and other early warning systems in different
risk areas with the intention to contribute to setting and
pursuing the Group’s business strategy, to support decision-
making on an ongoing basis, to strengthen the existing internal
controls, and to enable timely response when necessary.
The stress-testing framework includes all material types of
risk, as well those related to ESG, and various relevant stress
scenarios or sensitivity analysis, according to the vulnerability
of the Group’s business model. Stress-testing has an important
role when assessing the Group’s resilience to stressed
circumstances, namely from profitability, capital adequacy,
and liquidity in this forward-looking perspective. As such, it is
embedded into Group’s Risk management system, namely Risk
appetite, ICAAP, ILAAP, and Recovery plan, as an important
component of sound risk management. Beside internal stress-
testing, the Group as a systemically important bank also
participates in the regulatory stress test exercises carried out by
ECB.
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Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
The Group is one of the largest Slovenian banking and financial
groups, and it has an important presence in the SEE region. In
accordance with its strategic orientations, the Group intends to
be sustainably profitable, predominantly working with clients
on its core markets, providing innovative but simple customer-
oriented solutions, and actively contributing to a more
balanced and inclusive economic and social system. The Group
has a well-diversified business model. Efficient managing of
risks and capital is crucial for the Group to sustain long-term
profitable operations. Based on the Group’s business strategy,
credit risk is the dominant risk category, followed by credit
spread risk on its banking book portfolio, interest rate risk in its
banking book, operational risk, liquidity risk, market risk, and
other non-financial risks. ESG risks do not represent a new risk
category, but rather one of risk drivers of the existing type of
risks, such as credit, liquidity, market, and operational risks. The
Group integrates and manages them within the established risk
management framework. Regular risk identification and their
assessment is performed within the ICAAP process, with the aim
of assuring their overall control and effective risk management
on an ongoing basis.
Managing risks and capital efficiently at all levels is crucial
for NLB Group’s sustained, long-term profitable operations.
Management of credit risk, representing the Group’s most
important risk, focuses on the taking of moderate risks –
diversified credit portfolio, adequate credit portfolio quality,
the sustainable cost of risk, and ensuring an optimal return
considering the risks assumed. The liquidity risk tolerance is
low. The Group must maintain an appropriate level of liquidity
at all times to meet its short-term liabilities, even if a specific
stress scenario is realised. Further, with the aim of minimising
this risk, the Group pursues an appropriate structure of sources
of financing. The Group’s limited exposure to credit spread
risk, arises from the valuation risk of debt securities portfolio
servicing as liquidity reserves, to the moderate level. The
Group’s basic orientation in the management of interest rate
risk is to limit the unexpected negative effects on revenues and
capital that would arise from changed market interest rates,
and, therefore, a moderate tolerance for this risk is stated. When
assuming operational risk, the Group pursues the orientation
that such risk must not significantly impact its operations. The
risk appetite for operational risks is low to moderate, with a
focus on mitigation actions for important risks, and key risk
indicators serving as an early warning system. The conclusion
of transactions in derivative financial instruments at NLB is
primarily limited to serving customers and hedging the Bank’s
own positions. In the area of currency risk, the Group thus
pursues the goals of low to moderate exposure. Based on the
environmental and climate risk assessment, the impact of these
risks is estimated as low, except for transition risk in the area of
credit, which is assessed as low to medium. The tolerance for all
other risk types, including non-financial risks, is low with a focus
on minimising their possible impact on the Group's operations.
The main NLB Group Risk Appetite Statement objectives are
following:
•
preservation of regulatory capital adequacy;
•
preservation of internal capital adequacy;
• fulfilment of MREL requirement;
• maintenance of low leverage;
•
improvement in the quality of the credit portfolio, sufficient
NPL coverage, sustainable credit risk volatility, sustainable
cost of risk across the economic cycle, limited Stage 2
exposures, sustainable industry and individual concentration,
sustainable exposure to project financing;
•
maintenance of a solid liquidity position, maintaining stable
customers' deposits as the main funding base;
•
diversification of risk in exposures to banks and sovereigns;
•
limited exposure to credit spread risk;
•
limited exposure to interest rate risk;
•
limited exposure to foreign exchange risk;
•
sustainable exposure to ESG risks;
•
sustainable tolerance to net losses from operational risk.
During 2022, sustainable ESG financing in accordance with
Environmental and Social Management System (ESMS) was
partly integrated in the Group's Risk appetite statement.
Additional key risk indicators and targets in the area of ESG are
going to be addressed based in ongoing activities related to the
Net Zero Banking Alliance commitment, signed by the Group.
Values of the most important risk appetite indicators of the
Group as at the end of 2022, reflecting interconnection between
strategic business orientations, risk strategy and targeted risk
appetite profile, were following:
• Total capital ratio 19.2%,
• Tier 1 ratio 15.7%,
• CET1 ratio 15.1%,
• Leverage ratio 9.1%,
•
Cost of risk 14 bps,
•
NPE ratio (EBA definition) 1.3%,
•
NPL coverage ratio (EBA definition) 58.1%,
• LTD 65.3%,
•
Liquidity Coverage Ratio (LCR) 220.3%,
•
Net stable funding ratio (NSFR) 183.0%,
•
Interest rate risk (EVE) (of 200 bps) -5.1% of capital,
•
Transactional FX risk 1.1% of capital,
•
No new financing of coal mining and coal-fired electricity
generation (0 EUR),
•
Net losses from operational risk 0.7% of capital requirement
for operational risk.
In 2022, the war in Ukraine did not have a meaningful impact
on the quality of the credit portfolio, nor on the liquidity of the
Group. The Group’s direct and indirect exposures toward Russia
and Ukraine are quite limited. In the light of increasing energy
prices, inflationary pressures, and a forecast of a decrease
in economic growth, the Group has thoroughly analysed
potential impacts on its credit portfolio and made the necessary
adjustments. The most affected industries or segments are
carefully monitored with the intention to detect any additional
significant increase in credit risk at a very early stage. The
liquidity position of the Group remains very robust. Even if a
highly unfavourable liquidity scenario would materialise, the
Group holds sufficient level of high-quality liquidity reserves.
Consequently, the Group concluded 2022 as self-funded, with
strong liquidity, and a solid capital position, demonstrating
the Group’s financial resilience. The acquired N Banka has a
business model quite similar to that of NLB, so there were no
major changes in the Group’s risk profile in 2022. Otherwise,
there were no other transactions of sufficiently material nature
to impact on the Group’s risk profile or distribution of the risks
on the Group level.
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SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
The Condensed Statement of the management of risk is also
published on the Bank intranet with the aim of strict adherence
of the banks’ employees at daily operations of the Bank, as
regards the definition and importance of a consistent tendency
of the adopted risks, and ways to take into account when
adopting its daily business decisions.
Ljubljana, 12 April 2023
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MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Management Board of NLB
Supervisory Board of NLB
Primož Karpe
Chairman
Blaž Brodnjak
Chief executive officer
Andreas Burkhardt
Member
Archibald Kremser
Member
Hedvika Usenik
Member
Antonio Argir
Member
Andrej Lasič
Member
Statement on
Non-financial Operation
In accordance with Article 56 and in conjunction with Article 70c
of the Companies Act, the Bank has prepared a Consolidated
Statement on Non-Financial Operation as a separate report,
called the
NLB Group Sustainability Report 2022
.
The consolidated report enables interested parties to
understand the material dimensions of the NLB Group’s
development, performance, and position and the impact of its
activities and includes the following non-financial information,
which are disclosed in the NLB Group Sustainability Report
2022:
•
The NLB Group’s business model is presented in Chapters
NLB Group at a Glance and Sustainability Strategy.
•
Policy description and results on environmental, social,
and human resources matters are described in Chapters
Sustainable Operations and Sustainable Finance and Risk
Management.
•
Policy description and results on respect for human rights are
described in Chapter Respecting Human Rights.
•
Policy description and results on anti-corruption and anti-
bribery matters are covered in Chapter Fighting Against
Corruption and Bribery.
•
The main risks regarding the aforementioned issues are listed
in Chapters Sustainable Operations and Sustainable Finance
and Risk Management.
•
Key non-financial performance indicators that are important
for specific activities are described in the NLB Group
Sustainability Report 2022 and summarised in Appendix 1.
In addition to the aforementioned information, the report
discloses information based on the following legal bases,
requirements, recommendations, and reporting frameworks:
•
EU Taxonomy: Regulation (EU) 2020/852 establishing a
framework for the promotion of sustainable investments and
the delegated acts adopted under this Regulation;
•
Requirements and recommendations of regulatory
authorities: BoS, Securities Market Agency (SMA);
•
the United Nations Principles for Responsible Banking (UN-
PRB);
•
ECB Guide on Climate and Environmental Risks;
•
the European Commission's Guidelines on Non-Financial
Reporting;
•
the recommendations of the Task force on Climate Related
Financial Disclosures (TCFD) - in line with the requirements
and recommendations of the Financial Conduct Authority
(FCA); and
•
the Global Reporting Initiative (GRI) Sustainability Reporting
Standards.
The NLB Group Sustainability Report 2022 is published on the
Bank's website, on the Ljubljana Stock Exchange's SEOnet
system, on the websites of the Agency of the Republic of
Slovenia for Public Legal Records and Related Services (AJPES),
and on the London Stock Exchange (LSE), at the same time in
the NLB Group Annual Report 2022.
The NLB Group's Consolidated Annual Report 2022 is thus in
line with the requirements of the Companies Act (ZGD-1), which
requires public interest entities with an average number of
employees exceeding 500 on the balance sheet cut-off date
to include a Statement on Non-Financial Operation in their
business report.
Ljubljana, 12 April 2023
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MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Management Board of NLB
Blaž Brodnjak
Chief executive officer
Andreas Burkhardt
Member
Archibald Kremser
Member
Hedvika Usenik
Member
Antonio Argir
Member
Andrej Lasič
Member
Disclosure on Shares
and Shareholders
of NLB
acquirer of the shares has acquired them on the account of
third parties, so that (s)he is not entitled to exercise voting
rights from these shares at his/her sole discretion, while at
the same time committing to the Bank, (s)he will not exercise
voting rights on the basis of the instructions of an individual
third party for whose account (s)he has acquired the shares if,
together with the instructions for voting, (s)he does not receive
a written guarantee from the person that this person has shares
on his/her own account and that this person is not, directly
or indirectly, a holder of more than 25% of the Bank’s voting
rights. The acquirer who exceeds the share of 25% of the Bank’s
shares with voting rights, and does not require the issuance
of approval for the transfer of shares, or does not receive the
approval of the Bank, may exercise the voting right from 25% of
the shares with the voting rights.
There are no restrictions other than those mentioned and those
that are regulatory.
1.3
Qualifying holdings
This information is included in the chapter
Corporate
Governance Statement of NLB
.
1.4
Securities carrying special controlling rights
This information is included in the chapter
Corporate
Governance Statement of NLB.
1.5
The employee share scheme, if used by the
company, for shares to which the scheme
relates and about the method of exercising
control over this scheme, if the controlling
rights are not exercised directly by employees
NLB does not have an employee share scheme. In accordance
with the relevant remuneration policies, (when required by
ZBan-3) a part of variable remuneration of NLB’s Identified Staff
shall consist of NLB shares, or NLB share-linked instruments
or equivalent non-cash instruments (the instrument used is
determined by the Supervisory Board). So far, NLB has not used
own shares for this purpose. It currently uses NLB share-linked
instruments. More information will be available in the
Report of
the Remunerations for the Business Year 2022
.
1.6
Explanation regarding restrictions related to
voting rights
This information is included in the chapter
Corporate
Governance Statement of NLB
.
1.7
All agreements among shareholders which
are known to the company and could result
in restrictions relating to the transfer of
securities or voting rights
The Bank is not aware of such agreements.
1.8
The company’s rules on the appointment
or replacement of management and
supervisory board members and changes of
the articles of association
This information is included in the chapter
Corporate
Governance Statement of NLB
.
1.9
Authorisations given to management,
particularly authorisations to issue or
purchase own shares
This information is included in the chapter
Corporate
Governance Statement of NLB
.
1.10 All major agreements to which the company
is a party and which take effect, are changed
or cancelled following a change in control
over the company resulting from a bid, as
laid down by the Act governing M&A, and the
effects of such agreements
There are no major agreements to which the Bank is a party,
and which would take effect, be changed, or cancelled
following a change in control over the Bank resulting from a bid.
1.11
All agreements between the Bank and its
management or supervision bodies or its
employees which envisage compensation
if, due to a bid as laid down by the Act
governing M&A, these persons resign, are
dismissed without a well-founded reason, or
their employment is terminated
In line with the employment contracts of the members of the
Management Board, if the Supervisory Board recalls a member
of the Management Board for other business and economic
reasons, “such a member of the Management Board of NLB
is entitled to compensation for early termination of his term
of office. The member of the Management Board shall not be
entitled to compensation for early termination of the term of
office if he is employed in the Bank or in the Group after the
termination of the term of office. In the event of resignation, the
member of the Management Board shall not be entitled to any
compensation for early discontinuation of the term of office,
unless otherwise decided by the Supervisory Board.”
1.
Information pursuant to the
Companies Act (ZGD-1), Article
70, paragraph 6
1.1
Structure of the Bank’s share capital
The Bank has issued only ordinary registered no-par value
shares, the holders of which have a voting right and the right to
participate in the General Meeting of the Bank’s shareholders,
the pre-emptive right to subscribe for new shares in case
of a share capital increase, the right to profit participation
(dividends), the right to a share in the surplus in the event of
liquidation or bankruptcy of the Bank, and the right to be
informed. All shares belong to a single class and are issued in
book-entry form.
Information regarding the shareholder structure of NLB (as at
31 December 2022) is available in the subchapter
Shareholder
Structure of NLB
in the chapter
Key Highlights.
1.2
All restrictions relating to the transfer of
shares and the restrictions on voting rights
The shares of the Bank are freely transferable, subject to the
provisions of the Articles of Association of the Bank which
require the approval of the Supervisory Board, namely for the
transfer of shares of the Bank by which the acquirer, together
with the shares held by the holder before such an acquisition
and the shares held by third parties for the account of the
acquirer, exceeds the share of 25% of the Bank’s voting shares.
Approval for the transfer of shares is issued by the Supervisory
Board.
The Bank rejects the request for approval of transfer shares
if the acquirer, together with the shares held by the acquirer
before the acquisition and the shares held by third parties for
the account of the acquirer, exceed the 25% share of the Bank
with voting rights, increased by one share.
Notwithstanding the provision mentioned in the first paragraph,
approval for the transfer of shares is not required if the
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Risk Management
Events After 2022
Financial Report
2.
Number of shares held by
members of the Supervisory
Board and Management Board
Table 39:
Number of shares held by members of the Supervisory Board
and Management Board
Shares held as at
31 Dec 2022
Name of member of
Supervisory Board
Number
%
Primož Karpe
1,286
0.006%
Andreas Klingen
1,298
0.006%
David Eric Simon
(i)
582
0.003%
Islam Osama Zekry
—
—
Gregor Rok Kastelic
—
—
Shrenik Dhirajlal Davda
—
—
Mark William Lane Richards
—
—
Verica Trstenjak
—
—
Sergeja Kočar
190
0.001%
Tadeja Žbontar Rems
—
—
Name of member of
Management Board
Number
%
Blaž Brodnjak
1,700
0.009%
Archibald Kremser
791
0.004%
Andreas Burkhardt
800
0.004%
Andrej Lasič
325
0.002%
Hedvika Usenik
450
0.002%
Antonio Argir
620
0.003%
(i) David Eric Simon holds 2,910 GDRs, which is equal to 582 shares (as 1 share
represents 5 GDRs).
3. Stock option agreements
The Bank has no stock option agreements in relation to its listed
shares.
4. Dividend taxation
Withholding tax
In 2022 a Slovenian payer was required to deduct and withhold
the amount of Slovenian corporate or personal income tax from
dividend payments made to the certain categories of payees:
• Individuals: 25%
• Intermediaries: 25%
•
Legal entities (other than Intermediaries): 15%
In 2022, the tax rate for individuals and intermediaries has
changed from 27.5% to 25%.
There are some exemptions if dividends are paid
to intermediaries and legal entities
For the purposes of Slovenian tax legislation, the GDR
depositary will qualify as an intermediary. Therefore, the
dividends paid by the custodian to the GDR depositary will be
subject to the deduction and withholding of Slovenian tax at the
rate of 25%. A holder, an owner of a GDR or a beneficial owner
will be entitled, if and to the extent applicable, to claim a refund
of the withholding tax.
In the case of legal entities, the exemptions are related to the
characteristics of the legal entities.
Application of Double Tax Treaties
If the payee is not an intermediary, Slovenian tax authorities
may approve the application of a lower tax rate specified in the
double tax treaty between the RoS and the country of residence
of the payee if the Slovenian payer provides certain information
on the payee and a confirmation that the payee is a resident
for taxation purposes in such a country, issued by the tax
authorities of such a country.
Refund of Withholding Tax
If the Slovenian tax was deducted and withheld at a higher tax
rate than it would be paid if a Slovenian payer would make the
dividend payment directly to such person as a payee or higher
tax rate, than the one specified in the double tax treaty, the
payee of the dividend is entitled to the refund of the overpaid
tax. The tax refund is enforced by filing a claim to the Financial
Administration of the RoS (FURS).
Legal persons
Dividends with respect to the shares received by a legal
person who is a Slovenian resident are exempt from Slovenian
corporate income tax
(davek od dohodkov pravnih oseb)
.
Individuals
The amount of tax withheld from a dividend payment received
by an individual constitutes the final amount of Slovenian
Personal Income Tax
(dohodnina)
with respect to such a
dividend payment.
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Events After 2022
Financial Report
NLB Group’s unique geographical footprint became
even more pronounced by the merger of two
Serbian banks of the Group into
NLB Komercijalna
Banka, Beograd
in April 2022. The first chapter in
its history was marked by results that exceeded all
plans and predictions – dynamic growth, increased
share in the banking sector, and enviable net profit.
The bank remained a reliable support for citizens in
solving important life issues, defended its position
as the absolute market leader in agricultural loans,
and confirmed that the economy recognizes it as a
strategically important partner.
We
created better footprints
and with strong
support of the National Bank of Serbia implemented
numerous measures that preserved the life standard
of citizens and operations of business entities.
Most importantly, however, we managed to justify
the trust of almost a million clients and the entire
community in which we operate.
Pictured: NLB Komercijalna Banka, Beograd employees
Events After the End
of the 2022 Financial
Year
Rating upgrade
On 7 February 2023 Moody's upgraded NLB to A3 from Baa1.
USA regional banks & Credit Suisse turmoil
In March 2023, the collapse of two regional banks in the USA,
Silicon Valley Bank and Signature Bank, prompted investors
globally to scour for weak spots in the financial system,
resulting in an emergence of stress in the banking sector and
a turmoil in the capital markets. Developments in the USA
had impacts also in Europe and put European banks under
stress as well. Credit Suisse had been heavily impacted by
the collapse in confidence as the demise of regional banks in
the USA had spread fear about weaker institutions at time of
increasing interest rates undermining value of some financial
assets. To increase confidence in the banking sector, Swiss
financial regulators engineered an emergency rescue plan for
Credit Suisse in the form of UBS Group AG buying Credit Suisse.
As of 31 March 2023, the Group has only small exposure to
Credit Suisse, deriving mainly from limited investment in bonds.
Since the beginning of the bank stress and market turmoil, the
financial institutions’ credit spreads widening and overall risk-
free rates decrease were observed, which is currently positively
impacting the Group’s FVOCI positions (other comprehensive
income in relation to valuation of debt securities, net of related
deferred tax in the first quarter of 2023 was positive in the
amount of EUR 24 million). From a capital management point
of view, most of FVOCI cumulative negative valuations (except
a smaller part which was as of 31 December 2022 carved
out by temporary treatment of sovereign debt introduced by
COVID-19 related “quick fix” – see
Note 5.23.
) have already been
accommodated in the Group’s capital ratios and thus going
forward are rather supportive in terms of capital levels as those
exposures mature and new investments are made only with
short duration (i.e. low valuation risks).
With regard to debt securities measured at amortised cost,
the difference between the carrying amount and fair values as
of 31 March 2023 is negative in the amount of EUR 152 million.
These differences are not reflected in the capital ratio given
the Group’s intention to hold them to maturity and collect cash
flows from payments of interest and principal – thus these
differences will not be materialised and also diminish eventually
to zero over the lifetime of the book (duration on average:
3.75 years).
With regard to the liquidity management neither of these
portfolios are intended to be used given the Group’s and NLB’s
very high cash balances (EUR 5,306 million at the Group level
and EUR 3,478 million at NLB level as of 31 March 2023). Even
in extreme circumstances the portfolios could be used to large
extent to raise funds from the central bank using securities as
collateral without selling the asset – by that also not realising
any losses. At the year-end, the total amount of HQLA amounts
to EUR 6,028 million at the Group level. Finally, the amount
of non-insured retail deposits at the Group level is very low,
around 20%.
From a liquidity point of view, no material deviations from the
normal intra-monthly deposit dynamics were identified at
the
NLB Group level as a result of the turmoil.
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Reconciliation of Financial Statements in Business
and Financial Part of the Report
Table 40:
Income Statement of NLB Group for the annual period ended 31 December 2022
Business report
in EUR millions
Financial report
in EUR thousands
Notes
Net interest income
504.9
Interest and similar income
569,776
4.1.
Interest and similar expenses
(64,854)
4.1.
Net fee and commission income
273.4
Fee and commission income
381,599
4.3.
Fee and commission expenses
(108,249)
4.3.
Dividend income
0.2
Dividend income
242
4.2.
Net income from financial transactions
36.6
Gains less losses from financial assets and liabilities not
measured at fair value through profit or loss
866
4.4.
Gains less losses from financial assets and liabilities held for trading
33,451
4.5.
Gains less losses from non-trading financial assets
mandatorily at fair value through profit or loss
90
4.6.
Gains less losses from financial liabilities measured
at fair value through profit or loss
286
Fair value adjustments in hedge accounting
1,655
5.5.a)
Foreign exchange translation gains less losses
297
4.7.
Gains less losses from modification of financial assets
(26)
4.12.
Net other income
(16.6)
Gains less losses on derecognition of non-financial assets
1,861
Other net operating income
16,778
4.8.
Cash contributions to resolution funds and deposit guarantee schemes
(36,144)
4.10.
Gains less losses from non-current assets held for sale
921
4.15.
Net non-interest income
293.6
293,627
Total net operating income
798.5
798,549
Employee costs
(257.7)
Administrative expenses
(412,886)
4.9.
Other general and administrative expenses
(155.2)
Depreciation and amortisation
(47.4)
Depreciation and amortisation
(47,390)
4.11.
Total costs
(460.3)
(460,276)
Result before impairments and provisions
338.3
338,273
Impairments and provisions for credit risk
(17.5)
Provisions for credit losses
(3,050)
4.13.
Impairment of financial assets
(14,454)
4.14.
Other impairments and provisions
(11.4)
Provisions for other liabilities and charges
(5,932)
4.13.
Impairment of non-financial assets
(5,433)
4.14.
Impairments and provisions
(28.9)
(28,869)
Gains less losses from capital investment in
subsidiaries, associates, and joint ventures
0.8
Share of profit from investments in associates and joint
ventures (accounted for using the equity method)
781
5.12.e)
Negative goodwill
172.9
Negative goodwill
172,878
5.12.b), c)
Result before tax
483.1
Profit before income tax
483,063
Income tax
(25.2)
Income tax
(25,230)
4.16.
Result of non-controlling interests
11.0
Attributable to non-controlling interests
10,971
Result after tax
446.9
Attributable to owners of the parent
446,862
147
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Table 41:
Statement of Financial Position of NLB Group as at 31 December 2022
Business report
in EUR millions
Financial report
in EUR thousands
Notes
ASSETS
Cash, cash balances at central banks, and
other demand deposits at banks
5,271.4
Cash, cash balances at central banks and other demand deposits at banks
5,271,365
5.1.
Loans to banks
223.0
Financial assets measured at amortised cost - loans and advances to banks
222,965
5.6.b)
Net loans to customers
13,073.0
Financial assets measured at amortised cost -
loans and advances to customers
13,072,986
5.6.c)
Financial assets
4,877.4
4,877,437
- Trading book
21.6
Financial assets held for trading
21,588
5.2.a)
- Non-trading book
4,855.8
Non-trading financial assets mandatorily at fair value
through profit or loss - part (without loans)
19,031
5.3.a)
Financial assets measured at fair value through other comprehensive income
2,919,203
5.4.
Financial assets measured at amortised cost - debt securities
1,917,615
5.6.a)
Investments in subsidiaries,
associates, and joint ventures
11.7
Investments in associates and joint ventures
11,677
5.12.e)
Property and equipment
251.3
Property and equipment
251,316
5.8.
Investment property
35.6
Investment property
35,639
5.9.
Intangible assets
58.2
Intangible assets
58,235
5.10.
Other assets
358.6
Financial assets measured at amortised cost - other financial assets
177,823
5.6.d)
Derivatives - hedge accounting
59,362
5.5.b)
Fair value changes of the hedged items in portfolio hedge of interest rate risk
(23,767)
5.5.c)
Current income tax assets
1,696
Deferred income tax assets
55,527
5.17.
Other assets
72,543
5.13.
Non-current assets held for sale
15,436
5.7.
TOTAL ASSETS
24,160.2
Total assets
24,160,240
LIABILITIES
Deposits from customers
20,027.7
Financial liabilities measured at amortised cost - due to customers
20,027,726
5.15.a)
Deposits from banks and central banks
106.4
Financial liabilities measured at amortised cost -
deposits from banks and central banks
106,414
5.15.a)
Borrowings
281.1
Financial liabilities measured at amortised cost -
borrowings from banks and central banks
198,609
5.15.b)
Financial liabilities measured at amortised cost
- borrowings from other customers
82,482
5.15.b)
Subordinated debt securities
508.8
Financial liabilities measured at amortised cost -
debt securities issued
815,990
5.15.c)
Other debt securities in issue
307.2
Other liabilities
506.7
Financial liabilities held for trading
21,589
5.2.b)
Financial liabilities measured at fair value
through profit or loss
1,796
5.3.b)
Financial liabilities measured at amortised cost -
other financial liabilities
294,463
5.15.d)
Derivatives - hedge accounting
2,124
5.5.b)
Provisions
122,652
5.16.
Current income tax liabilities
12,420
Deferred income tax liabilities
2,569
5.17.
Other liabilities
49,081
5.19.
Equity
2,365.6
Equity and reserves attributable to owners of the parent
2,365,585
Non-controlling interests
56.7
Non-controlling interests
56,740
TOTAL LIABILITIES AND EQUITY
24,160.2
Total liabilities and equity
24,160,240
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Alternative
Performance
Indicators
The Bank has chosen to present these APIs, either because
they are in common use within the industry or because they
are commonly used by investors and as such are useful for
disclosure. The APIs are used internally to monitor and manage
operations of the Bank and the Group, and are not considered
to be directly comparable with similar KPIs presented by other
companies. The Bank’s APIs are described below together with
definitions.
Cost of risk
– Calculated as the ratio between credit
impairments and provisions annualized from the income
statement and average net loans to customers.
Table 42:
NLB Group cost of risk calculation
in EUR millions
NLB Group
2022
2021
Numerator
Credit impairments and provisions
(i)
17.6
-40.8
Denominator
Average net loans to customers
(ii)
12,256.6
10,080.9
Cost of risk (bps)
14
-41
(i) NLB internal information. Credit impairments and provisions are annualized,
calculated as all established and released impairments on loans and provisions
for off balance (from the income statement) in the period divided by the number
of months for reporting period and multiplied by 12. The net established Credit
impairments and provisions are shown with a positive sign, and the net released
Credit impairments and provisions are shown with a negative sign.
(ii) NLB internal information. Average net loans to customers are calculated as sum
of the balance of the previous year end (31 December) and monthly balances of the
last day of each month from January to month t divided by (t+1).
Cost to income ratio (CIR)
– Indicator of cost efficiency,
calculated as the ratio between the total costs and total net
operating income.
Table 43a:
NLB Group and NLB CIR calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Total costs
460.3
415.4
293.9
207.9
183.6
180.5
Denominator
Total net operating income
798.5
666.9
504.5
366.2
361.5
311.7
Cost to income ratio (CIR)
57.6%
62.3%
58.3%
56.8 %
50.8%
57.9%
Table 43b:
NLB Group’s banking subsidiaries CIR calculation
in EUR millions
NLB Banka,
Skopje
NLB Banka,
Banja Luka
NLB Banka,
Sarajevo
NLB Banka,
Prishtina
NLB Banka,
Podgorica
NLB
Banka,
Beograd
NLB
Komercijalna
banka,
Beograd
N Banka,
Ljubljana
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2021
2022
2021
2022
Numerator
Total cost
31.8
28.6
17.3
15.2
18.3
16.2
14.3
13.5
20.3
17.4
22.2
109.0
88.0
23.0
Denominator
Total net operating income
75.9
68.4
38.5
33.2
31.7
28.1
48.4
41.8
37.3
28.1
30.3
192.4
128.7
35.7
Cost to income ratio (CIR)
41.9%
41.8%
44.9%
45.7%
57.8%
57.7%
29.7%
32.4%
54.3%
61.7%
73.1% 56.6%
68.4%
64.3%
Average cost of funding (quarterly)
– Calculated as the ratio
between interest expenses annualized and average interest
bearing liabilities.
Table 44:
Average cost of funding (quarterly)
in EUR millions
NLB Group
Q4 2022
Q3 2022
Q2 2022
Q1 2022
Numerator
Interest expenses
(i)
66.5
48.0
23.8
23.6
Denominator
Average interest-bearing liabilities
(ii)
20,780.7
20,335.2
20,206.8
19,298.6
Average cost of funding (quarterly)
0.32%
0.24%
0.12%
0.12%
(i) Interest expenses (quarterly) are annualized, calculated as the sum of interest
expenses in the period divided by the number of days in the quarter and multiplied
by the number of days in the year. Interest expenses on interest bearing liabilities
also include interest income from negative interest rate on financial liabilities.
(ii) NLB internal information. Average interest-bearing liabilities (quarterly) for the
NLB Group are calculated as the sum of monthly balances (t) for the corresponding
quarter and monthly balance at the end of the previous quarter divided by (t+1).
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FVTPL
– Financial assets measured mandatorily at fair value
through profit or loss (FVTPL) represent the minor part (0.002%
December 2022; 0.002% December 2021) of the loan portfolio
(before the deduction of fair value for credit risk; loans with
contractual cash flows that are not solely payments of principal
and interest on the principal amount outstanding). Classification
into stages is calculated in the internal data source, by which
the NLB Group measures the loan portfolio quality, and which
is also published in the Business Report of Annual and Interim
Reports.
IFRS 9 classification into stages for loan portfolio:
IFRS 9 requires an expected loss model, where an allowance for
the expected credit losses (ECL) are formed. Loans measured
at amortised costs (AC) are classified into the following stages
(before deduction of loan loss allowances):
•
Stage 1
– A performing portfolio: no significant increase of
credit risk since initial recognition, NLB Group recognises an
allowance based on a 12-month period;
•
Stage 2
– An underperforming portfolio: a significant increase
in credit risk since initial recognition, NLB Group recognises
an allowance for a lifetime period;
•
Stage 3
– An impaired portfolio: NLB Group recognises
lifetime allowances for these financial assets. The definition of
default is harmonised with the EBA guidelines.
A significant increase in credit risk is assumed: when a credit
rating significantly deteriorates at the reporting date in
comparison to the credit rating at initial recognition; when a
financial asset has material delays over 30 days (days past due
are also included in the credit rating assessment); if NLB Group
expects to grant the client forbearance or if the client is placed
on the watch list.
Table 45a:
NLB Group Stage 1 calculation
in EUR millions
NLB Group
2022
Numerator
Total (AC) loans in Stage 1
17,457.5
Denominator
Total gross loans and advances
18,403.9
IFRS 9 classification into Stage 1
94.9%
Table 45b:
NLB Group Stage 2 calculation
in EUR millions
NLB Group
2022
Numerator
Total (AC) loans in Stage 2
618.3
Denominator
Total gross loans and advances
18,403.9
IFRS 9 classification into Stage 2
3.4%
Table 45c:
NLB Group Stage 3 calculation
in EUR millions
NLB Group
2022
Numerator
Total (AC) loans in Stage 3
327.7
Total (FVTPL) non-performing loans
0.4
Denominator
Total gross loans and advances
18,403.9
IFRS 9 classification into Stage 3
1.8%
Table 45d:
NLB Group Stage 1 in the Corporate segment calculation
in EUR millions
NLB Group
2022
Numerator
Total (AC) loans in Stage 1 to Corporates
5,920.1
Denominator
Total gross loans to Corporates
6,545.6
Corporates - IFRS 9 classification into Stage 1
90.4%
Table 45e:
NLB Group Stage 2 in the Corporate segment calculation
in EUR millions
NLB Group
2022
Numerator
Total (AC) loans in Stage 2 to Corporates
425.7
Denominator
Total gross loans to Corporates
6,545.6
Corporates - IFRS 9 classification into Stage 2
6.5%
Table 45f:
NLB Group Stage 3 in the Corporate segment calculation
in EUR millions
NLB Group
2022
Numerator
Total (AC) loans in Stage 3 to Corporates
199.5
Total (FVTPL) non-performing loans
0.4
Denominator
Total gross loans to Corporates
6,545.6
Corporates - IFRS 9 classification into Stage 3
3.1%
Table 45g:
NLB Group Stage 1 in the Retail segment calculation
in EUR millions
NLB Group
2022
Numerator
Total (AC) loans in Stage 1 to Retail
6,423.0
Denominator
Total gross loans to Retail
6,743.6
Retail - IFRS 9 classification into Stage 1
95.2%
Table 45h:
NLB Group Stage 2 in the Retail segment calculation
in EUR millions
NLB Group
2022
Numerator
Total (AC) loans in Stage 2 to Retail
192.6
Denominator
Total gross loans to Retail
6,743.6
Retail - IFRS 9 classification into Stage 2
2.9%
Table 45i:
NLB Group Stage 3 in the Retail segment calculation
in EUR millions
NLB Group
2022
Numerator
Total (AC) loans in Stage 3 to Retail
128.0
Denominator
Total gross loans to Retail
6,743.6
Retail - IFRS 9 classification into Stage 3
1.9%
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Leverage ratio
– its calculation uses Tier 1 as the numerator,
and the denominator is the total exposure of all active balance
sheet and off-balance-sheet items after the adjustments are
made in the context of which the exposures from individual
derivatives, exposures from transactions of security funding,
and other off-balance sheet items are especially pointed out.
The leverage ratio is a non-risk based supplementary measure
to the risk-based capital requirements. A minimum leverage
ratio requirement is 3%. The purpose of the leverage ratio is
to limit the size of the Bank balance sheets, and with a special
emphasis on exposures which are not weighted within the
framework of the existing capital requirement calculations.
Table 46:
NLB Group and NLB leverage ratio
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Tier I
2,295.7
1,965.6
1,768.1
1,496.7
1,362.7
1,347.0
Denominator
Total Leverage Ratio exposure measure
25,240.5
19,229.5
22,603.9
14,553.0
10,041.1
13,058.8
Leverage ratio
9.1%
10.2%
7.8%
10.3%
13.6%
10.3%
Liquidity coverage ratio
– LCR refers to high liquid assets held
by the financial institution to cover its net liquidity outflows over
a 30-calendar day stress period.
The LCR requires financial institutions to maintain a sufficient
reserve of high-quality liquid assets (HQLA) to withstand a
crisis that puts their cash flows under pressure. The assets to
hold must equal to or greater than their net cash outflow over a
30-calendar-day stress period (having at least 100% coverage).
The parameters of the stress scenario are defined under Basel
III guidelines. The calculations presented below are based on
internal data sources.
Table 47:
NLB Group LCR calculation
(i)
in EUR millions
NLB Group
NLB
31 Dec
2022
30 Nov
2022
31 Oct
2022
30 Sep
2022
31 Aug
2022
31 Jul
2022
30 Jun
2022
31 May
2022
30 Apr
2022
31 Mar
2022
28 Feb
2022
31 Jan
2022
31 Dec
2021
31 Dec
2020
31 Dec
2022
31 Dec
2021
31 Dec
2020
Numerator
Stock of HQLA
6,028.3
5,836.6
5,505.7
5,772.1
5,577.4
5,612.1
5,325.3
5,712.1
5,636.4
5,690.4
5,524.2
5,545.5
5,367.1
5,003.0
5,046.3
4,698.7
4,323.4
Denominator
Net liquidity outflow
2,736.6
2,612.2
2,587.4
2,641.3
2,568.0
2,498.5
2,499.6
2,524.2
2,548.1
2,439.6
2,163.5
2,134.5
2,125.0
1,943.1
1,825.2
1,493.9
1,285.4
LCR
220.3%
223.4%
212.8%
218.5%
217.2%
224.6%
213.0%
226.3%
221.2%
233.3%
255.3%
259.8%
252.6%
257.5%
276.5%
314.5%
336.3%
(i) Based on the European Commission’s Delegated Act on LCR.
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Net loan to deposit ratio (LTD)
– Calculated as the ratio
between net loans to customers and deposits from customers.
There is no regulatory defined limitation on the LTD, however,
the aim of this measure is to restrict extensive growth of the loan
portfolio.
Table 48a:
NLB Group and NLB LTD calculation
in EUR millions
NLB Group
NLB
31 Dec
2022
31 Dec
2021
31 Dec
2020
31 Dec
2022
31 Dec
2021
31 Dec
2020
Numerator
Net loans to customers
13,073.0
10,587.1
9,644.9
6,062.3
5,153.0
4,595.1
Denominator
Deposits from customers
20,027.7
17,640.8
16,397.2
10,984.4
9,659.6
8,850.8
Net loan to deposit ratio (LTD)
65.3%
60.0%
58.8%
55.2%
53.3%
51.9%
Table 48b:
NLB Group’s banking subsidiaries LTD calculation
in EUR millions
NLB Banka,
Skopje
NLB Banka,
Banja Luka
NLB Banka,
Sarajevo
NLB Banka,
Prishtina
NLB Banka,
Podgorica
NLB Banka,
Beograd
NLB Komercijalna
Banka, Beograd
N Banka,
Ljubljana
31 Dec
2022
31 Dec
2021
31 Dec
2022
31 Dec
2021
31 Dec
2022
31 Dec
2021
31 Dec
2022
31 Dec
2021
31 Dec
2022
31 Dec
2021
31 Dec
2021
31 Dec
2022
31 Dec
2021
31 Dec
2022
Numerator
Net loans to customers
1,170.7
1,084.1
523.2
471.1
521.3
453.0
740.8
634.5
532.3
491.6
511.7
2,589.2
1,795.9
939.2
Denominator
Deposits from customers
1,462.0
1,399.5
796.7
759.9
673.4
593.0
894.2
798.8
692.9
609.8
449.5
3,692.2
3,424.6
898.8
Net loan to deposit ratio (LTD)
80.1%
77.5%
65.7%
62.0%
77.4%
76.4%
82.8%
79.4%
76.8%
80.6%
113.8%
70.1%
52.4%
104.5%
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Net interest margin on the basis of interest-bearing assets
–
Calculated as the ratio between net interest income annualized
and average interest-bearing assets.
Table 49:
NLB Group’s banking subsidiaries net interest margin on the basis of interest-bearing assets calculation
(iii)
in EUR millions
NLB Banka,
Skopje
NLB Banka,
Banja Luka
NLB Banka,
Sarajevo
NLB Banka,
Prishtina
NLB Banka,
Podgorica
NLB Banka,
Beograd
NLB Komercijalna
Banka, Beograd
N Banka,
Ljubljana
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2021
2022
2021
2022
Numerator
Net interest income
(i)
53.9
50.4
23.6
20.1
19.5
17.8
39.8
34.5
29.6
22.0
23.4
131.6
88.6
27.8
Denominator
Average interest-bearing assets
(ii)
1,714.0
1,605.3
915.1
844.3
746.3
645.0
978.4
900.6
737.2
550.2
678.3
4,389.0
3,742.6
1,377.0
Net interest margin on
interest-bearing assets
3.1%
3.1%
2.6%
2.4%
2.6%
2.8%
4.1%
3.8%
4.0%
4.0%
3.4%
3.0%
2.4%
2.0%
(i) Net interest income is annualized, and calculated as the sum of interest income and interest expenses in the period divided by the number of days in the period and multiplied by the number of days in the year.
(ii) NLB internal information. Average interest-bearing assets for individual bank members are calculated as the sum of balance of previous year end (31 December) and monthly balances of the last day of each month from January to reporting month t divided by (t+1).
N Bank internal information. Average interest-bearing assets for N Bank are calculated as the sum of daily balances in the period (from 1 January to day d – the last day in reporting period) divided by number of days d.
(iii) Data for N Bank internal information.
Net interest margin on the basis of interest-bearing assets
–
Calculated as the ratio between net interest income annualized
and average interest-bearing assets.
Table 50:
NLB Group’s net interest margin on the basis of interest-
bearing assets calculation
in EUR millions
NLB Group
2022
Numerator
Net interest income
(i)
504.9
Denominator
Average interest-bearing assets
(ii)
21,988.4
Net interest margin on interest-bearing assets
2.30%
(i) Net interest income is annualized, calculated as the sum of interest income and
interest expenses in the period divided by the number of days in the period and
multiplied by the number of days in the year.
(ii) NLB internal information. Average interest-bearing assets for the Group are
calculated as the sum of balance from the previous year end (31 December) and
monthly balances of the last day of each month from January to the reporting
month t divided by (t+1).
Net interest margin on the basis of interest-bearing assets
(quarterly)
– Calculated as the ratio between the net interest
income annualized and average interest-bearing assets.
Table 51:
NLB Group net interest margin on the basis of interest-bearing assets calculation (quarterly)
in EUR millions
NLB Group
Q4 2022
Q3 2022
Q2 2022
Q1 2022
Numerator
Net interest income
(i)
602.4
502.7
475.6
437.2
Denominator
Average interest-bearing assets
(ii)
22,730.4
22,155.9
22,045.9
21,087.6
Net interest margin on interest-bearing
assets (quarterly)
2.65%
2.27%
2.16%
2.07%
(i) Net interest income (quarterly) is annualized, calculated as the sum of interest income and interest expenses in the period divided by the number of days in the quarter and
multiplied by the number of days in the year.
(ii) NLB internal information. Average interest-bearing assets (quarterly) for the NLB Group are calculated as the sum of monthly balances (t) for the corresponding quarter and
monthly balance at the end of the previous quarter divided by (t+1).
153
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Net interest margin on total assets
– Calculated as the ratio
between net interest income annualized, and average total
assets.
Table 52:
NLB Group and NLB net interest margin on total assets calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Net interest income
(i)
504.9
409.4
299.6
177.0
139.5
138.9
Denominator
Average total assets
(ii)
22,975.9
20,659.0
15,086.2
13,133.2
11,853.9
10,336.2
Net interest margin on total assets
2.2%
2.0%
2.0%
1.3%
1.2%
1.3%
(i) Net interest income is annualized, and calculated as sum of interest income and interest expenses in the period divided by the number of days in the period and multiplied by
the number of days in the year.
(ii) NLB internal information. Average total assets for the NLB Group are calculated as sum of balance of the previous year end (31 December) and monthly balances of the last
day of each month from January to month t divided by (t+1). Average total assets for NLB are calculated as the sum of total assets of the previous year end (31 December) and
daily balances in the period (from 1 January to day d – the last day in reporting month) divided by (d+1).
NPE
– NPE includes risk exposure to D- and E-rated clients
(includes loans and advances, debt securities, and off-balance
exposures, which are included in report Finrep18; before
the deduction of allowances for the ECL). Non-performing
exposures measured by fair value loans through P&L (FVTPL)
are taken into account at fair value increased by the amount of
negative fair changes for credit risk.
NPE per cent.
(on-balance and off-balance)/Classified
on-balance and off-balance exposures – NPE per cent. in
accordance with EBA methodology: NPE as a percentage of all
exposures to clients in Finrep18, before deduction of allowances
for the ECL; the ratio is in gross terms.
Where Non-Performing Exposure includes risk exposure to
D- and E-rated clients (includes loans and advances, debt
securities, and off-balance exposures, which are included in
report Finrep18; before the deduction of allowances for the
ECL). The share of NPEs is calculated on the basis of an internal
data source, with which the NLB Group monitors the portfolio
quality. The calculations presented below are based on internal
data sources.
Table 53:
NLB Group and NLB NPE (EBA def.) calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Total Non-Performing on-
balance and off-balance
Exposure in Finrep18
373.6
415.5
513.0
136.0
159.5
235.1
Denominator
Total on-balance and off-
balance exposures in Finrep18
28,133.2
24,328.0
22,042.3
15,512.0
13,869.9
12,223.1
NPE per cent.
1.3%
1.7%
2.3%
0.9%
1.1%
1.9%
154
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NPE
– NPE indicator according to the BoS calculation differs
from the EBA methodology in the treatment of debt instruments
measured at FVOCI. The carrying amount of debt instruments
measured at FVOCI is increased by value adjustments due to
impairments.
Table 54:
NLB Group and NLB NPE (EBA def.) (Bos) calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Total Non-Performing on-balance and
off-balance Exposure in Finrep18
373.6
415.5
513.0
136.0
159.5
235.1
Denominator
Total on-balance and off-balance
exposures in Finrep18, where carrying
amount of FVOCI is increased by value
adjustments due to impairments
28,134.7
24,339.2
22,051.0
15,506.3
13,872.1
12,225.5
NPE per cent.
1.3%
1.7%
2.3%
0.9%
1.1%
1.9%
155
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Non-performing loans
include loans to D- and E-rated clients,
namely loans at least 90 days past due, or loans unlikely to be
repaid without recourse to collateral (before deduction of loan
loss allowances).
NPL per cent.
– The share of non-performing loans in total
loans: non-performing loans as a percentage of total loans to
clients before deduction of loan loss allowances; ratio in gross
terms. Where non-performing loans are defined as loans to
D- and E-rated clients, namely loans at least 90 days past due,
or loans unlikely to be repaid without recourse to collateral
(before deduction of loan loss allowances). The share of non-
performing loans is calculated on the basis of an internal data
source, with which the NLB Group monitors the loan portfolio
quality.
Table 55a:
NLB NPL calculation
in EUR millions
NLB
2022
2021
2020
Numerator
Total Non-Performing Loans
111.2
130.4
208.4
Denominator
Total gross loans
9,667.2
8,522.5
6,980.8
NPL per cent.
1.1%
1.5%
3.0%
Table 55b:
NLB Group NPL calculation
in EUR millions
NLB Group
2022
2021
2020
2019
2018
2017
Numerator
Total Non-Performing Loans
328.3
367.4
474.7
374.7
622.3
844.5
Denominator
Total gross loans
18,403.9
15,541.8
13,686.6
9,793.5
9,017.2
9,130.4
NPL per cent.
1.8%
2.4%
3.5%
3.8%
6.9%
9.2%
Table 55c:
NLB Group’s banking subsidiaries NPL calculation
in EUR millions
NLB Banka,
Skopje
NLB Banka,
Banja Luka
NLB Banka,
Sarajevo
NLB Banka,
Prishtina
NLB Banka,
Podgorica
NLB Komercijalna
Banka, Beograd
N Banka,
Ljubljana
NLB Group’s
banking
subsidiaries
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2022
Numerator
Total Non-Performing Loans
54.5
59.7
8.3
9.4
17.0
19.0
15.7
15.6
32.6
42.2
32.5
36.3
23.6
295.4
Denominator
Total gross loans
1,506.5
1,383.8
734.4
734.7
724.2
621.0
940.5
802.0
715.3
602.0
3,390.0
2,610.1
1,218.4
18,174.2
NPL per cent.
3.6%
4.3%
1.1%
1.3%
2.3%
3.1%
1.7%
1.9%
4.6%
7.0%
1.0%
1.4%
1.9%
1.6%
156
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NPL coverage ratio 1
– The coverage of the gross non-
performing loans portfolio with loan loss allowances on the
entire loan portfolio - loan impairment in respect of non-
performing loans. It shows the level of credit provisions that the
entity has already absorbed into its profit and loss accounts
with respect to the total of impaired loans. The NPL coverage
ratio 1 is calculated on the basis of an internal data source, with
which the NLB Group monitors the quality of loan portfolio.
Table 56a:
NLB NPL coverage ratio 1 calculation
in EUR millions
NLB
2022
2021
2020
Numerator
Loan loss allowances
entire loan portfolio
95.7
97.9
158.4
Denominator
Total Non-Performing Loans
111.2
130.4
208.4
NPL coverage ratio 1 (NPL CR 1)
86.1%
75.1%
76.0%
Table 56b:
NLB Group NPL coverage ratio 1 calculation
in EUR millions
NLB Group
2022
2021
2020
2019
2018
2017
Numerator
Loan loss allowances
entire loan portfolio
324.8
316.5
388.4
334.2
479.6
654.8
Denominator
Total Non-Performing Loans
328.3
367.4
474.7
374.7
622.3
844.5
NPL coverage ratio 1 (NPL CR 1)
98.9%
86.1%
81.8%
89.2%
77.1%
77.5%
Table 56c:
NLB Group's banking subsidiaries NPL coverage ratio 1
calculation
in EUR millions
NLB Banka,
Skopje
NLB Banka,
Banja Luka
NLB Banka,
Sarajevo
NLB Banka,
Prishtina
NLB Banka,
Podgorica
NLB
Komercijalna
Banka,
Beograd
N Banka,
Ljubljana
NLB Group’s
banking
subsidiaries
2022
Numerator
Loan loss allowances
entire loan portfolio
63.7
17.5
20.8
36.6
20.2
35.9
15.9
303.5
Denominator
Total Non-Performing Loans
54.5
8.3
17.0
15.7
32.6
32.5
23.6
295.4
NPL coverage ratio 1 (NPL CR 1)
116.9%
211.3%
122.6%
232.8%
62.1%
110.4%
67.3%
102.7%
157
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NPL coverage ratio 2
– The coverage of the gross non-
performing loans portfolio with loan loss allowances on the
non-performing loans portfolio. The NPL coverage ratio 2 is
calculated on the basis of on an internal data source, with
which the NLB Group monitors the loan portfolio quality.
Table 57a:
NLB Group and NLB NPL coverage ratio 2 calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Loan loss allowances non-
performing loan portfolio
187.4
212.9
272.1
64.5
79.0
120.7
Denominator
Total Non-Performing Loans
328.3
367.4
474.7
111.2
130.4
208.4
NPL coverage ratio 2 (NPL CR 2)
57.1%
57.9%
57.3%
58.1%
60.6%
57.9%
Table 57b:
NLB Group’s banking subsidiaries NPL coverage ratio 2
calculation
in EUR millions
NLB Banka,
Skopje
NLB Banka,
Banja Luka
NLB Banka,
Sarajevo
NLB Banka,
Prishtina
NLB Banka,
Podgorica
NLB
Komercijalna
Banka,
Beograd
N Banka,
Ljubljana
NLB Group’s
banking
subsidiaries
2022
Numerator
Loan loss allowances non-
performing loan portfolio
38.7
5.0
14.9
13.8
14.7
11.2
3.8
166.6
Denominator
Total Non-Performing Loans
54.5
8.3
17.0
15.7
32.6
32.5
23.6
295.4
NPL coverage ratio 2 (NPL CR 2)
70.9%
60.7%
87.7%
87.7%
45.1%
34.5%
16.2%
56.4%
Net NPL Ratio
– The share of net non-performing loans in
total net loans: non-performing loans after deduction of
loss allowances on the non-performing loans portfolio as
a percentage of total loans to clients after the deduction of
loan loss allowances; the ratio is in net terms. The calculations
presented below are based on internal data sources.
Table 58:
NLB Group and NLB Net NPL ratio calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Net volume of non-performing loans
140.9
154.5
202.7
46.6
51.4
87.8
Denominator
Total Net Loans
18,079.1
15,225.4
13,298.2
9,571.5
8,424.7
6,822.4
Net NPL ratio per cent. (%Net NPL)
0.8%
1.0%
1.5%
0.5%
0.6%
1.3%
158
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Received collaterals for NPLs/NPL
– The coverage of the
gross non-performing loans portfolio with collateral for non-
performing loans. The collateral market value is used for this
calculation. The calculations presented below are based on
internal data sources.
Table 59:
NLB Group in NLB Received collaterals for NPLs/NPL
calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Gross volume of Non-Performing
Loans covered by collaterals
200.3
226.6
288.1
64.9
78.2
137.2
Denominator
Total Non-Performing Loans
328.3
367.4
474.7
111.2
130.4
208.4
Received collaterals for NPLs / NPL
61.0%
61.7%
60.7%
58.4%
60.0%
65.8%
Non-performing loans and advances (EBA def.)
–
Non-performing loans include loans and advances in
accordance with EBA Methodology that are classified as to D
and E, namely loans at least 90 days past due, or loans unlikely
to be repaid without recourse to collateral (before deduction of
loan loss allowances).
Gross NPL ratio (EBA def.)
– The gross NPL ratio is the ratio
of the gross carrying amount of non-performing loans and
advances to the total gross carrying amount of loans and
advances, in accordance with the EBA methodology (report
Finrep18). For the purpose of this calculation, loans and
advances classified as held for sale, cash balances at CBs,
and other demand deposits are excluded from both the
denominator and the numerator. The calculations presented
below are based on internal data sources.
Table 60:
NLB Group and NLB Gross NPL ratio (EBA def.) calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Gross volume of Non-Performing Loans and
advances without loans held for sale, cash
balances at CBs and other demand deposits
337.2
375.1
466.0
111.7
131.2
199.1
Denominator
Gross volume of Loans and advances in
Finrep18 without loans held for sale, cash
balances at CBs and other demand deposits
13,796.0
11,128.8
10,340.6
6,610.8
5,498.9
4,958.8
Gross NPL ratio per cent. (% NPL)
2.4%
3.4%
4.5%
1.7%
2.4%
4.0%
159
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Gross NPL ratio (EBA def.) (BoS)
–
The gross NPL ratio is the
ratio of the gross carrying amount of non-performing loans
and advances to the total gross carrying amount of loans and
advances, in accordance with the EBA methodology (report
Finrep18). Cash balances at CBs and other demand deposits
are included in the calculation.
The indicator for the banking
sector in the EU is published quarterly by the EBA in the Risk
dashboard.
The calculations presented below are based on
internal data sources.
Table 61:
NLB Group and NLB Gross NPL ratio (EBA def.) (BoS)
calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Gross volume of Non-Performing
Loans and advances
337.2
375.1
466.0
111.7
131.2
199.1
Denominator
Gross volume of Loans and advances in Finrep18
18,590.5
15,668.8
13,795.3
9,780.9
8,615.3
7,028.2
Gross NPL ratio per cent. (% NPL)
1.8%
2.4%
3.4%
1.1%
1.5%
2.8%
NPL coverage ratio (EBA def.)
– The NPL coverage ratio is
the ratio of the amount of accumulated impairment, negative
changes in fair value due to credit risk to the non-performing
loans and advances, in accordance with the EBA methodology
(report Finrep18). Loans and advances classified as held for
sale, cash balances at CBs and other demand deposits are
excluded both from the denominator and from the numerator.
Table 62:
NLB Group and NLB NPL coverage ratio (EBA def.) calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Volume of allowances and value
adjustments for credit losses on Non-
Performing loans and advances
(i)
195.9
219.1
265.3
65.0
79.8
110.1
Denominator
Gross volume of Non-Performing
loans and advances
(i)
337.2
375.1
466.0
111.7
131.2
199.1
NPL coverage ratio per cent. (% CR)
58.1%
58.4%
56.9%
58.2%
60.8%
55.3%
(i) Without loans and advances classified as held for sale, cash balances at CBs,
and other demand deposits.
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NPL coverage ratio (EBA def.) (BoS)
–
The NPL coverage ratio
is the ratio of the amount of accumulated impairment, negative
changes in fair value due to credit risk to the non-performing
loans and advances, in accordance with the EBA methodology
(report Finrep18). Cash balances at CBs and other demand
deposits are included in the calculation.
Table 63:
NLB Group and NLB NPL coverage ratio (EBA def.) (BoS)
calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Volume of allowances and value
adjustments for credit losses on Non-
Performing loans and advances
195.9
219.1
265.3
65.0
79.8
110.1
Denominator
Gross volume of Non-Performing
loans and advances
337.2
375.1
466.0
111.7
131.2
199.1
NPL coverage ratio per cent. (% CR)
58.1%
58.4%
56.9%
58.2%
60.8%
55.3%
Collateral received/NPL (EBA def.)
– The NPL collateral ratio
is the ratio of the collateral received for non-performing loans
and advances to the gross carrying amount of collateralized
non-performing loans and advances, in accordance with the
EBA methodology (report Finrep18). The calculation is provided
on single loan basis. The NPLs where the amount of collateral
received exceeds the net non-performing of each loan exposure
are the subject of calculation.
Table 64:
NLB Group and NLB NPL collateral coverage ratio (EBA def.)
calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Volume of collateral received up to the
carrying amount of each loan or advance
30.7
36.7
61.3
6.2
12.2
38.6
Denominator
Gross volume of collateralized Non-
Performing loans and advances
56.1
62.5
144.6
8.2
19.4
88.8
NPL Collateral received / NPL (%)
54.7%
58.8%
42.4%
75.6%
63.1%
43.5%
161
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Net stable funding ratio (NSFR)
– The net stable funding ratio
is a liquidity risk standard requiring financial institutions to hold
enough stable funding to cover the duration of their long-term
assets.
NSFR is defined as the amount of available stable funding
relative to the amount of required stable funding and is based
on the current Basel Committee guidelines. This ratio should
be equal to at least 100% on an on-going basis. ‘Available
stable funding’ is defined as the portion of capital and liabilities
expected to be reliable over the time horizon considered by the
NSFR, which extends to one year. The amount of such stable
funding required of a specific institution is a function of the
liquidity characteristics and residual maturities of the various
assets held by that institution, as well as those of its off-balance-
sheet (OBS) exposures. The calculations presented below are
based on internal data sources.
Table 65:
NLB Group and NLB NSFR calculation
in EUR millions
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2020
31 Dec 2022
31 Dec 2021
31 Dec 2020
Numerator
Amount of available stable funding
20,409.1
18,446.7
16,514.6
11,691.2
10,815.8
9,455.7
Denominator
Amount of required stable funding
11,154.7
9,960.8
9,966.8
6,582.3
6,309.5
5,833.7
NSFR
183.0%
185.2%
165.7%
177.6%
171.4%
162.1%
EVE (Economic Value of Equity) method
– EVE method is a
measure of sensitivity of changes in market interest rates on
the economic value of financial instruments. EVE represents
the present value of net future cash flows and provides a
comprehensive view of the possible long-term effects of
changing interest rates at least under the six prescribed
standardised interest rate shock scenarios or more if necessary,
according to the situation on financial markets. Calculations
take into account behavioural and automatic options, as well as
the allocation of non-maturing deposits.
The assessment of the impact of a change in interest rates of
200 bps on the economic value of the banking book position:
Table 66:
NLB Group EVE calculation
in EUR thousands
NLB Group
31 Dec 2022
30 Sep 2022
30 Jun 2022
31 Mar 2022
31 Dec 2021
30 Sep 2021
30 Jun 2021
31 Mar 2021
31 Dec 2020
Numerator
Interest risk in banking book – EVE
-110,452.4
-115,458.9
-129,345.0
-141,035.8
-126,650.6
-135,133.4
-134,172.8
-140,567.2
-128,370.1
Denominator
Equity (Tier I)
2,166,333.0
2,065,707.0
2,048,380.0
1,906,112.0
1,972,485.0
1,903,800.0
1,879,365.0
1,734,545.0
1,765,000.0
EVE as % of Equity
-5.1%
-5.6%
-6.3%
-7.4%
-6.4%
-7.1%
-7.1%
-8.1%
-7.3%
162
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Operational business margin (OBM)
– Calculated as the ratio
between operational business net income annualized and
average assets.
Table 67:
NLB Group and NLB OBM calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Operational business net income
(i)
820.0
678.1
490.3
326.8
274.3
257.7
Denominator
Average total assets
(ii)
22,975.9
20,659.0
15,086.2
13,147.5
11,876.0
10,336.3
OBM (cumulative)
3.6%
3.3%
3.2%
2.5%
2.3%
2.5%
(i) Operational business net income is annualized, and calculated as operational business income in the period divided by the number of days in the period and multiplied by
the number of days in the year. Operational business income consists of net interest income (excluding interest expenses from subordinated securities), net fees and commissions
and net gains and losses from financial assets and liabilities held for trading that derive from foreign exchange trading.
(ii) NLB internal information. Average total assets is calculated as a sum of balance as at the end of the previous year end (31 December) and monthly balances of the last day of
each month from January to month
t divided by (t+1).
Operational business margin (OBM) (quarterly)
– Calculated
as the ratio between operational business net income
annualized and average assets.
Table 68:
NLB Group OBM (quarterly) calculation
in EUR millions
NLB Group
Q4 2022
Q3 2022
Q2 2022
Q1
2022
Numerator
Operational business net income
(i)
917.9
834.0
795.1
730.7
Denominator
Average total assets
(ii)
23,740.9
23,185.2
23,050.6
22,006.7
OBM (quarterly)
3.87%
3.60%
3.45%
3.32%
(i) Operational business net income (quarterly) is annualized, and calculated as operational business income in the period divided by the number of days in the quarter and
multiplied by the number of days in the year. Operational business income consists of net interest income (excluding interest expenses from subordinated securities), net fees and
commissions and net gains and losses from financial assets and liabilities held for trading that derive from foreign exchange trading.
(ii) NLB internal information. Average total assets (quarterly) for the NLB Group are calculated as the sum of monthly balances (t) for the corresponding quarter and monthly
balance at the end of the previous quarter divided by (t+1).
Return on equity before tax (ROE b.t.)
– Calculated as the ratio
between result before tax annualized and average total equity
(including non-controlling interests).
Table 69:
NLB Group and NLB ROE b.t. calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Result before tax
(i)
483.1
261.4
277.9
164.1
211.5
113.9
Denominator
Average total equity
(ii)
2,344.4
2,222.8
1,808.1
1,558.3
1,507.2
1,384.6
ROE b.t.
20.6%
11.8%
15.4%
10.5%
14.0%
8.2%
(i) The result before tax is annualized and calculated as the result before tax in the period divided by the number of months for the reporting period and multiplied by 12.
(ii) NLB internal information. Average total equity (including non-controlling interests) is calculated as the sum of the balance as at end of the previous year end (31 December)
and monthly balances of the last day of each month from January to month
t divided by (t+1).
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Return on equity after tax (ROE a.t.)
– Calculated as the ratio
between result after tax annualized and average equity.
Table 70a:
NLB Group and NLB ROE a.t. calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Result after tax
(i)
446.9
236.4
269.7
159.6
208.4
114.0
Denominator
Average equity
(ii)
2,248.7
2,069.9
1,751.2
1,558.3
1,507.2
1,384.6
ROE a.t.
19.9%
11.4%
15.4%
10.2%
13.8%
8.2%
(i) The result after tax is annualized and calculated as the result after tax in the period divided by the number of months for the reporting period and multiplied by 12.
(ii) NLB internal information. Average equity is calculated as the sum of the balance as at the end of the previous year end (31 December) and monthly balances of the last day of
each month from January to month
t divided by (t+1).
Table 70b:
NLB Group (w/o negative goodwill) ROE a.t. calculation
in EUR millions
NLB Group (w/o NGW)
2022
Numerator
Result after tax
(i)
274.0
Denominator
Average equity
(ii)
2,248.7
ROE a.t.
12.2%
(i)(ii) Please refer to the notes under Table 70a.
Table 70c:
NLB Group’s banking subsidiaries ROE a.t. calculation
in EUR millions
NLB Banka,
Skopje
NLB Banka,
Banja Luka
NLB Banka,
Sarajevo
NLB Banka,
Prishtina
NLB Banka,
Podgorica
NLB Banka,
Beograd
NLB Komercijalna
Banka, Beograd
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2021
2022
2021
Numerator
Result after tax
(i)
37.9
39.0
19.3
18.2
11.4
10.0
32.4
24.4
16.6
10.1
4.3
68.2
34.8
Denominator
Average equity
(ii)
252.9
245.4
95.3
106.7
91.5
93.5
111.1
108.9
99.5
76.5
77.4
713.0
630.2
ROE a.t.
15.0%
15.9%
20.2%
17.0%
12.5%
10.7%
29.2%
22.4%
16.7%
13.1%
5.5%
9.6%
5.5%
(i)(ii) Please refer to the notes under Table 70a.
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Return on equity after tax (ROE a.t.)
normalized
(iii)
– Calculated
as the ratio between result after tax annualized and average
risk adjusted capital.
Table 71:
NLB Group ROE a.t. normalized calculation
in EUR millions
NLB Group
2022
Numerator
Result after tax
(i)
274.0
Denominator
Average risk adjusted capital
(ii)
1,759.8
ROE a.t.
15.6%
(i) Result after tax is annualized, calculated as a result after tax in the period divided
by the number of months for the reporting period and multiplied by 12.
(ii) NLB internal information. Average risk adjusted capital is calculated as a sum
of Risk Weighted Assets (RWA)
balance as at the end of the previous year end (31
December) and monthly Risk Weighted Assets (RWA) balances of the last day of
each month from January to month t divided by (t+1), multiplied by Tier 1 regulatory
capital requirement and decreased by minority shareholder capital.
(iii) Result a.t. w/o negative goodwill divided by Average risk adjusted capital.
Average risk adjusted capital calculated as Tier 1 requirement of average Risk
Weighted Assets (RWA) reduced for minority shareholder capital contribution.
Return on assets (ROA b.t.)
– Calculated as the ratio between
result before tax annualized and average total assets.
Table 72:
NLB Group and NLB ROA b.t. calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Result before tax
(i)
483.1
261.4
277.9
164.1
211.5
113.9
Denominator
Average total assets
(ii)
22,975.9
20,659.0
15,086.2
13,147.5
11,876.0
10,336.3
ROA b.t.
2.1%
1.3%
1.8%
1.2%
1.8%
1.1%
(i) The result before tax is annualized and calculated as the result before tax in the period divided by the number of months for the reporting period and multiplied by 12.
(ii) NLB internal information. Average total assets are calculated as the sum of the balance as at the end of the previous year end (31 December) and the monthly balances of the
last day of each month from January to month
t divided by (t+1).
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Return on assets (ROA a.t.)
– Calculated as the ratio between
result after tax annualized and average total assets.
Table 73a:
NLB Group and NLB ROA a.t. calculation
in EUR millions
NLB Group
NLB
2022
2021
2020
2022
2021
2020
Numerator
Result after tax
(i)
446.9
236.4
269.7
159.6
208.4
114.0
Denominator
Average total assets
(ii)
22,975.9
20,659.0
15,086.2
13,147.5
11,876.0
10,336.3
ROA a.t.
1.9%
1.1%
1.8%
1.2%
1.8%
1.1%
(i) The result after tax is annualized and calculated as the result after tax in the period divided by the number of months for the reporting period and multiplied by 12.
(ii) NLB internal information. Average total assets are calculated as the sum of balance as at the end of the previous year
end (31 December) and monthly balances of the last
day of each month from January to month
t
divided by (
t+1
).
Table 73b:
NLB Group’s banking subsidiaries ROA a.t. calculation
in EUR millions
NLB Banka,
Skopje
NLB Banka,
Banja Luka
NLB Banka,
Sarajevo
NLB Banka,
Prishtina
NLB Banka,
Podgorica
NLB Banka,
Beograd
NLB Komercijalna
Banka, Beograd
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2021
2022
2021
Numerator
Result after tax
(i)
37.9
39.0
19.3
18.2
11.4
10.0
32.4
24.4
16.6
10.1
4.3
68.2
34.8
Denominator
Average total assets
(ii)
1,771.1
1,658.6
948.7
874.5
777.6
673.5
987.1
906.0
795.2
593.5
696.3
4,668.8
4,029.4
ROA a.t.
2.1%
2.4%
2.0%
2.1%
1.5%
1.5%
3.3%
2.7%
2.1%
1.7%
0.6%
1.5%
0.9%
(i)(ii) Please refer to the notes under Table 73a.
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Total capital ratio (TCR)
– TCR is the own funds of the institution
expressed as a percentage of the total risk exposure amount.
Table 74a:
NLB Group and NLB TCR calculation
in EUR millions
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2020
31 Dec 2022
31 Dec 2021
31 Dec 2020
Numerator
Total capital (Own funds)
2,806.4
2,252.5
2,065.5
2,004.2
1,647.3
1,631.6
Denominator
Total risk exposure Amount (Total RWA)
14,653.1
12,667.4
12,421.0
7,832.7
6,708.5
6,028.8
Total capital ratio
19.2%
17.8%
16.6%
25.6%
24.6%
27.1%
Table 74b:
NLB Group’s banking subsidiaries TCR calculation
in EUR millions
NLB Banka,
Skopje
NLB Banka,
Banja Luka
NLB Banka,
Sarajevo
NLB Banka,
Prishtina
NLB Banka,
Podgorica
NLB Banka,
Beograd
NLB Komercijalna
Banka, Beograd
N Banka,
Ljubljana
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
31 Dec 2021
31 Dec 2022
31 Dec 2021
31 Dec 2022
Numerator
Total capital
251.4
243.6
81.4
77.1
80.4
75.0
117.5
112.3
77.0
70.0
87.7
620.9
555.8
188.3
Denominator
Total risk exposure
Amount (Total RWA)
1,384.8
1,354.4
508.3
456.7
488.1
445.0
746.0
647.9
419.6
429.3
456.3
2,521.5
1,946.7
877.9
Total capital ratio
18.2%
18.0%
16.0%
16.9%
16.5%
16.9%
15.7%
17.3%
18.4%
16.3%
19.2%
24.6%
28.6%
21.4%
167
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Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Big stories don’t write themselves. In NLB they
are written by experts, visionaries, and caring
mentors – in
NLB
we write them together, mindful
of our business decisions and actions, and of the
footprints we create
.
Despite the precarious circumstances, the shadow
of war in Europe, the resulting energy crisis, and the
economic slowdown, 2022 was the best year in the
history of our Bank and Group. We reached many
important milestones and through responsible
environmental and societal actions once again
confirmed our commitment and contribution to
a better quality of life in South-Eastern Europe,
our home region. We are proud that our efforts
and our progress in the field of sustainability were
recognized by our first ESG Risk Rating.
The results give us confidence to pursue future
growth ambitions. We will continue to create
added value for our shareholders, live up to the
expectations of our clients and the public, as well
as seize all opportunities in front of us.
Pictured: NLB employees
NLB Group Chart
Companies
Companies
Financial institutions
Financial institutions
Slovenia
Slovenia
Slovenia
Slovenia
Nova Ljubljanska banka d.d.,
Ljubljana
Core
Non-core
Banks
Slovenia
Foreign countries
Foreign countries
Foreign countries
Foreign countries
Foreign countries
N Banka, Ljubljana
100%
100%
NLB Lease&Go, Skopje
(v)
51%
100%
NLB DigIT, Beograd
100%
100%
NLB InterFinanz in
Liquidation, Zürich
100%
100%
NLB InterFinanz, Beograd -
u likvidaciji
100%
100%
NLB Leasing, Beograd -
u likvidaciji
100%
100%
LHB AG, Frankfurt
100%
100%
REAM, Beograd
100%
100%
REAM, Podgorica
100%
100%
Tara Hotel, Budva
12.71%
100%
SPV 2, Beograd
100%
100%
NLB Srbija, Beograd
100%
100%
NLB Crna Gora, Podgorica
100%
100%
NLB Skladi, Ljubljana
100%
100%
Bankart, Ljubljana
(ii)
45.64%
46.03%
NLB Banka, Sarajevo
97.35%
97.35%
NLB Lease&Go Leasing,
Beograd
(vi)
95.20%
95.20%
NLB Lease&Go, leasing,
Ljubljana
100%
100%
NLB Cultural Heritage
Management Institute
100%
100%
NLB Banka, Podgorica
99.87%
99.87%
NLB Banka, Prishtina
82.38%
82.38%
NLB Banka, Banja Luka
99.85%
99.85%
NLB Banka, Skopje
86.97%
86.97%
NLB Komercijalna Banka,
Beograd
100%
100%
NLB Leasing, Ljubljana-
v likvidaciji
(iii)
100%
100%
Prvi faktor,
v likvidaciji, Ljubljana
50%
50%
PRO-REM, Ljubljana -
v likvidaciji
100%
100%
S-REAM, Ljubljana
100%
100%
PRIVATINVEST, Ljubljana
(iv)
100%
100%
ARG-Nepremičnine, Horjul
75%
75%
KomBank Invest, Beograd
100%
100%
Optima Leasing u likvidaciji,
Zagreb
100%
100%
Prvi faktor-faktoring,
Beograd - u likvidaciji
(i.b)
90%
95%
Prvi faktor u likvidaciji,
Zagreb
(i.a)
100%
100%
OL Nekretnine, Zagreb -
u likvidaciji
100%
100%
REAM, Zagreb
100%
100%
Subsidiary
% direct share
% indirect share at
the group level
Associate
% direct share
% indirect share at
the group level
Joint venture
% direct share
% indirect share at
the group level
Legend:
The chart shows voting rights shares. The Group includes entities according to the definition in the Financial Conglomerates Act (Article 2).
(i.a) 100% direct ownership Prvi Faktor, v likvidaciji, Ljubljana.
(i.b) 90% direct ownership Prvi Faktor, v likvidaciji, Ljubljana, 5% NLB, 5% SID banka d.d.
(ii)
- 45.64% share NLB d.d., 0.39% share N Banka.
- Abanka merged into Nova KBM, which currently has a 29.22% share in Bankart.
This is over the 25% threshhold set in the Founding agreement - no shareholder other than
NLB can have more than 25% capital share in Bankart.
(iii)
100% direct ownership NLB Lease&Go, leasing, d.o.o. Ljubljana.
(iv)
100% direct ownership N Banka d.d., Ljubljana.
(v)
51% direct ownership NLB Lease&Go, leasing, d.o.o. Ljubljana, 49% NLB Banka AD Skopje.
(vi)
95.20% direct ownership NLB Lease&Go, leasing, d.o.o. Ljubljana.
Former name of the company: Zastava Istrabenz Lizing, d.o.o., Beograd (change was
registered on 17 January 2023).
169
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Organisational
Structure of NLB
Understanding of the tasks and responsibilities of Global Risk, Compliance and
Integrity and Internal Audit is taken into account in accordance to the definitions
of the (currently valid) Banking Act (ZBan-3).
(i) Worker´s Council is independent organisational unit with no subordinate or
superior organisational units and it operates in accordance with ZSDU.
SUPERVISORY BOARD
MANAGEMENT BOARD
Internal Audit
Worker´s Council
(i)
Compliance and Integrity
Strategy and Business Development
Global Risk
Credit Risk - Corporate
Credit Risk - Retail
Evaluation and Control
Restructuring
Workout and Legal support
Group Real Estate Management
Sales Development and Management
Controlling
CSA & Cross-border Financing
Financial Accounting and Administration
Large Corporates
Financial Markets
Small and Mid Corporates
Trade Finance Services
Investment Banking and Custody
NLB Group Corporate and Investment Banking
Management
Private Banking
KC 24/7
Area Branch Ljubljana
Area Branch Northwest and Central Slovenia
Area Branch Northeast Slovenia
Area Branch Southeast Slovenia
Area Branch Southwest Slovenia
Micro Enterprises
Mobile Banking
IT Delivery
Data Management
IT Governance
IT Security
IT Infrastructure
Procurement
Card Operations
Payments Processing
Cash Processing
Financial Instruments Processing
Corporate Customer Delivery
Retail Banking Processing
Distribution Network
CRO
CFO
CMO
COO
Group Steering
Legal and Secretariat
Communication
Human Resources and Organization Development
170
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Risk Management
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172
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Contents
172
Contents
Independent auditor’s report
.............................
174
Statement of management’s responsibility
...............
178
Income statement for the annual period
ended 31 December
......................................
179
Statement of comprehensive income
for the annual period ended 31 December
.................
180
Statement of financial position as at 31 December
. . . . . . . . .
181
Statement of changes in equity for the annual
period ended 31 December
...............................
183
Statement of cash flows for the annual period
ended 31 December
......................................
185
Notes to the financial statements
.........................
187
1.
General information
...............................
187
2.
Summary of significant accounting policies
.........
187
2.1.
Statement of compliance
.............................
187
2.2.
Basis for presenting the financial statements
.........
187
2.3.
Comparative amounts
...............................
187
2.4.
Consolidation
........................................
187
2.5.
Business combinations, goodwill,
and bargain purchases
..............................
188
2.6.
Investments in subsidiaries, associates
and joint ventures
....................................
188
2.7.
A combination of entities or businesses
under common control
...............................
189
2.8.
Foreign currency translation
.........................
189
2.9.
Interest income and expenses
........................
189
2.10.
Fee and commission income
.........................
189
2.11.
Dividend income
.....................................
190
2.12.
Financial instruments
................................
190
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Financial Report
2.13.
Allowances for financial assets
.......................
192
2.14.
Forborne loans
......................................
195
2.15.
Repossessed assets
..................................
195
2.16.
Offsetting
............................................
195
2.17.
Sale and repurchase agreements
....................
195
2.18.
Property and equipment
.............................
196
2.19.
Intangible assets
.....................................
196
2.20.
Investment properties
................................
196
2.21.
Non-current assets and disposal groups
classified as held for sale
.............................
196
2.22.
Accounting for leases
................................
196
2.23.
Cash and cash equivalents
..........................
197
2.24.
Borrowings, deposits, and issued debt securities
with characteristics of debt
...........................
197
2.25.
Other issued financial instruments with
characteristics of equity
..............................
197
2.26.
Provisions
............................................
197
2.27.
Contingent liabilities and commitments
...............
198
2.28.
Taxes
................................................
198
2.29.
Fiduciary activities
...................................
198
2.30.
Employee benefits
...................................
199
2.31.
Share-based payment transactions
..................
199
2.32.
Share capital
.........................................
199
2.33.
Segment reporting
...................................
199
2.34.
Critical accounting estimates and judgments
in applying accounting policies
. . . . . . . . . . . . . . . . . . . . .
200
2.35.
Implementation of the new and revised International
Financial Reporting Standards
.......................
202
3.
Changes in the composition of the NLB Group
.....
204
4.
Notes to the income statement
....................
205
4.1.
Interest income and expenses
.......................
205
4.2.
Dividend income
....................................
206
4.3.
Fee and commission income and expenses
..........
206
4.4.
Gains less losses from financial assets and liabilities
not measured at fair value through profit or loss
......
207
4.5.
Gains less losses from financial assets and
liabilities held for trading
............................
208
4.6.
Gains less losses from non-trading financial assets
mandatorily at fair value through profit or loss
......
208
4.7.
Foreign exchange translation gains less losses
......
209
4.8.
Other net operating income
.........................
209
4.9.
Administrative expenses
..............................
210
4.10.
Cash contributions to resolution funds and
deposit guarantee schemes
...........................
211
4.11.
Depreciation and amortisation
........................
211
4.12.
Gains less losses from modification of financial assets 211
4.13.
Provisions
............................................
212
4.14.
Impairment charge
...................................
212
4.15.
Gains less losses from non-current
assets held for sale
...................................
212
4.16.
Income tax
...........................................
213
4.17.
Earnings per share
...................................
214
173
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Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
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Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
5.
Notes to the statement of financial position
.........
214
5.1.
Cash, cash balances at central banks, and other
demand deposits at banks
...........................
214
5.2.
Financial instruments held for trading
...............
215
5.3.
Non-trading financial instruments measured
at fair value through profit or loss
....................
216
5.4.
Financial assets measured at fair value
through other comprehensive income
................
217
5.5.
Derivatives for hedging purposes
....................
219
5.6.
Financial assets measured at amortised cost
.........
221
5.7.
Non-current assets held for sale
.....................
224
5.8.
Property and equipment
.............................
224
5.9.
Investment property
..................................
227
5.10.
Intangible assets
.....................................
228
5.11.
Leases
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
229
5.12.
Investments in subsidiaries, associates
and joint ventures
....................................
231
5.13.
Other assets
.........................................
239
5.14.
Movements in allowance for the impairment
of financial assets
..................................
240
5.15.
Financial liabilities, measured at amortised cost
......
247
5.16.
Provisions
............................................
249
5.17.
Deferred income tax
................................
256
5.18.
Income tax relating to components
of other comprehensive income
.....................
259
5.19.
Other liabilities
......................................
259
5.20.
Share capital
........................................
260
5.21.
Other equity instruments issued
.....................
260
5.22.
Accumulated other comprehensive
income and reserves
.................................
261
5.23.
Capital adequacy ratios
..............................
262
5.24.
Off-balance sheet liabilities
.........................
265
5.25.
Funds managed on behalf of third parties
...........
266
6.
Risk management
.................................
267
6.1.
Credit risk management
..............................
269
6.2.
Market risk
...........................................
287
6.3.
Liquidity risk
.........................................
293
6.4.
Management of non-financial risks
..................
305
6.5.
Fair value hierarchy of financial and
non-financial assets and liabilities
...................
306
6.6.
Offsetting financial assets and financial liabilities
.....
315
7.
Analysis by segment for NLB Group
................
316
8.
Related-party transactions
........................
320
9.
Events after the reporting date
.....................
329
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Statement of management’s
responsibility
The Management Board hereby confirms its responsibility for
preparing the consolidated financial statements of NLB Group
and the financial statements of NLB for the year ending on 31
December 2022, and for the accompanying accounting policies
and notes to the financial statements.
The Management Board is responsible for the preparation and
fair presentation of these financial statements in accordance
with the International Financial Reporting Standards as
adopted by the European Union, and with the requirements
of the Slovenian Companies Act and the Banking Act so as to
give a true and fair view of the financial position of NLB Group
and NLB as at 31 December 2022, and their financial results and
cash flows for the year then ended.
The Management Board also confirms that the appropriate
accounting policies were consistently applied, and that the
accounting estimates were prepared according to the principles
of prudence and good management. The Management Board
further confirms that the financial statements of NLB Group
and NLB, together with the accompanying notes, have been
prepared on a going-concern basis for NLB Group and NLB,
and in line with valid legislation and the International Financial
Reporting Standards as adopted by the European Union.
The Management Board is also responsible for appropriate
accounting practices, the adoption of appropriate measures for
safeguarding assets, and the prevention and identification of
fraud and other irregularities or illegal acts.
The Management Board of NLB
Hedvika Usenik
Member
Andrej Lasič
Member
Archibald Kremser
Member
Andreas Burkhardt
Member
Antonio Argir
Member
Blaž Brodnjak
Chief executive officer
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Income statement for the annual period ended 31 December
in EUR thousands
NLB Group
NLB
Notes
2022
2021
2022
2021
Interest income calculated using the effective interest method
Other interest and similar income
Interest and similar income
4.1.
Interest expenses calculated using the effective interest method
(43,785 )
(40,460 )
(27,373 )
(15,297 )
Other interest and similar expenses
(21,069 )
(28,009 )
(17,562 )
(24,749 )
Interest and similar expenses
4.1.
(64,854 )
(68,469 )
(44,935 )
(40,046 )
Net interest income
Dividend income
4.2.
Fee and commission income
4.3.
Fee and commission expenses
4.3.
(108,249 )
(95,413 )
(37,291 )
(35,623 )
Net fee and commission income
Gains less losses from financial assets and liabilities not
measured at fair value through profit or loss
4.4.
(1,050 )
Gains less losses from financial assets and liabilities held for trading
4.5.
Gains less losses from non-trading financial assets
mandatorily at fair value through profit or loss
4.6.
(1,451 )
Gains less losses from financial liabilities measured
at fair value through profit or loss
Fair value adjustments in hedge accounting
5.5.a)
Foreign exchange translation gains less losses
4.7.
(1,588 )
Net gains or losses on derecognition of investments in
subsidiaries, associates and joint ventures
5.12.d)
(9,298 )
Gains less losses on derecognition of non-financial assets
Other net operating income
4.8.
Administrative expenses
4.9.
(412,886 )
(368,851 )
(190,865 )
(166,079 )
Cash contributions to resolution funds and deposit guarantee schemes
4.10.
(36,144 )
(35,140 )
(9,713 )
(9,535 )
Depreciation and amortisation
4.11.
(47,390 )
(46,528 )
(17,001 )
(17,522 )
Gains less losses from modification of financial assets
4.12.
(26 )
(263 )
Provisions for credit losses
4.13.
(3,050 )
Provisions for other liabilities and charges
4.13.
(5,932 )
(22,670 )
(2,325 )
(72 )
Impairment of financial assets
4.14.
(14,454 )
(14,968 )
Impairment of non-financial assets
4.14.
(5,433 )
(4,407 )
Negative goodwill
5.12.b), c)
Share of profit from investments in associates and joint
ventures (accounted for using the equity method)
5.12.e)
Gains less losses from non-current assets held for sale
4.15.
(94 )
Profit before income tax
Income tax
4.16.
(25,230 )
(13,538 )
(4,468 )
(3,047 )
Profit for the year
Attributable to owners of the parent
Attributable to non-controlling interests
Earnings per share/diluted earnings per share (in EUR per share)
4.17.
The notes are an integral part of these financial statements.
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Statement of comprehensive income for the annual period ended 31 December
in EUR thousands
NLB Group
NLB
Notes
2022
2021
2022
2021
Net profit for the year after tax
Other comprehensive income after tax
(149,677 )
(30,168 )
(90,445 )
(15,281 )
Items that will not be reclassified to income statement
Actuarial gains/(losses) on defined benefit pensions plans
5.16.c)
(1,377 )
(115 )
Fair value changes of equity instruments measured at
fair value through other comprehensive income
5.4.c)
(2,383 )
(1,925 )
(383 )
Share of other comprehensive income/(losses) of
entities accounted for using the equity method
(30 )
Income tax relating to components of other comprehensive income
5.18.
(1 )
Items that have been or may be reclassified subsequently to income statement
Foreign currency translation
Translation gains/(losses) taken to equity
Debt instruments measured at fair value through
other comprehensive income
(163,055 )
(37,394 )
(92,030 )
(17,359 )
Valuation gains/(losses) taken to equity
5.4.c)
(168,593 )
(40,081 )
(98,172 )
(17,187 )
Transferred to income statement
4.4., 4.14.
(172 )
Income tax relating to components of other comprehensive income
5.18.
Total comprehensive income for the year after tax
Attributable to owners of the parent
Attributable to non-controlling interests
The notes are an integral part of these financial statements.
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Statement of financial position as at 31 December
in EUR thousands
NLB Group
NLB
Notes
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Cash, cash balances at central banks, and other demand deposits at banks
5.1.
Financial assets held for trading
5.2.a)
Non-trading financial assets mandatorily at fair value through profit or loss
5.3.a)
Financial assets measured at fair value through other comprehensive income
5.4.
Financial assets measured at amortised cost
- debt securities
5.6.a)
- loans and advances to banks
5.6.b)
- loans and advances to customers
5.6.c)
- other financial assets
5.6.d)
Derivatives - hedge accounting
5.5.b)
Fair value changes of the hedged items in portfolio hedge of interest rate risk
5.5.c)
(23,767 )
(23,767 )
Investments in subsidiaries
5.12.a)
Investments in associates and joint ventures
5.12.e)
Tangible assets
Property and equipment
5.8.
Investment property
5.9.
Intangible assets
5.10.
Current income tax assets
Deferred income tax assets
5.17.
Other assets
5.13.
Non-current assets held for sale
5.7.
Total assets
Financial liabilities held for trading
5.2.b)
Financial liabilities measured at fair value through profit or loss
5.3.b)
Financial liabilities measured at amortised cost
- deposits from banks and central banks
5.15.a)
- borrowings from banks and central banks
5.15.b)
- due to customers
5.15.a)
- borrowings from other customers
5.15.b)
- debt securities issued
5.15.c)
- other financial liabilities
5.15.d)
Derivatives - hedge accounting
5.5.b)
Provisions
5.16.
Current income tax liabilities
Deferred income tax liabilities
5.17.
Other liabilities
5.19.
Total liabilities
Equity and reserves attributable to owners of the parent
Share capital
5.20.
Share premium
5.22.a)
Other equity instruments
5.21.
Accumulated other comprehensive income
5.22.b)
(160,588 )
(10,552 )
(81,677 )
Profit reserves
5.22.a)
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
The notes are an integral part of these financial statements.
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Hedvika Usenik
Member
Andrej Lasič
Member
Archibald Kremser
Member
Andreas Burkhardt
Member
Antonio Argir
Member
Blaž Brodnjak
Chief executive officer
Ljubljana, 12 April 2023
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Statement of changes in equity for the annual period ended 31 December
in EUR thousands
Accumulated other
comprehensive income
NLB Group
Share capital
Share premium
Other equity
instruments
Fair value
reserve of
financial assets
measured at
FVOCI
Foreign
currency
translation
reserve
Other
Profit reserves
Retained
earnings
Equity
attributable to
owners of the
parent
Equity
attributable to
non-controlling
interests
Total equity
Notes
5.20.
5.22.a)
5.21.
5.22.b)
5.22.b)
5.22.b)
5.22.a)
Balance as at 1 January 2022
(17,184 )
(4,734 )
- Net profit for the year
- Other comprehensive income
(153,255 )
(148,926 )
(751 )
(149,677 )
Total comprehensive income after tax
(153,255 )
Dividend paid
(100,000 )
(100,000 )
(4,568 )
(104,568 )
Other equity instruments issued
Transactions with non-controlling
interests (
note 3.
)
(1,020 )
(140 )
(86,358 )
(79,221 )
Transfer of fair values reserve
(17 )
Other
(2,405 )
(221 )
(165 )
Balance as at 31 December 2022
(142,909 )
(16,485 )
(1,194 )
in EUR thousands
Accumulated other
comprehensive income
NLB Group
Share capital
Share premium
Fair value
reserve of
financial assets
measured at
FVOCI
Foreign
currency
translation
reserve
Other
Profit reserves
Retained
earnings
Equity
attributable to
owners of the
parent
Equity
attributable to
non-controlling
interests
Total equity
Notes
5.20.
5.22.a)
5.22.b)
5.22.b)
5.22.b)
5.22.a)
Balance as at 1 January 2021
(17,724 )
(3,645 )
- Net profit for the year
- Other comprehensive income
(28,005 )
(1,085 )
(28,550 )
(1,618 )
(30,168 )
Total comprehensive income after tax
(28,005 )
(1,085 )
Dividends paid
(92,200 )
(92,200 )
(7,710 )
(99,910 )
Transactions with non-controlling
interests (
note 3.
)
(34,997 )
(24,680 )
Transfer of fair values reserve
(3,274 )
(4 )
Other
(27 )
(27 )
(27 )
Balance as at 31 December 2021
(17,184 )
(4,734 )
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in EUR thousands
Accumulated other
comprehensive income
NLB
Share capital
Share premium
Other equity
instruments
Fair value reserve
of financial assets
measured at FVOCI
Other
Profit reserves
Retained earnings
Total equity
Notes
5.20.
5.22.a)
5.21.
5.22.b)
5.22.b)
5.22.a)
5.20.
Balance as at 1 January 2022
(3,696 )
- Net profit for the year
- Other comprehensive income
(92,207 )
(90,445 )
Total comprehensive income after tax
(92,207 )
Dividends paid
(100,000 )
(100,000 )
Other equity instruments issued
Other
(2,405 )
(221 )
Balance as at 31 December 2022
(79,743 )
(1,934 )
in EUR thousands
Accumulated other
comprehensive income
NLB
Share capital
Share premium
Fair value reserve
of financial assets
measured at FVOCI
Other
Profit reserves
Retained earnings
Total equity
Notes
5.20.
5.22.a)
5.22.b)
5.22.b)
5.22.a)
5.20.
Balance as at 1 January 2021
(3,592 )
- Net profit for the year
- Other comprehensive income
(15,177 )
(104 )
(15,281 )
Total comprehensive income after tax
(15,177 )
(104 )
Dividends paid
(92,200 )
(92,200 )
Transfer of fair values reserve
(53 )
Balance as at 31 December 2021
(3,696 )
The notes are an integral part of these financial statements.
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Statement of cash flows for the annual period ended 31 December
in EUR thousands
NLB Group
NLB
Notes
2022
2021
2022
2021
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received
Interest paid
(50,824 )
(69,578 )
(30,982 )
(43,343 )
Dividends received
Fee and commission receipts
Fee and commission payments
(105,086 )
(92,102 )
(37,183 )
(33,927 )
Realised gains from financial assets and financial
liabilities not at fair value through profit or loss
Net gains/(losses) from financial assets and liabilities held for trading
Payments to employees and suppliers
(428,539 )
(382,529 )
(186,831 )
(170,986 )
Other receipts
Other payments
(43,260 )
(51,129 )
(11,955 )
(16,026 )
Income tax (paid)/received
(18,336 )
(8,617 )
(1,603 )
Cash flows from operating activities before
changes in operating assets and liabilities
(Increases)/decreases in operating assets
(1,002,409 )
(964,998 )
(819,088 )
(469,788 )
Net (increase)/decrease in trading assets
(213 )
(213 )
Net (increase)/decrease in non-trading financial assets
mandatorily at fair value through profit or loss
(3,048 )
Net (increase)/decrease in financial assets measured at
fair value through other comprehensive income
(57,015 )
Net (increase)/decrease in loans and receivables
measured at amortised cost
(1,357,757 )
(1,020,944 )
(890,003 )
(598,138 )
Net (increase)/decrease in other assets
(2,477 )
(128 )
Increases/(decreases) in operating liabilities
Net increase/(decrease) in deposits and
borrowings measured at amortised cost
Net increase/(decrease) in other liabilities
Net cash flows from operating activities
(116,822 )
CASH FLOWS FROM INVESTING ACTIVITIES
Receipts from investing activities
Proceeds from sale of property, equipment, and investment property
Proceeds from sale of subsidiaries, net of cash and cash equivalents
5.12.d)
(47,832 )
Proceeds from non-current assets held for sale
Proceeds from disposals of debt securities measured at amortised cost
Payments from investing activities
(252,726 )
(832,512 )
(442,731 )
(697,976 )
Purchase of property, equipment, and investment property
(26,910 )
(23,013 )
(5,748 )
(9,093 )
Purchase of intangible assets
(14,273 )
(12,704 )
(6,684 )
(6,889 )
Purchase of subsidiaries, net of cash acquired
and increase in subsidiaries’ equity
3., 5.12.b), c)
(24,437 )
(120,944 )
(40,046 )
Increase in associates and joint ventures’ equity
(2,900 )
(2,900 )
Purchase of debt securities measured at amortised cost
(409,784 )
(769,458 )
(309,355 )
(639,048 )
Net cash flows from investing activities
(41,190 )
(337,338 )
(303,751 )
(219,125 )
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from financing activities
Issuance of subordinated bonds
5.15.c)
Issuance of Senior Preferred notes
5.15.c)
Issuance of ordinary shares and other equity instruments
5.21.
Other proceeds related to financing activities
Payments from financing activities
(123,628 )
(100,503 )
(100,000 )
(92,200 )
Dividends paid
(104,586 )
(100,503 )
(100,000 )
(92,200 )
Purchase of subsidiary’s treasury shares
(19,042 )
Net cash flows from financing activities
(100,503 )
(92,200 )
Effects of exchange rate changes on cash and cash equivalents
(1,106 )
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
The notes are an integral part of these financial statements.
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in EUR thousands
NLB Group
NLB
Notes
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Cash and cash equivalents comprise:
Cash, cash balances at central banks, and
other demand deposits at banks
5.1.
Loans and advances to banks with original maturity up to three months
Debt securities measured at fair value through other comprehensive
income with original maturity up to three months
Total
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Notes to the financial
statements
1. General information
Nova Ljubljanska banka d.d. Ljubljana (hereinafter: ‘NLB’
or ‘the Bank’) is a Slovenian joint-stock entity providing
universal banking services. NLB Group consists of NLB and
its subsidiaries located in nine countries, mainly in Slovenia
and the SEE market. Information on NLB Group’s structure
is disclosed in note 5.12. Information on other related party
relationships of NLB Group is provided in note 8.
NLB is incorporated and domiciled in Slovenia. The address
of its registered office is Trg Republike 2, 1000 Ljubljana. NLB’s
shares are listed on the Ljubljana Stock Exchange, and the
global depositary receipts (‘GDR’) representing ordinary shares
of NLB, are listed on the London Stock Exchange. Five GDRs
represent one share of NLB.
As at 31 December 2022 and as at 31 December 2021, the largest
shareholder of NLB with significant influence is the Republic of
Slovenia, owning 25.00% plus one share.
All amounts in the financial statements and in the notes to the
financial statements are expressed in thousands of euros unless
otherwise stated. or ‘the Bank’) is a Slovenian joint-stock entity providing
its subsidiaries located in nine countries, mainly in Slovenia
is disclosed in note 5.12. Information on other related party
relationships of NLB Group is provided in note 8.
NLB is incorporated and domiciled in Slovenia
of its registered office is Trg Republike 2, 1000 Ljubljana . NLB’s
shares are listed on the Ljubljana Stock Exchange, and the
global depositary receipts (‘GDR’) representing ordinary shares
of NLB, are listed on the London Stock Exchange. Five GDRs
represent one share of NLB.
As at 31 December 2022 and as at 31 December 2021, the largest
shareholder of NLB with significant influence is the Republic of
Slovenia, owning 25.00% plus one share.
All amounts in the financial statements and in the notes to the
financial statements are expressed in thousands of euros unless
otherwise stated.
accounting policies
The principal accounting policies adopted for the preparation
of the separate and consolidated financial statements are set
out below. The policies have been consistently applied to all
the years presented, except for changes in accounting policies
resulting from the application of new standards or changes to
standards.
The principal accounting policies applied in the preparation
of the separate and consolidated financial statements were
prepared in accordance with the International Financial
Accounting Standards (hereinafter: ‘the IFRS’) as adopted by
the European Union (hereinafter: ‘EU’). Additional requirements
under the national legislation are included where appropriate.
The separate and consolidated financial statements are
comprised of the income statement and statement of
comprehensive income, the statement of financial position, the
statement of changes in equity, the statement of cash flows,
financial statements
concern basis, under the historical cost convention as modified
by the revaluation of financial assets measured at fair value
through other comprehensive income, financial assets, and
financial liabilities at fair value through profit or loss, including
all derivative contracts, hedged items in fair value hedge
accounting relationships, non-current assets held for sale, and
The preparation of financial statements in accordance with the
IFRS requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities on the date of the financial
statements, and the reported amounts of revenue and expenses
during the reporting period. Although these estimates are
based on management’s best knowledge of current events
and activities, actual results may ultimately differ from those
estimates. Accounting estimates and underlying assumptions
are reviewed on an ongoing basis. Revisions of accounting
estimates are recognised in the period in which the estimate
is revised. Critical accounting estimates and judgements in
applying accounting policies are disclosed in note 2.34.
This document contains both the separate financial statements
of NLB, and the consolidated financial statements of NLB
Group. The presented accounting policies apply to both sets of
financial statements, with the exception of policies described
in notes 2.4. and 2.5., which only apply to the consolidated
financial statements and policies described in note 2.6., where
differences in the accounting treatment for investments in
subsidiaries, and associated and joint ventures between
separate and consolidated financial statements are described.
Data relating to separate financial statements is marked ‘NLB,’
while data relating to consolidated financial statements is
2.3. Comparative amounts
Except when a standard or an interpretation permits or
requires otherwise, all amounts are reported or disclosed with
comparative amounts. Where IAS 8 applies, comparative figures
have been adjusted to conform to the changes in presentation
in the current year.
position as at 31 December 2021, the line item ‘Subordinated
liabilities’ was renamed to ‘Debt securities issued.’ In years 2020
and 2021, all issued debt securities were subordinated liabilities,
while in 2022 the Bank also issued Senior Preferred notes.
All issued debt securities are included in one line item and
In the consolidated financial statements (NLB Group),
subsidiaries which are directly or indirectly controlled by NLB
have been fully consolidated. Subsidiaries are consolidated
from the date on which effective control is transferred to NLB
Group.
NLB controls an entity when all three elements
of control are met:
•
it has power over the entity;
•
it is exposed or has rights to variable returns from its
involvement with the entity; and
•
it has the ability to use its power over the entity to affect the
amount of the entity’s returns.
NLB reassesses whether it controls an entity if facts and
circumstances indicate there are changes to one or more of the
three elements of control. If the loss of control of a subsidiary
occurs, the subsidiary is no longer consolidated from the date
that the control ceases.
Where necessary, the accounting policies of subsidiaries
have been amended to ensure consistency with the policies
adopted by NLB. The financial statements of consolidated
subsidiaries are prepared as at the parent entity’s reporting
date. Non-controlling interests are disclosed in the consolidated
statement of changes in equity. Non-controlling interest is
that part of the net results, and of the equity of a subsidiary,
attributable to interests which NLB does not own, either directly
or indirectly. NLB Group measures non-controlling interest on a
transaction-by-transaction basis, either at fair value, or by the
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non-controlling interest’s proportionate share of net assets of
the acquiree.
Inter-company transactions, balances, and unrealised gains
on transactions between NLB Group entities are eliminated.
Unrealised losses are also eliminated unless the transaction
provides evidence of impairment of the asset transferred.
NLB Group treats transactions with non-controlling interests as transactions with equity owners of NLB Group. For purchases of subsidiaries from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is deducted from the equity. For sales to non-controlling interests, the differences between any proceeds received and the relevant share of non-controlling interests are also recorded in the equity. All effects are presented in the line item ‘Equity Attributable to Non-controlling Interest.’ NLB Group treats transactions with non-controlling interests as
transactions with equity owners of NLB Group. For purchases
of subsidiaries from non-controlling interests, the difference
between any consideration paid and the relevant share
acquired of the carrying value of net assets of the subsidiary
is deducted from the equity. For sales to non-controlling
interests, the differences between any proceeds received and
the relevant share of non-controlling interests are also recorded
in the equity. All effects are presented in the line item ‘Equity
goodwill, and bargain
purchases
NLB Group accounts for business combinations using the
acquisition method when the acquired set of activities and
assets meets the definition of a business and control is
transferred to the Group. In determining whether a particular
set of activities and assets is a business, the Group assesses
whether the set of assets and activities acquired includes, at a
minimum, an input and substantive process, and whether the
acquired set has the ability to produce outputs. The acquired
process is considered substantive if it is critical to the ability to
continue producing outputs; and the inputs acquired include an
organised workforce with the necessary skills, knowledge, or
experience to perform that process or it significantly contributes
to the ability to continue producing outputs and is considered
unique or scarce or cannot be replaced without significant cost,
effort, or delay in the ability to continue producing outputs.
The consideration transferred is measured at the fair value of
the assets transferred, equity interest issued, liabilities incurred
or assumed, including the fair value of assets or liabilities
from contingent consideration arrangements and fair value
of any pre-existing equity interest in the subsidiary. However,
this excludes amounts related to the settlement of pre-existing
relationships which are recognised in profit or loss. Acquisition-
related costs such as advisory, legal, valuation, and similar
professional services are recognised in profit or loss as well.
Transaction costs incurred for issuing equity instruments are
deducted from the equity, and all other transaction costs
associated with the acquisition are expensed.
Identifiable assets acquired and liabilities assumed in a
business combination are, with limited exceptions, measured
initially at their fair values at the acquisition date.
A contingent consideration classified as equity is not re-
measured and its subsequent settlement is accounted for within
equity. A contingent consideration classified as an asset or
liability that is a financial instrument and within the scope of
IFRS 9 Financial Instruments is measured at fair value at each
reporting date and changes in fair value are recognised in the
statement of profit or loss in accordance with IFRS 9. Other
contingent considerations that are not within the scope of
IFRS 9 are measured at fair value at each reporting date, and
changes in fair value are recognised in profit or loss.
For each business combination, NLB Group elects whether to
measure the non-controlling interests in the acquiree at fair
value or at the present ownership instruments’ proportionate
share in the recognised amounts of the acquiree’s identifiable
net assets at the date of acquisition. All other components of
non-controlling interests are measured at their acquisition-date
fair values, unless another measurement basis is required by
IFRSs.
consideration transferred measured at fair value, the amount
of any non-controlling interest in the acquiree, and the fair
value of an interest in the acquiree held immediately before
the acquisition date over the net amounts of the identifiable
assets acquired, as well as the liabilities assumed. Any negative
amount, a gain on a bargain purchase (or ‘negative goodwill’),
is recognised in profit or loss after management reassesses
whether it has identified all the assets acquired and all the
liabilities and contingent liabilities assumed, and reviews the
appropriateness of their measurement.
Goodwill is tested annually for impairment. For the purpose
of impairment testing, goodwill arising from a business
combination is, from the acquisition date, allocated to the
Group’s cash-generating units (CGUs) or groups of CGUs that
are expected to benefit from the synergies of the combination.
Where goodwill has been allocated to a cash-generating unit
(CGU) and part of the operation within that unit is disposed of,
the goodwill associated with the disposed operation is included
in the carrying amount of the operation when determining
the gain or loss on disposal. Goodwill disposed in these
circumstances is measured based on the relative values of the
disposed operation and the portion of the cash-generating unit
retained.
The goodwill of associates and joint ventures is included in the
In a business combination achieved in stages, NLB Group
remeasures its previously held equity interest in the acquiree at
its acquisition-date fair value and recognises the resulting gain
associates and joint ventures
In the separate financial statements (NLB), investments in
subsidiaries, associates and joint ventures are accounted
for with the cost method. Dividends from subsidiaries, joint
ventures, or associates are recognised in the income statement
when NLB’s right to receive the dividend has been established.
In the consolidated financial statements, investments in
associates are accounted for using the equity method of
accounting. These are generally undertakings in which NLB
Group holds between 20% and 50% of the voting rights, and
over which NLB Group exercises significant influence, but does
not have control.
Joint ventures are entities over whose activities NLB Group
has joint control, established by contractual agreement. In the
consolidated financial statements, investments in joint ventures
are accounted for using the equity method of accounting.
NLB Group’s share of its associates’ and joint ventures’ post-
acquisition profits or losses is recognised in the consolidated
income statement, and its share of other comprehensive income
is recognised in other comprehensive income. The cumulative
post-acquisition movements are adjusted against the carrying
amount of the investment. When NLB Group’s share of losses in
an associate and joint venture equals or exceeds its interest in
the associate and joint venture, including any other unsecured
receivables, NLB Group does not recognise further losses unless
it has incurred obligations or made payments on behalf of the
associate and joint venture. NLB Group resumes recognising its
share of those profits only after its share of the profits equals the
share of losses not recognised (note 5.12.e).
NLB Group’s subsidiaries, associates and joint ventures are
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businesses under common
control
A merger of entities within NLB Group is a business combination
involving entities under common control. For such mergers,
members of NLB Group apply merger accounting principles,
and use the carrying amounts of merged entities as reported
in the consolidated financial statements. No goodwill is
recognised on mergers of NLB Group entities.
Mergers of entities within NLB Group do not affect the
Functional and presentation currency
Items included in the financial statements of each of NLB
Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (i.e., the
functional currency). The financial statements are presented in
the settlement of such transactions and from the translation
of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement, except
when deferred in other comprehensive income as qualifying
cash flow hedges.
Translation differences resulting from changes in the amortised
cost of monetary items denominated in a foreign currency and
classified as financial assets measured at fair value through
other comprehensive income, are recognised in the income
statement.
Translation differences on non-monetary items, such as equity
instruments at fair value through profit or loss, are reported
as part of the fair value gain or loss in the income statement.
Translation differences on non-monetary items, such as equity
instruments classified as financial assets measured at fair value
through other comprehensive income, are included together
with valuation reserves in the valuation (losses)/gains taken to
other comprehensive income and accumulated in the equity.
Gains and losses resulting from foreign currency purchases and
sales for trading purposes are included in the income statement
as gains less losses from financial assets and liabilities held for
trading.
NLB Group entities
The financial statements of all NLB Group entities that have a
functional currency different from the presentation currency are
translated into the presentation currency as follows:
•
assets and liabilities for each statement of financial position
presented are translated at the closing rate on the reporting
date;
•
income and expenses for each income statement are
translated at average exchange rates; and
•
components of equity are translated at the historical rate.
Goodwill and fair value adjustments arising from the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated at the closing rate.
In the consolidated financial statements, exchange differences
arising from the translation of the net investment in foreign
operations are recognised in other comprehensive income.
When control over a foreign operation is lost, the previously
recognised exchange differences on translations to a
different presentation currency are reclassified from other
comprehensive income to profit and loss for the year. On the
partial disposal of a subsidiary without loss of control, the
related portion of accumulated currency translation differences
Interest income and expenses for all financial instruments
measured at amortised cost, and financial assets measured at
fair value through other comprehensive income are recognised
in the income statement for all interest-bearing instruments on
an accrual basis using the effective interest method. Interest
income on all trading assets and financial assets mandatorily
required to be measured at fair value through profit or loss is
recognised using the contractual interest rate. The effective
interest method is used to calculate the amortised cost of a
financial asset or financial liability, and to allocate the interest
income or interest expenses over the relevant period. The
effective interest rate is the rate that exactly discounts estimated
future cash payments or receipts over the expected life of the
financial instrument, or a shorter period (when appropriate)
to the gross carrying amount of the financial asset or to the
amortised cost of a financial liability. Interest income includes
coupons earned on fixed-yield investments and trading
securities, and accrued discounts and premiums on securities.
The calculation of the effective interest rate includes all fees
and points paid or received by parties to the contract and all
transaction costs, but excludes future credit risk losses.
Interest income is calculated by applying the effective interest
rate to the gross carrying amount of financial assets other than
credit-impaired assets.
When a financial asset becomes credit-impaired and is,
therefore, classified in Stage 3, interest income is calculated by
applying the effective interest rate to the net amortised cost of
the financial asset. If the financial asset cures and is no longer
credit-impaired, interest income is again calculated on a gross
basis.
In the case of purchased or originated credit-impaired financial
assets (POCI), the credit-adjusted effective interest rate is
applied to the amortised cost of the financial asset from initial
recognition. The credit-adjusted effective interest rate is the
interest rate that, at initial recognition, discounts the estimated
future cash flows (including credit losses) to the amortised cost
of the purchased or originated credit-impaired financial asset.
At the NLB Group level, most POCI exposures relate to the
initial recognition of non-performing exposures in the case of a
Fees and commissions mainly include fees received from
credit cards and ATMs, customer transaction accounts,
payment services, investment funds, and commissions from
guarantees. Fee and commission income are recognised at
an amount that reflects the consideration to which the Group
expects to be entitled, in exchange for providing the services.
The performance obligations, as well as the timing of their
satisfaction, are identified and determined at the inception
of the contract. The Group’s revenue contracts do not include
multiple performance obligations.
When the Group provides a service to its customers, the
consideration is invoiced and generally due immediately upon
satisfaction of a service provided at a point in time. When the
service is provided over time, the consideration is invoiced and
due in line with the contractual provisions.
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The Group has generally concluded that it is the principal in its
revenue arrangements because it typically controls the services
before transferring them to the customer.
Fees and commissions that are integral to the effective interest
rate of financial assets and liabilities are presented within
2.11. Dividend income
Dividends are recognised in the income statement within the
line item ‘Dividend income’ when NLB Group’s right to receive
payment has been established and an inflow of economic
benefits is probable. In the consolidated financial statements,
dividends received from associates and joint ventures reduce
the carrying value of the investment.
a) Classification and measurement
Financial instruments are initially measured at fair value plus
or minus, in the case of a financial instrument not measured
at fair value through profit or loss, transaction costs that are
directly attributable to the acquisition or issue of the financial
instrument. Subsequent measurement depends on the
classification of the instrument.
All debt financial assets need to be assessed based on a
combination of the Group’s business model for managing
the assets and the instruments’ contractual cash flow
characteristics. The measurement categories of financial assets
are as follows:
•
Financial assets, measured at amortised costs (AC);
•
Financial assets at fair value through other comprehensive
income (FVOCI);
•
Financial assets held for trading (FVTPL); and
•
Non-trading financial assets, mandatorily at fair value
through profit or loss (FVTPL).
Financial assets are measured at AC if they are held within a
business model for the purpose of collecting contractual cash
flows (‘held to collect’), and if cash flows are solely payments
of principal and interest on the principal amount outstanding.
After initial recognition, they are measured at the amortised
cost using the effective interest method and are subject to
impairment. Interest income calculated using the effective
presented as a separate line item in the income statement. Any
gain or loss on derecognition is recognised in profit or loss in
line item ‘Gains less losses from financial assets and liabilities
not classified at fair value through profit or loss.’
Debt financial instruments are measured at FVOCI if they are
held within a business model for the purpose of both collecting
contractual cash flows and selling (‘held to collect and sell’),
and if cash flows are solely payments of principal and interest
on the principal amount outstanding. FVOCI results in the debt
instruments being recognised at fair value in the statement
of financial position and at the AC in the income statement.
Interest income is calculated using the effective interest method,
foreign exchange gains and losses, and impairments are
recognised separately in the income statement. Other net gains
and losses are recognised in other comprehensive income, until
the instrument is derecognised. At derecognition of the debt
financial instrument, the cumulative gains and losses previously
recognised in other comprehensive income are reclassified to
the income statement under the line item ‘Gains less losses from
financial assets and liabilities not classified at fair value through
profit or loss.’
Equity instruments that are not held for trading may be
irrevocably designated as FVOCI, with no subsequent
reclassification of gains or losses to the income statement.
Dividends are recognised as income in profit or loss unless
the dividend clearly represents a recovery of part of the cost
of the investment, in which case, such gains are recorded in
other comprehensive income. Other net gains and losses are
recognised in other comprehensive income and are never
reclassified to profit or loss. In NLB Group, the most material
equity instrument irrevocably designated as FVOCI is the
investment in the National Resolution Fund (note 5.4.a). NLB
Group decided to use this presentation alternative because
the fund was established based on the law and it has a highly
regulated investment strategy in order to ensure safety, low risk,
and the high liquidity of the fund.
All other financial assets are mandatorily measured at FVTPL,
including financial assets within other business models such as
financial assets managed at fair value or held for trading and
financial assets with contractual cash flows that are not solely
payments of principal and interest on the principal amount
outstanding. Net gains and losses, including any interest or
dividend income, are recognised in profit or loss.
IFRS 9 includes an option to designate financial assets at fair
value through profit or loss if doing so eliminates or significantly
reduces a measurement or recognition inconsistency that
would otherwise arise from measuring assets or liabilities, or
Financial liabilities are subsequently measured at the amortised
cost or at fair value through profit or loss, when they are held
for trading, derivative instruments, or the fair value designation
is applied.
Upon initial recognition, financial liability may be irrevocably
designated as measured at fair value through profit or loss
if that eliminates or significantly reduces a measurement or
recognition inconsistency that would otherwise arise from
measuring assets or liabilities or recognising the gains or
losses on them on different bases, or if the liabilities are part of
a group of financial instruments which are managed and their
performance evaluated on a fair value basis in accordance with
a documented risk management or investment strategy.
Changes in the fair value of financial liabilities designated as
measured at fair value through profit or loss are recognised
in profit or loss, with the exception of movement in the fair
value due to changes of NLB Group’s own credit risk. Such
changes are presented in other comprehensive income with no
subsequent reclassification to the income statement.
Other financial liabilities are subsequently measured
at amortised cost using the effective interest method.
Interest expenses and foreign exchange gains and losses
are recognised in profit or loss. Any gain or loss on the
derecognition of a financial liability is recognised in profit
or loss. In the event of derecognition of a financial liability
measured at amortised cost, the gains and losses are
recognised in the line item ‘Gains less losses from financial
assets and liabilities not classified at fair value through profit
or loss.’ Gains and losses on disposals of financial liabilities
designated as measured at fair value through profit or loss are
Assessment of NLB Group’s business model
NLB Group has determined its business model separately
for each reporting unit within NLB Group, and is based on
observable factors for different portfolios that best reflect how
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the Group manages groups of financial assets to achieve its
business objective, such as:
•
how the performance of the business model and the financial
assets held within that business model are evaluated and
reported to key management personnel;
•
the risks that affect the performance of the business model
and, in particular, the way those risks are managed;
•
how the managers of the business are compensated (e.g.,
whether the compensation is based on the fair value of the
assets or on collection of contractual cash flows); and
•
the expected frequency, value, and timing of sales.
The business model assessment is based on reasonably
expected scenarios without taking worst-case and stress case
scenarios into consideration. In general, the business model
assessment of the Group can be summarised as follows:
•
Loans and deposits given are included in a business model
‘held to collect’ since the primary objective of NLB Group for
the loan portfolio is to collect the contractual cash flows;
•
Debt securities are divided into three business models:
•
the first group of debt securities presents ‘held for trading’
category;
•
debt securities in the second group are held under a
business model ‘held to collect and sale’ with the intention
of collecting the contractual cash flows and sale of financial
assets, and forms part of the Group’s liquidity reserves;
•
the third part of debt securities is held within the business
model for holding them with objective to collect contractual
cash flows.
With regard to debt securities within the ‘held to collect’
business model, the sales which are related to the increase of
the issuers’ credit risk, concentrations risk, sales made close to
the final maturity, or sales in order to meet liquidity needs in a
stress case scenario are permitted. Other sales, which are not
due to an increase in credit risk may still be consistent with a
held to collect business model if such sales are incidental to the
overall business model, and:
•
are insignificant in value both individually and in aggregate,
even when such sales are frequent;
•
are infrequent even when they are significant in value.
A review of instruments’ contractual cash flow characteristics
(the SPPI test – solely payment of principal and interest on
the principal amount outstanding)
The second step in the classification of the financial assets in
portfolios being ‘held to collect’ and ‘held to collect and sell’
relates to the assessment of whether the contractual cash
flows are consistent with the SPPI test. The principal amount
reflects the fair value at initial recognition less any subsequent
changes, e.g. due to repayment. The interest must represent
only the consideration for the time value of money, credit risk,
other basic lending risks, and a profit margin consistent with
basic lending features. If the cash flows introduce more than
de minimis exposure to risk or volatility that is not consistent
with basic lending features, the financial asset is mandatorily
measured at fair value through profit or loss.
NLB Group reviews the portfolio within ‘held to collect’ and
‘held to collect and sale’ for standardised products on a level
of a product and for non-standardised products on a single
exposure level. The Group has established a procedure for SPPI
identification as part of regular investment process with defined
responsibilities for primary and secondary controls. Special
emphasis is put on new and non-standardised characteristics
of loan agreements.
Accounting policy for modified financial assets
When contractual cash flows of a financial asset are modified,
NLB Group assesses if the terms and conditions have been
modified to the extent that, substantially, it becomes a new
financial asset. The following factors are, amongst others,
considered when making such assessment:
•
reason for modification of cash flows (commercial or client’s
financial difficulties);
•
change in currency of the loan;
•
introduction of an equity feature;
•
replacement of initially agreed debtor with a new debtor that
is not related party to initial debtor; and
•
if the modification changes the result of the SPPI test.
If the modification results in derecognition of a financial asset,
the new financial asset is initially recognised at fair value, with
the difference recognised as a derecognition gain or loss,
to the extent that an impairment loss has not already been
recorded. If the modification does not result in cash flows that
are substantially different, the modification does not result
in derecognition. In such cases, NLB Group recalculates the
gross carrying amount of the financial asset and recognises
modification gain or loss in the income statement. The gross
carrying amount is recalculated as the present value of the
renegotiated or modified contractual cash flows that are
discounted at the financial asset’s original effective interest
rate (or credit-adjusted effective interest rate for purchased or
originated credit-impaired financial assets).
Financial assets can be reclassified when and only when NLB
Group’s business model for managing those assets changes.
The reclassification takes place from the start of the reporting
period following the change. Such changes are expected to
be very infrequent, and none occurred during the presented
c) Day one gains or losses
The best evidence of fair value at initial recognition is the
transaction price (i.e., the fair value of the consideration given
or received), unless the fair value of that instrument is evidenced
by a comparison with other observable current market
transactions in the same instrument (i.e., without modification
or repackaging), or based on a valuation technique whose
variables only include data from observable markets.
If the transaction price on a non-active market is different
than the fair value from other observable current market
transactions in the same instrument, or is based on a valuation
technique whose variables only include data from observable
markets, the difference between the transaction price and fair
value is recognised immediately in the income statement (‘day
one gains or losses’).
In cases where the data used for valuation are not fully
observable in financial markets, day one gains or losses are not
recognised immediately in the income statement. The timing of
recognition of deferred day one gains or losses is determined
individually. It is either amortised over the life of the transaction,
deferred until the instrument’s fair value can be determined
using market observable inputs, or realised through settlement.
A financial asset is derecognised when the contractual rights
to the cash flows from the financial asset expire, or when the
financial asset is transferred, and the transfer qualifies for
derecognition. A financial liability is derecognised only when it
is extinguished, i.e., when the obligation specified in the contract
e) Write-offs
NLB Group writes off financial assets in their entirety or a
portion thereof when it has exhausted all practical recovery
efforts and has no reasonable expectations of recovery. Criteria
indicating that there is no reasonable expectation of recovery
include default period, quality of collateral, and different stages
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of enforcement procedures. NLB Group may write off financial
assets that are still subject to enforcement activities, but this
does not affect its rights in the enforcement procedures. NLB
Group still seeks to recover all amounts it is legally entitled to in
full. A write-off reduces the gross carrying amount of a financial
asset and allowance for the impairment. Any subsequent
recoveries are credited to credit loss expenses. Write-offs and
recoveries are disclosed in note 5.14.a).
The fair value of financial instruments traded on active markets
is based on the price that would be received to sell the assets
or transfer liability (exit price) being measured at the reporting
date, excluding transaction costs. If there is no active market,
the fair value of the instruments is estimated using discounted
cash flow techniques or pricing models.
If discounted cash flow techniques are used, estimated future
cash flows are based on management’s best estimates; and
the discount rate is a market-based rate at the reporting
date for an instrument with similar terms and conditions. If
pricing models are used, inputs are based on market-based
Derivative financial instruments – including forward and futures
contracts, swaps, and options – are initially recognised in the
statement of financial position at fair value. Derivative financial
instruments are subsequently re-measured at their fair value.
Fair values are obtained from quoted market prices, discounted
cash flow models, or pricing models, as appropriate. All
derivatives are carried at their fair value within assets when
the derivative position is favourable to NLB Group, and within
liabilities when the derivative position is unfavourable to NLB
Group.
The method of recognising the resulting fair value gain or loss
depends on whether the derivative is designated as a hedging
instrument and, if so, the nature of the item being hedged. NLB
Group designates certain derivatives as either:
•
hedges of the fair value of recognised assets or liabilities or
firm commitments (fair value hedge);
•
hedges of highly probable future cash flows attributable to a
recognised asset or liability, or a highly probable forecasted
transaction (cash flow hedge); or
•
hedges of a net investment in a foreign operation (net
investment hedge).
Hedge accounting is used when certain criteria are met.
NLB Group and NLB have exercised the option to continue
applying the existing IAS 39 hedge accounting requirements
in accordance with the policy choice permitted under IFRS 9.
However, disclosures that are required by the IFRS 9 related
amendments to IFRS 7 ‘Financial Instruments: Disclosures’ are
implemented.
At the inception of the transaction, NLB Group documents
the relationship between hedged items and hedging
instruments, as well as its risk management objective, valuation
methodology, and strategy for undertaking various hedge
transactions. NLB Group also documents its assessment, both
at the hedge inception and on an ongoing basis, of whether the
derivatives used in hedging transactions are highly effective in
offsetting changes in fair values or cash flows of hedged items.
The actual results of a hedge must always fall within a range of
80–125%.
Fair value hedge
Changes in the fair value of derivatives that are designated
and qualify as fair value hedges are recognised in the income
statement together with any changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk.
Effective changes in the fair value of hedging instruments and
related hedged items are reflected in ‘Fair Value Adjustments in
Hedge Accounting’ in the income statement. Any ineffectiveness
from derivatives is recorded in ‘Gains Less Losses on Financial
Assets and Liabilities Held for Trading.’
If a hedge no longer meets the hedge accounting criteria, the
adjustment to the carrying amount of the hedged item for
which the effective interest method is used is amortised to profit
or loss over the remaining period to maturity. The adjustment to
the carrying amount of a hedged equity security is included in
the income statement upon disposal of the equity security.
Cash flow hedge
The effective portion of changes in the fair value of derivatives
that are designated and qualify as cash flow hedges is
recognised in other comprehensive income. The gain or loss
relating to the ineffective portion is immediately recognised in
the income statement.
Amounts accumulated in equity are recycled as a
reclassification from other comprehensive income to the income
statement in the periods when the hedged item affects the profit
or loss.
When a hedging instrument expires or is sold, or when a hedge
no longer meets hedge accounting criteria, any cumulative
gain or loss existing in other comprehensive income and
previously accumulated in equity at that time remains in other
comprehensive income and in equity, and is recognised in
profit or loss only when the forecasted transaction is ultimately
recognised in the income statement. When a forecasted
transaction is no longer expected to occur, the cumulative gain
or loss that was reported in other comprehensive income is
immediately transferred to the income statement.
Hedge of a net investment in a foreign operation
Hedges of net investments in foreign operations are accounted
for in consolidated financial statements similar to cash flow
hedges. Any gain or loss on the hedging instrument relating
to the effective portion of the hedge is recognised directly in
equity. The gain or loss relating to the ineffective portion is
recognised immediately in the consolidated income statement
in ‘Gains Less Losses on Financial Assets and Liabilities Held for
Trading.’ Gains and losses accumulated in other comprehensive
income are included in the consolidated income statement
when the foreign operation is disposed of as part of the gain or
a) Expected credit losses for collective allowances
IFRS 9 applies an expected loss model that provides an
unbiased and probability-weighted estimate of credit losses
by evaluating a range of possible outcomes that incorporates
forecasts of future economic conditions. The expected loss
model requires NLB Group to recognise not only credit losses
that have already occurred, but also losses that are expected
to occur in the future. An allowance for expected credit losses
(ECL) is required for all loans and other debt financial assets
not measured at FVTPL, together with loan commitments and
financial guarantee contracts.
In the general model, the allowance is based on the expected
credit losses associated with the probability of default in the
next 12 months unless there has been a significant increase
in credit risk since initial recognition, in which case, the
allowance is based on the probability of default over the life
of the financial asset (LECL). When determining whether the
risk of default increased significantly since initial recognition,
the Group considers reasonable and supportable information
that is relevant and available without undue cost or effort. This
includes both quantitative and qualitative information and
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analysis, based on the Group’s historical data, experience,
expert credit assessment, and incorporation of forward-looking
information. In 2022, the NLB Group made improvements to the
SICR (significant increase of credit risk) identification concept by
including a watch list for retail clients.
Classification into stages
NLB Group prepared a methodology for ECL defining the
criteria for classification into stages, transition criteria between
stages, models for risk indicators calculation, forward-looking
scenarios, and the validation of models. The Group classifies
financial instruments into Stage 1, Stage 2, and Stage 3, based
on the applied ECL allowance methodology as described
below:
•
Stage 1 – performing portfolio: no significant increase of
credit risk since initial recognition, NLB Group recognises an
allowance based on 12-month period;
•
Stage 2 – underperforming portfolio: significant increase
in credit risk (SICR) since initial recognition, NLB Group
recognises an allowance for lifetime period; and
•
Stage 3 – impaired portfolio: NLB Group recognises lifetime
allowances for these defaulted financial assets.
The Bank has aligned its definition of credit impaired assets
under IFRS 9 to the new European Banking Authority (EBA)
definition of non-performing loans (NPLs) as at 31 December
2020. The Bank uses a unified definition of past due and default
exposures; defaulted clients are rated D, DF, or E based on the
internal rating system and contains the clients with material
delays over 90 days, as well as the clients that were assessed
as unlikely to pay. All facilities of retail clients obtain a unified
credit rating.
A significant increase in credit risk is assumed:
•
when a credit rating significantly deteriorates at the reporting
date in comparison to the credit rating at initial recognition
(which is accompanied with the increase of Probability of
default (PD) indicator),
•
when a threefold increase of LPD since initial recognition is
detected,
•
when a financial asset has material delays over 30 days (days
past due are also included in the credit rating assessment),
•
if NLB Group grants the forbearance to the borrower,
•
if the facility is placed on the watch list or intensive care list,
•
if a retail client is placed on the watch list.
The methodology of credit rating for banks and sovereign
classification depends on the existence or non-existence of
a rating from international credit rating agencies – Fitch,
Moody’s, or the S&P. Ratings are set on a basis of the average
international credit rating. If there are no international credit
ratings, the classification is based on the internal methodology
of NLB Group.
The classification into stages is based on the facility level,
nevertheless occurring delays on one facility may trigger the
stage deterioration of other facilities of the same client. When
the SICR criteria no longer exist, the facility may be transferred
to a more favourable stage subject to the prescribed cure
period of three months.
The ECL for Stage 1 financial assets is calculated based on
12-month PDs or shorter period PDs, if the remaining maturity
of the financial asset is shorter than 1 year. The 12-month PD
already includes the macroeconomic impact effect. Allowances
in Stage 1 are designed to reflect expected credit losses that had
been incurred in the performing portfolio, but have not been
identified.
The ECL for Stage 2 financial assets is calculated based on
lifetime PDs (LPD) because their credit risk has increased
significantly since their initial recognition. This calculation is also
based on a forward-looking assessment that considers several
economic scenarios in order to recognise the probability of
losses associated with the predicted macro-economic forecasts.
For financial instruments in Stage 3, the same treatment
is applied as for those considered to be credit impaired.
Exposures below the materiality threshold obtain collective
allowances using a PD of 100%. Financial instruments will be
transferred out of Stage 3 if they no longer meet the criteria
of being credit-impaired after a probation period. Special
treatment applies for purchased or originated credit-impaired
financial instruments (POCI), where only the cumulative
changes in lifetime expected losses since the initial recognition
are recognised as a loss allowance.
The calculation of collective allowances is performed by
multiplying the EAD (exposure at default) at the end of each
month with an appropriate PD and LGD (loss-given default).
The obtained result for each month is discounted to the present
time using the original effective interest rate of the facility. For
Stage 1 exposures, the ECL only takes a 12-month period into
account, while for Stage 2 or 3 all potential losses until the
maturity date are included. Risk parameters are calculated
separately for each of the three possible scenarios. The final
ECL for each facility is calculated as a weighted average ECL
for each scenario.
The EAD represents the anticipated outstanding amount
owed by the obligor, which is determined as the sum of on-
balance exposure and expected future drawings of the off-
balance exposure. The drawings are assessed by applying
the CCF (credit conversion factor) based on the Bank’s historic
experience with similar types of facilities.
The PD is the estimation of likelihood of default over a given
time horizon. The estimation is performed separately for each
unique segment (corporate clients by size, institutions, central
government) or by product group (mortgage, consumer
loans and other retail products). Through the cycle, the PD is
supplemented with the forward-looking aspect using three
possible scenarios.
The PD is the estimation of likelihood of default over a given
time horizon. The estimation is performed separately for each
unique segment (corporate clients by size, institutions, or
central government) or by product group (mortgage, consumer
loans, and other retail products). Through the cycle, the PD is
supplemented with the forward-looking aspect using three
possible scenarios.
Risk parameter calculations are based on the data from each
subsidiary, while the calculations and modelling are performed
centrally. In the case where the data samples are not sufficiently
large, hurdle rates are applied based on the regulatory or other
benchmarks.
Expected Life
When measuring ECL, the Bank must consider the maximum
contractual period over which the Bank is exposed to credit risk.
For certain revolving credit facilities that do not have a fixed
maturity, the expected life is estimated based on the period
over which the Bank is exposed to credit risk and where the
credit losses would not be mitigated by management actions.
Forward-looking information
During 2022, the Group reviewed IFRS 9 provisioning by testing
a set of relevant macroeconomic scenarios to adequately
reflect the current circumstances and the related impacts in the
future.
NLB Group established and developed multiple scenarios (i.e.,
baseline, mild, and severe) on the level of ECL calculation. The
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baseline scenario presents a common forecast macroeconomic
view for all countries that are present in the NLB Group. This
scenario is constructed with the purpose to culminate various
outlooks into a unified projection of macroeconomic and
financial variables for the NLB Group. This is in line with the
concept that the bank has a consolidated view on the future
of economic development in Southeast Europe (SEE). The
IFRS 9 baseline scenario is based on the most recent official
and professional forecasters outputs, with additional specific
adjustments for individual countries of the NLB Group.
The macroeconomic rationale behind the alternative scenarios
is related to a range of plausible drivers on economic
development during the next three years. The narrative for
the alternative scenarios combines statistical techniques
with expert knowledge as a means of concept and outputs
validation. The Group developed both alternative scenarios
through the lens of possible expected impact on regional
economic activity. In general, the mild scenario is a demand-
driven optimistic scenario, where limited supply disruption
factors and an active role from the central banks help to
brighten the economic conditions and economic subjects’
confidence. This scenario narrates stronger economic growth,
while the severe scenario envisions zero real economic growth
for all NLB Group home countries. Namely, the severe scenario
is supply-driven pessimistic scenario, where both upside
inflation risk and downside growth risk materialize. The bank
includes these scenarios in calculating expected credit losses in
the context of IFRS 9.
Macroeconomic scenarios for explanatory variables, developed for each country in the NLB Group (in %):
Mild scenario
Baseline scenario
Severe scenario
2022
2023
2024
2022
2023
2024
2022
2023
2024
Slovenia
Real GDP
4.7
5.5
4.0
3.5
3.1
2.8
1.5
0.6
1.8
Unemployment rate
4.3
4.2
4.0
4.4
4.4
4.3
4.6
5.6
7.9
Bosnia and Herzegovina
Real GDP
4.0
4.9
4.6
2.4
2.3
3.0
(0.1)
(0.7)
1.8
Unemployment rate
15.3
15.1
14.4
15.3
15.1
14.4
15.4
15.8
16.4
Montenegro
Real GDP
6.2
6.9
5.2
4.2
3.9
3.2
1.2
(0.1)
1.7
Unemployment rate
16.1
15.5
14.5
16.1
15.5
14.5
16.2
16.2
16.5
North Macedonia
Real GDP
4.1
6.0
5.2
2.9
3.6
4.0
(0.1)
0.1
2.5
Unemployment rate
15.0
14.4
13.9
15.2
14.9
14.6
15.5
16.4
19.1
Serbia
Real GDP
4.8
6.5
5.0
3.6
4.1
3.8
1.6
1.6
2.8
Unemployment rate
9.9
9.2
8.8
10.0
9.4
9.1
10.4
11.5
15.3
Kosovo
Real GDP
4.4
6.5
5.1
2.8
3.9
3.5
0.3
0.9
2.3
Unemployment rate
23.6
22.6
21.8
23.6
22.6
21.8
23.7
23.3
23.8
NLB Group formed three probable scenarios with an associated
probability of occurrence for forward-looking assessment of
risk provisioning in the context of IFRS 9. IFRS 9 macroeconomic
scenarios incorporate the forward-looking and probability-
weighted aspects of ECL impairment calculation. Both features
may change when material changes in the future development
of the economy are recognised and not embedded in previous
forecasts. For the year 2022, we have initially assigned the
scenario probability weights of 10% to the optimistic, 60% to the
baseline, and 30% to the pessimistic scenarios.
The monitoring process of the macroeconomic environment
revealed that uncertainties remain high in the global economy
due to the energy crisis, inflation, and the war in Ukraine.
The current economic situation led to sluggish growth
projections, persistent inflationary pressures, and interest rate
hikes. Increased uncertainty and changes in expectations of
macroeconomic development affected forecasts for some
economies in the NLB Group. The NLB Group noticed a material
decrease in growth projections for Slovenia and Serbia for 2023.
Hence, the executive decision was to adjust risk expectations
using the scenario's weight. The Bank changed the scenario
probability weighting set to 0%–10%–90%, where the severe
and baseline scenarios reflect the likelihood of relevant future
economic conditions for them. We have derived the likelihood
of occurrence for the pessimistic scenario to 90%, whereby the
baseline scenario received a weight of 10%. Minor changes
were also applied in other countries based on the latest
available forecast. These adjustments are adopted to reflect
the risk expectations of credit management due to uncertain
conditions in the macroeconomic environment. The Bank
follows the conservative stance for the LGD parameter due to
the particularities of the local market.
Effects of changed risk parameters
The effects of the changed risk parameters on the amount of
expected credit losses are disclosed in notes 5.14. and 5.16.b).
b) Individual assessment of allowances for impaired financial
assets
NLB Group assesses impairments of financial assets separately
for all individually significant assets classified in Stage 3. The
materiality threshold is set at a EUR 0.5 million exposure for
legal entities, and EUR 0.1 million for private persons on the
level of NLB, while the Group members apply lower thresholds
applicable to their portfolio size. All other financial assets obtain
collective allowances.
The amount of loss is measured as the difference between the
asset’s carrying amount and the present value of estimated
future cash flows, which are discounted to the estimation date.
The scenario of expected cash flows can be based on the ‘going
concern’ assumption, where the cash flow from operations is
considered along with the sale of collateral that is not crucial
for future business. In the case of the ‘gone concern’ principle,
the repayments are based on expected cash flows from the
sale of collateral. The expected payment from the collateral is
calculated from the appraised market value of the collateral,
the haircut used as defined in the Haircut Methodology, and
discounted. Off-balance sheet liabilities are also assessed
individually and, where necessary, related allowances are
recognised as liabilities.
The carrying amount of financial assets measured at amortised
cost is reduced through an allowance account and the loss is
recognised in the income statement line item ‘Impairment of
financial assets.’ If the amount of allowances for ECL decreases
subsequently due to an event occurring after the impairment
was recognised (e.g., repayment in the collection process
exceeds the assessed expected payment from collateral),
the reversal of the loss is recognised as a reduction in the
allowance account, and the gain is recognised in the same
income statement item. For off-balance exposures, the amount
of ECL is recognised in the statement of financial position in the
line item ‘Provisions’ and in the income statement in the line item
‘Provisions for credit losses.’
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The ECLs for debt instruments measured at fair value through
other comprehensive income do not reduce the carrying
amount of these financial assets in the statement of financial
position, which remains at fair value. Instead, an amount equal
to the allowance that would arise if the assets were measured
at amortised cost is recognised in other comprehensive income
as an accumulated impairment amount, with a corresponding
charge to profit or loss. The accumulated loss recognised in
other comprehensive income is recycled to the profit or loss
upon derecognition of the assets, or when the amount of
allowances for ECL decreases due to an event occurring after
2.14. Forborne loans
A forborne loan (or restructured financial asset) arises as
a result of a debtor’s inability to repay a debt under the
originally agreed terms, either by modifying the terms of the
original contract (via an annex) or by signing a new contract
under which the contracting parties agree the partial or total
repayment of the original debt. When receivables from the
client receive restructuring status, the debtor must be classified
in the rating grade C or lower.
The definitions of forborne loans closely follow definitions that
were developed by the European Banking Authority (EBA).
These definitions aim to achieve comprehensive coverage of
exposures to which forbearance measures have been extended.
The accounting treatment of forborne loans depends on the
type of restructuring. When NLB Group embarks on a forborne
loan via the modified terms of repayment proceeding from
extending the deadline for the repayment of the principal
and/or interest, and/or a forbearance of the repayment of
the principal, and/or interest or a reduction in the interest
rate, and/or other expenses, it adjusts the carrying amount
of the forborne loan on the basis of the discounted value of
the estimated future cash flows under the modified terms, and
recognises the resulting effect in profit or loss. In the event of
the reduction of a claim against the debtor via the reduction in
the amount of the claims as a result of a contractually agreed
debt waiver and ownership restructuring or debt to equity
swap, NLB Group derecognises the claim in the part relating to
the write-down or the contractually agreed upon debt waiver.
The new estimate of the future cash flows for the residual claim,
not yet written down, is based on an updated estimate of the
probability of loss. NLB Group considers the debtor’s modified
position, the economic expectations, and the collateral of the
forborne loan. When NLB Group is embarking on the forborne
loan by taking possession of other assets (i.e., property, plant
and equipment; securities; and other financial assets), including
investments in the equity of debtors obtained via debt-to-
equity swaps, it recognises the acquired assets in the statement
of financial position at fair value, recognising the difference
between the fair value of the asset and the carrying amount of
the eliminated claim in profit or loss.
Forborne exposures may be identified in both the performing
and non-performing parts of the portfolio. Where the forborne
loan is classified in the non-performing part of the portfolio, it
can be reclassified to the performing part when exposure is no
longer considered as impaired or defaulted, when determined
amounts were repaid, when one year has passed from the
latest of the events defined (introduction of forbearance,
classification in the non-performing part, repayment of the
last overdue amount, end of the grace period), and after the
introduction of forbearance there have been no overdue
amounts or doubts concerning the repayment of the entire
exposure, under the terms and conditions after the forbearance.
The absence of doubt is confirmed by analysis of the financial
situation of the debtor.
The forborne status is withdrawn when:
•
at least a 2-year probation period has
passed since the latest of:
•
the moment of extending the restructuring measures, or
•
the forborne exposure was deemed performing;
•
regular payments of the principal or interest were made, in
a substantial total amount, during at least half the probation
period;
•
no exposure, in the probation period, is more than 30 days in
default of more than EUR 100;
•
the client fulfils determined financial indicators.
In the case of a deferral of payment approved due to the
COVID-19 crisis, the probation period is extended for the period
of deferral.
2.15. Repossessed assets
In certain circumstances, assets are repossessed following the
foreclosure on loans that are in default. Repossessed assets are
initially recognised in the financial statements at their fair value
and classified in the appropriate category according to their
purpose and are sold as soon as it is feasible in order to reduce
exposure (note 6.1.l). After initial recognition, the repossessed
assets are measured and accounted for in accordance
with the policies applicable to the relevant asset categories.
Repossessed assets mainly represent items of real estate that
NLB Group classifies within investment properties measured in
accordance with an IAS 40 Investment property (note 2.20.), and
other assets measured in accordance with IAS 2 Inventories.
Real estate obtained as collateral from the foreclosure of
loans and receivables, classified as other assets are initially
recognised at fair value less costs to sell (realisable value),
wherein only the direct costs of sales can be considered. At
subsequent measurement, the realisable value is verified at
least annually. Valuations of the fair value of real estate are
performed by certified real estate appraisers. The real estate is
impaired when the carrying value exceeds the realisable value.
The effect of impairment is recognised as the impairment of
other assets and the reversal of impairment as income from the
Financial assets and liabilities are offset, and the net amount
reported in the statement of financial position when there is a
legally enforceable right to offset the recognised amounts, and
there is an intention to settle on a net basis, or to realise the
agreements
Securities sold under sale and repurchase agreements (repos)
are retained in the financial statements, and the counterparty
liability is recognised in financial liabilities measured at an
amortised cost. Securities sold subject to sale and repurchase
agreements are reclassified in the financial statements as
pledged assets when the transferee has the right by contract or
custom to sell or re-pledge the collateral. Securities purchased
under agreements to resell (reverse repos) are presented as
loans to other banks or customers, as appropriate.
In financial statements, the difference between the sale and
repurchase price is treated as interest and accrued over the life
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All items of property and equipment are initially recognised
at cost. They are subsequently measured at cost less any
accumulated depreciation and any accumulated impairment
loss.
Each year, NLB Group assesses whether there are indications
that property and equipment may be impaired. If any such
indication exists, the recoverable amounts are estimated. The
recoverable amount is the higher of the fair value less costs
to sell and value in use. If the recoverable amount exceeds
the carrying value, the assets are not impaired. If the carrying
amount exceeds the recoverable amount, the difference is
recognised as an impairment loss in the income statement.
Items of a largely independent property and equipment which
do not generate cash flows are included in the cash-generating
unit and later tested for possible impairment.
Depreciation is calculated on a straight-line basis over the
assets’ estimated useful lives. The following annual depreciation
rates were applied:
NLB Group and NLB
in %
Buildings
2 – 5
Leasehold improvements
5 – 25
Computers
14.3 – 50
Furniture and equipment
10 – 33.3
Motor vehicles
12.5 – 25
Depreciation does not begin until the assets are available for
use.
The assets’ residual values and useful lives are reviewed and
adjusted if appropriate on each reporting date. Gains and
losses on the disposal of items of property and equipment
are determined as the difference between the sale proceeds
and their carrying amount, and are recognised in the income
statement.
Maintenance and repairs are charged to the income statement
during the financial period in which they are incurred.
Subsequent costs that increase future economic benefits
are recognised in the carrying amount of an asset, and the
Intangible assets include software licenses, goodwill (note
2.5.), and identifiable intangible assets acquired in a business
combination. Intangible assets other than goodwill, have a finite
useful life and are in the statement of financial position stated
at cost, less accumulated amortisation and impairment losses.
Amortisation is calculated on a straight-line basis at rates
designed to write-down the cost of an intangible asset over its
estimated useful life. The core banking system is amortised over
a period of 10 years, and other software over a period of three
to five years. Amortisation does not begin until the assets are
available for use.
The identifiable intangible assets acquired in a business
combination and recognised separately from goodwill, are
recorded at fair value on the acquisition date if the intangible
asset is separable or arises from contractual or other legal
rights. After initial recognition, intangible assets acquired in a
business combination are measured in accordance with IAS 38
Intangible Assets. Other intangible assets acquired in a business
combination (note 5.10.) relate to core deposits and trade name.
Their useful life is assessed to be five years. Amortisation of a trade name is calculated on a straight-line basis, while for core deposits accelerated amortisation is applied, since it better reflects the pattern of the asset’s consumption.Their useful life is assessed to be five years. Amortisation of a
trade name is calculated on a straight-line basis, while for core
deposits accelerated amortisation is applied, since it better
Investment properties include properties held to earn rentals,
or to increase the value of a long-term investment, rather than
to be used by NLB Group. Investment properties are carried
at fair value determined by a certified appraiser. Fair value is
based on current market prices. Any gain or loss arising from a
disposal groups classified
as held for sale
Non-current assets and disposal groups are classified as held
for sale if their carrying amount will be recovered through
a sale transaction rather than through continuing use. This
condition is deemed to be met only when the sale is highly
probable, and the asset is available for immediate sale in its
present condition. Management must be committed to the
sale, which should be expected to qualify for recognition as a
completed sale within one year from the date of classification.
Non-current assets and disposal groups classified as held for
sale are measured at the lower of the assets’ previous carrying
amount and fair value less costs to sell.
In the case of business combinations, NLB Group measures an
acquired non-current asset (or disposal group) that is classified
as held for sale at the acquisition date in accordance with
IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations at fair value less costs to sell.
During subsequent measurement, certain assets and liabilities
of a disposal group that are outside the scope of IFRS 5
measurement requirements are measured in accordance
with the applicable standards (e.g., deferred tax assets,
assets arising from employee benefits, financial instruments,
investment property measured at fair value, and contractual
rights under insurance contracts). Tangible and intangible
assets are not depreciated. The effects of sale and valuation are
included in the income statement as a gain or loss from non-
current assets held for sale.
Liabilities directly associated with disposal groups are
reclassified and presented separately in the statement of
A lease is a contract, or part of a contract which creates
enforceable rights and obligations and conveys the right
to control the use of an identified asset for a period of
time in exchange for consideration. Thus, IFRS 16 requires
determination whether a contract is, or contains, a lease.
NLB Group as a lessee
NLB Group recognises a liability to make lease payments and
an asset representing the right to use the underlying asset
(i.e., the right-of-use asset) during the lease term for all leases,
except for short-term leases and leases of low-value. Short-
term leases are defined as those which at the commencement
date have a lease term of 12 months or less without the option
to purchase the underlying asset. Leases of underlying assets
with a value, when new, lower, or equal to EUR 5 thousand
are defined as low value leases, and are thus recognised as
expenses on a straight-line basis over the lease term.
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Right-of-use assets
At the commencement date, NLB Group measures the right-
of-use asset at cost. The cost of right-of-use assets consists of
the amount of lease liabilities recognised, the initial direct costs
incurred, an estimate of costs to be incurred by the lessee in
dismantling and removing the underlying asset to the condition
required by the terms and conditions of the lease and lease
payments made at or before the commencement date less
any lease incentives received. After the commencement date,
NLB Group measures the right-of-use asset using a cost model
(the asset is measured at cost, reduced by any accumulated
depreciation and impairment losses, and adjusted for any
remeasurement of lease liabilities) and recognises depreciation
of the right-of-use assets, on a straight-line basis over the
lease term, and (separately) interest on the lease liabilities.
In the statement of financial position, right-of-use assets are
presented in the line item ‘Property and equipment.’
Lease liabilities
At the commencement date, NLB Group measures the lease
liability at the present value of the lease payments that are not
paid at that date. The lease payments consist of fixed payments,
variable lease payments that depend on an index or a rate,
amounts expected to be paid under residual value guarantees,
the exercise price of a purchase option if there exists a
reasonable certainty for it to be exercised, and payments of
penalties for terminating the lease if the lease term reflects
exercising the option to terminate. Subsequently (after the
commencement date), NLB Group measures the lease
liability by:
•
increasing the carrying amount to reflect interest on the lease
liability;
•
reducing the carrying amount to reflect the lease payments
made;
•
remeasuring the carrying amount to reflect any reassessment
or lease modifications.
In the statement of financial position, lease liabilities are
presented in line item ‘Other financial liabilities.’
NLB Group as a lessor
Payments under operating leases are recognised as income
on a straight-line basis over the period of the lease. Assets
leased under operating leases are presented in the statement
of financial position as investment property or as property and
equipment.
NLB Group classifies a lease as a finance lease when the risks
and rewards incidental to ownership of a leased asset lie with
the lessee. When assets are leased under a finance lease,
the present value of the lease payments is recognised as a
receivable. Income from finance lease transactions is amortised
over the lifetime of the lease using the effective interest method.
Finance lease receivables are recognised at an amount equal
to the net investment in the lease, including the unguaranteed
residual value.
Sale-and-leaseback transactions
NLB Group also enters into sale-and-leaseback transactions (in
which NLB Group is primarily a lessor) under which the leased
assets are purchased from, and then leased back to the lessee.
These contracts are classified as finance leases or operating
leases, depending on the contractual terms of the leaseback
agreement.
Leases recognised in a business combination
In most leases acquired in business combinations, the acquiree
is the lessee. For such leases, NLB Group applies the IFRS 16
initial measurement provisions (with exceptions for leases with
remaining term of 12 months or less and low value leases) and
recognises the acquired lease liability as if the lease contract
was a new lease at the acquisition date. The right-of-use asset
is measured at an amount equal to the recognised liability.
There are no favourable or unfavourable terms of the leases
relative to market terms, which would require the adjustment of
For the purpose of the statement of cash flows, cash and cash
equivalents comprise cash and balances with central banks
and other demand deposits at banks, debt securities held for
trading, loans to banks, and debt securities not held for trading
with an original maturity of up to three months. Cash and cash
issued debt securities with
characteristics of debt
Loans and deposits received and issued debt securities are
initially recognised at fair value. Borrowings are subsequently
measured at the amortised cost. The difference between the
value at initial recognition and the final value is recognised
in the income statement as interest expenses, applying the
effective interest rate.
Repurchased own debt is disclosed as a reduction of
liabilities in the statement of financial position. The difference
between the book value and the price at which own debt was
2.25. Other issued financial
instruments with
characteristics of equity
Upon initial recognition, other issued financial instruments
are classified in part or in full as equity instruments if the
contractual characteristics of the instruments are such that NLB
Group must classify them as equity instruments in accordance
with IAS 32 Financial Instruments: Presentation. An issued
financial instrument is only considered an equity instrument if
that instrument does not represent a contractual obligation for
payment.
Issued financial instruments with characteristics of equity are
recognised in equity in the statement of financial position.
Transaction costs incurred for issuing such instruments are
deducted from retained earnings. The corresponding interest is
recognised directly in retained earnings.
The carrying value of an issued financial instrument with
characteristics of equity is presented in the statement of
changes in equity in the line item ‘Other Equity Instruments.’
Provisions are recognised when NLB Group has a present legal
or constructive obligation as a result of past events, and it is
probable that an outflow of resources embodying economic
benefits will be required to settle the obligation, and a reliable
estimate of the amount of the obligation can be made. They
are recognised in the amount that is the best estimate of the
expenditure required to settle the present obligation at the end
of the reporting period. When the effect of the time value of
money is material, NLB Group determines the level of provisions
by discounting the expected cash flows at a pre-tax rate
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commitments
Financial guarantees are contracts that require the issuer to
make specific payments to reimburse the holder for a loss it
incurs because a specific debtor fails to make payments when
due, in accordance with the terms of debt instruments. Such
financial guarantees are given to banks, financial institutions,
and other bodies on behalf of the customer to secure loans,
overdrafts, and other banking facilities.
The issued guarantees covering non-financial obligations of the
clients represent the obligation of the Bank (guarantor) to pay if
the client fails to perform certain works in accordance with the
terms of the commercial contract.
Financial and non-financial guarantees are initially recognised
at fair value, which is usually evidenced by the fees received.
The fees are amortised to the income statement over the
contract term using the straight-line method. NLB Group’s
liabilities under guarantees are subsequently measured at the
greater of:
•
the initial measurement, less amortisation calculated to
recognise fee income over the period of guarantee; or
•
Documentary letters of credit
Documentary (and standby) letters of credit constitute a written
and irrevocable commitment of the issuing (opening) bank on
behalf of the issuer (importer) to pay the beneficiary (exporter)
the value set out in the documents by a defined deadline:
•
if the letter of credit is payable on sight; and
•
if the letter of credit is payable for deferred payment, the bank
will pay according to the contractual agreement when and if
the beneficiary (exporter) presents the bank with documents
that are in line with the conditions and deadlines set out in the
letter of credit.
A commitment may also take the form of a letter of credit
confirmation, which is usually done at the request or
authorisation of the issuing (opening) bank and constitutes a
firm commitment by the confirming bank, in addition to that of
the issuing bank, which independently assumes a commitment
to the beneficiary under certain conditions.
Other contingent liabilities and commitments
Other contingent liabilities and commitments represent
undrawn loan commitments to extend credit, uncovered letters
of credit, and other commitments.
The nominal contractual values of guarantees, letters of credit,
and undrawn loan commitments where the loan agreed to
be provided is on market terms, are not recognised in the
statement of financial position.
Contingent liabilities recognised in a business combination
A contingent liability recognised in a business combination
is initially measured at its fair value and is recognised in the
statement of financial position in the line item ‘Provisions.’ After
initial recognition, it is measured at the higher of:
•
the amount that would be recognised in accordance with IAS
37 Provisions, Contingent Liabilities and Contingent Assets; or
•
the amount initially recognised less, if appropriate, the
cumulative amount of income recognised in accordance
with the principles of IFRS 15 Revenue from Contracts with
Customers. This requirement does not apply to contracts
Income tax expenses comprises current and deferred income
tax.
Current corporate income tax in NLB Group is calculated
on taxable profits at the applicable tax rate in the respective
jurisdiction. The corporate income tax rate for 2022 in Slovenia
was 19% (2021: 19%).
Current and deferred taxes are recognised in profit or loss,
except to the extent that they relate to a business combination
or taxes related to effects recognised directly in equity (deferred
tax related to the fair value re-measurement of financial assets
measured at fair value through other comprehensive income,
cash flow hedges, and actuarial gains and losses on defined
benefit pension plans is charged or credited directly to other
comprehensive income).
liability method for temporary differences arising between the
tax bases of assets and liabilities, and their carrying amounts
for financial reporting purposes.
Deferred tax assets are recognised if it is probable that future
taxable profit will be available in the foreseeable future against
which the temporary differences can be utilised.
Deferred tax assets and liabilities are measured at tax rates
enacted or substantively enacted at the end of the reporting
period that are expected to apply to the period when the asset
is realised, or the liability is settled. At each reporting date, NLB
Group reviews the carrying amount of deferred tax assets and
assesses future taxable profits against which temporary taxable
differences can be utilised.
Deferred tax assets for temporary differences arising from
impairments of investments in subsidiaries, associates and joint
ventures are recognised only to the extent that it is probable
that:
•
the temporary differences will be reversed in the foreseeable
future; and
•
taxable profit will be available.
Slovenian tax law does not set deadlines by which uncovered
tax losses must be utilised.
In the case of business combination, deferred tax balances
are recognised if related to temporary differences and carry-
forwards of an acquiree that exist at the acquisition date, or
if they arise as a result of the acquisition. Income taxes are
measured in accordance with IAS 12 Income Taxes.
financial services rendered (financial services, exempt from
value added tax (with the exception of securities transactions)
and the services of insurance brokers and agents), paid in
Slovenia. The tax rate is 8.5% (2021: 8.5%) and the tax is paid
monthly. Given that the tax on financial services is classified
as a sales tax, it reduces accrued revenues in the financial
2.29. Fiduciary activities
NLB Group provides asset management services to its clients.
Assets held in a fiduciary capacity are not reported in NLB
Group’s financial statements as they do not represent assets of
NLB Group. Fee and commission income and expenses relating
to fiduciary activities are generally recognised in the income
statement when the service has been provided (see also note
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2.10.). Fee and commission income charged for this type of
service is broken down by items in note 4.3.b). Further details on
transactions managed on behalf of third parties are disclosed
in note 5.25.
Based on the requirements of Slovenian legislation, NLB Group
has, in note 5.25., additionally disclosed the assets and liabilities
on accounts used to manage financial assets from fiduciary
activities, i.e., information related to the receipt, processing, and
execution of orders and related custody activities.
Employee benefits include:
•
short-term employee benefits (such as salary, compensations,
annual holiday allowance, separation allowance, and non-
monetary benefits);
•
reimbursement of commuting costs, meal allowance,
compensation for use of own resources;
•
retirement indemnity bonuses (post-employment benefits);
•
other employment benefits (jubilee long-service benefits,
voluntary supplementary pension insurance);
• variable remuneration.
Short-term employee benefits are recognised in the period to
which they relate and included in the income statement line
item ‘Administrative expenses.’ Among others, they include the
payment of contributions for pension and disability insurance,
which according to local legislation (for employer) amount to
8.85% of the gross salaries.
conditions according to Pension and Disability Insurance Act
(ZPIZ), they are entitled to a lump-sum severance payment.
Employees are also entitled to a long-service bonus for every 10
years of service in NLB.
These obligations are measured at the present value of future
cash outflows considering future salary increases and other
conditions, and then apportioned to past and future employee
service based on the benefit plan’s terms and conditions.
Service costs are included in the income statement in the line
item ‘Administrative expenses’ as defined benefit costs, while
interest expenses on the defined benefit liability are recognised
in the line item ‘Interest and similar expenses.’ These interest
expenses represent the change during the period in the defined
benefit liability that arises from the passage of time. For post-
employment benefits, actuarial gains and losses from the
effect of changes in actuarial assumptions and experience
adjustments (differences between the realised and expected
payments) are recognised in other comprehensive income
under the line item ‘Actuarial Gains/(Losses) on Defined
Benefit Pensions Plans,’ and will not be recycled to the income
statement. Actuarial gains and losses that relate to other
employment benefits are recognised in the income statement
as defined benefit costs. In the statement of financial position,
liabilities for short-term employee benefits are included in the
line item ‘Other liabilities,’ while liabilities for post-employment
benefits and other employment benefits (jubilee long-service
benefits) are included in the line item ‘Provisions.’
In the case of a business combination employee benefits are
recognised and measured in accordance with IAS 19 Employee
transactions
Cash-settled share-based payment transactions
If certain conditions are met, members of the Management
Board and employees performing special work (i.e., those
who can significantly impact the risk profile of the Group in the
scope of their tasks and activities) receive part of their variable
remuneration in the form of financial instruments, whose value
is linked to the value of NLB share. Upon expiration of legally
prescribed period (up to five years), beneficiaries receive cash
payments depending on the value of a NLB share. The first
contracts, including share-based payment transactions, were
concluded in the second quarter of 2022.
In the statement of financial position, a liability is recognised in
line ‘Financial liabilities measured at fair value through profit
or loss.’ Its fair value is measured initially and at each reporting
date up to and including the settlement date, with changes in
fair value recognised in the income statement line ‘Gains less
losses from financial liabilities measured at fair value through
profit or loss.’
Equity-settled share-based payment transactions
NLB Group does not have any equity-settled share-based
Dividends on ordinary shares are recognised in equity in the
If NLB or another member of NLB Group purchases NLB shares,
the consideration paid is deducted from the total shareholders’
equity as treasury shares. If such shares are subsequently sold,
any consideration received is included in equity. If NLB shares
are purchased by NLB itself or other NLB Group entities, NLB
Share issue costs
Costs directly attributable to the issue of new shares are
recognised in equity as a reduction in the share premium
Operating segments are reported in a manner consistent with
internal reporting to the Management Board of the Bank,
which is the executive body that makes decisions regarding
the allocation of resources and assesses the performance of a
specific segment.
Transactions between organisational units (OUs) are managed
under normal operating conditions. Interest income among
individual OUs in the parent bank (NLB) and N Banka is
allocated using a fund transfer pricing method and shown
within the net interest income of each OU. Net non-interest
income is allocated to the OU that actually provides the service
that generates income. Direct costs are attributed to the
segment that is directly related to the provided service, and
indirect costs (costs which service centres provide for profit
centres) are attributed to the segment for which the service is
provided, whereas overhead costs are allocated according
to general keys. External net income is the net income of NLB
Group from the consolidated income statement. Income tax is
not allocated between segments. Analysis by segment for NLB
Group is presented in note 7.a).
In accordance with IFRS 8, NLB Group has the following
reportable segments: Retail Banking in Slovenia, Corporate
and Investment Banking in Slovenia, Strategic Foreign Markets,
Financial Markets in Slovenia, Non-core members, and Other
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and judgments in applying
accounting policies
NLB Group’s financial statements are influenced by accounting
policies, assumptions, estimates, and management’s judgment.
NLB Group makes estimates and assumptions that affect
the reported amounts of assets and liabilities within the next
financial year. All estimates and assumptions required in
conformity with the IFRS are best estimates undertaken in
accordance with the applicable standard. Estimates and
judgments are evaluated on a continuing basis, and are based
on past experience and other factors, including expectations
with regard to future events.
a)
Allowances for expected credit losses on loans and
advances
NLB Group monitors and checks the quality of the loan portfolio
at the individual and portfolio levels to continuously estimate
the necessary allowances for ECL. NLB Group creates individual
allowances for individually significant financial assets attributed
to Stage 3. Such an assignment is based on information
regarding the fulfilment of contractual obligations or other
financial difficulties of the debtor, and other important facts.
Individual assessments are based on the expected discounted
cash flows from operations and/or the assessed expected
payment from collateral.
Allowances are assessed collectively for financial assets
assigned to Stage 1 or 2, or for financial assets in Stage 3 with
exposure below the materiality threshold. The ECL in this
group of assets are estimated based on expected value of risk
parameters combining the historic movements with the future
macroeconomic predictions for three separate scenarios. The
models used to estimate future risk parameters are validated
and back-tested on a regular basis to make the loss estimations
as realistic as possible.
NLB Group performs regular stress-testing as part of the ICAAP
process normative approach, where the 3-year budget is tested
for adverse circumstances. The selected stress scenario predicts
adverse economic circumstances as a result of the escalation of
geopolitical tension and a fragile supply. This scenario features
a fall in output, growing inflationary pressures, and a sudden
increase in interest rates that hampers the debtors’ ability to
repay.
In terms of credit risk, the scenario has an unfavourable impact
on default rates (transfer of assets from performing to default)
and loss rates (expected losses after occurrence of default).
Furthermore, a transfer of assets within the performing sub-
portfolio to rating classes with worse default probabilities is
envisaged. Based on the existing exposures (static balance
sheet assumption), additional allowances for expected credit
losses are assessed on existing default exposures and new
default flows, as well as on the remaining performing portfolio.
The results of the stress scenario for NLB Group shows an
increase of credit risk impairments in the first year of stress
by EUR 188 million (2021: EUR 177 million), and an increase in
the coverage of the credit portfolio by impairments by 1.02
percentage points (2021: 1.14 percentage points).
b) Fair value of financial instruments
The fair values of financial investments traded on the active
market are based on current bid prices (financial assets) or
offer prices (financial liabilities).
The fair values of financial instruments that are not traded on
the active market are determined by using valuation models.
These include a comparison with recent transaction prices,
the use of a discounted cash flow model, valuation based
on comparable entities, and other frequently used valuation
models. These valuation models at their best estimate reflect
current market conditions at the measurement date, which
may not be representative of market conditions either before
or after the measurement date. Management reviewed
all applied models as at the reporting date to ensure they
appropriately reflect current market conditions, including the
relative liquidity of the market and the applied credit spread.
Changes in assumptions regarding these factors could affect
the reported fair values of financial instruments held for trading,
and financial assets measured at fair value through other
comprehensive income.
The fair values of derivative financial instruments are
determined on the basis of market data (mark-to-market), in
accordance with NLB Group’s methodology for the valuation of
financial instruments. The market exchange rates, interest rates,
yield, and volatility curves used in valuations are based on the
market snapshot principle. Market data are saved daily at 4
p.m., and later used for the calculation of the fair values (market
value, NPV) of financial instruments. NLB Group applies market
yield curves for valuation, and fair values are additionally
adjusted for credit risk of the counterparty.
The fair value hierarchy of financial instruments is disclosed in
note 6.5.
c)
Impairment of investments in subsidiaries, associates and
joint ventures
The process of identifying and assessing the impairment of
investments in subsidiaries, associates and joint ventures is
inherently uncertain, as the forecasting of cash flows requires
the significant use of estimates, which themselves are sensitive
to the assumptions used. The review of impairment represents
management’s best estimate of the facts and assumptions such
as:
•
Future cash flows from individual investments present the
estimated cash flow for periods for which adopted business
plans are available. For core members, estimated cash
flows are based on a five-year business plan. For non-core
members, estimated cash flows are based on a period in
line with the strategy of divestment. The business plans of
individual entities are based on an assessment of future
economic conditions that will impact an individual member’s
business and the quality of the credit portfolio;
•
The growth rate in cash flows for the period following the
adopted business plan is between 2.3 and 4.0%;
•
The target capital adequacy ratio of an individual bank is
between 14 and 17%;
•
The discount rate derived from the capital asset pricing model
that is used to discount future cash flows is based on the cost
of equity allocated to an individual investment. The discount
rate reflects the impact of a range of financial and economic
variables, including the risk-free rate and risk premium. The
value of variables used is subject to fluctuations outside
management’s control. The pre-tax discount rate is between
13.1 and 22.2% (31 December 2021: between 9.66 and 15.88%).
For strategic NLB Group members in 2022 and 2021, there
were no indications of impairment for equity investments. In
2022, NLB released previously formed impairment of equity
investments in the amount EUR 23,388 thousand and impaired
equity investments in non-core members in the amount of EUR
615 thousand (2021: EUR 458 thousand).
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Liabilities for certain employee benefits are calculated by an independent actuary. The main assumptions included in the actuarial
calculation are as follows:
NLB Group
NLB
2022
2021
2022
2021
Actuarial assumptions
Discount factor
3.1% - 8.3%
0.5% - 4.3%
3.1%
0.6%
Wage growth based on inflation,
promotions, and wage growth
based on past years of service
2.3% - 14.2%
1.8% - 4.8%
3.0% - 7.0%
2.5% - 3.0%
Other assumptions
Number of employees eligible for benefits
7,154
7,014
2,369
2,444
A sensitivity analysis of significant actuarial assumptions for post-employment benefit:
31 Dec 2022
NLB Group
NLB
Discount rate
Future salary
increases
Discount rate
Future salary
increases
+0.5 p.p.
-0.5 p.p.
+0.5 p.p.
-0.5 p.p.
+0.5 p.p.
-0.5 p.p.
+0.5 p.p.
-0.5 p.p.
Impact on provisions for employee benefits
- post-employment benefits (in %)
(4.7)
5.0
5.1
(4.8)
(4.5)
4.8
4.9
(4.7)
31 Dec 2021
NLB Group
NLB
Discount rate
Future salary
increases
Discount rate
Future salary
increases
+0.5 p.p.
-0.5 p.p.
+0.5 p.p.
-0.5 p.p.
+0.5 p.p.
-0.5 p.p.
+0.5 p.p.
-0.5 p.p.
Impact on provisions for employee benefits
- post-employment benefits (in %)
(5.3)
5.7
5.5
(5.1)
(5.1)
5.5
5.5
(5.2)
Individual analysis is done by changing one assumption for
+/- 0.5 percentage points, while all other assumptions stay
the same.
The breakdown of actuarial gains and losses for post-employment benefit by causes:
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Actuarial gains and losses due to
changed financial assumptions
4,093
251
1,759
292
Actuarial gains and losses due to
changes in demographic assumptions
-
(1,211)
-
151
Actuarial gains and losses due to experience
(62)
(417)
289
(558)
Total actuarial gains and losses for the year
4,031
(1,377)
2,048
(115)
The weighted average duration of liabilities in years:
NLB Group
NLB
2022
2021
2022
2021
Post-employment benefit
11.1 - 22.0
9.4 - 19.0
11.1
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e) Taxes
NLB Group operates in countries governed by different laws.
The deferred tax assets recognised as at 31 December 2022
are based on profit forecasts and take the expected manner of
recovery of the assets into account. Changes in assumptions
regarding the likely manner of recovering assets or changes
in profit forecasts can lead to the recognition of currently
unrecognised deferred tax assets or derecognition of previously
created deferred tax assets. If NLB profit projections used for
estimation of the amount of deferred tax assets which are
expected to be reversed in foreseeable future (i.e., within five
years) would change by 10%, the estimated amount of deferred
tax assets would change by approximately EUR 3.4 million
revised International Financial
Reporting Standards
During the current year, NLB Group adopted all new
and revised standards and interpretations issued by the
International Accounting Standards Board (hereinafter: ‘the
IASB’) and the International Financial Reporting Interpretations
Committee (hereinafter: ‘the IFRIC’), and that are endorsed
by the EU that are effective for annual accounting periods
beginning on 1 January 2022.
Accounting standards and amendments to existing standards
effective for annual periods beginning on 1 January 2022 that
were endorsed by the EU and adopted by NLB Group
• IFRS 16 (amendment) –
Covid-19-Related Rent Concessions
beyond 30 June 2021
is effective for annual periods beginning
on or after 1 April 2021. The amendment extended the
availability of the practical expedient by one year so that it
applies to rent concessions for which any reduction in lease
payments affects only payments originally due on or before
30 June 2022, provided the other conditions for applying
the practical expedient are met. There is no impact on NLB
Group’s and NLB’s financial statements.
• IFRS 3 (amendment) –
Business Combinations – Reference
to the Conceptual Framework
is effective for annual periods
beginning on or after 1 January 2022. The amendments
update a reference in IFRS 3 to the Conceptual Framework
for Financial Reporting without changing the accounting
requirements for business combinations. Furthermore, the
amendments add an exception to the recognition principle
for liabilities and contingent liabilities within the scope of IAS
37 Provisions, Contingent Liabilities and Contingent Assets
or IFRIC 21 Levies. The amendments also clarify existing
guidance for contingent assets. There is no impact on NLB
Group’s and NLB’s financial statements.
• IAS 16 (amendment) –
Property, Plant and Equipment:
Proceeds before Intended Use
is effective for annual periods
beginning on or after 1 January 2022. The amendment
prohibits the deduction from the cost of an item of property,
plant and equipment of any proceeds from the sale of
produced items while the asset is being prepared for its
intended use. The proceeds from selling such items, and
the cost of producing those items, are recognised in profit
or loss. It also clarifies that an entity is ‘testing whether the
asset is functioning properly’ when it assesses the technical
and physical performance of the asset. The financial
performance of the asset is not relevant to this assessment.
The amendment further requires separate disclosure of the
amounts of proceeds and costs relating to items produced
that are not an output of the entity’s ordinary activities. It is
also necessary to disclose the line item in the statement of
comprehensive income where the proceeds are included.
There is no impact on NLB Group’s and NLB’s financial
statements.
• IAS 37 (amendments) –
Provisions, Contingent Liabilities and
Contingent Assets: Onerous Contracts – Cost of Fulfilling
a Contract
is effective for annual periods beginning on or
after 1 January 2022. The amendments modify the standard
regarding costs a company should include as the cost of
fulfilling a contract when assessing whether a contract is
onerous. The amendments specify that the ‘cost of fulfilling’
a contract comprises the ‘costs that relate directly to the
contract.’ The costs that relate directly to a contract can either
be incremental costs of fulfilling that contract or an allocation
of other costs that relate directly to fulfilling contracts. There is
no impact on NLB Group’s and NLB’s financial statements.
•
Annual Improvements to IFRS Standards 2018-2020
(amendments) are effective for annual periods beginning on
or after 1 January 2022. The amendments to IFRS 9 clarify
which fees and costs should be included in the ‘10 per cent’
test for derecognition of a financial liability. The amendment
to IFRS 16 – Leases removes from the example the illustration
of the reimbursement of leasehold improvements by the
lessor in order to resolve any potential confusion regarding
the treatment of lease incentives. The amendments to IFRS
1 – First-time Adoption of International Financial Reporting
Standards permits a subsidiary that becomes a first-time
adopter of IFRS Standards later than its parent to measure
cumulative translation differences at amounts included in
the consolidated financial statements of the parent, based
on the parent’s date of transition to IFRS Standards. The
amendments to IAS 41 – Agriculture remove the requirement
to exclude cash flows for taxation when measuring fair value
under IAS 41. This amendment is intended to align with the
requirement in the standard to discount cash flows on a post-
tax basis. This will ensure consistency with the requirements in
IFRS 13 – Fair Value Measurement. There is no impact on NLB
Group’s and NLB’s financial statements.
Accounting standards and amendments to existing standards
that were endorsed by the EU, but not adopted early by NLB
Group
New and revised accounting standards and interpretations
endorsed by the EU that are not mandatory for annual
accounting periods beginning on 1 January 2022, were
not adopted early by NLB Group. These standards and
amendments are not expected to have a material impact on
the consolidated financial statements of NLB Group in the
future reporting periods and on foreseeable future transactions.
NLB Group plans to adopt the accounting standards and
amendments listed below for reporting periods commencing on
or after the effective date.
• IAS 1 (amendment) –
Presentation of Financial Statements
and IFRS Practice Statement 2 – Disclosure of Accounting
policies
is effective for annual periods beginning on or after 1
January 2023. The amendments to IAS 1 require companies to
disclose their material accounting policy information rather
than their significant accounting policies. The amendments to
IFRS Practice Statement 2 provide guidance on how to apply
the concept of materiality to accounting policy disclosures.
NLB Group and NLB do not expect an impact on their
financial statements.
• IAS 8 (amendment) –
Accounting policies, Changes in
Accounting Estimates and Errors: Definition of Accounting
Estimates
is effective for annual periods beginning on or
after 1 January 2023. The amendments clarify how companies
should distinguish changes in accounting policies from
changes in accounting estimates. That distinction is important
because changes in accounting estimates are applied
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prospectively only to future transactions and other future
events, but changes in accounting policies are generally also
applied retrospectively to past transactions and other past
events. NLB Group and NLB do not expect an impact on their
financial statements.
•
IFRS 17 (new standard including amendments) –
Insurance
Contracts
is effective for annual periods beginning on or after
1 January 2023. The new standard provides a comprehensive
principle-based framework for the measurement and
presentation of all insurance contracts. The new standard will
replace IFRS 4 Insurance Contracts and requires insurance
contracts to be measured using current fulfilment cash
flows, and for revenue to be recognised – as the service is
provided over the coverage period. The additionally issued
amendments to IFRS 17 simplify some requirements and
explanation of financial performance, and provide additional
transition reliefs to reduce the complexity of applying
standard for the first time. NLB Group and NLB do not expect
an impact on their financial statements.
• IAS 12 (amendment) –
Income Taxes: Deferred Tax related
to Assets and Liabilities arising from a Single Transaction
is
effective for annual periods beginning on or after 1 January
2023. IAS 12 specifies how a company accounts for income
tax, including deferred tax, which represents tax payable
or recoverable in the future. In specified circumstances,
companies are exempt from recognising deferred tax when
they recognise assets or liabilities for the first time. The
amendments clarify that the exemption does not apply and
that companies are required to recognise deferred tax on
such transactions. NLB Group and NLB do not expect an
impact on their financial statements.
Accounting standards and amendments to existing standards,
but not endorsed by the EU
•
IAS 1 (amendment and deferral of effective date) –
Presentation of Financial Statements: Classification
of Liabilities as Current or Non-current
is effective for
annual periods beginning on or after 1 January 2024. The
amendments clarify that liabilities are classified as either
current or non-current, depending on the rights that exist at
the end of the reporting period. Classification is unaffected
by the expectations of the entity or events after the reporting
date. The amendment also clarifies what IAS 1 means when it
refers to the ‘settlement’ of a liability. NLB Group and NLB do
not expect an impact on their financial statements.
• IAS 1 (amendment) –
Presentation of Financial Statements:
Non-current Liabilities with Covenants
is effective for
annual periods beginning on or after 1 January 2024. The
amendments improved the information an entity provides
when its right to defer settlement of a liability for at least
12 months is subject to compliance with covenants. The
amendments also responded to stakeholders’ concerns
about the classification of such a liability as current or non-
current. NLB Group and NLB do not expect an impact on their
financial statements.
• IFRS 16 (amendment) –
Leases: Lease Liability in a Sale
and Leaseback
is effective for annual periods beginning
on or after 1 January 2024. The amendments affect only the
subsequent measurement of lease liabilities arising from a
sale and leaseback transaction with variable lease payments,
which occurred from the date of initial application of IFRS
16 and for which the seller-lessee’s accounting policy differs
from the requirements specified in these amendments. NLB
Group and NLB do not expect an impact on their financial
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3. Changes in the
composition
of the NLB Group
Changes in 2022
Capital changes:
•
In March 2022, in accordance with Resolution and
Compulsory Winding-Up of Banks Act, NLB became an
owner of 100% shares of Sberbank banka d.d., Ljubljana.
The purchase price for the bank was EUR 5,109 thousand and
was fully paid in cash (note 5.12.b). At the General Meeting of
Shareholders of Sberbank banka d.d., Ljubljana, held in April
2022, a decision was made to rename Sberbank banka d.d.,
Ljubljana to ‘N Banka d.d., Ljubljana.’
•
In March 2022, Komercijalna banka a.d. Beograd bought
2.90% of all ordinary shares in the amount of EUR 19,047
thousand of treasury shares from dissenting shareholders,
which Komercijalna banka a.d. Beograd should dispose of
within 12 months of their takeover.
•
In April 2022, NLB established IT services company named
‘NLB DigIT d.o.o., Beograd.’
•
In May 2022, NLB acquired an additional 442,799 ordinary
shares of NLB Komercijalna banka a.d. Beograd and
combined with existing shareholding reached the ownership
of 90.2155% of the basic capital and 91.7294% of shares
with voting rights. The increase in capital investment was
recognised in the amount of EUR 15,715 thousand.
•
In July 2022, NLB successfully squeezed out the remaining
shareholders of NLB Komercijalna banka a.d. Beograd and
thereby became the owner of 100% of this Serbian bank.
Prior to the squeeze-out process, NLB owned 90.2155% of
share capital and 91.7294% of voting rights. Through the
squeeze-out process, NLB acquired 1,528,110 regular shares
and 316,260 preferred shares with a total value of EUR 61,865
thousand.
•
In September 2022, an increase in share capital in the form
of a cash contribution in the amount of EUR 306 thousand in
NLB Lease&Go, leasing, d.o.o., Ljubljana for the purpose of
achieving NLB Group’s leasing strategy.
•
In September 2022, NLB Lease&Go, leasing, d.o.o., Ljubljana
(51%) and NLB Banka a.d., Skopje (49%) established financial
company named ‘NLB Liz&Go d.o.o. Skopje.’ In December
2022, the company was renamed to ‘NLB Lease&Go d.o.o.
Skopje.’
•
In November 2022, NLB Lease&Go, leasing, d.o.o., Ljubljana
became an owner of 95.20% of financial company ‘Zastava
Istrabenz Lizing, d.o.o., Beograd.’ The purchase price for the
company was EUR 1,036 thousand and was fully paid in cash
(note 5.12.c). In January 2023, the company was renamed to
‘NLB Lease&Go leasing d.o.o. Beograd.’
•
In December 2022, an increase in share capital in the form of
a cash contribution in the amount of EUR 2,100 thousand in
NLB Lease&Go, leasing, d.o.o., Ljubljana for the purpose of
achieving NLB Group’s leasing strategy.
•
In December 2022, an increase in share capital in the form of
a cash contribution in the amount of EUR 21,130 thousand in
S-REAM d.o.o., Ljubljana for the purpose of consolidation of
real estate companies in Slovenia.
Other changes:
•
After obtaining all regulatory licenses, as well as by
registering the merger with the Business Registers Agency,
the integration process of Komercijalna banka a.d. Beograd
and NLB Banka a.d., Beograd, was successfully completed.
From 30 April 2022, the bank operates under the new name
NLB Komercijalna banka a.d. Beograd. Based on the merger
of NLB Banka a.d., Beograd to Komercijalna banka a.d.
Beograd as the acquirer, NLB Komercijalna Banka a.d.
Beograd is its universal legal successor.
•
In November 2022, NLB Komercijalna banka a.d. Beograd
sold its 23.97% ownership interest in NLB Banka a.d.,
Podgorica to NLB.
•
In December 2022, NLB sold its 100% ownership interest in
PRO-REM d.o.o., Ljubljana – v likvidaciji to S-REAM d.o.o.,
Ljubljana.
Changes in 2021
Capital changes:
•
In April 2021, NLB increased the share of voting rights in the
takeover bid for the remaining shares of Komercijalna banka
a.d. Beograd from 83.23% to 87.999%, and also acquired
15.328% of preference shares. This increased NLB’s share in
total shareholding of the bank from 81.42% to 86.42%. The
increase in capital investment was recognised in the amount
of EUR 23,098 thousand.
•
In May 2021, NLB increased the share of voting rights in the
public offering of ordinary shares of Komercijalna banka a.d.
Beograd from 87.999% to 88.28%. This increased NLB’s share
in total shareholding of the bank from 86.42% to 86.70%. The
increase in capital investment was recognised in the amount
of EUR 1,337 thousand.
•
In May 2021, NLB acquired the remaining shares of minority
shareholders of NLB Banka a.d., Beograd and increased its
ownership from 99.997% to 100%. The increase in capital
investment was recognised in the amount of EUR 2 thousand.
•
An increase in equity reserves in the form of a cash
contribution in the amount of EUR 300 thousand in REAM
d.o.o., Beograd to ensure regular business operations.
•
In October 2021, NLB increased its business share in Bankart
d.o.o., Ljubljana from 40.08% to 45.64%.
•
In November 2021, Komercijalna banka a.d. Podgorica
merged with NLB Banka a.d. Podgorica. After this merger,
Komercijalna banka a.d. Beograd has 23.97% shareholding of
NLB Banka a.d. Podgorica, while NLB d.d. has 75.90%.
•
In December 2021, an increase in share capital in the form of
a cash contribution in the amount of EUR 15,309 thousand in
NLB Lease&Go, leasing, d.o.o., Ljubljana for the purpose of
achieving NLB Group’s leasing strategy.
•
In December 2021, NLB increased its ownership in settlement
agreement in relation to the put and call option of shares of
NLB Banka sh.a., Prishtina from 81.21% to 82.38%. The increase
in capital investment was recognised in the amount of EUR
223 thousand.
Other changes:
•
In April 2021 company BH-RE d.o.o., Sarajevo – u likvidaciji
was liquidated. In accordance with a court order, the
company was removed from the court register.
•
In September 2021, NLB sold its 0.002% ownership interest in
Komercijalna banka a.d. Banja Luka to Komercijalna banka
a.d. Beograd.
•
In November 2021, Prvi Faktor d.o.o., Sarajevo - u likvidaciji
was liquidated. In accordance with a court order, the
company was removed from the court register.
•
In December 2021, Komercijalna banka a.d. Beograd sold its
subsidiary Komercijalna banka a.d. Banja Luka.
•
In December 2021, NLB sold its subsidiary NLB Leasing d.o.o.,
Ljubljana – v likvidaciji to NLB Lease&Go, leasing, d.o.o.,
Ljubljana.
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4. Notes to the income statement
4.1. Interest income and expenses Analysis by type of assets and liabilities in EUR thousands NLB Group NLB 2022 2021 2022 2021 Interest and similar income Interest income calculated using the effective interest method 561,467 467,500 214,163 170,002 Financial assets measured at fair value through other comprehensive income 38,840 40,347 11,215 11,733 Securities measured at amortised cost 16,791 14,049 11,431 10,150 Deposits with banks and central banks 12,067 239 10,868 101 Loans and advances to banks measured at amortised cost 3,770 416 6,106 3,937 Loans and advances to customers at amortised cost 489,999 412,449 174,543 144,081 Other interest and similar income 8,309 10,329 7,799 9,183 Financial assets held for trading 3,732 4,757 3,352 4,455 Non-trading financial assets mandatorily at fair value through profit or loss 48 780 166 744 Negative interest 3,966 3,980 3,718 3,981 Derivatives - hedge accounting 559 - 559 - Other 4 812 4 3 Total 569,776 477,829 221,962 179,185 Interest and similar expenses Interest expenses calculated using the effective interest method 43,785 40,460 27,373 15,297 Deposits from banks and central banks 795 865 692 6 Borrowings from banks and central banks 1,236 1,797 617 1,647 Due to customers 19,464 25,575 5,116 3,067 Borrowings from other customers 939 1,205 - - Subordinated liabilities 12,737 10,548 12,737 10,548 Debt securities issued 8,183 - 8,183 - Lease liabilities (note 5.11.a) 431 470 28 29 Other interest and similar expenses 21,069 28,009 17,562 24,749 Derivatives - hedge accounting 7,468 10,279 7,468 10,279 Negative interest 9,301 12,711 6,793 9,845 Financial liabilities held for trading 3,497 4,222 3,144 4,222 Interest expenses on defined employee benefits (note 2.30., 5.16.c) 374 202 144 48 Other 429 595 13 355 Total 64,854 68,469 44,935 40,046 Net interest income 504,922 409,360 177,027 139,139 The item ‘Negative interest’ classified under the line item ‘Other interest and similar income’ mainly includes the interest from targeted longer-term refinancing operations (TLTRO) in the amount of EUR 3,902 thousand for NLB Group (2021: EUR 3,979 thousand) and EUR 3,677 thousand for NLB (2021: EUR 3,979 thousand) (note 5.15.b). The item ‘Negative interest’ classified under the line item ‘Other interest and similar expenses’ includes the interest from deposits with banks and central banks in the amount of EUR 8,746 thousand for NLB Group (2021: EUR 11,692 thousand), and EUR 6,238 thousand for NLB (2021: EUR 8,826 thousand). It also includes interest from deposits with financial organisations in the amount of EUR 186 thousand for NLB Group and NLB (2021: EUR 336 thousand), and interest from securities with a negative yield in the amount of EUR 369 thousand for NLB Group and NLB (2021: EUR 683 thousand). Other interest income in year 2021 for NLB Group in the amount of EUR 809 thousand relates to interests in relation to a refund of VAT from the Slovenian Tax Authority. Interest income and expenses
Analysis by type of assets and liabilities
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Interest and similar income
Interest income calculated using the effective interest method
561,467
467,500
214,163
170,002
Financial assets measured at fair value
through other comprehensive income
38,840
40,347
11,215
11,733
Securities measured at amortised cost
16,791
14,049
11,431
10,150
Deposits with banks and central banks
12,067
239
10,868
101
Loans and advances to banks measured at amortised cost
3,770
416
6,106
3,937
Loans and advances to customers at amortised cost
489,999
412,449
174,543
144,081
Other interest and similar income
8,309
10,329
7,799
9,183
Financial assets held for trading
3,732
4,757
3,352
4,455
Non-trading financial assets mandatorily
at fair value through profit or loss
48
780
166
744
Negative interest
3,966
3,980
3,718
3,981
Derivatives - hedge accounting
559
-
559
-
Other
4
812
4
3
Total
569,776
477,829
221,962
179,185
Interest and similar expenses
Interest expenses calculated using the effective interest method
43,785
40,460
27,373
15,297
Deposits from banks and central banks
795
865
692
6
Borrowings from banks and central banks
1,236
1,797
617
1,647
Due to customers
19,464
25,575
5,116
3,067
Borrowings from other customers
939
1,205
-
-
Subordinated liabilities
12,737
10,548
12,737
10,548
Debt securities issued
8,183
-
8,183
-
Lease liabilities (note 5.11.a)
431
470
28
29
Other interest and similar expenses
21,069
28,009
17,562
24,749
Derivatives - hedge accounting
7,468
10,279
7,468
10,279
Negative interest
9,301
12,711
6,793
9,845
Financial liabilities held for trading
3,497
4,222
3,144
4,222
Interest expenses on defined employee benefits (note 2.30., 5.16.c)
374
202
144
48
Other
429
595
13
355
Total
64,854
68,469
44,935
40,046
Net interest income
504,922
409,360
177,027
139,139
The item ‘Negative interest’ classified under the line item ‘Other
interest and similar income’ mainly includes the interest from
targeted longer-term refinancing operations (TLTRO) in the
amount of EUR 3,902 thousand for NLB Group (2021: EUR 3,979
thousand) and EUR 3,677 thousand for NLB (2021: EUR 3,979
thousand) (note 5.15.b).
The item ‘Negative interest’ classified under the line item
‘Other interest and similar expenses’ includes the interest from
deposits with banks and central banks in the amount of EUR
8,746 thousand for NLB Group (2021: EUR 11,692 thousand), and
EUR 6,238 thousand for NLB (2021: EUR 8,826 thousand). It also
includes interest from deposits with financial organisations in
the amount of EUR 186 thousand for NLB Group and NLB (2021:
EUR 336 thousand), and interest from securities with a negative
yield in the amount of EUR 369 thousand for NLB Group and
NLB (2021: EUR 683 thousand).
Other interest income in year 2021 for NLB Group in the amount
of EUR 809 thousand relates to interests in relation to a refund
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4.2. Dividend income
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Financial assets measured at fair value through
other comprehensive income
173
184
-
-
- related to investments held at the end of reporting period
173
184
-
-
Investments in subsidiaries
-
-
55,244
79,136
Investments in associates and joint ventures
-
-
754
441
Non-trading financial assets mandatorily at
fair value through profit or loss
69
39
46
39
Total
242
223
56,044
79,616
a) Fee and commission income and expenses relating to activities of NLB Group and NLB
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Fee and commission income
Fee and commission income relating to financial
instruments not at fair value through profit or loss
Credit cards and ATMs
113,358
93,644
44,476
38,389
Customer transaction accounts
89,277
90,212
52,120
57,147
Other fee and commission income
Payments
94,035
77,248
24,005
22,751
Investment funds
29,640
27,095
9,034
8,694
Guarantees
16,417
13,918
8,418
7,831
Agency of insurance products
10,511
8,642
7,973
7,010
Other services
17,336
10,445
11,019
4,484
Total
370,574
321,204
157,045
146,306
Fee and commission expenses
Fee and commission expenses relating to financial
instruments not at fair value through profit or loss
Credit cards and ATMs
78,291
67,860
28,390
27,952
Other fee and commission expenses
Payments
13,812
11,567
1,148
917
Insurance for holders of personal accounts and gold cards
1,335
3,650
841
1,015
Investment banking
4,036
3,468
944
664
Guarantees
1,713
1,026
1,580
957
Other services
5,594
4,535
917
808
Total
104,781
92,106
33,820
32,313
Net fee and commission income related to banking activities
265,793
229,098
123,225
113,993
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b) Fee and commission income and expenses relating to fiduciary activities
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Fee and commission income related to fiduciary activities
Receipt, processing, and execution of orders
1,928
1,942
1,657
1,655
Management of financial instruments portfolio
1,601
2,118
-
-
Initial or subsequent underwriting and/or placing of
financial instruments without a firm commitment basis
143
264
143
264
Custody and similar services
5,150
5,290
5,426
5,247
Management of clients’ account of non-materialised securities
1,696
1,595
1,696
1,595
Safe-keeping of clients’ financial instruments
34
26
-
-
Advice to companies on capital structure, business
strategy, and related matters and advice, and services
relating to mergers and acquisitions of companies
473
150
473
150
Total
11,025
11,385
9,395
8,911
Fee and commission expenses related to fiduciary activities
Fee and commission related to Central Securities
Clearing Corporation and similar organisations
3,374
3,188
3,377
3,191
Fee and commission related to stock exchange
and similar organisations
94
119
94
119
Total
3,468
3,307
3,471
3,310
Net fee income related to fiduciary activities
7,557
8,078
5,924
5,601
Total fee and commission income
381,599
332,589
166,440
155,217
Total fee and commission expenses
108,249
95,413
37,291
35,623
Total a) and b)
273,350
237,176
129,149
4.4. Gains less losses from financial assets and liabilities not measured at fair
value through profit or loss
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Debt instruments measured at fair value through other comprehensive income
- gains
96
171
-
24
- losses
(1,764)
(4)
(316)
-
Debt instruments measured at amortised cost
- gains
3,269
-
1
-
- losses
(735)
-
(735)
-
Total
866
167
(1,050)
24
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in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Foreign exchange trading
- gains
43,213
28,160
19,388
10,799
- losses
(13,988)
(7,114)
(11,465)
(5,795)
Debt instruments
- gains
237
776
195
460
- losses
(175)
(616)
(175)
(571)
Derivatives
- currency
3,636
(199)
2,768
(484)
- interest rate
512
749
605
749
- securities
16
(562)
16
(562)
Total
33,451
21,194
11,332
4,596
Interest income from financial assets held for trading is included
in the income statement line item ‘Interest and similar income’
and interest expenses from financial liabilities held for trading in
4.6. Gains less losses from non-trading financial assets mandatorily
at fair value through profit or loss
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Equity securities
- gains
3,481
2,208
2,699
1,157
- losses
(3,162)
(1,049)
(1,925)
(855)
Debt securities
- gains
70
5
-
-
- losses
(299)
(63)
-
-
Loans and advances to customers
- gains
-
15,737
(2,225)
13,190
Total
90
16,838
(1,451)
13,492
Material exposure that was restructured in 2014, and classified
as non-performing, was repaid in April 2021. This resulted in
positive valuation effect in the amount of EUR 14,837 thousand
at the NLB Group level and EUR 13,033 thousand at the NLB
level.
Interest income from non-trading financial assets mandatorily
at fair value through profit or loss is included in the income
statement line item ‘Interest and similar income’ (note 4.1.).
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in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Financial assets and liabilities not measured
as at fair value through profit or loss
(95)
359
(1,980)
714
Financial assets measured at fair value through profit or loss
(11)
37
(11)
37
Other
403
(51)
403
(51)
Total
297
345
(1,588)
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Other operating income
Income from non-banking services
6,952
6,528
6,367
5,884
- cash transportation
3,327
3,241
3,383
3,250
- operating leases of movable property
1,252
1,074
475
471
- IT services
254
426
1,020
1,098
- other
2,119
1,787
1,489
1,065
Rental income from investment property
2,912
3,558
459
567
Revaluation of investment property to fair value (note 5.9.)
3,766
4,447
85
411
Sale of investment property
2,450
778
393
-
Other operating income
7,366
14,335
2,912
10,633
Total
23,446
29,646
10,216
17,495
Other operating expenses
Expenses related to issued service guarantees
451
453
451
453
Revaluation of investment property to fair value (note 5.9.)
674
858
1
105
Other operating expenses
5,543
5,114
5,353
3,190
Total
6,668
6,425
5,805
3,748
Other net operating income
16,778
23,221
4,411
13,747
Other operating expenses mainly include expenses associated
with donations, penalties and damages, and licences.
Other operating income in year 2021 includes settlement of
legal dispute in the amount of EUR 8,978 thousand in the NLB
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NLB Group
NLB
2022
2021
2022
2021
Employee costs
Gross salaries, compensations, and other short-term benefits
230,277
205,821
104,278
94,433
Defined contribution scheme
16,343
15,065
7,217
6,891
Social security contributions
11,404
10,363
6,002
5,715
Defined benefit expenses (note 5.16.c)
(365)
73
(207)
(59)
Post-employment benefits
(82)
126
(38)
(27)
Other employee benefits
(283)
(53)
(169)
(32)
Total
257,659
231,322
117,290
106,980
Other general and administrative expenses
Material
6,091
5,806
1,529
1,521
Services
47,053
40,193
24,748
17,896
Intellectual services
20,393
16,504
9,932
5,468
Costs of supervision
5,422
4,628
3,325
2,493
Costs of other services
21,238
19,061
11,491
9,935
Tax expenses
4,096
7,584
956
932
Membership fees and similar
833
823
322
307
Business travel
1,230
502
326
129
Marketing
15,340
11,407
7,916
5,641
Buildings and equipment
33,092
27,085
15,230
11,676
Electricity
10,212
5,960
5,740
2,357
Rents and leases
2,079
1,928
273
283
Maintainance costs
8,846
7,450
4,335
4,347
Costs of security
6,181
6,015
1,935
1,821
Insurance for tangible assets
689
851
156
166
Other costs related to buildings and equipment
5,085
4,881
2,791
2,702
Technology
32,735
30,599
16,349
15,107
Maintainance of software and hardware
15,792
12,949
6,140
6,053
Licences
9,725
9,895
6,760
6,332
Data assets and subscription costs
3,022
2,518
1,876
1,655
Other technology costs
4,196
5,237
1,573
1,067
Communications
11,146
11,377
4,423
4,770
Postal services
4,043
4,859
2,612
2,935
Telecommunication and internet
4,717
4,131
649
669
Other communication costs
2,386
2,387
1,162
1,166
Other general and administrative costs
3,611
2,153
1,776
1,120
Total
155,227
137,529
73,575
59,099
Total administrative expenses
412,886
368,851
190,865
166,079
Number of employees
8,228
8,185
2,418
Costs of other services include costs for cash transport,
administrative legal costs, other insurances and session fees to
the members of the Supervisory Board.
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in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
External audit services
Audit of annual report
750
679
275
232
Other non-audit services
412
195
287
153
Total
1,162
874
562
385
Additionally, to the services included in the table above, the
statutory auditor in 2022 performed also some services related
4.10. Cash contributions to resolution funds and deposit guarantee schemes
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Cash contributions to deposit guarantee schemes
33,884
33,148
7,614
7,543
Cash contributions to resolution funds
2,260
1,992
2,099
1,992
Total
36,144
35,140
9,713
9,535
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Amortisation of intangible assets (note 5.10.)
15,757
16,211
5,769
6,022
Depreciation of property and equipment:
- own property and equipment (note 5.8.b)
22,941
21,607
10,260
10,610
- right-of-use assets (note 5.11.a)
8,692
8,710
972
890
Total
47,390
46,528
17,001
4.12. Gains less losses from modification of financial assets
in EUR thousands
2022
2021
NLB Group
12-month
expected
credit losses
Lifetime ECL
not credit -
impaired
Lifetime
ECL credit-
impaired
Total
12-month
expected
credit losses
Lifetime ECL
not credit -
impaired
Lifetime
ECL credit-
impaired
Total
Financial assets modified
during the period
Amortised cost before modification
1,046
1,361
698
3,105
15,569
5,259
4,435
25,263
Net modification gains/(losses)
(56)
5
25
(26)
(48)
(12)
(203)
(263)
in EUR thousands
NLB Group
31 Dec 2022
31 Dec 2021
Financial assets modified since initial recognition
Gross carrying amount of financial assets for which loss allowance has changed to 12-month measurement during the period
-
162
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4.13. Provisions
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Guarantees and commitments (note 5.16.b)
3,050
(8,504)
(282)
(8,028)
Restructuring provisions (note 5.16.d)
10,325
14,797
-
-
Provisions for legal risks (note 5.16.e)
1,645
7,873
125
72
Other provisions (note 5.16.f)
(6,038)
-
2,200
-
Total
8,982
14,166
2,043
(7,956)
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Impairment of financial assets
Cash balances at central banks, and other demand deposits at banks
(6,600)
117
10
89
Loans and advances to banks measured at amortised cost (note 5.14.a)
67
57
34
27
Loans and advances to individuals measured
at amortised cost (note 5.14.a)
17,140
13,414
13,523
6,830
Loans and advances to other customers
measured at amortised cost (note 5.14.a)
(2,629)
(44,639)
(4,744)
(24,840)
Debt securities measured at fair value through
other comprehensive income (note 5.14.b)
3,870
2,854
5,826
(148)
Debt securities measured at amortised cost (note 5.14.b)
474
(383)
161
(17)
Other financial assets measured at amortised cost (note 5.14.a)
2,132
1,249
158
(8)
Total impairment of financial assets
14,454
(27,331)
14,968
(18,067)
Impairment of investments in subsidiaries, associates and joint ventures
Investments in subsidiaries
-
-
(22,685)
(7,522)
Investments in associates and joint ventures
-
-
(88)
79
Total
-
-
(22,773)
(7,443)
Impairment of other assets
Property and equipment (note 5.8.)
1,620
216
-
-
Intangible assets (note 5.10.)
-
936
-
-
Other assets
3,813
3,255
6
(104)
Total
5,433
4,407
6
(104)
Total impairment of non-financial assets
5,433
4,407
(22,767)
(7,547)
Total impairment
19,887
(22,924)
(7,799)
(25,614)
Impairment of financial assets in 2022 includes EUR 8,900
thousand of 12-month expected credit losses for Stage 1
financial assets, acquired through a business combination (note
5.12.b). Of that, EUR 8,894 thousand relates to financial assets
measured at amortised cost, EUR 5 thousand to financial assets
measured at fair value through other comprehensive income,
and EUR 1 thousand to cash balances at central banks and
other demand deposits at banks.
Impairment of debt securities measured at fair value through
other comprehensive income in 2022 relates mainly to
impairment of Russian sovereign debt, which was sold in
February 2023 (note 5.4.).
In 2022, NLB impaired equity investment in non-core subsidiary
in amount of EUR 615 thousand. The release of impairments
relates to equity investments in subsidiaries and an associate in
total amount of EUR 23,388 thousand.
In 2021, NLB impaired equity investments in non-core
subsidiaries and an associate in total amount of EUR 458
thousand. The release of impairments in amount of EUR 7,901
4.15. Gains less losses from non-current assets held for sale
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Gains less losses from property and equipment
921
248
168
(94)
Total
921
248
168
(94)
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in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Current income tax
26,753
16,961
5,992
3,159
Deferred income tax (note 5.17.)
(1,523)
(3,423)
(1,524)
(112)
Total
25,230
13,538
4,468
3,047
Income tax differs from the amount of tax determined by applying the Slovenian statutory tax rate as follows:
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Profit before tax
483,063
261,406
164,070
211,468
Tax calculated at prescribed rate of 19%
91,782
49,667
31,173
40,179
Income not assessable for tax purposes
(45,791)
(12,685)
(10,387)
(14,900)
Expenses not deductible for tax purposes
7,246
6,510
1,488
1,160
Effect of unrecognised deferred tax assets on
impairments of subsidiaries and associates
(7,518)
(32,036)
(11,818)
(36,446)
Tax reliefs
(4,132)
(463)
(2,792)
-
Effect of unrecognised deferred tax assets on tax losses
(12,963)
10,675
(4,641)
9,886
Effects of different tax rates in other countries
(4,535)
(11,345)
-
-
Withholding tax suffered in other countries for which
no tax credit was available in Slovenia
1,617
3,156
1,617
3,156
Adjustment to tax in respect of prior periods
(282)
50
-
3
Other
(194)
9
(172)
9
Total
25,230
13,538
4,468
3,047
Each member of NLB Group (disclosed in note 5.12.a) is taxable
as required by local tax legislation. Income tax rates within NLB
Group ranges from 9 to 32%.
A tax rate of 19% was applied in Slovenia in 2022 (2021: 19%).
Non-taxable income of NLB relates mostly to dividends.
Non-taxable dividend income in 2022 amounts to EUR 53,242
thousand (2021: EUR 75,635 thousand).
For the year 2021, NLB realised tax loss due to the utilisation of
previously tax non-deductible expenses for impairments in the
subsidiary, which was divested in 2021. The effects of the sale
of the subsidiary are included into the effect of unrecognised
deferred tax assets on impairments of subsidiaries and
associates, and the effects of new tax loss are included into
effect of unrecognised deferred tax assets on tax losses.
NLB recognised deferred tax assets accrued on the basis of
temporary differences in an amount that, given future profit
estimates, is expected to be reversed in the foreseeable future
(i.e., within five years). Due to some uncertainties regarding
external factors (regulatory environment, market situation, etc.),
a lower range of expected outcomes was considered for the
purposes of deferred tax assets calculation.
NLB did not recognise deferred tax assets arising from tax
losses and tax reliefs. NLB recognised deferred tax assets
on all temporary differences, except for impairments of non-
strategic capital investments and the valuation of financial
instruments where deferred tax assets are recognised in the
amount that, taking into account other recognised deferred
tax assets, reaches the total amount of deferred tax assets, for
which a reversal is expected within five years. The deferred
tax assets with respect to which simultaneously deferred tax
liabilities are recognised are excluded from this calculation (e.g.,
deferred tax assets for temporary non-deductible expenses for
impairment of debt securities measured at fair value through
other comprehensive income and deferred tax assets related to
fair value hedge accounting).
NLB Group members did not recognise deferred tax assets for
tax losses if there is uncertainty about whether the tax losses
can be utilised, because it is not probable that future taxable
profits will be available against which the deferred tax assets
can be utilised.
The tax authorities may audit operations of NLB Group entities.
In general, tax inspection, which may result in the emergence
of additional tax liability, default interest, and penalties, may
be initiated at any time within four to six years from the date of
tax statement or from the year in which tax should have been
assessed. NLB is not aware of any circumstances that could
give rise to a potential material tax liability in this respect.
In 2018, the Financial Administration of the Republic of Slovenia
(FURS) granted NLB special tax status for a period of three
years. This status was extended in March 2021 for another three
years. The purpose of the status is to establish cooperation
between FURS and the taxpayers, with the aim of encouraging
voluntary compliance and reduce administrative burdens on
financial supervision. FURS cooperates with NLB and responds
quickly to resolve NLB’s tax compliance issues, which reduces
NLB’s tax risks and uncertain tax positions.
The effective tax rate of NLB Group relating to operations in
2022, calculated as a ratio of the tax expenses and profit before
tax is 5.2% (2021: 5.2%). The effective tax rate for NLB is 2.7%
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the weighted average number of ordinary shares in issue, less
treasury shares.
Diluted earnings per share are the same as basic earnings per
share for NLB Group and NLB, since subordinated bonds and
other issued debt securities have no future conversion options,
NLB Group
NLB
2022
2021
2022
2021
Net profit attributable to the owners of the parent (in EUR thousands)
446,862
236,404
159,602
208,421
Weighted average number of ordinary shares (in thousands)
20,000
20,000
20,000
20,000
Basic earnings per share (in EUR per share)
22.3
11.8
8.0
10.4
Diluted earnings per share (in EUR per share)
22.3
11.8
8.0
5. Notes to the statement of financial position
demand deposits at banks
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Balances and obligatory reserves with central banks
4,536,526
4,133,104
3,104,442
2,982,576
Cash
489,197
509,596
180,483
178,045
Demand deposits at banks
246,815
363,246
54,456
90,163
5,272,538
5,005,946
3,339,381
3,250,784
Allowance for impairment
(1,173)
(894)
(357)
(347)
Total
5,271,365
5,005,052
3,339,024
3,250,437
Slovenian banks are required to maintain a compulsory reserve
with the Bank of Slovenia relative to the volume and structure
of their customer deposits. Other banks in NLB Group maintain
a compulsory reserve in accordance with local legislation. NLB
and other banks in NLB Group fulfil their compulsory reserve
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in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Derivatives, excluding hedging instruments
Swap contracts
16,169
6,665
16,274
6,675
- currency swaps
743
438
849
448
- interest rate swaps
15,426
6,227
15,425
6,227
Options
2,312
54
2,312
54
- interest rate options
2,295
53
2,295
53
- securities options
17
1
17
1
Forward contracts
2,904
959
2,903
953
- currency forward
2,904
959
2,903
953
Total derivatives
21,385
7,678
21,489
7,682
Securities
Treasury bills
203
-
203
-
Total securities
203
-
203
-
Total
21,588
7,678
21,692
7,682
- quoted securities
203
-
203
-
of these debt instruments
203
-
203
-
The notional amounts of derivative financial instruments are
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Derivatives, excluding hedging instruments
Swap contracts
15,903
6,609
16,535
6,626
- currency swaps
1,550
716
1,963
733
- interest rate swaps
14,353
5,893
14,572
5,893
Options
2,800
53
2,742
53
- interest rate options
2,800
53
2,742
53
Forward contracts
2,886
923
2,873
923
- currency forward
2,886
923
2,873
923
Total
21,589
7,585
22,150
7,602
The notional amounts of derivative financial instruments are
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at fair value through profit or loss
a) Financial assets mandatorily at fair value through profit or loss
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Assets
Shares
5,579
4,472
5,211
4,472
Investment funds
10,336
12,428
2,308
-
Bonds
3,116
4,261
-
-
Loans and advances to companies
-
-
7,892
7,888
Total
19,031
21,161
15,411
12,360
- quoted securities
3,484
4,261
-
-
of these equity instruments
368
-
-
-
of these debt instruments
3,116
4,261
-
-
- unquoted securities
15,547
16,900
7,519
4,472
of these equity instruments
15,547
16,900
7,519
4,472
As at 31 December 2022, the value of assets received by taking
possession of collateral and included in financial assets
mandatorily at fair value through profit or loss by NLB Group
amounted to EUR 368 thousand. As at 31 December 2022 and as
at 31 December 2021, NLB did not have any assets received by
taking possession of collateral and included in financial assets
mandatorily at fair value through profit or loss (note 6.1.l).
b) Financial liabilities measured at fair value through profit or loss
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Liabilities
Loans and advances to companies
-
-
1,786
352
Other financial liabilities (note 2.31.)
1,796
-
728
-
Total
1,796
-
2,514
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5.4. Financial assets measured at fair value through
other comprehensive income
a) Analysis by type of financial assets measured at fair value through other comprehensive income
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Bonds
2,506,224
3,191,280
1,196,760
1,526,237
- governments
1,895,891
2,416,739
586,427
766,688
- Republic of Slovenia
269,853
314,929
199,224
270,423
- other EU members
271,464
406,315
253,346
331,676
- Republic of Serbia
898,531
1,196,724
3,913
5,021
- other non-EU members
456,043
498,771
129,944
159,568
- banks
578,552
739,935
578,552
724,943
- other issuers
31,781
34,606
31,781
34,606
Shares
22,285
22,109
269
219
National Resolution Fund
58,122
44,490
42,515
44,490
Treasury bills
310,748
166,412
94,517
14,805
- Republic of Slovenia
52,723
6,475
32,908
-
- other EU members
170,382
125,980
10,888
14,805
- other non-EU members
87,643
33,957
50,721
-
Commercial bills
21,824
37,569
-
-
Total
2,919,203
3,461,860
1,334,061
1,585,751
of these debt securities
2,838,796
3,395,261
1,291,277
1,541,042
of these equity securities
80,407
66,599
42,784
44,709
Allowance for impairment (note 5.14.b)
(15,876)
(12,016)
(8,799)
(3,001)
- quoted securities
2,612,330
3,205,277
1,291,277
1,541,042
of these debt instruments
2,593,533
3,204,745
1,291,277
1,541,042
of these equity instruments
18,797
532
-
-
- unquoted securities
306,873
256,583
42,784
44,709
of these debt instruments
245,263
190,516
-
-
of these equity instruments
61,610
66,067
42,784
44,709
As at 31 December 2022, bonds at the NLB Group and NLB level
include Russian government bonds maturing in September
2023, with a notional amount of USD 8,000 thousand (EUR
7,500 thousand). Their fair value as at 31 December 2022 is
assessed to be EUR 2,026 thousand (31 December 2021: EUR
7,531 thousand), while the impairment for these bonds amounts
to EUR 5,979 thousand (31 December 2021: EUR 19 thousand).
In February 2023, NLB sold these bonds and released
impairments in the amount of EUR 4,299 thousand.
As at 31 December 2021, NLB Group and NLB also held Russian
government bonds with a notional amount of USD 14,000
thousand, which was fully repaid in May 2022.
NLB Group and NLB do not have any other direct exposures
towards Russia.
The credit quality analysis for financial assets and contingent
liabilities is disclosed in note 6.1.j) and movements in allowance
for the impairment of debt securities in note 5.14.b).
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b) Movements of financial assets measured at fair value through other comprehensive income
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Debt securities
Equity securities
Debt securities
Equity securities
Debt securities
Equity securities
Debt securities
Equity securities
Balance as at 1 January
3,395,261
66,599
3,446,491
67,799
1,541,042
44,709
1,671,204
45,147
Effects of translation of foreign
operations to presentation currency
1,358
30
1,194
31
-
-
-
-
Acquisition of subsidiaries (note 5.12.b)
53,223
16,164
-
-
-
-
-
-
Additions
1,699,839
-
1,455,823
-
290,245
-
219,733
-
Derecognition
(2,141,377)
-
(1,468,240)
(4,297)
(414,666)
-
(338,929)
(55)
Net interest income
38,471
-
40,310
-
10,846
-
11,696
-
Exchange differences on monetary assets
3,104
-
8,367
-
4,484
-
8,452
-
Changes in fair values
(211,083)
(2,386)
(52,085)
3,066
(140,674)
(1,925)
(31,114)
(383)
Disposal of subsidiary (note 5.12.d)
-
-
(36,599)
-
-
-
-
-
Balance as at 31 December
2,838,796
80,407
3,395,261
66,599
1,291,277
42,784
1,541,042
44,709
As at 31 December 2022, and as at 31 December 2021, NLB
Group and NLB do not have any equity instruments measured
at fair value through other comprehensive income obtained
by taking possession of collateral in the statement of financial
position (note 6.1.l).
By selling equity securities measured at fair value through other
comprehensive income in 2021, NLB Group realised a net gain
in the amount of EUR 3,362 thousand, and NLB a net gain in the
amount of EUR 53 thousand. The realised gain in year 2021 was
transferred to retained earnings (note 5.4.c).
c) Accumulated other comprehensive income related to financial assets measured at fair value through other comprehensive income
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Debt securities
Equity securities
Debt securities
Equity securities
Debt securities
Equity securities
Debt securities
Equity securities
Balance as at 1 January
7,481
3,257
39,924
3,726
12,365
99
27,242
452
Effects of translation of foreign
operations to presentation currency
(12)
3
(7)
6
-
-
-
-
Disposal of subsidiaries (note 5.12.d)
- valuation and impairment
-
-
(1,916)
-
-
-
-
-
- deferred income tax (note 5.17.)
-
-
193
-
-
-
-
-
Net gains/(losses) from changes in fair value
(168,581)
(2,386)
(38,158)
3,066
(98,172)
(1,925)
(17,187)
(383)
Gains/losses transferred to net
profit on disposal (note 4.4.)
1,668
-
(167)
-
316
-
(24)
-
Impairment (note 4.14.)
3,870
-
2,854
-
5,826
-
(148)
-
Transfer of gains/losses to retained
earnings (note 5.4.b)
-
-
-
(3,362)
-
-
-
(53)
Deferred income tax (note 5.17.)
10,996
458
4,758
(179)
1,382
366
2,482
83
Balance as at 31 December
(144,578)
1,332
7,481
3,257
(78,283)
(1,460)
12,365
99
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purposes
NLB Group entities measure exposure to interest rate risk using
repricing gap analysis and by calculating the sensitivity of the
statement of financial position and off-balance-sheet items in
terms of the economic value of equity. The portfolio duration is
used as a measure of risk in the management of securities in
the banking book.
NLB Group entities use various derivatives such as interest
rate swaps (IRS) and currency interest rate swaps (CIRS) to
close open positions in an individual maturity bucket. Micro
and macro fair value hedges are used for that purpose, i.e.,
the swapping of a fixed interest rate on a hedged item for
a variable interest rate. Micro cash flow hedges are also
occasionally used, i.e. the swapping of a variable interest rate
on a hedged item for a fixed interest rate. All cash flow hedges
are made on liability items, while fair value hedges are used on
asset items.
Hedge accounting principles (i.e., fair value and cash flow
hedging) were applied in the hedging of interest rate risk using
interest rate swaps. These hedge relationships are designated
in such a way that the characteristics of the hedging instrument
and those of the hedged item match (i.e., the principal terms
match), while the dollar-offset method is used to regularly
measure hedge effectiveness retrospectively. Prospective
testing of hedge effectiveness is carried out regularly for macro
hedges where the characteristics of both items in the hedge
relationship do not fully match by comparing the change in the
fair value of both items to the shift in the yield curve.
Hedge accounting principles were not applied in economic
hedges using CIRS. Thus, the effects of valuation are disclosed
in the income statement in the line item ‘Gains less losses from
financial assets and liabilities held for trading.’
Sources of hedge ineffectiveness may arise, but are not limited
to the discount rates used for valuation of derivatives at fair
value, and notional and timing differences, as well differences in
the amortisation plan between hedged items and the hedging
instrument. Hedge effectiveness is assessed monthly, by
comparing changes in the fair value of the hedged item that are
attributable to a hedged risk with changes in the fair value of
the hedging instrument.
a) Fair value adjustment in hedge accounting recognised in profit or loss
in EUR thousands
NLB Group and NLB
2022
2021
Fair value hedge
1,655
167
Net effects from hedging instruments
89,894
26,406
- interest rate swap for micro hedge
57,981
19,547
- interest rate swap for macro hedge
31,913
6,859
Net effects from hedged items
(88,239)
(26,239)
- loans measured at amortised cost - micro hedge
(57)
(105)
- bonds measured at amortised cost - micro hedge
(14,834)
(5,443)
- bonds measured at fair value through OCI - micro hedge
(42,499)
(13,929)
- loans measured at amortised cost- macro hedge
(30,849)
(6,762)
In both years presented, all fair value hedges were effective,
with actual results of the hedge ratio within a range of 80–125%,
therefore, no discontinuation of the hedge accounting was
required.
As at 31 December 2022 and 2021, NLB Group and NLB had no
relationships designated for cash flow hedge accounting or for
hedge of a net investment in a foreign operation. NLB Group
applied a hedge of a net investment in a foreign operation in years
2011 and 2012, and at that time recognised a EUR 754 thousand
gain on the hedging instrument in other comprehensive income
(note 5.22.b). This gain will be included in the consolidated income
statement when the foreign operation is disposed of as a part of
the gain or loss on the disposal.
b) Notional amounts of interest rate swaps
in EUR thousands
NLB Group and NLB
Notional amount
Fair value
Asset
Liability
Fair value hedge
31 Dec 2022
644,132
59,362
2,124
31 Dec 2021
572,455
568
35,377
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c) Accumulated fair value adjustments arising from the
corresponding continuing hedge relationships
The table below presents accumulated fair value adjustments
arising from the corresponding continuing hedge relationships,
irrespective of whether there has been a change in the hedge
designation during the year. The accumulated fair value
adjustment is presented in the same line of statement of
financial position as a hedged item, except for macro fair value
hedges. In such relationships, hedged items are presented in
the line item ‘Financial assets measured at amortised cost,’
while the accumulated fair value adjustment is presented in a
separate line item ‘Fair value changes of the hedged items in
portfolio hedge of interest rate risk.’
in EUR thousands
2022
2021
NLB Group and NLB
Carrying amount
of hedged items
Accumulated
amount of FV
adjustments
on the
hedged item
Carrying amount
of hedged items
Accumulated
amount of FV
adjustments
on the
hedged item
Micro fair value hedges
371,431
(33,923)
479,574
23,783
Fixed rate corporate loans measured at AC
573
3
1,662
60
Fixed rate bonds measured at AC
108,979
(6,721)
117,368
8,426
Fixed rate bonds measured at FVOCI
261,879
(27,205)
360,544
15,297
Macro fair value hedges
153,594
(23,767)
145,638
7,082
Fixed rate retail loans
153,594
(23,767)
145,638
7,082
d) IBOR reform
NLB Group closely monitors the development of Benchmark
Interest Rate Reform and is actively preparing for the changes
imposed by the regulation. In 2018, NLB formed a special
working group which deals with the preparation for the
discontinuation of some important reference interest rates and
reports on this to NLB Group ALCO.
NLB Group no longer offers new products that would be tied
to reference rates in termination. The exception are products
related to EURIBOR, which is not scheduled for discontinuation.
Therefore, NLB Group’s attention in the past few years was
focused on the modification of new contractual relationships
with customers in which EURIBOR occurs and the amendment
of existing contractual relationships with customers in which
other benchmarks in termination appear.
EURIBOR
(possible)
discontinuation
Due to the timely transition to the new hybrid EURIBOR
methodology which meet the BMR requirements, EURIBOR
can continue to be used in new and legacy contracts for the
foreseeable future.
EU-supervised entities are bound to include robust fallback
clauses into contractual documentation with the clients. In
November 2019, the Euro risk-free rates (RFR) Working Group
published high level recommendations for fallback provisions
for products referencing EURIBOR. The inclusion of robust
fallback language is a requirement in contracts subject to the
EU Benchmark Regulation. The Bank already incorporated the
generic fallback clause into all new EURIBOR (both retail and
corporate) contracts.
In May 2021, the Euro RFR Working Group produced its
recommendations on EURIBOR fallback trigger events and
€STR-based EURIBOR fallback rates. Our mid-term activities
are expected to undertake on the implementation of more
precise fallback provisioning, based on these recommendations.
NLB identified potential €STR-based fallbacks for EURIBOR, in
line with the current market consensus on those fallbacks and
intends to proceed with the activities for inclusion on EURIBOR
fallbacks into all new EURIBOR-based contracts. In the next step,
the Bank is also expected to include fallback provisions in legacy
contracts. The exact timing depends on regulatory development
and best market practice.
NLB as a supervised entity, is required to comply with the
Benchmark regulation and, as a user of benchmarks, must
produce and maintain a robust written plan setting out
the actions NLB would take in the event that a benchmark
materially changes or ceases to be provided. NLB has prepared
a plan, which sets out an inexhaustive/summary action list,
and will continue to closely follow market standards to identify
alternative benchmarks that could be referenced in substitute of
existing benchmarks.
LIBOR
(imminent)
discontinuation
Since many LIBOR settings ceased to exist at the beginning
of 2022, the Bank finished the process of winding-down
the exposures in a most efficient way. Incremental LIBOR
transactions were not allowed unconditionally.
NLB Group activities for implementation of LIBOR transition
were as follows:
•
review of outstanding LIBOR referencing loans,
•
identification of alternative reference rate to be used for loan
portfolio,
•
analysis of how the alternative reference rate will be
calculated and how to calculate any economic difference
between LIBORs and the selected alternative reference rates,
•
consideration of IT system accommodation with alternative
reference rates,
•
documentation of the transition of the loans.
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The table below indicates the notional amount and weighted
average maturity of derivatives in hedging relationships that
will be affected by the IBOR reform, analysed on an interest
rate basis. The derivative hedging instruments provide a close
approximation to the extent of the risk exposure NLB Group
manages through hedging relationships.
in EUR thousands
2022
2021
NLB Group and NLB
Notional amount
(in EUR thousands)
Weighted average
maturity (years)
Notional amount
(in EUR thousands)
Weighted average
maturity (years)
Interest rate swaps
EURIBOR (3 months)
280,981
10.01
186,472
4.23
EURIBOR (6 months)
355,651
6.06
371,866
7.00
USD LIBOR (6 months)
7,500
0.71
14,117
0.98
As can be seen from the table, the majority of long-term
derivatives in hedging relationships are exposed to EURIBOR,
therefore, the uncertainty arising from interest rate benchmark
reform derives mainly from derivatives with longer maturities,
when a change of EURIBOR could be expected. As at 31
December 2022, derivatives with remaining maturity of five or
more years amount to EUR 295,580 thousand (31 December
5.6. Financial assets measured at amortised cost
Analysis by type
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Debt securities
1,917,615
1,717,626
1,597,448
1,436,424
Loans and advances to banks
222,965
140,683
350,625
199,287
Loans and advances to customers
13,072,986
10,587,121
6,054,413
5,145,153
Other financial assets
177,823
122,229
114,399
92,404
Total
15,391,389
12,567,659
8,116,885
6,873,268
The credit quality analysis for financial assets and contingent
liabilities is disclosed in note 6.1.j).
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Governments
1,486,496
1,317,248
1,184,601
1,041,787
Companies
84,979
79,852
64,913
72,632
Banks
323,944
295,653
323,944
295,653
Financial organisations
25,980
28,178
25,980
28,178
1,921,399
1,720,931
1,599,438
1,438,250
Allowance for impairment (note 5.14.b)
(3,784)
(3,305)
(1,990)
(1,826)
Total
1,917,615
1,717,626
1,597,448
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in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Loans
782
10,200
127,717
117,490
Time deposits
118,241
130,602
221,271
81,900
Reverse sale and repurchase agreements
102,358
-
-
-
Purchased receivables
1,853
79
1,853
79
223,234
140,881
350,841
199,469
Allowance for impairment (note 5.14.a)
(269)
(198)
(216)
(182)
Total
222,965
140,683
350,625
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Loans
12,626,259
10,310,300
5,873,443
5,006,871
Overdrafts
425,135
352,018
208,499
174,063
Finance lease receivables (note 5.11.b)
193,948
108,715
-
-
Credit card business
148,870
129,330
64,460
59,305
Called guarantees
2,772
2,731
1,423
1,333
13,396,984
10,903,094
6,147,825
5,241,572
Allowance for impairment (note 5.14.a)
(323,998)
(315,973)
(93,412)
(96,419)
Total
13,072,986
10,587,121
6,054,413
5,145,153
Analysis of loans and advances to customers by sector
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Governments
303,443
281,010
124,736
143,864
Financial organisations
116,078
141,709
286,504
226,144
Companies
6,031,795
4,645,112
2,606,674
2,118,210
Individuals
6,621,670
5,519,290
3,036,499
2,656,935
Total
13,072,986
10,587,121
6,054,413
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d) Other financial assets
Analysis by type of other financial assets
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Receivables in the course of settlement
and other temporary accounts
36,712
40,436
19,370
23,945
Credit card receivables
41,364
22,670
30,544
15,270
Debtors
8,516
8,227
2,710
1,311
Fees and commissions
8,737
7,303
2,359
3,041
Receivables to brokerage firms and others for
the sale of securities and custody services
31,587
613
31,081
610
Accrued income
3,390
1,715
3,413
1,690
Dividends
-
-
-
20,493
Prepayments
2,563
1,526
-
-
Other financial assets
53,988
45,965
25,935
27,197
186,857
128,455
115,412
93,557
Allowance for impairment (note 5.14.a)
(9,034)
(6,226)
(1,013)
(1,153)
Total
177,823
122,229
114,399
92,404
Receivables in the course of settlement are temporary balances
which will be transferred to the appropriate item in the days
following their occurrence.
Other financial assets in the amount of EUR 23,464 thousand
(31 December 2021: EUR 22,192 thousand) relate to a receivable
recognised in accordance with the ‘Act for Value Protection of
Republic of Slovenia’s Capital Investment in Nova Ljubljanska
banka d.d., Ljubljana’ (note 5.16.a). The remaining balance
includes claims for securities and trust services, claims arising
from re-invoicing costs and claims to pension funds for early
retirement payments.
Analysis of other financial assets by sector
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Banks
38,362
33,325
11,918
34,131
Government
78,285
43,432
55,708
23,769
Financial organisations
23,644
15,979
17,578
12,818
Companies
6,368
5,994
670
647
Individuals
31,164
23,499
28,525
21,039
Total
177,823
122,229
114,399
92,404
e) Movement of called non-financial guarantees
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Balance as at 1 January
717
1,838
420
440
Effects of translation of foreign
operations to presentation currency
1
(1)
-
-
Called guarantees
891
1,541
82
1,207
Paid guarantees
(1,087)
(1,904)
(287)
(470)
Write-offs
(125)
(757)
(125)
(757)
Balance as at 31 December
397
717
90
420
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The line item ‘Non-current assets held for sale’ includes
business premises and assets received as collateral that are in
the process of being sold. As at 31 December 2022, the value of
assets received by taking possession of collateral and included
in non-current assets held for sale by NLB Group amounted to
EUR 651 thousand (31 December 2021: EUR 699 thousand). As
at 31 December 2022, and as at 31 December 2021, NLB did not
have any non-current assets obtained by taking possession of
collateral and included in non-current assets held for sale (note
6.1.l).
Analysis of movements of non-current assets held for sale
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Balance as at 1 January
7,051
8,658
4,089
4,454
Effects of translation of foreign
operations to presentation currency
9
3
-
-
Additions
-
97
-
-
Transfer from/(to) property and
equipment (note 5.8.)
8,226
605
617
518
Transfer from/(to) other assets
-
20
-
-
Transfer from/(to) investment property (note 5.9.)
-
(22)
-
-
Disposals
(637)
(1,952)
(532)
(547)
Valuation
787
(358)
61
(336)
Balance as at 31 December
15,436
7,051
4,235
a) Analysis by type
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Own property and equipment
228,944
223,593
75,262
82,905
Right-of-use assets (note 5.11.)
22,372
23,421
3,330
3,217
Total
251,316
247,014
78,592
86,122
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b) Movement of own property and equipment
in EUR thousands
NLB Group
NLB
Land &
Buildings
Computers
Other
equipment
Total
Land &
Buildings
Computers
Other
equipment
Total
for own use
in operating
lease
for own use
in operating
lease
Cost
Balance as at 1 January 2022
346,858
80,131
94,729
5,609
527,327
195,852
43,899
46,143
3,519
289,413
Effects of translation of foreign
operations to presentation currency
39
13
3
-
55
-
-
-
-
-
Acquisition of subsidiaries
(note 5.12.b) c)
4,552
818
1,154
-
6,524
Additions
8,118
13,508
10,767
4,262
36,655
1,448
3,072
1,420
271
6,211
Disposals
(1,242)
(9,595)
(11,550)
(567)
(22,954)
-
(4,791)
(3,780)
(68)
(8,639)
Reversal of impairment (note 4.14.)
79
-
-
-
79
-
-
-
-
-
Transfer to/from investment
property (note 5.9.)
(1,358)
-
(28)
-
(1,386)
-
-
-
-
-
Transfer to/from non-current
assets held for sale (note 5.7.)
(9,794)
-
-
-
(9,794)
(1,615)
-
-
-
(1,615)
Balance as at 31 December 2022
347,252
84,875
95,075
9,304
536,506
195,685
42,180
43,783
3,722
285,370
Depreciation and impairment
Balance as at 1 January 2022
172,160
53,833
74,415
3,326
303,734
135,514
30,087
37,782
3,125
206,508
Effects of translation of foreign
operations to presentation currency
(3)
7
4
-
8
-
-
-
-
-
Disposals
(1,109)
(9,608)
(8,084)
(134)
(18,935)
-
(4,713)
(904)
(45)
(5,662)
Depreciation (note 4.11.)
7,030
9,108
5,979
824
22,941
3,748
4,245
2,013
254
10,260
Impairment (note 4.14.)
1,699
-
-
-
1,699
-
-
-
-
-
Transfer to/from investment
property (note 5.9.)
(313)
-
(4)
-
(317)
-
-
-
-
-
Transfer to/from non-current
assets held for sale (note 5.7.)
(1,568)
-
-
-
(1,568)
(998)
-
-
-
(998)
Balance as at 31 December 2022
177,896
53,340
72,310
4,016
307,562
138,264
29,619
38,891
3,334
210,108
Net carrying value
Balance as at 31 December 2022
169,356
31,535
22,765
5,288
228,944
57,421
12,561
4,892
388
75,262
Balance as at 1 January 2022
174,698
26,298
20,314
2,283
223,593
60,338
13,812
8,361
394
82,905
As at 31 December 2022, the value of assets received by
taking possession of collateral and included in property and
equipment by NLB Group amounted to EUR 11,962 thousand (31
December 2021: EUR 13,559 thousand). As at 31 December 2022
NLB did not have any assets received by taking possession
of collateral and included in property and equipment (31
December 2021: EUR 7 thousand) (note 6.1.l).
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in EUR thousands
NLB Group
NLB
Land &
Buildings
Computers
Other
equipment
Total
Land &
Buildings
Computers
Other
equipment
Total
for own use
in operating
lease
for own use
in operating
lease
Cost
Balance as at 1 January 2021
345,769
81,729
98,838
4,309
530,645
197,043
49,580
49,355
3,514
299,492
Effects of translation of foreign
operations to presentation currency
62
17
30
-
109
-
-
-
-
-
Additions
3,987
7,296
4,871
1,948
18,102
3,321
1,513
1,510
9
6,353
Disposals
(1,385)
(8,710)
(8,393)
(648)
(19,136)
-
(7,194)
(4,722)
(4)
(11,920)
Impairment (note 4.14.)
(126)
-
-
-
(126)
-
-
-
-
-
Transfer to/from investment
property (note 5.9.)
4,377
-
-
-
4,377
(2,423)
-
-
-
(2,423)
Transfer to/from non-current
assets held for sale (note 5.7.)
(5,707)
-
-
-
(5,707)
(2,089)
-
-
-
(2,089)
Disposal of subsidiary (note 5.12.b)
(119)
(201)
(617)
-
(937)
-
-
-
-
-
Balance as at 31 December 2021
346,858
80,131
94,729
5,609
527,327
195,852
43,899
46,143
3,519
289,413
Depreciation and impairment
Balance as at 1 January 2021
173,404
53,822
76,897
2,924
307,047
135,343
32,905
39,944
2,805
210,997
Effects of translation of foreign
operations to presentation currency
7
10
26
-
43
-
-
-
-
-
Disposals
(684)
(8,634)
(7,577)
(152)
(17,047)
-
(7,194)
(4,248)
(3)
(11,445)
Depreciation (note 4.11.)
7,124
8,733
5,196
554
21,607
3,825
4,376
2,086
323
10,610
Impairment (note 4.14.)
90
-
-
-
90
-
-
-
-
-
Transfer to/from investment
property (note 5.9.)
(2,676)
-
-
-
(2,676)
(2,083)
-
-
-
(2,083)
Transfer to/from non-current
assets held for sale (note 5.7.)
(5,102)
-
-
-
(5,102)
(1,571)
-
-
-
(1,571)
Disposal of subsidiary (note 5.12.b)
(3)
(98)
(127)
-
(228)
-
-
-
-
-
Balance as at 31 December 2021
172,160
53,833
74,415
3,326
303,734
135,514
30,087
37,782
3,125
206,508
Net carrying value
Balance as at 31 December 2021
174,698
26,298
20,314
2,283
223,593
60,338
13,812
8,361
394
82,905
Balance as at 1 January 2021
172,365
27,907
21,941
1,385
223,598
61,700
16,675
9,411
709
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in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Balance as at 1 January
47,624
54,842
9,181
8,300
Effects of translation of foreign operations to presentation currency
22
19
-
-
Acquisition of subsidiaries (note 5.12. b) c)
766
-
-
-
Additions
70
-
-
-
Disposals
(17,004)
(4,075)
(2,512)
-
Transfer from/(to) property and equipment (note 5.8.)
1,069
(7,053)
-
340
Transfer from/(to) non-current assets held for sale (note 5.7.)
-
22
-
-
Transfer from/(to) other assets
-
1,397
-
137
Net valuation to fair value (note 4.8.)
3,092
3,589
84
306
Disposals of subsidiaries (note 5.12.d)
-
(1,215)
-
-
Other
-
98
-
98
Balance as at 31 December
35,639
47,624
6,753
9,181
As at 31 December 2022, the value of assets received by taking
possession of collateral and included in investment property by
NLB Group amounted to EUR 25,326 thousand (31 December
2021: EUR 36,009 thousand), and in NLB amounted to EUR 1,901
thousand (31 December 2021: EUR 4,176 thousand) (note 6.1.l).
Operating expenses arising from investment properties:
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Leased to others
2,496
1,103
355
291
Not leased to others
564
231
300
183
Total
3,060
1,334
655
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in EUR thousands
NLB Group
NLB
Software
licenses
Other
intangible
assets
Goodwill
Total
Software
licenses
Cost
Balance as at 1 January 2022
245,607
13,211
32,336
291,154
201,028
Effects of translation of foreign operations to presentation currency
(7)
16
-
9
-
Acquisition of subsidiaries (note 5.12.b), c)
1,444
-
-
1,444
-
Additions
14,170
-
-
14,170
6,741
Disposals
(535)
-
-
(535)
-
Write-offs
(995)
-
-
(995)
-
Balance as at 31 December 2022
259,684
13,227
32,336
305,247
207,769
Amortisation and impairment
Balance as at 1 January 2022
198,997
4,274
28,807
232,078
171,575
Effects of translation of foreign operations to presentation currency
(8)
8
-
-
-
Amortisation (note 4.11.)
12,655
3,102
-
15,757
5,769
Write-offs
(823)
-
-
(823)
-
Balance as at 31 December 2022
210,821
7,384
28,807
247,012
177,344
Net carrying value
Balance as at 31 December 2022
48,863
5,843
3,529
58,235
30,425
Balance as at 1 January 2022
46,610
8,937
3,529
59,076
29,453
Other intangible assets represent additionally identified
intangible assets in a business combination, namely core
deposits and trade name.
in EUR thousands
NLB Group
NLB
Software
licenses
Other
intangible
assets
Goodwill
Total
Software
licenses
Cost
Balance as at 1 January 2021
246,687
13,200
32,336
292,223
201,614
Effects of translation of foreign operations to presentation currency
13
11
-
24
-
Additions
14,866
-
-
14,866
7,370
Write-offs
(15,527)
-
-
(15,527)
(7,956)
Disposal of subsidiary (note 5.12.d)
(432)
-
-
(432)
-
Balance as at 31 December 2021
245,607
13,211
32,336
291,154
201,028
Amortisation and impairment
Balance as at 1 January 2021
201,748
-
28,807
230,555
173,509
Effects of translation of foreign operations to presentation currency
8
7
-
15
-
Amortisation (note 4.11.)
11,944
4,267
-
16,211
6,022
Impairments (note 4.14.)
936
-
-
936
-
Write-offs
(15,435)
-
-
(15,435)
(7,956)
Disposal of subsidiary (note 5.12.d)
(204)
-
-
(204)
-
Balance as at 31 December 2021
198,997
4,274
28,807
232,078
171,575
Net carrying value
Balance as at 31 December 2021
46,610
8,937
3,529
59,076
29,453
Balance as at 1 January 2021
44,939
13,200
3,529
61,668
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Performance Overview
Risk Management
Events After 2022
Financial Report
a) NLB Group as a lessee
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Right-of-use assets
Land and buildings
19,567
19,545
2,241
2,244
Vehicles
130
390
1,089
960
Furniture and equipment
2,675
3,486
-
13
Total
22,372
23,421
3,330
3,217
Lease liabilities
23,840
24,324
3,349
3,256
In the statement of financial position, right-of-use assets are
included in the line item ‘Property and equipment’ and lease
liabilities are included in the line item ‘Other financial liabilities.’
Additions to the right-of-use assets during 2022 in NLB Group
amounted to EUR 6,411 thousand (2021: EUR 10,172 thousand),
and in NLB EUR 1,751 thousand (2021: EUR 1,245 thousand).
The income statement shows the following amounts relating to leases:
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Depreciation of right-of-use assets (note 4.11.)
Land and buildings
7,092
7,159
511
465
Vehicles
276
444
448
410
Furniture and equipment
1,324
1,107
13
15
Total
8,692
8,710
972
890
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Interest expenses on lease liabilities (note 4.1.)
(431)
(470)
(28)
(29)
Expenses relating to short-term leases
(included in administrative expenses)
(855)
(606)
(158)
(179)
Expenses relating to leases of low-value assets that are not shown
above as short-term leases (included in administrative expenses)
(1,129)
(1,050)
(185)
(157)
Income from sub-leasing right-of-use assets
(included in other operating income)
77
108
-
-
The total cash outflow for leases in 2022 in NLB Group was EUR
8,547 thousand (2021: EUR 9,397 thousand), and in NLB EUR
1,001 thousand (2021: EUR 933 thousand).
NLB Group leases various offices, branches, vehicles, and other
equipment used in its business. Rental contracts for offices and
branches generally have lease terms between 5 to 20 years,
while some contracts are made for indefinite periods. Contracts
for indefinite periods are included in the measurement of the
liability in accordance with planning projections. Normally,
a lease term of five years is assumed, with the exemption of
business premises on strategic locations where management
assesses a different (longer) lease term. Vehicles and other
equipment generally have lease terms between 1 to 5 years.
There are several lease contracts that include extension
and termination options. These options are negotiated by
management to align with the Group’s business needs. Lease
payments to be made under reasonably certain extension
options are included in measurement of the liability.
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Performance Overview
Risk Management
Events After 2022
Financial Report
Lease terms are negotiated on an individual basis and contain
a range of different terms and conditions. The lease agreements
do not impose any covenants other than the security interests in
the leased assets that are held by the lessor. Leased assets may
not be used as security for borrowing purposes.
NLB Group also has certain leases of other equipment with a
lease term of 12 months or less, and equipment with low value.
For these leases, NLB Group applies the short-term lease and
the lease of low-value assets recognition exemptions. Lease
payments on short-term leases and leases of low-value assets
are recognised as expenses on a straight-line basis over the
lease term.
For calculation of the net present value of the future lease
payments, NLB Group applies the internal transfer price for
retail deposits as a discount rate.
NLB Group and NLB do not have expenses relating to
variable payments and gains or losses arising from a sale and
leaseback transactions.
A maturity analysis of lease liabilities is disclosed in note 6.3.f).
b) NLB Group as a lessor
Finance and operating leases of motor vehicles and operating
leases of business premises and POS terminals represent the
majority of agreements in which NLB Group acts as a lessor.
Most of the lease agreements entered into by NLB Group
as lessor contracts are finance lease agreements. Most of
the finance lease agreements are concluded for a non-
cancellable period of between 48 and 60 months. By paying
the last instalment at the end of the contract, the leasing object
becomes the lessee’s property. The financial leasing receivables
are secured by the object of financing. NLB Group does not
have finance lease contracts with variable payments not
included in the measurement of the net investment in the lease.
The investment properties are leased to the lessee under
operating leases with rentals payable monthly. There are no
variable lease payments that depend on an index or a rate. The
investment properties generally have lease terms between 2 to
10 years. Some contracts are made for an indefinite period.
As at 31 December 2022, the allowance for unrecoverable
finance lease receivables included in the allowance for loan
impairment amounted to EUR 726 thousand (as at 31 December
2021 EUR 436 thousand).
Finance leases
Loans and advances to customers in NLB Group include
finance lease receivables.
The following table sets out a maturity analysis of lease
receivables, showing the undiscounted lease payments to be
received after the reporting date.
in EUR thousands
NLB Group
2022
2021
Less than one year
70,629
36,465
One to two years
46,515
25,723
Two to three years
39,899
21,276
Three to four years
29,423
16,435
Four to five years
17,422
10,375
More than five years
13,878
8,604
Total undiscounted
lease receivable
217,766
118,878
Unearned finance income
(23,818)
(10,163)
Net investment in the lease
193,948
108,715
During 2022, NLB Group recognised interest income on lease
receivables in the amount of EUR 6,607 thousand (2021: EUR
3,452 thousand).
Operating lease
A maturity analysis of lease payments, showing the
undiscounted lease payments to be received after the reporting
date.
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Less than one year
2,580
2,757
345
375
One to two years
1,657
1,396
343
348
Two to three years
1,028
817
340
346
Three to four years
694
597
315
342
Four to five years
488
430
315
301
More than five years
1,314
1,211
1,224
1,029
Total
7,761
7,208
2,882
2,741
NLB Group realised rental income arising from: investment
properties in the amount of EUR 2,912 thousand (2021: EUR
3,558 thousand); and movable property in the amount of
EUR 1,252 thousand (2021: EUR 1,074 thousand). NLB realised
rental income arising from: investment properties in the amount
of EUR 459 thousand (2021: EUR 567 thousand); and movable
property in the amount of EUR 475 thousand (2021: EUR 471
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Financial Report
in EUR thousands
NLB
31 Dec 2022
31 Dec 2021
Banks
813,362
696,538
Other financial organisations
32,126
29,720
Enterprises
58,552
55,282
Total
904,040
781,540
Data of subsidiaries as included in the consolidated financial statements of NLB Group as at 31 December 2022:
in EUR thousands
Nature
of Business
Country of
Incorporation
Equity as at
31 Dec 2022
Profit/(loss)
for 2022
NLB’s
shareholding %
NLB’s
voting rights %
NLB Group’s
shareholding %
NLB Group’s
voting rights%
Core members
NLB Banka a.d., Skopje
Banking
North Macedonia
265,844
37,874
86.97
86.97
86.97
86.97
NLB Banka a.d., Podgorica
Banking
Montenegro
106,937
16,613
99.87
99.87
99.87
99.87
NLB Banka a.d., Banja Luka
Banking
Bosnia and
Herzegovina
96,237
19,281
99.85
99.85
99.85
99.85
NLB Banka sh.a., Prishtina
Banking
Kosovo
113,844
32,402
82.38
82.38
82.38
82.38
NLB Banka d.d., Sarajevo
Banking
Bosnia and
Herzegovina
90,608
11,436
97.34
97.35
97.34
97.35
NLB Komercijalna banka a.d. Beograd
Banking
Serbia
737,972
66,014
100
100
100
100
KomBank Invest a.d. Beograd
Finance
Serbia
1,203
(148)
-
-
100
100
N Banka d.d., Ljubljana
Banking
Slovenia
186,423
11,085
100
100
100
100
Privatinvest d.o.o., Ljubljana
Real estate
Slovenia
123
(99)
-
-
100
100
NLB Skladi d.o.o., Ljubljana
Finance
Slovenia
12,598
8,404
100
100
100
100
NLB Lease&Go, leasing, d.o.o., Ljubljana
Finance
Slovenia
19,578
810
100
100
100
100
NLB Lease&Go, d.o.o. Skopje**
Finance
North Macedonia
529
(68)
-
-
100
100
NLB Lease&Go leasing d.o.o. Beograd
Finance
Serbia
766
(390)
-
-
95.20
95.20
NLB Zavod za upravljanje kulturne
dediščine, Ljubljana
Cultural heritage
management
Slovenia
3,414
2,601
100
100
100
100
NLB DigIT d.o.o., Beograd
IT services
Serbia
2,368
(36)
100
100
100
100
Non-core members
NLB Leasing d.o.o., Ljubljana - v likvidaciji*
Finance
Slovenia
16,936
366
-
-
100
100
Optima Leasing d.o.o., Zagreb - “u likvidaciji”
Finance
Croatia
821
(434)
-
-
100
100
NLB Leasing d.o.o., Beograd - u likvidaciji
Finance
Serbia
5,899
(91)
100
100
100
100
Tara Hotel d.o.o., Budva
Real estate
Montenegro
13,546
(3,255)
12.71
12.71
100
100
REAM d.o.o., Podgorica
Real estate
Montenegro
1,767
71
100
100
100
100
REAM d.o.o., Beograd - Novi Beograd
Real estate
Serbia
1,758
(90)
100
100
100
100
SPV 2 d.o.o., Beograd - Novi Beograd
Real estate
Serbia
867
35
100
100
100
100
S-REAM d.o.o., Ljubljana
Real estate
Slovenia
23,141
(184)
100
100
100
100
REAM d.o.o., Zagreb
Real estate
Croatia
994
66
-
-
100
100
PRO-REM d.o.o., Ljubljana - v likvidaciji
Real estate
Slovenia
19,974
162
-
-
100
100
OL Nekretnine d.o.o., Zagreb - u likvidaciji
Real estate
Croatia
1,467
153
-
-
100
100
NLB Srbija d.o.o., Beograd
Real estate
Serbia
31,591
(709)
100
100
100
100
NLB Crna Gora d.o.o., Podgorica
Finance
Montenegro
3,295
165
100
100
100
100
NLB InterFinanz AG, Zürich in Liquidation
Finance
Switzerland
10,029
(2,213)
100
100
100
100
NLB InterFinanz d.o.o., Beograd
Finance
Serbia
4
1
-
-
100
100
LHB AG, Frankfurt
Finance
Germany
1,086
(646)
100
100
100
100
*100% ownership of NLB Lease&Go, leasing, d.o.o., Ljubljana.
**51% ownership of NLB Lease&Go, leasing, d.o.o., Ljubljana and 49% ownership of NLB Banka a.d., Skopje.
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Risk Factors & Outlook
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Performance Overview
Risk Management
Events After 2022
Financial Report
Data of subsidiaries as included in the consolidated financial statements of NLB Group as at 31 December 2021:
in EUR thousands
Nature of
Business
Country of
Incorporation
Equity as at
31 Dec 2021
Profit/(loss)
for 2021
NLB’s
shareholding %
NLB’s
voting rights %
NLB Group’s
shareholding %
NLB Group’s
voting rights%
Core members
NLB Banka a.d., Skopje
Banking
North Macedonia
243,267
39,000
86.97
86.97
86.97
86.97
NLB Banka a.d., Podgorica
Banking
Montenegro
92,643
10,050
75.90
75.90
99.87
99.87
NLB Banka a.d., Banja Luka
Banking
Bosnia and
Herzegovina
97,149
18,180
99.85
99.85
99.85
99.85
NLB Banka sh.a., Prishtina
Banking
Kosovo
98,856
24,436
82.38
82.38
82.38
82.38
NLB Banka d.d., Sarajevo
Banking
Bosnia and
Herzegovina
87,838
10,012
97.34
97.35
97.34
97.35
NLB Banka a.d., Beograd
Banking
Serbia
77,918
4,293
100
100
100
100
Komercijalna banka a.d. Beograd
Banking
Serbia
634,643
34,818
86.70
88.28
86.70
88.28
KomBank Invest a.d. Beograd
Finance
Serbia
1,345
4
-
-
100
100
NLB Skladi d.o.o., Ljubljana
Finance
Slovenia
14,966
8,969
100
100
100
100
NLB Lease&Go, leasing, d.o.o., Ljubljana
Finance
Slovenia
16,342
(921)
100
100
100
100
NLB Zavod za upravljanje kulturne
dediščine, Ljubljana
Cultural heritage
management
Slovenia
814
436
100
100
100
100
Non-core members
NLB Leasing d.o.o., Ljubljana - v likvidaciji*
Finance
Slovenia
18,058
2,545
-
-
100
100
Optima Leasing d.o.o., Zagreb - “u likvidaciji”
Finance
Croatia
1,258
(94)
-
-
100
100
NLB Leasing d.o.o., Beograd - u likvidaciji
Finance
Serbia
5,985
40
100
100
100
100
Tara Hotel d.o.o., Budva
Real estate
Montenegro
16,802
(223)
12.71
12.71
100
100
PRO-REM d.o.o., Ljubljana - v likvidaciji
Real estate
Slovenia
19,966
154
100
100
100
100
OL Nekretnine d.o.o., Zagreb - u likvidaciji
Real estate
Croatia
1,319
(93)
-
-
100
100
REAM d.o.o., Podgorica
Real estate
Montenegro
1,696
44
100
100
100
100
REAM d.o.o., Beograd - Novi Beograd
Real estate
Serbia
1,844
(217)
100
100
100
100
SPV 2 d.o.o., Beograd - Novi Beograd
Real estate
Serbia
831
9
100
100
100
100
S-REAM d.o.o., Ljubljana
Real estate
Slovenia
2,197
850
100
100
100
100
REAM d.o.o., Zagreb
Real estate
Croatia
1,025
5
-
-
100
100
NLB Srbija d.o.o., Beograd
Real estate
Serbia
32,259
188
100
100
100
100
NLB Crna Gora d.o.o., Podgorica
Finance
Montenegro
3,130
2,375
100
100
100
100
NLB InterFinanz AG, Zürich in Liquidation
Finance
Switzerland
12,395
1,725
100
100
100
100
NLB InterFinanz d.o.o., Beograd
Finance
Serbia
3
-
-
-
100
100
LHB AG, Frankfurt
Finance
Germany
2,221
489
100
100
100
100
*100% ownership of NLB Lease&Go, leasing, d.o.o., Ljubljana.
Changes in ownership interest in the subsidiaries of NLB Group in 2022 and 2021 are presented in
note 3.
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Performance Overview
Risk Management
Events After 2022
Financial Report
in EUR thousands
NLB Banka,
Skopje
NLB Banka,
Prishtina
NLB Komercijalna
banka, Beograd
2022
2021
2022
2021
2021
Non-controlling interest in equity in %
13.03
13.03
17.62
17.62
13.30
Non-controlling interest’s voting rights in %
13.03
13.03
17.62
17.62
11.72
Income statement and statement
of comprehensive income
Revenues
94,624
87,864
58,296
51,509
156,710
Profit/(loss) for the year
37,874
39,000
32,402
24,436
34,818
Attributable to non-controlling interest
4,935
5,082
5,710
4,306
4,631
Other comprehensive income
(5,071)
(759)
(309)
(311)
(10,117)
Total comprehensive income
32,803
38,241
32,093
24,125
24,701
Attributable to non-controlling interest
4,274
4,983
5,656
4,252
3,285
Paid dividends to non-controlling interest
1,332
3,222
3,014
4,160
-
Statement of financial position
Current assets
826,723
719,846
563,629
446,182
1,859,605
Non-current assets
1,020,798
1,050,742
520,009
484,363
2,305,644
Current liabilities
1,404,491
1,335,444
806,646
756,702
3,266,253
Non-current liabilities
177,186
191,877
163,148
74,987
264,353
Equity
265,844
243,267
113,844
98,856
634,643
Attributable to non-controlling interest
34,639
31,698
20,063
17,421
84,408
Data for NLB Komercijalna banka, Beograd is presented only
for year 2021, as during the year 2022 NLB became 100% owner
of the subsidiary (
note 3.
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Performance Overview
Risk Management
Events After 2022
Financial Report
On the level of the European Central Bank and the Single
Resolution Board, a decision was made on 28 February 2022
to suspend the business operations of the banking group
Sberbank Europe AG, which also had a subsidiary bank in
Slovenia. At the same time, a transitional period or short-term
moratorium was adopted, during which a solution for the
Slovenian subsidiary, Sberbank banka d.d., was found with the
aim to ensure the continuity of the business operations for all of
its clients. On 1 March 2022, in order to maintain financial stability
in Slovenia, the Single Resolution Board, in cooperation with
the Bank of Slovenia, adopted a scheme and resolution plan
for Sberbank banka d.d., Ljubljana. Based on this resolution,
the Bank of Slovenia issued a decision using the instrument of
sale of operation in a way that all shares are transferred from
the shareholders to the transferee. In the process of finding a
new owner of Sberbank banka d.d., Ljubljana, a sale agreement
was concluded with NLB, which became an owner of 100% of
the bank’s shares as at 1 March 2022. At the date of acquisition,
the acquired bank had one 100% owned subsidiary, company
Privatinvest d.o.o., whose assets consist only of repossessed real
estate. It also had an investment into Bankart d.o.o., Ljubljana,
which is in individual financial statements of the acquired bank
accounted for as financial asset measured at fair value through
other comprehensive income, while on the level of NLB Group it
is an associate.
In April 2022, Sberbank banka d.d., Ljubljana was renamed to N
Banka d.d., Ljubljana.
The purchase price for the bank was EUR 5,109 thousand and
was fully paid in cash. There are no contingent consideration
arrangements. At the acquisition date, cash in acquired entities
amounted to EUR 265,062 thousand, therefore the net inflow
of cash amounted to EUR 259,953 thousand (included in
the statement of cash flows within payments from investing
activities).
The assets and liabilities recognised as a result of the acquisition are as follows:
in EUR thousands
Cash, cash balances at central banks and other demand deposits at banks
265,062
Financial assets held for trading
4,788
Non-trading financial assets mandatorily at fair value through profit or loss
332
Financial assets measured at fair value through other comprehensive income
69,387
Financial assets measured at amortised cost
- debt securities
12,819
- loans and advances to banks
2,489
- loans and advances to customers
1,148,615
- other financial assets
3,465
Investments in associates and joint ventures
11
Tangible assets
Property and equipment
10,905
- own property and equipment (note 5.8.b)
4,518
- right-of-use assets
6,387
Investment property
464
Intangible assets
1,424
Current income tax assets
46
Deferred income tax assets
4,481
Other assets
2,169
Total assets
1,526,457
Financial liabilities held for trading
4,698
Financial liabilities measured at amortised cost
- deposits from banks and central banks
24,937
- borrowings from banks and central banks
190,008
- due to customers
1,072,411
- other financial liabilities
30,155
Provisions
21,896
Current income tax liabilities
2,249
Other liabilities
2,184
Total liabilities
1,348,538
Net identifiable assets acquired
177,919
Consideration given
5,109
Bargain purchase (negative goodwill)
172,810
NLB owns 100% of N Banka, therefore no non-controlling
interests were recognised as a result of acquisition.
The acquisition of N Banka resulted in a gain from a bargain
purchase (negative goodwill) in the amount of EUR 172,810
thousand, which is recognised in the income statement under
the line item ‘Negative goodwill.’ Current market conditions,
when banks are generally valued below their net book
values, usually result in recognition of a gain from a bargain
purchase, which is in the case of N Banka even higher than it
would be as a result of an orderly transaction, since the bank
was acquired in the process of resolution. Negative goodwill is
not taxable.
As a result of the acquisition, NLB Group’s off-balance sheet
liabilities increased by EUR 277,772 thousand:
in EUR thousands
Guarantees
136,309
- financial
41,615
- non-financial
94,694
Commitments to extend credit
138,749
Letters of credit
2,714
Total
277,772
Since the bank was acquired within a very short timeframe
in the process of resolution, acquisition-related costs were
immaterial.
NLB obtained all the necessary information for measuring fair
values, therefore no amounts were measured and recognised
on a provisional basis.
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The valuation techniques used for measuring the fair value of material assets and liabilities acquired were as follows:
Assets acquired
Valuation technique
Performing loans
Discounted cash flow approach:
Since these are performing loans, it was assumed that they
would be repaid by future cash flows in accordance with amortisation schedules. Credit risk was
considered for loans which are classified in Stage 2 in N Banka individual financial statements, by
reducing future cash flows accordingly. Also prepayment risk was estimated for consumer and
mortgage loans.
The discount rates used for fair value measurement of loans were based on the publicly available
interest rates published by Bank of Slovenia, that represent market rates and are thus considered
the most appropriate. Discount rates differ based on product type, client segment, maturity and
currency.
Non-performing loans
Discounted cash flow approach:
Since these are non-performing loans, it could generally not be
assumed that they would be repaid with cash flows from client’s regular business. Instead, gone
concern principle was used, taking into account liquidation value of collateral as expected cash
flows. Appropriate haircuts for age of valuations, type of collateral, type of location, and type of real
estate were used to estimate the liquidation value of collateral, which was then discounted for a
period of 4 years, with the required yield of 15%.
Debt securities
For debt securities classified in Level 1 of fair value hierarchy, fair values were determined by an
observable market price in an active market for an identical asset. For valuing debt securities in
Level 2, income approach was used, based on the estimation of future cash flows discounted to the
present value. The input parameters used in the income approach were the risk-free yield curve
and the spread over the yield curve (credit, liquidity, country).
Real estate
Three approaches were used for estimating the value of real estate - the income capitalisation
approach, the sale comparison approach and the residual land value approach. Each views the
valuation from different perspectives and considers data from different market sources. The most
suitable approach depends on the characteristics and use of individual real estate.
The income capitalization approach:
Values property by the amount of income - cash flow that it
can potentially generate. The value of the property is derived by converting the expected income
generated from a property into a present value estimate using market capitalization rate. This
method is commonly used for valuing income-generating properties.
The sale comparison approach:
Values property by comparing similar properties that have been
sold recently. This approach is sometimes referred to as the ‘direct sales comparison approach.’
The reliability of an indication found by this method depends on the quality of comparable data
found in the marketplace and application of adequate adjustments for individually appraised
real estate. When sale transactions are not available, the direct sales comparison approach is not
applicable.
Residual land value approach:
is a method for calculating the value of development land. It is
performed by subtracting from the total value of a development project, all costs associated with
the development project, including profit but excluding the cost of the land. It is applicable only for
development/construction land.
Liabilities acquired
Valuation technique
Deposits
Discounted cash flow approach:
Aggregated future cash flows were discounted by applying
market interest rates for term deposits. As a discount rate, average market rates on the deposits,
published by Bank of Slovenia, were used.
The fair value of acquired loans and advances to customers is
EUR 1,148,615 thousand, of which EUR 1,127,261 thousand relates
to performing portfolio and EUR 21,354 thousand to non-
performing portfolio. The latter was recognised as purchased
or originated credit-impaired financial assets (POCI). The
gross contractual amount for performing loans and advances
to customers is EUR 1,135,072 thousand and for this exposure
12-month expected credit losses in the amount of EUR 8,552
thousand were recognised through the income statement.
The gross contractual amount for non-performing loans
and advances to customers is EUR 49,641 thousand, and it is
expected that approximately EUR 23 million of the contractual
cash flows will not be collected.
Immediately after acquisition, 12-month expected credit
losses for Stage 1 financial assets in the amount of EUR 8,900
thousand and attributable deferred taxes in the amount of
EUR 1,691 thousand were recognised. Additionally, EUR 39,657
thousand of revenue, EUR 18,294 thousand of gain after tax,
and EUR 2,650 thousand of other comprehensive loss were
recognised in NLB Group financial statements since the
acquisition date. Had the acquisition occurred on 1 January
2022, management estimates that the consolidated revenue
(excluding negative goodwill) would have been approximately
EUR 960 million, and the consolidated profit for the year
(excluding negative goodwill) approximately EUR 265 million.
The exact result is difficult to determine due to the changed
circumstances during the year, especially the impact of the war
in Ukraine.
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c) Acquisition of NLB Lease&Go leasing d.o.o. Beograd
In November 2022, NLB Lease&Go, leasing, d.o.o., Ljubljana
became an owner of 95.20% of financial company Zastava
Istrabenz Lizing, d.o.o., Beograd.
In January 2023, Zastava Istrabenz Lizing, d.o.o., Beograd was
renamed to NLB Lease&Go leasing d.o.o. Beograd.
The purchase price for the company was EUR 1,036
thousand and was fully paid in cash. There are no contingent
consideration arrangements. At the acquisition date, cash in
acquired entity amounted to EUR 117 thousand, therefore the
net outflow of cash amounted to EUR 919 thousand (included
in the statement of cash flows within payments from investing
activities).
The assets and liabilities recognised as a result of the acquisition are as follows:
in EUR thousands
Cash, cash balances at central banks and other demand deposits at banks
117
Financial assets measured at amortised cost
- loans and advances to banks
171
- loans and advances to customers
913
- other financial assets
5
Tangible assets
Property and equipment
137
- own property and equipment (note 5.8.b)
137
Investment property
302
Intangible assets
20
Current income tax assets
5
Other assets
2
Total assets
1,672
Financial liabilities measured at amortised cost
- borrowings from other customers
490
- other financial liabilities
7
Provisions
7
Other liabilities
8
Total liabilities
512
Net identifiable assets acquired (100%)
1,160
Less: non-controling interests
56
Net assets acquired (NLB Group share)
1,104
Consideration given
1,036
Bargain purchase (negative goodwill)
68
NLB Group recognises non-controlling interests in NLB
Lease&Go leasing d.o.o. Beograd at the non-controlling
interest’s proportionate share of the acquired entity’s net
identifiable assets.
The acquisition of NLB Lease&Go leasing d.o.o. Beograd
resulted in a gain from a bargain purchase (negative goodwill)
in the amount of EUR 68 thousand, which is recognised in
the income statement under the line item ‘Negative goodwill.’
Negative goodwill is not taxable.
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d) Disposal of Komercijalna banka a.d. Banja Luka
In December 2021, Komercijalna banka a.d. Beograd sold its
subsidiary Komercijalna banka a.d. Banja Luka.
The assets and liabilities derecognised from NLB Group financial statements as a result of the disposal are as follows:
in EUR thousands
Cash, cash balances at central banks, and other demand deposits at banks
75,699
Financial assets measured at fair value through other comprehensive income
36,599
Financial assets measured at amortised cost
- loans and advances to customers
131,928
- other financial assets
381
Tangible assets
Property and equipment
2,438
- own property and equipment (note 5.8.b)
709
- right-of-use assets
1,729
Investment property (note 5.9.)
1,215
Intangible assets (note 5.10.)
228
Current income tax assets
29
Other assets
1,026
Total assets
249,543
Financial liabilities measured at amortised cost
- deposits from banks and central banks
15,514
- due to customers
172,900
- borrowings from other customers
25,120
- other financial liabilities
2,289
Provisions
361
Deferred income tax liabilities
61
Other liabilities
277
Total liabilities
216,522
Net assets of subsidiary
33,021
Total disposal consideration
22,000
Cash and cash equivalents in subsidiary sold
(69,832)
Cash outflow on disposal
(47,832)
Consideration for disposal of the subsidiary
22,000
Carrying amount of net assets disposed of
33,021
Transfer of FV OCI revaluation reserve to P&L
1,723
Loss from disposal of subsidiary in consolidated financial statements
(9,298)
- Non-controlling interest
(1,237)
- Attributable to owners of the parent
(8,061)
Effect of the sale of Komercijalna banka a.d. Banja Luka is
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e) Analysis by type of investment in associates and joint ventures
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Carrying amount of the NLB Group’s interest
Other financial organisations
11,677
11,525
4,282
4,282
Enterprises
-
-
289
201
Total
11,677
11,525
4,571
4,483
NLB Group’s associates
2022
in %
NLB Group
NLB
Nature of
Business
Country of
Incorporation
Shareholding
Voting rights
Shareholding
Voting rights
Bankart d.o.o., Ljubljana
Card processing
Slovenia
46.03
46.03
45.64
45.64
ARG - Nepremičnine
d.o.o., Horjul
Real estate
Slovenia
75.00
75.00
75.00
75.00
2021
in %
NLB Group
NLB
Nature of
Business
Country of
Incorporation
Shareholding
Voting rights
Shareholding
Voting rights
Bankart d.o.o., Ljubljana
Card processing
Slovenia
45.64
45.64
45.64
45.64
ARG - Nepremičnine
d.o.o., Horjul
Real estate
Slovenia
75.00
75.00
75.00
75.00
By contractual agreement between the shareholders, NLB
does not control ARG-Nepremičnine, Horjul, but does have a
significant influence. Therefore, the entity is accounted as an
associate.
consolidated financial statements of NLB Group:
in EUR thousands
2022
2021
Carrying amount of the NLB Group’s interest
11,677
11,525
NLB Group’s share of:
- Profit for the year
781
1,108
- Other comprehensive income
121
(30)
- Total comprehensive income
902
1,078
NLB Group's interest in an associate was in previous years
reduced to zero, consequently NLB Group did not recognise a
share of profit in the amount of EUR 94 thousand in 2022 (2021:
EUR 88 thousand). The cumulative unrecognised share of losses
of an associate as at 31 December 2022 amounted to EUR 2,083
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NLB Group’s joint ventures
in %
2022
2021
Nature of
Business
Country of
Incorporation
Voting rights
Voting rights
Prvi Faktor Group, Ljubljana
Finance
Slovenia
50
50
NLB Group's interest in a joint venture was in previous years
reduced to zero, consequently NLB Group did not recognise
a share of profit in the amount of EUR 429 thousand in 2022
(2021: EUR 435 thousand). The cumulative unrecognised share
of losses of a joint venture as at 31 December 2022 amounted to
EUR 14,396 thousand (31 December 2021: EUR 14,825 thousand).
f) Movements of investments in associates
in EUR thousands
NLB Group
2022
2021
Balance as at 1 January
11,525
7,988
Acquisition of subsidiaries (note 5.12.b)
11
-
Increase in capital share
-
2,900
Share of result before tax
827
1,339
Share of tax
(46)
(231)
Net gains/(losses) recognised in other comprehensive income
121
(30)
Dividends received
(761)
(441)
Balance as at 31 December
11,677
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Assets, received as collateral (note 6.1.l)
51,586
75,450
3,170
4,827
Deferred expenses
12,200
10,046
6,929
6,202
Inventories
4,961
2,173
2,324
42
Claim for taxes and other dues
1,509
1,826
417
621
Prepayments
2,287
1,726
321
161
Total
72,543
91,221
13,161
11,853
Assets, received as collateral on NLB Group in the amount of
EUR 50,913 thousand (31 December 2021: EUR 74,717 thousand),
and on NLB in the amount of EUR 3,170 thousand (31 December
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a) Movements in allowance for the impairment of loans and receivables measured at amortised cost
in EUR thousands
NLB Group
Balance as at
1 Jan 2022
Effects of
translation
of foreign
operations to
presentation
currency
Transfers
Increases/
(Decreases)
Write-offs
Changes in
models/risk
parameters
Foreign
exchange
differences
and other
movements
Balance as at
31 Dec 2022
Repayments
of written-off
receivables
Notes
4.14.
4.14.
5.6.b), c), d)
4.14.
12-month expected credit losses
Loans and advances to banks
198
1
-
(46)
-
5
3
161
-
Loans and advances to individuals
18,336
(6)
19,708
(12,932)
(239)
6,521
(3)
31,385
-
Loans and advances to
other customers
50,961
6
(4,026)
18,487
(1)
(5,585)
(2)
59,840
-
Other financial assets
476
1
(263)
911
(72)
20
173
1,246
-
Lifetime ECL not credit-impaired
Loans and advances to individuals
7,398
(4)
(12,893)
16,206
(18)
3,897
(4)
14,582
-
Loans and advances to
other customers
26,624
2
2,175
2,943
(1)
(493)
(20)
31,230
-
Other financial assets
36
(1)
13
1
(26)
12
3
38
-
Lifetime ECL credit-impaired
Loans and advances to banks
-
-
-
108
-
-
-
108
-
Loans and advances to individuals
76,047
4
(6,815)
28,969
(21,199)
(751)
(448)
75,807
8,213
Loans and advances to
other customers
136,607
626
1,851
(9,912)
(27,759)
144
9,597
111,154
24,770
Other financial assets
5,714
(3)
250
1,556
(1,136)
(22)
1,391
7,750
346
Of which: Purchased or originated credit-impaired
Loans and advances to individuals
(157)
1
-
24
(219)
-
(148)
(499)
1,537
Loans and advances to
other customers
613
(2)
-
(11,136)
(244)
-
7,635
(3,134)
3,546
Other financial assets
(608)
-
-
(1,034)
-
-
1,827
185
12
Column Increases/(Decreases) also includes 12-month expected
credit losses recognised at acquisition of N Banka in the
amount of EUR 187 thousand for Loans and advances to banks,
in the amount of EUR 8,552 thousand for Loans and advances
to customers, and in the amount of EUR 95 thousand for Other
financial assets (notes 4.14. and 5.12.b).
Other movements relate mainly to income from repayments
of non-performing exposures in NLB Komercijalna banka and
N Banka, which were at acquisition recognised at fair value,
without a corresponding allowance for the impairment and to
expenses due to initial recognition of non-performing exposure
at fair value in NLB.
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in EUR thousands
NLB Group
Balance as at
1 Jan 2021
Effects of
translation
of foreign
operations to
presentation
currency
Transfers
Increases/
(Decreases)
Write-offs
Changes in
models/risk
parameters
Foreign
exchange
differences
and other
movements
Disposal of
subsidiary
Balance as at
31 Dec 2021
Repayments
of written-off
receivables
Notes
4.14.
4.14.
5.6.b), c), d)
4.14.
12-month expected credit losses
Loans and advances to banks
141
-
-
9
-
48
-
-
198
-
Loans and advances to individuals
25,044
5
14,152
(13,005)
(164)
(7,479)
(3)
(214)
18,336
-
Loans and advances to other customers
49,475
20
4,036
2,476
(8)
(4,292)
31
(777)
50,961
-
Other financial assets
276
(2)
202
115
(54)
(70)
10
(1)
476
-
Lifetime ECL not credit-impaired
Loans and advances to individuals
8,151
1
(8,554)
6,975
(35)
898
(3)
(35)
7,398
-
Loans and advances to other customers
32,682
4
(3,515)
(240)
(231)
(1,960)
21
(137)
26,624
-
Other financial assets
30
-
-
7
(7)
9
(3)
-
36
-
Lifetime ECL credit-impaired
Loans and advances to individuals
61,305
14
(5,598)
25,606
(15,160)
7,868
2,135
(123)
76,047
7,449
Loans and advances to other customers
195,623
587
(521)
8
(66,532)
1,641
6,226
(425)
136,607
42,272
Other financial assets
5,247
-
(202)
1,770
(847)
(112)
(142)
-
5,714
470
Of which: Purchased or
originated credit-impaired
Loans and advances to individuals
-
1
-
(1,157)
(702)
-
1,701
-
(157)
-
Loans and advances to other customers
1,319
-
-
(3,243)
(2,312)
-
4,849
-
613
-
Other financial assets
4
(1)
-
(602)
(9)
-
-
-
(608)
-
Other movements relate mainly to income from repayments of
non-performing exposures in Komercijalna banka, which were
at acquisition recognised at fair value, without a corresponding
allowance for the impairment and to expenses due to initial
recognition of non-performing exposure at fair value in NLB.
in EUR thousands
NLB
Balance as at
1 Jan 2022
Transfers
Increases/
(Decreases)
Write-offs
Changes in
models/risk
parameters
Foreign
exchange
differences
and other
movements
Balance as at
31 Dec 2022
Repayments
of written-off
receivables
Notes
4.14.
4.14.
5.6.b), c), d)
4.14.
12-month expected credit losses
Loans and advances to banks
182
-
34
-
-
-
216
-
Loans and advances to individuals
3,503
7,665
(6,686)
(238)
1,916
1
6,161
-
Loans and advances to other customers
10,101
833
5,358
(1)
(1,440)
29
14,880
-
Other financial assets
62
16
95
(17)
46
1
203
-
Lifetime ECL not credit-impaired
Loans and advances to individuals
2,421
(6,808)
8,313
(15)
3,474
-
7,385
-
Loans and advances to other customers
1,787
1,192
(2,277)
(1)
100
(1)
800
-
Other financial assets
1
-
2
(1)
-
-
2
-
Lifetime ECL credit-impaired
Loans and advances to individuals
31,497
(857)
9,321
(5,761)
(279)
365
34,286
2,536
Loans and advances to other customers
47,110
(2,025)
3,922
(11,178)
(94)
(7,835)
29,900
10,313
Other financial assets
1,090
(16)
225
(491)
-
-
808
210
Of which: Purchased or
originated credit-impaired
Loans and advances to other customers
838
-
4,801
-
-
(5,001)
638
-
Other financial assets
6
-
(5)
-
-
-
1
-
Other movements relate mainly to expenses due to initial
recognition of non-performing exposure at fair value.
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in EUR thousands
NLB
Balance as at
1 Jan 2021
Transfers
Increases/
(Decreases)
Write-offs
Changes in
models/risk
parameters
Foreign
exchange
differences
and other
movements
Balance as at
31 Dec 2021
Repayments
of written-off
receivables
Notes
4.14.
4.14.
5.6.b), c), d)
4.14.
12-month expected credit losses
Loans and advances to banks
155
-
27
-
-
-
182
-
Loans and advances to individuals
8,973
3,881
(4,914)
(156)
(4,281)
-
3,503
-
Loans and advances to other customers
16,664
4,740
(5,419)
(1)
(5,915)
32
10,101
-
Other financial assets
73
14
41
(12)
(57)
3
62
-
Lifetime ECL not credit-impaired
Loans and advances to individuals
2,351
(2,181)
2,007
(27)
270
1
2,421
-
Loans and advances to other customers
8,936
(2,651)
(2,715)
(3)
(1,799)
19
1,787
-
Other financial assets
2
-
(1)
-
-
-
1
-
Lifetime ECL credit-impaired
Loans and advances to individuals
22,855
(1,700)
8,779
(6,020)
7,566
17
31,497
2,597
Loans and advances to other customers
83,593
(2,089)
(659)
(33,269)
349
(815)
47,110
8,682
Other financial assets
1,255
(14)
129
(280)
-
-
1,090
120
Of which: Purchased or
originated credit-impaired
Loans and advances to other customers
1,319
-
1,339
-
-
(1,820)
838
-
Other financial assets
4
-
2
-
-
-
6
-
Other movements relate mainly to expenses due to initial
recognition of non-performing exposure at fair value.
The contractual amount outstanding on financial assets that
were written off during the year ending 31 December 2022
and that are still subject to enforcement activity for NLB
Group amounted to EUR 29,654 thousand (31 December 2021:
EUR 76,252 thousand), and for NLB amounted to EUR 9,949
thousand (31 December 2021: EUR 8,136 thousand), of which
EUR 1,730 thousand in NLB Group (31 December 2021: EUR 2,251
thousand) and EUR 1,140 thousand in NLB (31 December 2021:
EUR 1,265 thousand) represents interest receivables that have
not been recognised in the income statement prior to the
write-off.
b) Movements in allowance for the impairment of debt securities
in EUR thousands
NLB Group
Balance as at
1 Jan 2022
Effects of
translation
of foreign
operations to
presentation
currency
Transfers
Increases/
(Decreases)
Changes in
models/risk
parameters
Foreign
exchange
differences
and other
movements
Balance as at
31 Dec 2022
Notes
4.14.
4.14.
5.4.a), 5.6.a)
12-month expected credit losses
Debt securities measured at amortised cost
3,253
(2)
-
158
104
6
3,519
Debt securities measured at fair value
through other comprehensive income
11,148
5
(25)
(2,049)
(67)
17
9,029
Lifetime ECL not credit-impaired
Debt securities measured at amortised cost
52
1
-
271
(59)
-
265
Debt securities measured at fair value
through other comprehensive income
70
-
(803)
739
12
52
70
Lifetime ECL credit-impaired
Debt securities measured at fair value
through other comprehensive income
798
-
828
5,235
-
(84)
6,777
Column Increases/(Decreases) includes also 12-month expected
credit losses recognised at the acquisition of N Banka in the
amount of EUR 60 thousand for Debt securities measured at
amortised cost, and in the amount of EUR 5 thousand for Debt
securities measured at fair value through other comprehensive
income (notes 4.14. and 5.12.b).
Impairment of debt securities measured at fair value through
other comprehensive income relates mainly to impairment of
Russian sovereign debt (note 5.4.).
243
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
in EUR thousands
NLB Group
Balance as at
1 Jan 2021
Effects of
translation
of foreign
operations to
presentation
currency
Transfers
Increases/
(Decreases)
Changes in
models/risk
parameters
Foreign
exchange
differences
and other
movements
Disposal of
subsidiary
Balance as at
31 Dec 2021
Notes
4.14.
4.14.
5.4.a), 5.6.a)
12-month expected credit losses
Debt securities measured at amortised cost
3,685
1
(32)
997
(1,400)
2
-
3,253
Debt securities measured at fair value
through other comprehensive income
8,656
2
-
81
2,731
18
(340)
11,148
Lifetime ECL not credit-impaired
Debt securities measured at amortised cost
-
-
32
16
4
-
-
52
Debt securities measured at fair value
through other comprehensive income
28
-
-
24
18
-
-
70
Lifetime ECL credit-impaired
Debt securities measured at fair value
through other comprehensive income
798
-
-
-
-
-
-
798
in EUR thousands
NLB
Balance as at
1 Jan 2022
Transfers
Increases/
(Decreases)
Changes in
models/risk
parameters
Foreign
exchange
differences
and other
movements
Balance as at
31 Dec 2022
Notes
4.14.
4.14.
5.4.a), 5.6.a)
12-month expected credit losses
Debt securities measured at amortised cost
1,826
-
119
42
3
1,990
Debt securities measured at fair value
through other comprehensive income
2,203
(25)
(192)
32
4
2,022
Lifetime ECL not credit-impaired
Debt securities measured at fair value
through other comprehensive income
-
(803)
751
-
52
-
Lifetime ECL credit-impaired
Debt securities measured at fair value
through other comprehensive income
798
828
5,235
-
(84)
6,777
Impairment of debt securities measured at fair value through
other comprehensive income relates mainly to impairment of
Russian sovereign debt (note 5.4.).
in EUR thousands
NLB
Balance as at
1 Jan 2021
Increases/
(Decreases)
Changes in
models/risk
parameters
Foreign
exchange
differences
and other
movements
Balance as at
31 Dec 2021
Notes
4.14.
4.14.
5.4.a), 5.6.a)
12-month expected credit losses
Debt securities measured at amortised cost
1,841
456
(473)
2
1,826
Debt securities measured at fair value
through other comprehensive income
2,343
(22)
(126)
8
2,203
Lifetime ECL credit-impaired
Debt securities measured at fair value
through other comprehensive income
798
-
-
-
798
244
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MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
c) Explanation of how significant changes in the gross carrying amount of financial instruments contributed to changes in the loss allowance
Movement of gross carrying amount of loans to banks
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
12-month expected
credit losses
Lifetime ECL
credit-impaired
12-month expected
credit losses
12-month expected
credit losses
12-month expected
credit losses
Balance as at 1 January
140,881
-
197,146
199,469
158,475
Effects of translation of foreign operations
to presentation currency
74
-
(7)
-
-
Acquisition of subsidiaries (note 5.12.b), c)
2,660
-
-
-
-
Decreases/Increases
75,516
-
(61,245)
150,644
41,094
Exchange differences on monetary assets
4,103
-
4,987
728
(100)
Transfer
(108)
108
-
-
-
Balance as at 31 December
223,126
108
140,881
350,841
199,469
Movement of gross carrying amount of loans and advances to individuals
in EUR thousands
NLB Group
NLB
Individuals
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
Balance as at 1 January 2022
5,372,551
120,235
128,285
5,621,071
2,570,925
66,035
57,396
2,694,356
Effects of translation of foreign operations
to presentation currency
672
(12)
8
668
-
-
-
-
Acquisition of subsidiaries (note 5.12.b)
411,068
-
6,583
417,651
-
-
-
-
Transfers
(106,876)
78,073
28,803
-
(46,023)
35,084
10,939
-
Increases/(Decreases)
746,532
(8,179)
(12,059)
726,294
396,545
596
(2,932)
394,209
Write-offs
(239)
(18)
(21,199)
(21,456)
(238)
(15)
(5,761)
(6,014)
Exchange differences on monetary assets
(746)
34
12
(700)
1,698
44
38
1,780
Modification losses (note 4.12.)
(85)
(12)
13
(84)
-
-
-
-
Balance as at 31 December 2022
6,422,877
190,121
130,446
6,743,444
2,922,907
101,744
59,680
3,084,331
in EUR thousands
NLB Group
NLB
Individuals
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
Balance as at 1 January 2021
4,777,413
132,987
117,193
5,027,593
2,295,630
64,675
51,644
2,411,949
Effects of translation of foreign operations
to presentation currency
1,268
(8)
26
1,286
-
-
-
-
Transfers
(39,411)
4,604
34,807
-
(17,729)
5,230
12,499
-
Increases/(Decreases)
666,437
(16,708)
(8,010)
641,719
291,509
(3,888)
(764)
286,857
Write-offs
(164)
(35)
(15,160)
(15,359)
(156)
(27)
(6,020)
(6,203)
Exchange differences on monetary assets
1,930
27
32
1,989
1,671
45
37
1,753
Modification losses (note 4.12.)
(31)
(6)
(2)
(39)
-
-
-
-
Disposal of subsidiary
(34,891)
(626)
(601)
(36,118)
-
-
-
-
Balance as at 31 December 2021
5,372,551
120,235
128,285
5,621,071
2,570,925
66,035
57,396
2,694,356
In year 2022, the loss allowance for loans and advances to
individuals increased by EUR 19,993 thousand at the NLB
Group level, while at the NLB level it increased by EUR 10,411
thousand. The main reasons for this increase are changed
risk parameters, which increased loss allowance by EUR 9,667
thousand at the NLB Group level, and by EUR 5,111 thousand
at NLB level and an increase of the gross carrying amount.
At the NLB Group level, the gross carrying amount increased
by EUR 1,122,373 thousand, mainly due to increased exposure
and the acquisition of subsidiaries, while at the NLB level it
increased by EUR 389,975 thousand.
Acquisition of subsidiaries (note 5.12.b) contributed EUR 417,651
thousand to the gross carrying amount of loans and advances
to individuals on the NLB Group level.
In year 2021, the loss allowance for loans and advances to
individuals increased by EUR 7,281 thousand at the NLB Group
level, while at the NLB level it increased by EUR 3,242 thousand.
Even though the gross carrying amount increased mainly in
Stage 1 due to new exposures, the increase of loss allowance
was observed mostly in Stage 3. The main reason for this were
changes in the risk parameters, which increased loss allowance
for Stage 3 loans and advances to individuals in the amount
of EUR 7,868 thousand at the NLB Group level and
EUR 7,566 thousand at the NLB level.
245
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SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Movement of gross carrying amount of loans and advances to other customers
in EUR thousands
NLB Group
NLB
Other customers
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
Balance as at 1 January 2022
4,630,485
412,184
239,354
5,282,023
2,351,275
123,304
72,637
2,547,216
Effects of translation of foreign operations
to presentation currency
1,189
87
893
2,169
-
-
-
-
Acquisition of subsidiaries (note 5.12.b), c)
716,577
-
15,300
731,877
-
-
-
-
Transfers
(154,654)
123,967
30,687
-
34,662
(37,337)
2,675
-
Increases/(Decreases)
835,299
(112,477)
(56,944)
665,878
572,648
(34,158)
(13,056)
525,434
Write-offs
(1)
(1)
(27,759)
(27,761)
(1)
(1)
(11,178)
(11,180)
Exchange differences on monetary assets
(639)
(106)
41
(704)
1,871
98
55
2,024
Modification losses (note 4.12.)
29
17
12
58
-
-
-
-
Balance as at 31 December 2022
6,028,285
423,671
201,584
6,653,540
2,960,455
51,906
51,133
3,063,494
in EUR thousands
NLB Group
NLB
Other customers
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
Balance as at 1 January 2021
4,219,862
427,166
317,519
4,964,547
1,982,033
193,835
119,733
2,295,601
Effects of translation of foreign operations
to presentation currency
1,220
82
852
2,154
-
-
-
-
Transfers
(110,801)
85,364
25,437
-
(13,004)
11,931
1,073
-
Increases/(Decreases)
608,913
(98,209)
(34,880)
475,824
379,138
(82,687)
(15,037)
281,414
Write-offs
(8)
(231)
(66,532)
(66,771)
(1)
(3)
(33,269)
(33,273)
Exchange differences on monetary assets
3,620
235
159
4,014
3,109
228
137
3,474
Modification losses (note 4.12.)
(17)
(6)
(201)
(224)
-
-
-
-
Disposal of subsidiary
(92,304)
(2,217)
(3,000)
(97,521)
-
-
-
-
Balance as at 31 December 2021
4,630,485
412,184
239,354
5,282,023
2,351,275
123,304
72,637
2,547,216
In year 2022, the gross carrying amount of loans and advances
to other customers increased by EUR 1,371,517 thousand at the
NLB Group level and EUR 516,278 thousand at the NLB level,
mostly in Stage 1 due to the acquisition of subsidiaries and the
increased exposure. Regardless of that, the loss allowance
decreased for EUR 11,968 thousand at the NLB Group level and
EUR 12,631 thousand at the NLB level, mainly in Stage 3. The
main reason for the decrease were write-offs in the amount
of EUR 27,761 thousand at the NLB Group level and EUR 11,180
thousand at the NLB level.
In year 2021, the gross carrying amount of loans and advances
to other customers increased by EUR 317,476 thousand at the
NLB Group level and EUR 251,615 thousand at the NLB level,
mostly in Stage 1 due to the increased exposure. Regardless of
that, the loss allowance decreased (for EUR 63,588 thousand
at the NLB Group level and EUR 50,195 thousand), with main
reasons being write-offs (EUR 66,771 thousand at the NLB
Group level and EUR 33,273 thousand at the NLB level) and
changes in the risk parameters (a decrease of loss allowance at
the NLB Group level for EUR 4,611 thousand and at the NLB level
for EUR 7,365 thousand).
Movement of gross carrying amount of other financial assets
The gross carrying amount of other financial assets in year 2022
increased (for EUR 58,402 thousand at the NLB Group level and
EUR 21,855 thousand at the NLB level), with the majority of this
increase relating to credit card receivables and receivables for
the sale of securities. As these receivables are by their nature
short-term, they did not contribute significantly to the increase
of the loss allowance. Therefore the loss allowance for other
financial assets in year 2022 on the NLB Group level increased
only by EUR 2,808 thousand, while at the NLB level it decreased
by EUR 140 thousand. The main reason for this moderate
increase at the NLB Group level and decrease on the NLB level
are write-offs (EUR 1,234 thousand at the NLB Group level and
EUR 509 thousand at the NLB level).
The loss allowance for other financial assets in year 2021 on the
NLB Group level moved in line with the gross carrying amount
and increased by EUR 673 thousand. At the NLB level, the gross
carrying amount increased by EUR 37,724 thousand, but most of
this increase relates to receivables with a very short maturity (of
that EUR 20,492 thousand to receivables towards a subsidiary
for dividends declared in 2021). Therefore, the loss allowance
in 2021 slightly decreased (by EUR 177 thousand), with the main
reason being write-offs in the amount of EUR 292 thousand.
246
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SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Movement of gross carrying amount of debt securities measured at amortised cost
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
12-month expected
credit losses
Lifetime ECL
not credit - impaired
12-month expected
credit losses
Lifetime ECL
not credit - impaired
12-month expected
credit losses
12-month expected
credit losses
Balance as at 1 January
1,713,711
7,220
1,506,772
-
1,438,250
1,279,721
Effects of translation of foreign operations
to presentation currency
(187)
9
74
11
-
-
Acquisition of subsidiaries (note 5.12.b)
12,819
-
-
-
-
-
Additions
411,723
769,067
-
310,394
639,735
Derecognition
(226,884)
-
(564,041)
-
(146,939)
(486,630)
Net interest income
16,792
-
13,144
-
11,431
9,504
Exchange differences on monetary assets
1,030
-
1,348
-
1,136
1,364
Other
(14,834)
-
(5,444)
-
(14,834)
(5,444)
Transfers
-
-
(7,209)
7,209
-
-
Balance as at 31 December
1,914,170
7,229
1,713,711
7,220
1,599,438
1,438,250
Movement of gross carrying amount of debt securities measured at fair value through other comprehensive income
in EUR thousands
NLB Group
NLB
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
Balance as at 1 January 2022
3,396,101
184
798
3,397,083
1,526,972
-
798
1,527,770
Effects of translation of foreign operations
to presentation currency
1,370
-
-
1,370
-
-
-
-
Acquisition of subsidiaries (note 5.12.b)
53,223
-
-
53,223
-
-
-
-
Additions
1,699,839
-
-
1,699,839
290,245
-
-
290,245
Derecognition
(2,171,808)
(13,750)
-
(2,185,558)
(443,781)
(13,731)
-
(457,512)
Net interest income
38,554
38
(121)
38,471
10,929
38
(121)
10,846
Exchange differences on monetary assets
2,054
973
77
3,104
3,434
973
77
4,484
Transfers
(20,303)
12,720
7,583
-
(20,303)
12,720
7,583
-
Balance as at 31 December 2022
2,999,030
165
8,337
3,007,532
1,367,496
-
8,337
1,375,833
in EUR thousands
NLB Group
NLB
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
Balance as at 1 January 2021
3,407,394
203
798
3,408,395
1,639,915
-
798
1,640,713
Effects of translation of foreign operations
to presentation currency
1,204
-
-
1,204
-
-
-
-
Additions
1,455,823
-
-
1,455,823
219,733
-
-
219,733
Derecognition
(1,481,974)
(19)
-
(1,481,993)
(352,824)
-
-
(352,824)
Net interest income
40,310
-
-
40,310
11,696
-
-
11,696
Exchange differences on monetary assets
8,367
-
-
8,367
8,452
-
-
8,452
Disposal of subsidiary
(35,023)
-
-
(35,023)
-
-
-
-
Balance as at 31 December 2021
3,396,101
184
798
3,397,083
1,526,972
-
798
247
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SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
5.15. Financial liabilities, measured at amortised cost
Analysis by type of financial liabilities, measured at the amortised cost
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Deposits from banks and central banks
106,414
71,828
212,656
109,329
Borrowings from banks and central banks
198,609
858,531
57,292
873,479
Due to customers
20,027,726
17,640,809
10,984,411
9,659,605
Borrowings from other customers
82,482
74,051
216
406
Debt securities issued
815,990
288,519
815,990
288,519
Other financial liabilities
294,463
206,878
164,567
102,527
Total
21,525,684
19,140,616
12,235,132
11,033,865
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Deposit on demand
- banks and central banks
86,892
56,427
193,523
94,323
- other customers
17,386,022
15,319,112
10,268,908
8,982,546
- governments
421,770
401,295
151,251
109,228
- financial organisations
306,836
303,858
254,948
265,900
- companies
4,374,028
3,653,713
2,241,793
1,870,118
- individuals
12,283,388
10,960,246
7,620,916
6,737,300
Other deposits
- banks and central banks
19,522
15,401
19,133
15,006
- other customers
2,641,704
2,321,697
715,503
677,059
- governments
91,662
95,062
42,049
34,801
- financial organisations
237,758
125,310
95,637
71,582
- companies
646,944
380,815
282,560
229,093
- individuals
1,665,340
1,720,510
295,257
341,583
Total
20,134,140
17,712,637
11,197,067
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Loans
- banks and central banks
198,609
858,531
57,292
873,479
- other customers
82,482
74,051
216
406
- governments
21,535
20,607
-
-
- financial organisations
60,731
52,958
-
-
- companies
216
486
216
406
Total
281,091
932,582
57,508
873,885
As at 31 December 2022, NLB Group and NLB had EUR 96,878
thousand in undrawn borrowings (31 December 2021: EUR 94,115
thousand).
In June 2021, the Bank participated in the ECB TLTRO III.8
operation and had drawn a credit tranche of EUR 750,000
thousand for three years. The carrying amount of the loan as at
31 December 2021 amounted to EUR 746,021 thousand. The loan
was early repaid in June 2022.
In December 2021, N Banka participated in ECB TLTRO III.10
operation and had drawn a credit tranche of EUR 93,000
thousand for three years. In December 2022, N Banka early
repaid a part of the loan in the amount of EUR 30,000
thousand. The carrying amount of the loan as at 31 December
2022 amounts to EUR 62,755 thousand (EUR 92,850 as at the
acquisition date).
NLB Group accounts for these loans according to the
requirements of IFRS 9 and recognises interest income by
applying the expected effective interest rate (note 4.1.). The
expected effective interest rate was estimated based on the
expectation of achieving a lending performance threshold,
and in the case of NLB, also expected early repayment was
taken into account. As the lending performance threshold was
achieved in both banks, there were no changes in estimates
of payments due to the revised assessment of meeting the
eligibility criteria. NLB Group does not consider these loans as
loans at below-market rate of interest, as these targeted longer-
term refinancing operations were available to all banks under
248
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SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
in EUR thousands
NLB Group and NLB
31 Dec 2022
31 Dec 2021
Currency
Due date
Interest rate
Carrying amount
Nominal value
Carrying amount
Nominal value
Subordinated bonds
EUR
06.05.2029
4.20% to 06.05.2024, thereafter 5Y MS + 4.159% p.a.
45,941
45,000
45,903
45,000
EUR
19.11.2029
3.65% to 19.11.2024, thereafter 5Y MS + 3.833% p.a.
119,677
120,000
119,577
120,000
EUR
05.02.2030
3.40% to 05.02.2025, thereafter 5Y MS + 3.658% p.a.
123,106
120,000
123,039
120,000
EUR
28.11.2032
10.75% to 28.11.2027, thereafter 5Y MS + 8.298% p.a.
220,054
225,000
-
-
Total Subordinated bonds
508,778
510,000
288,519
285,000
Senior Preferred notes
EUR
19.07.2025
6% to 19.07.2024, thereafter 1Y MS + 4.835% p.a.
307,212
300,000
-
-
Total Senior Preferred notes
307,212
300,000
-
-
Total Debt securities issued
815,990
810,000
288,519
285,000
All issued subordinated bonds represent non-convertible Tier 2
instruments (note 5.23.). In the event of bankruptcy or liquidation
of the issuer, obligations arising from Tier 2 instruments shall be
repaid:
a.
after repayment of all unsubordinated obligations of the
Issuer, as well as at all subordinated obligations (if any)
which are expressed to rank in priority to Tier 2 instruments;
b.
with the same priority (pari passu) as, and proportionally
with the obligations arising from other instruments which
qualify as Tier 2 instruments or have the same priority of
repayment as the Tier 2 instruments;
c.
in priority to the obligations arising from shares or other
instruments which qualify as Common Equity Tier 1 capital
instruments or Additional Tier 1 instruments or have the
same priority of repayment as these instruments.
Movement of debt securities issued
in EUR thousands
NLB Group and NLB
Subordinated bonds
Senior Preferred notes
2022
2021
2022
2021
Balance as at 1 January
288,519
288,321
-
-
Cash flow items:
207,523
(10,350)
299,029
-
- new issued
217,873
-
299,029
-
- repayment of interest
(10,350)
(10,350)
-
-
Non-Cash flow items:
12,736
10,548
8,183
-
- accrued interest
12,736
10,548
8,183
-
Balance as at 31 December
508,778
288,519
307,212
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Financial Report
d) Other financial liabilities
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Items in the course of settlement
70,232
57,934
16,281
5,940
Debit or credit card payables
72,148
27,325
54,920
24,638
Suppliers
19,608
17,514
13,455
12,049
Lease liabilities (note 5.11.a)
23,840
24,324
3,349
3,256
Accrued expenses
33,574
25,852
15,898
12,909
Fees and commissions
751
1,609
633
1,504
Liabilities to brokerage firms and others for
securities purchase and custody services
224
297
205
202
Other financial liabilities
74,086
52,023
59,826
42,029
Total
294,463
206,878
164,567
102,527
Other financial liabilities in the amount of EUR 24,788 thousand
(31 December 2021: EUR 23,495 thousand) relate to a liability
recognised in accordance with the ‘Act for Value Protection of
Republic of Slovenia’s Capital Investment in Nova Ljubljanska
banka d.d., Ljubljana’ (note 5.16.a). The remaining balance
includes also liabilities to insurance companies, liabilities for
received EIB financial initiatives, received warranties, and
obligations for the purchase of securities.
a) Analysis by type of provisions
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Provisions for guarantees and commitments (note 5.24.a)
37,609
33,441
20,299
20,560
Stage 1
18,826
12,912
8,156
3,909
Stage 2
1,953
1,640
378
141
Stage 3
16,830
18,889
11,765
16,510
Employee benefit provisions
18,026
21,447
11,876
14,206
Restructuring provisions
21,036
19,217
7,288
11,131
Provisions for legal risks
43,209
45,288
3,584
3,466
Other provisions
2,772
11
2,169
-
Total
122,652
119,404
45,216
49,363
Provisions for guarantees and commitments represent expected
credit losses in accordance with IFRS 9, employee benefits are
recognised in accordance with IAS 19, while all other provisions
are recognised according to IAS 37.
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Legal risks
Provisions for legal risks are formed based on expectations
regarding the probable outcome of legal disputes. As at 31
December 2022, NLB Group was involved in 41 (31 December
2021: 38) legal disputes with material claims against Group
members in the total amount of EUR 462,564 thousand,
excluding accrued interest (31 December 2021: EUR 404,001
thousand). As at 31 December 2022, NLB was involved in 17
(31 December 2021: 16) legal disputes with material monetary
claims against NLB. The total amount of these claims, excluding
accrued interest, was EUR 219,847 thousand (31 December 2021:
EUR 180,077 thousand).
In connection with legal risks, the largest amount of material
monetary claims relates to civil claims filed by Privredna
banka Zagreb (the PBZ) and Zagrebačka banka (the ZaBa)
against NLB, referring to the old savings of LB Branch Zagreb
savers, which were transferred to these two banks in a
principal amount of approximately EUR 173.4 million (as per
31 December 2022). Due to the fact the proceedings had been
pending for such a long time, the penalty interest already
exceeds the principal amount. As NLB is not liable for the old
foreign currency savings, based on numerous process and
content-related reasons, NLB has all along objected to these
claims. Two key reasons NLB is not liable for the old foreign
currency savings are that it was only founded on the basis of
the Constitutional Act on 27 July 1994 (at the time the savings
were deposited with LB Branch Zagreb, NLB did not yet exist),
and NLB did not assume any such obligations. Moreover, this
is a former Yugoslavia succession matter, as the governments
of the Republic of Slovenia and the Republic of Croatia agreed
in a Memorandum of Understanding signed in 2013 whose
intent was to find a solution to the transferred foreign currency
savings of Ljubljanska banka in Croatia (LB) on the basis of the
Agreement on Succession Issues. The Memorandum also said
that the Republic of Croatia would ensure the stay of all the
proceedings commenced by the PBZ and the ZaBa in relation
to the transferred foreign currency savings until the issue was
finally resolved.
Despite the agreement in the Memorandum of Understanding
to stay all of the proceedings commenced, the Court of Appeal,
the County Court of Zagreb, ruled in six claims (as explained
below in detail) in favour of the plaintiff. In four of those cases,
NLB filed a constitutional suit after an extraordinary legal
measure of NLB with the Supreme Court of the Republic
of Croatia was not successful, and in two, NLB filed an
extraordinary legal measure with the Supreme Court of the
Republic of Croatia.
Contrary to the decisions of the court described above in
another case, a claim filed by the PBZ was refused and the
judgment became final in favour of NLB. The extraordinary
legal measure with the Supreme Court of the Republic of
Croatia, filed by the plaintiff, was dismissed by the Supreme
Court on 16 June 2015.
In the other cases, with respect to which court procedures
described above are pending, final court decisions have not yet
been issued.
The table below summarises the amounts according to final court decisions (not including penalty interest):
Date of the ruling
Plaintiff
Principal
amount
Costs of the
proceedings
Measures taken by NLB
May 2015
PBZ
254.76 EUR
15,781.25 HRK
Constitutional suit against the final judgement, as NLB found the court decision contrary to the legislation in force and constitutional principles and
as well contrary to the Memorandum concluded between the Republic of Slovenia and the Republic of Croatia. Constitutional Court of the Republic of
Croatia rejected the constitutional appeal of NLB d.d. on 21 May 2018.
April 2018
PBZ
222,426.39 EUR
253,283.37 HRK
Constitutional suit against the court decisions (including the decision of the Supreme Court of the Republic of Croatia in the revision proceeding), as NLB
found the court decision contrary to the legislation in force and constitutional principles, and as well contrary to the Memorandum concluded between
the Republic of Slovenia and the Republic of Croatia. Constitutional Court of the Republic of Croatia rejected the constitutional appeal of NLB d.d. on 5
October 2021.
September 2017
ZaBa
492,430.53 EUR
748,583.75 HRK
Constitutional suit against the court decisions (including the decision of the Supreme Court of the Republic of Croatia in the revision proceeding), as NLB
found the court decision contrary to the legislation in force and constitutional principles, and as well contrary to the Memorandum concluded between
the Republic of Slovenia and the Republic of Croatia. Constitutional Court of the Republic of Croatia rejected the constitutional appeal of NLB d.d. on 5
October 2021.
November 2017
PBZ
220,115.98 EUR
688,268.12 HRK
NLB challenged the judgments with the extraordinary legal measure (revision) on the Supreme Count of the Republic of Croatia and later, if necessary,
will challenge the judgments with all other available remedies of the obligations of the old foreign currency savings in accordance with Slovenian
Constitutional Law are not the liabilities of NLB.
December 2018
PBZ
3,855,173.35 SEK
679,926.08 HRK
Constitutional suit against the court decisions (including the decision of the Supreme Court of the Republic of Croatia in the revision proceeding), as NLB
found the court decision contrary to the legislation in force and constitutional principles and as well contrary to the Memorandum concluded between
the Republic of Slovenia and the Republic of Croatia.
March 2019
PBZ
9,185,141.76 USD
3,198,760.00 HRK
NLB challenged the judgment with the extraordinary legal measure (revision) on the Supreme Count of the Republic of Croatia and later, if necessary,
will challenge the judgment with all other available remedies of the obligations of the old foreign currency savings in accordance with Slovenian
Constitutional Law are not the liabilities of NLB.
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The NLB Shareholders’ Meeting provided the Management
Board of NLB with instructions how to act in the event of existing
or potential new final decisions by Croatian courts against LB
and NLB regarding the transferred foreign currency deposits,
especially not to voluntarily settle the adjudicated amounts, and
also gave some additional instructions on the usage of legal
remedies and regarding the management of the property from
that perspective.
On 19 July 2018, the National Assembly of the Republic of
Slovenia passed the ‘Act for Value Protection of Republic of
Slovenia’s Capital Investment in Nova Ljubljanska banka
d.d., Ljubljana’ (Zakon za zaščito vrednosti kapitalske
naložbe Republike Slovenije v Novi Ljubljanski banki d.d.,
Ljubljana, hereinafter: ‘the ZVKNNLB’) which entered into
force on 14 August 2018. In accordance with the ZVKNNLB, the
Succession Fund of the Republic of Slovenia (Sklad Republike
Slovenije za nasledstvo, javni sklad, hereinafter: ‘the Fund’),
shall compensate NLB for the sums recovered from NLB by
enforcement of final judgements delivered by Croatian courts
with regard to the transferred foreign currency deposits, that
is the principle amount, accrued interest, expenses of court,
attorney’s expenses and other expenses of the plaintiff, and
expenses related to enforcement with the accrued interest, and
shall not compensate NLB for its own costs or for the difference
between the book value of its assets sold in enforcement
proceedings and the price obtained for such assets in
enforcement proceedings. There shall be no compensation
for any voluntarily made payments by NLB. In accordance
with the ZVKNNLB and pursuant to the agreement between
NLB and the Fund, as envisaged by the ZVKNNLB (which was
concluded on 14 August 2018), NLB has to contest the claims
made against it in court proceedings in relation to transferred
foreign currency deposits, and use against court decisions that
are disadvantageous for NLB, all reasonable legal remedies
and to continue to actively challenge the judicial decisions of
the courts of the Republic of Croatia in relation to transferred
foreign currency deposits on the basis of which enforcement
took place, leading, on the basis of ZVKNNLB, to the
compensation of the sums recovered from NLB by enforcement.
In the aforementioned case from May 2015, the Succession Fund
of the Republic of Slovenia has already compensated the sums
recovered from NLB by enforcement.
All procedures relating to the receivables of PBZ and ZaBa, as
well as NLB’s view on this matter, were also discussed with the
ECB as the supervisor of both Croatian banks.
Provisions for legal risks for claims filed by PBZ and ZaBa
are not formed, since NLB believes that based on the factual
and legal evaluation there are greater prospects for the court
proceedings to end in favour of NLB than the opposite.
Regardless of the negative judgements, in the financial
statements NLB Group did not recognise the negative
impact due to protection provided by the ZVKNNLB. For final
judgements, NLB Group recognised the liabilities and related
assets, which are included within other financial assets (note
5.6.d) and other financial liabilities (note 5.15.d).
The Swiss Francs Law
On 2 February 2022, the Slovenian Parliament passed the ‘Law
on limitation and distribution of foreign exchange risk between
creditors and borrowers concerning loan agreements in Swiss
francs’ (here and after the CHF Law), which stipulated that
all loan agreements denominated in Swiss francs concluded
between banks operating in Slovenia (including NLB) as lenders
and individuals as borrowers in the period from 28 June 2004 to
31 December 2010, are subjected to a cap on the exchange rate
between Swiss francs and the Euro to be set at 10% volatility
(the ‘FX cap’) and shall be applied from the conclusion of any
of the affected loan agreements and any overpayment on
such loans by the relevant borrowers shall be subject to default
interest to be paid by the lender.
On 28 February 2022, the banks filed an initiative with the
Constitutional Court of the Republic of Slovenia to initiate
proceedings to assess the constitutionality of the CHF Law
and a proposal for its temporary suspension of enforcement.
The Constitutional Court of the Republic of Slovenia adopted
a decision on 10 March 2022 to suspend in whole the
implementation of the CHF Law, and on 17 November 2022 it
adopted a decision to abrogate the CHF Law. The decision
of the Constitutional Court of the Republic of Slovenia on
abrogation of the CHF Law was published in the Official
Gazette on 16 December 2022.
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b) Provisions for guarantees and commitments
Movements in provisions for guarantees and commitments
in EUR thousands
NLB Group
Balance as at
1 Jan 2022
Effects of translation
of foreign operations
to presentation
currency
Acquisition of
subsidiaries
Transfer
Increases/
(Decreases)
Changes in
models/risk
parameters
Foreign exchange
differences and
other movements
Balance as at
31 Dec 2022
Notes
5.12.b)
4.13.
4.13.
5.16.a)
12-month expected credit losses
Guarantees and commitments
12,912
2
921
740
1,468
2,765
18
18,826
Lifetime ECL not credit-impaired
Guarantees and commitments
1,640
(1)
-
(55)
291
76
2
1,953
Lifetime ECL credit-impaired
Guarantees and commitments
18,889
(1)
180
(685)
(1,462)
(88)
(3)
16,830
Of which: Purchased or
originated credit-impaired
Guarantees and commitments
4,344
-
180
(11)
(444)
-
26
4,095
in EUR thousands
NLB Group
Balance as at
1 Jan 2021
Effects of translation
of foreign operations
to presentation
currency
Transfer
Increases/
(Decreases)
Changes in
models/risk
parameters
Foreign exchange
differences and
other movements
Disposal
of subsidiary
Balance as at
31 Dec 2021
Notes
4.13.
4.13.
5.12.d)
5.16.a)
12-month expected credit losses
Guarantees and commitments
15,796
1
1,388
(1,337)
(2,810)
(4)
(122)
12,912
Lifetime ECL not credit-impaired
Guarantees and commitments
2,767
-
(730)
(358)
(37)
4
(6)
1,640
Lifetime ECL credit-impaired
Guarantees and commitments
23,611
1
(659)
(4,239)
277
48
(150)
18,889
Of which: Purchased or
originated credit-impaired
Guarantees and commitments
5,057
-
-
(755)
-
42
-
4,344
in EUR thousands
NLB
Balance as at
1 Jan 2022
Transfer
Increases/
(Decreases)
Changes in
models/risk
parameters
Foreign exchange
differences and
other movements
Balance as at
31 Dec 2022
Notes
4.13.
4.13.
5.16.a)
12-month expected credit losses
Guarantees and commitments
3,909
570
(229)
3,910
(4)
8,156
Lifetime ECL not credit-impaired
Guarantees and commitments
141
60
192
(15)
-
378
Lifetime ECL credit-impaired
Guarantees and commitments
16,510
(630)
(4,146)
6
25
11,765
Of which: Purchased or
originated credit-impaired
Guarantees and commitments
4,041
(11)
(1,179)
-
25
2,876
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in EUR thousands
NLB
Balance as at
1 Jan 2021
Transfer
Increases/
(Decreases)
Changes in
models/risk
parameters
Foreign exchange
differences and
other movements
Balance as at
31 Dec 2021
Notes
4.13.
4.13.
5.16.a)
12-month expected credit losses
Guarantees and commitments
7,510
530
(1,451)
(2,683)
3
3,909
Lifetime ECL not credit-impaired
Guarantees and commitments
732
(123)
(340)
(129)
1
141
Lifetime ECL credit-impaired
Guarantees and commitments
20,301
(407)
(3,698)
273
41
16,510
Of which: Purchased or
originated credit-impaired
Guarantees and commitments
3,808
-
186
-
47
4,041
Movement of contractual amounts of guarantees and commitments in off-balance sheet
in EUR thousands
NLB Group
NLB
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
Balance as at 1 January 2022
3,027,971
97,536
38,998
3,164,505
1,913,572
49,102
26,903
1,989,577
Effects of translation of foreign
operations to presentation currency
541
24
4
569
-
-
-
-
Acquisition of subsidiaries (note 5.12.b)
277,325
-
447
277,772
-
-
-
-
Increases/(Decreases)
543,028
(14,927)
(18,212)
509,889
477,730
(8,465)
(11,491)
457,774
Foreign exchange differences
703
16
6
725
631
16
6
653
Transfers
(6,275)
621
5,654
-
5,809
(5,410)
(399)
-
Balance as at 31 December 2022
3,843,293
83,270
26,897
3,953,460
2,397,742
35,243
15,019
2,448,004
in EUR thousands
NLB Group
NLB
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
12-month expected
credit losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Total
Balance as at 1 January 2021
2,824,750
103,950
46,270
2,974,970
1,896,418
73,255
34,907
2,004,580
Effects of translation of foreign
operations to presentation currency
687
24
9
720
-
-
-
-
Increases/(Decreases)
219,688
(4,666)
(9,309)
205,713
4,769
(14,315)
(8,167)
(17,713)
Foreign exchange differences
2,733
101
51
2,885
2,570
92
48
2,710
Transfers
(685)
(1,752)
2,437
-
9,815
(9,930)
115
-
Disposal of subsidiary
(19,202)
(121)
(460)
(19,783)
-
-
-
-
Balance as at 31 December 2021
3,027,971
97,536
38,998
3,164,505
1,913,572
49,102
26,903
1,989,577
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c) Movements in employee benefit provisions
Post-employment benefits
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Balance as at 1 January
19,227
18,162
12,781
12,695
Effects of translation of foreign
operations to presentation currency
2
-
-
-
Acquisition of subsidiaries (note 5.12.b), c)
1,393
-
-
-
Disposal of subsidiaries (note 5.12.d)
-
(83)
-
-
Additional provisions (note 4.9.)
1,046
1,957
635
723
Provisions released (note 4.9.)
(1,128)
(1,831)
(673)
(750)
Interest expenses (note 4.1.)
335
177
130
43
Utilised during year (payments)
(823)
(532)
(153)
(45)
Actuarial gains and losses
(4,031)
1,377
(2,048)
115
Balance as at 31 December
16,021
19,227
10,672
12,781
Other employee benefits
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Balance as at 1 January
2,220
2,545
1,425
1,525
Acquisition of subsidiaries (note 5.12.b)
167
-
-
-
Additional provisions (note 4.9.)
275
222
90
100
Provisions released (note 4.9.)
(558)
(275)
(259)
(132)
Interest expenses (note 4.1.)
39
25
14
5
Utilised during year
(138)
(297)
(66)
(73)
Balance as at 31 December
2,005
2,220
1,204
1,425
Other employee benefits include NLB Group’s obligations for
jubilee long-service benefits.
d) Movements in restructuring provisions
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Balance as at 1 January
19,217
15,565
11,131
15,354
Effects of translation of foreign
operations to presentation currency
10
11
-
-
Additional provisions (note 4.13.)
10,335
14,797
-
-
Provisions released (note 4.13.)
(10)
-
-
-
Utilised during year
(8,516)
(11,156)
(3,843)
(4,223)
Balance as at 31 December
21,036
19,217
7,288
11,131
Additional restructuring provisions recognised during the year
2022 relate mainly to N Banka and NLB Komercijalna banka
and are based on reorganisation plans in both banks.
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e) Movements in provisions for legal risks
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Balance as at 1 January
45,288
46,602
3,466
5,673
Effects of translation of foreign
operations to presentation currency
54
40
-
-
Acquisition of subsidiaries (note 5.12.b)
1,790
-
-
-
Additional provisions (note 4.13.)
7,595
16,632
125
1,881
Provisions released (note 4.13.)
(5,950)
(8,759)
-
(1,809)
Utilised during year
(5,568)
(9,227)
(7)
(2,279)
Balance as at 31 December
43,209
45,288
3,584
3,466
f) Movements in other provisions
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Balance as at 1 January
11
11
-
-
Acquisition of subsidiaries (note 5.12.b)
17,452
-
-
-
Additional provisions (note 4.13.)
2,372
-
2,200
-
Provisions released (note 4.13.)
(8,410)
-
-
-
Utilised during year
(106)
-
(31)
-
Other
(8,547)
-
-
-
Balance as at 31 December
2,772
11
2,169
-
At acquisition of N Banka on 1 March 2022, other provisions
increased for EUR 17,452 thousand, which represents the
assessed fair value of contingent liabilities of N Banka as at the
acquisition date. During March 2022, some unfavourable events,
which were taken into account already at assessing initial fair
values realised, therefore EUR 8,547 thousand of provisions
were used to decrease the amount of related receivables,
mainly for unsettled derivative transactions. Additionally, the
amount of other provisions significantly decreased in December
2022 (for EUR 8,400 thousand), when possible obligation
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a) Analysis by type of deferred income taxes
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Deferred income tax assets
Valuation of financial instruments and capital investments
48,415
33,002
38,028
31,696
Impairment of financial assets
9,480
5,879
2,050
917
Provisions for liabilities and charges
9,899
10,128
1,819
2,660
Depreciation and valuation of non-financial assets
4,737
3,505
109
112
Fair value adjustments of financial assets measured at amortised cost
2,046
320
-
-
Unpaid dividends
-
3,876
-
3,876
Tax losses
-
253
-
-
Tax reliefs
-
945
-
-
Other
141
62
-
-
Total deferred income tax assets
74,718
57,970
42,006
39,261
Deferred income tax liabilities
Valuation of financial instruments
8,375
12,026
5,283
6,620
Depreciation and valuation of non-financial assets
1,641
1,374
163
169
Impairment of financial assets
5,501
3,960
1,672
570
Fair value adjustments of financial assets measured at amortised cost
5,366
3,338
-
-
Other
877
1,340
-
-
Total deferred income tax liabilities
21,760
22,038
7,118
7,359
Net deferred income tax assets
55,527
38,977
34,888
31,902
Net deferred income tax liabilities
(2,569)
(3,045)
-
-
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Included in the income statement
1,523
3,423
1,524
112
- valuation of financial instruments and capital investments
6,416
(1,024)
4,819
(3,241)
- impairment of financial assets
2,934
2,260
1,133
(30)
- provisions for liabilities and charges
(1,718)
1,453
(555)
(489)
- depreciation and valuation of non-financial assets
962
(338)
3
(4)
- tax losses
(253)
253
-
-
- unpaid dividends
(3,876)
3,876
(3,876)
3,876
- tax reliefs
(945)
(234)
-
-
- fair value adjustments of financial assets measured at amortised cost
(2,540)
(3,413)
-
-
- other
543
590
-
-
Included in other comprehensive income
11,013
4,950
1,462
2,576
- valuation and impairment of financial assets measured
at fair value through other comprehensive income
11,454
4,772
1,748
2,565
- actuarial assumptions and experience
(441)
178
(286)
11
Included in equity - transfer of fair value reserve
-
368
-
-
- valuation of financial assets measured at fair value
through other comprehensive income
-
368
-
-
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Temporary differences on which NLB did not recognise
deferred tax assets, as related deferred tax assets would exceed
the amount of deferred tax assets expected to be reversed in
five years are presented in the table below, together with non-
recognised deferred tax assets.
in EUR thousands
31 Dec 2022
31 Dec 2021
NLB
Temporary
difference
Non-recognised
deferred tax assets
Temporary
difference
Non-recognised
deferred tax assets
Tax loss
950,469
180,589
974,902
185,231
Tax reliefs
-
-
4,329
823
Impairments and valuation of capital investments
and financial instruments
116,913
22,213
73,359
13,938
Tax loss on which NLB did not recognise deferred tax assets,
as at 31 December 2022 amounts to EUR 950,469 thousand (31
December 2021: 974,902 thousand). Slovenian tax law does not
set deadlines by which uncovered tax losses must be utilised,
but the use of tax loss is limited to 50% of the actual tax base.
Other banking members have no unrecognised deferred tax
assets for tax losses.
NLB Group did not recognise deferred tax assets on temporary
differences arising from the impairments of investments in
subsidiaries and associates where it is not probable that the
temporary difference will reverse in the foreseeable future.
These temporary differences amount to EUR 282,092 thousand
as at 31 December 2022 (31 December 2021: EUR 315,531
thousand).
b) Movements in deferred income taxes
Deferred income tax assets
in EUR thousands
NLB Group
Provisions for
liabilities and
charges
Valuation
of financial
instruments
and capital
investments
Depreciation
and valuation
of non-financial
assets
Impairment of
financial assets
Unpaid
dividends
Tax
losses
Tax
relief
Fair value
adjustments of
financial assets
measured at
amortised cost
Other
Total
Balance as at 1 January 2021
8,489
37,729
4,063
3,190
-
-
1,179
938
111
55,699
Effects of translation of foreign
operations to presentation currency
8
-
1
4
-
-
-
-
2
15
(Charged)/credited to profit and loss
1,453
(3,368)
(480)
2,791
3,876
253
(234)
(618)
(51)
3,622
(Charged)/credited to other
comprehensive income
178
(1,359)
-
-
-
-
-
-
-
(1,181)
Disposal of subsidiaries
-
-
(79)
(106)
-
-
-
-
-
(185)
Balance as at 31 December 2021
10,128
33,002
3,505
5,879
3,876
253
945
320
62
57,970
Effects of translation of foreign
operations to presentation currency
6
2
3
7
-
-
-
-
-
18
(Charged)/credited to profit and loss
(1,718)
4,837
1,229
3,583
(3,876)
(253)
(945)
(516)
79
2,420
(Charged)/credited to other
comprehensive income
(441)
10,270
-
-
-
-
-
-
-
9,829
Acquisition of subsidiaries (note 5.12.b)
1,924
304
-
11
-
-
-
2,242
-
4,481
Balance as at 31 December 2022
9,899
48,415
4,737
9,480
-
-
-
2,046
141
74,718
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in EUR thousands
NLB
Provisions for
liabilities and
charges
Valuation
of financial
instruments
and capital
investments
Depreciation
and valuation
of non-financial
assets
Impairment of
financial assets
Unpaid
dividends
Total
Balance as at 1 January 2021
3,138
37,650
140
947
-
41,875
(Charged)/credited to profit and loss
(489)
(3,367)
(28)
(30)
3,876
(38)
(Charged)/credited to other
comprehensive income
11
(2,587)
-
-
-
(2,576)
Balance as at 31 December 2021
2,660
31,696
112
917
3,876
39,261
(Charged)/credited to profit and loss
(555)
4,688
(3)
1,133
(3,876)
1,387
(Charged)/credited to other
comprehensive income
(286)
1,644
-
-
-
1,358
Balance as at 31 December 2022
1,819
38,028
109
2,050
-
42,006
Deferred income tax liabilities
in EUR thousands
NLB Group
Impairment of
financial assets
Valuation
of financial
instruments
and capital
investments
Depreciation
and valuation
of non-financial
assets
Other
Fair value
adjustments of
financial assets
measured at
amortised cost
Total
Balance as at 1 January 2021
3,271
21,023
1,515
1,984
592
28,385
Effects of translation of foreign
operations to presentation currency
1
3
1
1
1
7
Charged/(credited) to profit and loss
531
(2,344)
(142)
(641)
2,795
199
Charged/(credited) to other
comprehensive income
157
(6,656)
-
-
-
(6,499)
Disposal of subsidiaries
-
-
-
(4)
(50)
(54)
Balance as at 31 December 2021
3,960
12,026
1,374
1,340
3,338
22,038
Effects of translation of foreign
operations to presentation currency
-
4
-
1
4
9
Charged/(credited) to profit and loss
649
(1,579)
267
(464)
2,024
897
Charged/(credited)to other
comprehensive income
892
(2,076)
-
-
-
(1,184)
Balance as at 31 December 2022
5,501
8,375
1,641
877
5,366
21,760
in EUR thousands
NLB
Impairment of
financial assets
Valuation
of financial
instruments
and capital
investments
Depreciation
and valuation
of non-financial
assets
Total
Balance as at 1 January 2021
597
11,871
193
12,661
Charged/(credited) to profit and loss
-
(126)
(24)
(150)
Charged/(credited) to other
comprehensive income
(27)
(5,125)
-
(5,152)
Balance as at 31 December 2021
570
6,620
169
7,359
Charged/(credited) to profit and loss
-
(131)
(6)
(137)
Charged/(credited) to other
comprehensive income
1,102
(1,206)
-
(104)
Balance as at 31 December 2022
1,672
5,283
163
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5.18. Income tax relating to components of other comprehensive income
in EUR thousands
2022
NLB Group
NLB
Before tax
Tax expense
Net of tax
Before tax
Tax expense
Net of tax
Actuarial gains and losses
4,031
(441)
3,590
2,048
(286)
1,762
Financial assets measured at fair value
through other comprehensive income
(165,438)
11,454
(153,984)
(93,955)
1,748
(92,207)
Share of associates and joint ventures
121
-
121
-
-
-
Total
(161,286)
11,013
(150,273)
(91,907)
1,462
(90,445)
in EUR thousands
2021
NLB Group
NLB
Before tax
Tax expense
Net of tax
Before tax
Tax expense
Net of tax
Actuarial gains and losses
(1,377)
178
(1,199)
(115)
11
(104)
Financial assets measured at fair value
through other comprehensive income
(34,322)
4,772
(29,550)
(17,742)
2,565
(15,177)
Share of associates and joint ventures
(30)
-
(30)
-
-
-
Total
(35,729)
4,950
(30,779)
(17,857)
2,576
(15,281)
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Accrued salaries
21,948
18,615
14,014
9,050
Unused annual leave
6,886
6,032
2,569
2,425
Deferred income
11,177
11,374
4,749
5,257
Taxes payable
5,724
9,450
4,023
3,999
Payments received in advance
3,346
3,997
32
308
Total
49,081
49,468
25,387
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The share capital of NLB amounts to EUR 200,000 thousand
and did not change in 2022. It is comprised of 20,000,000 no-
par-value ordinary registered shares, with the corresponding
value of EUR 10.0 for one share. All issued shares are fully
paid and there are no un-issued authorised shares. As at 31
December 2022, the major shareholder of NLB with significant
influence is the Republic of Slovenia, owning 25.00% plus one
share.
The book value of a NLB share on a consolidated level as at 31
December 2022 was EUR 114.1 (31 December 2021: EUR 103.9),
and on a solo level was EUR 75.9 (31 December 2021: EUR 77.6).
It is calculated as the ratio of net assets’ book value excluding
other equity instruments issued and the number of shares.
Distributable profit as at 31 December 2022 amounts to EUR
515,463 thousand (31 December 2021: EUR 458,266 thousand)
and consists of NLB net profit for 2022 in the amount of EUR
159,602 thousand (2021: EUR 208,421 thousand), and retained
earnings from previous years in the amount of EUR 358,267
thousand reduced for the interests and direct issue costs
of subordinated bonds issued in the year 2022, which are
considered instruments of additional basic capital in the
amount of EUR 2,405 thousand. Its allocation will be subject to
a decision by the Bank’s General Assembly. The proposal for
the General Assembly will be prepared by the Management
and the Supervisory Board, considering restrictions imposed
by the regulators, the Group’s risk appetite, the target capital
adequacy at the Group’s level and actual prevailing capital
position at the time of the proposal.
The shares give to their holders the right to vote at the NLB’s
meeting of shareholders where, as a rule, each share entitles its
holder to one vote. Nevertheless, a shareholder who acquires
shares which, together with the shares already held by such
shareholder or by a third person on behalf of such shareholder,
represent more than 25% of the NLB’s share capital, may only
exercise its voting rights under such shares if NLB’s Supervisory
Board approves such an acquisition. The Supervisory Board’s
approval may only be rejected if, following such an acquisition,
such a person would hold shares representing more than 25%
of NLB’s issued share capital plus one share. The approval shall
be considered given if not expressly rejected in 20 days. No
such approval is necessary in respect of the shares acquired
by a person on behalf of third persons provided that such
a person is not entitled to exercise the voting rights arising
out of such shares at its own discretion and undertakes to
NLB that it will not exercise the voting rights based on voting
instructions unless such voting instructions are accompanied
with a confirmation that the person giving such instructions is
the beneficial owner of the shares in respect of which votes are
to be exercised and does not hold in the aggregate, directly or
indirectly 25% or more NLB shares with voting rights.
well as the pre-emptive right to subscribe for new shares on a
pro rata basis in the case of a share capital increase, the right
to a pro-rata share of remaining assets in case of bankruptcy
or liquidation or NLB and the right to receive a dividend. In
2022, NLB paid dividends for previous year in the amount of
EUR 5.0 per share (2021: EUR 4.61 per share), which decreased
retained earnings for EUR 100,000 thousand (2021: EUR 92,200
As at 31 December 2022 and 31 December 2021, NLB holds
no own shares. In June 2019, the General Assembly of NLB
authorised the Management Board that in the period of 36
months from the adoption of the shareholders’ resolution, it
can buy own shares of the Bank for the payment of variable
remuneration to certain employees as required by the Banking
Act and other relevant regulations. NLB did not buy any own
5.21. Other equity instruments issued
On 23 September 2022, NLB issued subordinated notes
intended to qualify as Additional Tier 1 Instruments in the
aggregate nominal amount of EUR 82 million. The notes have
no scheduled maturity date. The issuer has the option for early
redemption of the notes in the period between 23 September
2027 and 23 March 2028, and on each distribution payment
date after 23 March 2028. Until 23 March 2028, the interest
on the principal of the notes will accrue at the interest rate of
9.721% per annum, and for each subsequent 5-year period,
will accrue at the applicable interest rate, which shall be reset
prior to the commencement of each such period (5Y MS +
7.20% per annum). The coupon payments are discretionary
and non-cumulative. The notes terms provide for a temporary
write-down in the event that the Common Equity Tier 1 ratio of
NLB Group and/or NLB drop(s) below 5.125%. The issue price
was equal to 100% of the nominal amount of the notes. The ISIN
code of the notes is SI0022104275. The carrying amount as of 31
December 2022 is EUR 84,184 thousand.
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5.22. Accumulated other comprehensive income and reserves
The share premium account as at 31 December 2022 and 31
December 2021 comprises paid-up premiums in the amount of
EUR 822,173 thousand and the revaluation of share capital from
previous years in the amount of EUR 49,205 thousand.
As at 31 December 2022 and 31 December 2021, profit reserves
in the amount of EUR 13,522 thousand relate entirely to legal
reserves in accordance with the Companies Act.
In 2022, NLB recorded a net profit in the amount of EUR 159,602
thousand (2021: net profit EUR 208,421 thousand) which is
b) Accumulated other comprehensive income
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Financial assets measured at fair value through other
comprehensive income - debt securities
(143,954)
8,540
(78,283)
12,365
Financial assets measured at fair value through other
comprehensive income - equity securities
1,045
2,826
(1,460)
99
Actuarial defined benefit pension plans
(1,948)
(5,488)
(1,934)
(3,696)
Foreign currency translation
(16,485)
(17,184)
-
-
Hedge of a net investment in a foreign operation
754
754
-
-
Total
(160,588)
(10,552)
(81,677)
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5.23. Capital adequacy ratios
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Paid up capital instruments
200,000
200,000
200,000
200,000
Share premium
871,378
871,378
871,378
871,378
Retained earnings - from previous years
908,965
767,152
355,861
249,845
Profit eligible - from current year
334,297
135,968
49,602
39,613
Accumulated other comprehensive income
(98,470)
(10,091)
(50,527)
8,768
Other reserves
13,522
13,522
13,522
13,522
Minority interest
26,806
27,905
-
-
Prudential filters: Additional Valuation Adjustments (AVA)
(2,981)
(3,498)
(1,385)
(1,606)
(-) Goodwill
(3,529)
(3,529)
-
-
(-) Other intangible assets
(41,351)
(39,116)
(23,675)
(18,829)
(-) Insufficient coverage for non-performing exposures
(418)
(90)
(80)
(10)
COMMON EQUITY TIER 1 CAPITAL (CET1)
2,208,219
1,959,601
1,414,696
1,362,681
Capital instruments eligible as AT1 Capital
82,000
-
82,000
-
Minority interest
5,481
5,950
-
-
Additional Tier 1 capital
87,481
5,950
82,000
-
TIER 1 CAPITAL
2,295,700
1,965,551
1,496,696
1,362,681
Capital instruments and subordinated loans eligible as Tier 2 capital
507,516
284,595
507,516
284,595
Minority interest
3,159
2,344
-
-
TIER 2 CAPITAL
510,675
286,939
507,516
284,595
TOTAL CAPITAL
2,806,375
2,252,490
2,004,212
1,647,276
RWA for credit risk
11,797,851
10,205,172
6,356,959
5,411,433
RWA for market risks
1,359,476
1,206,363
776,963
698,463
RWA for credit valuation adjustment risk
85,600
11,850
86,138
11,850
RWA for operational risk
1,410,132
1,244,023
612,654
586,781
TOTAL RISK EXPOSURE AMOUNT (RWA)
14,653,059
12,667,408
7,832,714
6,708,527
Common Equity Tier 1 Ratio
15.1%
15.5%
18.1%
20.3%
Tier 1 Ratio
15.7%
15.5%
19.1%
20.3%
Total Capital Ratio
19.2%
17.8%
25.6%
24.6%
European banking capital legislation – CRD IV, is based on the
Basel III guidelines. The legislation defines three capital ratios
reflecting a different quality of capital:
•
Common Equity Tier 1 ratio (ratio between common or CET1
capital and risk-weighted exposure amount or RWA), which
must be at least 4.5%,
•
Tier 1 capital ratio (Tier 1 capital to RWA), which must be at
least 6%, and
•
Total capital ratio (total capital to RWA), which must be at
least 8%.
In addition to the aforementioned ratios which form the
Pillar 1 requirement, NLB must meet other requirements
and recommendations that are imposed by the supervisory
institutions or by the legislation:
•
The Pillar 2 Requirement (SREP requirement): bank-specific,
obligatory requirement set by the supervisory institution
through the SREP process (together with the Pillar 1
requirement it represents the minimum total SREP capital
requirement – TSCR),
•
The applicable combined buffer requirement (CBR): a system
of capital buffers to be added on top of TSCR – breaching of
the CBR is not a breach of capital requirement, but triggers
limitations in the payment of dividends and other distributions
from capital. Some of the buffers are prescribed by law for
all banks and some of them are bank-specific, set by the
supervisory institution (CBR and TSCR together form the
overall capital requirement – OCR),
•
Pillar 2 Capital Guidance: capital recommendation set by
the supervisory institution through the SREP process. It is
bank-specific and is a recommendation, and not obligatory.
Any non-compliance does not affect dividends or other
distributions from capital; however, it might lead to intensified
supervision and the imposition of measures to re-establish
a prudent level of capital (including preparation of capital
restoration plan).
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NLB’s overall capital requirement on the consolidated level:
SREP requirement
2022
2021
2020
CET1
4.5%
4.5%
4.5%
Pillar 1 (P1R)
AT1
1.5%
1.5%
1.5%
T2
2.0%
2.0%
2.0%
CET1
1.46%
1.55%
1.55%
Pillar 2 (P2R)
Tier 1
1.95%
2.06%
2.06%
Total Capital
2.60%
2.75%
2.75%
CET1
5.96%
6.05%
6.05%
Total SREP Capital Requirement (TSCR)
Tier 1
7.95%
8.06%
8.06%
Total Capital
10.60%
10.75%
10.75%
Combined buffer requirement (CBR)
Conservation buffer
CET1
2.5%
2.5%
2.5%
O-SII buffer
CET1
1.0%
1.0%
1.0%
Countercyclical buffer
CET1
0.0%
0.0%
0.0%
CET1
9.46%
9.55%
9.55%
Overall capital requirement (OCR) = MDA threshold
Tier 1
11.45%
11.56%
11.56%
Total Capital
14.10%
14.25%
14.25%
Pillar 2 Guidance (P2G)
CET1
1.0%
1.0%
1.0%
CET1
10.46%
10.55%
10.55%
OCR + P2G
Tier 1
12.45%
12.56%
12.56%
Total Capital
15.10%
15.25%
15.25%
In 2022, the Overall Capital Requirement (OCR) for the Group
was 14.10%, consisting of:
•
10.60% TSCR (8.00% Pillar 1 Requirement and 2.60% Pillar 2
Requirement); and
•
3.50% CBR (2.50% Capital Conservation Buffer, 1.00% O-SII
Buffer
22
and 0.00% Countercyclical Buffer).
P2G amounts to 1.0% of CET1. The Pillar 2 Requirement for 2023
decreased by 0.2 p.p. to 2.40%, as a result of better overall SREP
assessment.
On 29 April 2022, the Bank of Slovenia issued a new Regulation
on determining the requirement to maintain a systemic risk
buffer for banks and savings banks, which is with 1 January
2023 introducing the systemic risk buffer rates for the sectoral
exposures:
•
1.00% for all retail exposures to natural persons secured by
residential real estate,
•
0.50% for all other exposures to natural persons.
Additionally, in December 2022 the Bank of Slovenia announced
that due to growing uncertainties in the economic environment
22 As of 1 January 2023, the O-SII Buffer will amount to 1.25%.
and systemic risks is raising the countercyclical buffer for
exposures to the Republic of Slovenia from 0% to the level of
0.5% of the total risk exposure amount, valid from December
2023 onwards.
The Bank and Group’s capital covers all the current and
announced regulatory capital requirements, including capital
buffers and other currently known requirements, as well as the
P2G.
As at 31 December 2022, NLB Group capital ratios on a
consolidated basis stand at:
• 15.1% CET1 ratio,
• 15.7% Tier 1 ratio,
• 19.2% Total Capital ratio.
In the scope of regulatory risks, which include credit
risk, operational risk, and market risk, NLB Group uses a
standardised approach for credit and market risks, while the
calculation of capital requirement for operational risks is made
according to a basic indicator approach. The same approaches
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are used for calculating the capital requirements for NLB on
a standalone basis, except for the calculation of the capital
requirement for operational risks where the standardised
approach is used.
As at 31 December 2022, the Total capital ratio for the Group
stood at 19.2% (or a 1.4 p.p. increase compared to 31 December
2021), and the CET1 ratio stood at 15.1% (a 0.4 p.p. decrease
compared to 31 December 2021). The higher total capital
adequacy derives from higher capital (EUR 553,9 million
compared to 31 December 2021), which compensated the
increase of the RWA (EUR 1,985.7 million compared to 31
December 2021). The Group increased the capital with the
inclusion of negative goodwill from the acquisition of N Banka
in retained earnings (EUR 172.8 million), a partial inclusion of
2022 profit (EUR 161.5 million), additional Tier 1 notes issued in
September (EUR 82 million) and additional Tier 2 notes issued
in November (EUR 222.9 million). In accordance with the CRR
‘Quick fix’ from June 2020, the temporary treatment of FVOCI
for sovereign securities was implemented by the Group in
September 2022, which increased the capital by EUR 61.6 million
(i.e., accumulated other comprehensive income amounted
EUR -98.5 million instead of EUR -160.1 million). This temporary
measure ceased to apply as of 1 January 2023.
The capital calculation does not include a part of the 2022 result
in the amount of EUR 110 million which is envisaged to be paid
as the dividend distribution in 2023. Therefore, there will be no
effect on the capital once the dividends in this amount are paid.
In 2022, the RWA of NLB Group for credit risk increased by
EUR 1,592.7 million, where EUR 747.1 million of the increase
relates to the acquisition of N Banka (at the acquisition date
the contribution of N Banka to NLB Group was EUR 858.9
million). The remaining part of RWA increase in the amount
of EUR 845.6 million was mainly the consequence of ramping
up lending activity in all NLB Group banks, the most in NLB
and NLB Komercijalna banka. RWA growth was partially
mitigated by CRR-eligible real estate collaterals from Bosnia
and Herzegovina, Serbia, and North Macedonia. Higher
RWA for high-risk exposures was the result of higher project
finance exposure. Furthermore, RWA decrease was observed
for liquidity assets mainly due to maturity of some non-EU
sovereign bonds (mainly Serbia, Kosovo and Russia). The
lower exposure to institutions also resulted in RWA reduction,
the most in NLB Komercijalna banka, banks from Bosnia
and Herzegovina, NLB and NLB Banka Skopje. At the same
time, lower exposure to covered bonds in NLB also reduced
RWA. The repayments, as well as the upgrade of some clients,
additional impairments and provisions recognised, and the
package sale of NPLs from Serbia contributed to a lower RWA
for the exposures in default.
The increase in RWAs for market risks and CVA (Credit Value
Adjustments) in the amount of EUR 226.9 million compared to
31 December 2021 is the result of higher RWA for FX risk in the
amount of EUR 139.4 million (mainly the result of more opened
positions in domestic currencies of non-euro subsidiary banks),
higher RWA for CVA risk in the amount of EUR 73.8 million (a
consequence of an adjustment of calculating exposure in the
CVA calculation due to the change of a methodology from a
mark to market method to the OEM (original exposure method),
and due to the conclusion of longer term and the higher size
of derivatives by NLB) and the higher RWA for TDI risk in the
amount of EUR 13.7 million (a consequence of new derivatives
businesses).
The increase in the RWA for operational risks (EUR 166.1 million
compared to 31 December 2021) derives from the higher three-
year average of relevant income, as defined in Article 316 of
CRR, which represents the basis for the calculation. The main
reasons for the increase were a generally higher income base
in most Group members, and the acquisition of N Banka in
March 2022.
The most important goal of internal capital adequacy
assessment process (ICAAP) in NLB Group, set up in accordance
with ECB Guidelines, is ensuring adequate capital and
sustainability on an ongoing basis. The purpose of this process
is to have in place sound, effective, and comprehensive
strategies and processes to assess and maintain capital on
an ongoing basis, as well the adequate distribution of internal
capital for covering the nature and level of the risks to which
NLB Group is or might be exposed. In addition, NLB Group
gives strong emphasis on its integration into the overall risk
management system in order to assure proactive support for
informed decision-making.
From an economic perspective, NLB Group manages its
capital adequacy by ensuring that all its risks are adequately
covered by internal capital. A normative perspective is a
multiyear forward-looking assessment of NLB Group which
shows its ability to fulfil all of its capital-related regulatory
and supervisory requirements and risk appetite of NLB
Group. Within these capital constraints, NLB Group defines its
management buffers in the Risk appetite above the regulatory
and supervisory requirement and internal capital needs that
allow it to sustainably follow its business strategy. A normative
perspective includes several stress scenarios which are
integrated into NLB Group’s annual business plan review and
budgeting process.
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5.24. Off-balance sheet liabilities
a) Contractual amounts of off-balance sheet financial instruments
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Short-term guarantees
407,967
258,975
176,535
112,758
- financial
220,786
139,732
96,473
63,188
- non-financial
187,181
119,243
80,062
49,570
Long-term guarantees
1,103,341
977,759
613,061
614,343
- financial
427,743
393,901
230,318
226,747
- non-financial
675,598
583,858
382,743
387,596
Loan commitments
2,388,468
1,878,988
1,635,498
1,259,489
Letters of credit
35,029
35,615
13,204
1,950
Other
18,655
13,167
9,706
1,037
3,953,460
3,164,504
2,448,004
1,989,577
Provisions (note 5.16.b)
(37,609)
(33,441)
(20,299)
(20,560)
Total
3,915,851
3,131,063
2,427,705
1,969,017
Fee income from issued non-financial guarantees amounted to
EUR 7,535 thousand (2021: EUR 7,578 thousand) in NLB Group,
and to EUR 4,574 thousand (2021: EUR 4,547 thousand) in NLB.
In addition to the instruments presented in the table above,
NLB Group and NLB have also some low-risk off-balance sheet
items, for which a 0% credit conversion factor is applied in
accordance with the Capital Requirements Regulation (credit
and other lines which can be irrevocably cancelled by a bank).
As at 31 December 2022, these items at the NLB Group level
amount to EUR 657,232 thousand (31 December 2021: EUR
372,403 thousand), and at the NLB level EUR 316,977 thousand
(31 December 2021: EUR 302,063 thousand).
b) Analysis of derivative financial instruments by notional amounts
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Short-term
Long-term
Short-term
Long-term
Short-term
Long-term
Short-term
Long-term
Swaps
257,015
1,111,946
99,349
1,284,832
359,978
1,111,690
109,137
1,284,832
- currency swaps
256,820
-
99,349
16,844
359,587
-
109,137
16,844
- interest rate swaps
195
1,111,946
-
1,267,988
391
1,111,690
-
1,267,988
Options
72
60,626
9,880
30,945
72
60,626
9,880
30,945
- interest rate options
72
46,963
-
30,945
72
46,963
-
30,945
- securities options
-
13,663
9,880
-
-
13,663
9,880
-
Forward contracts
54,660
11,720
38,825
26,921
54,384
11,720
37,511
26,921
- currency forward
54,660
11,720
38,825
26,921
54,384
11,720
37,511
26,921
Total
311,747
1,184,292
148,054
1,342,698
414,434
1,184,036
156,528
1,342,698
1,496,039
1,490,752
1,598,470
1,499,226
The notional amounts of derivative financial instruments that
qualify for hedge accounting at NLB Group and NLB amount
to EUR 644,132 thousand (31 December 2021: EUR 572,455
thousand) (note 5.5.b). Derivatives that qualify for hedge
accounting are used to hedge interest rate risk.
The fair values of derivative financial instruments are disclosed
in notes 5.2. and 5.5.
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Capital commitments for purchase of:
- property and equipment
1,651
1,696
1,496
1,623
- intangible assets
5,246
4,243
5,206
4,094
Total
6,897
5,939
6,702
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5.25. Funds managed on behalf of third parties
Funds managed on behalf of third parties are accounted
separately from NLB Group’s funds. Income and expenses
arising with respect to these funds are charged to the respective
fund, and no liability falls on NLB Group in connection with
these transactions. NLB Group charges fees for its services.
Funds managed on behalf of third parties
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Fiduciary activities
26,935,868
26,670,696
24,990,075
24,806,894
Settlement and other services
1,247,360
1,079,548
1,156,361
977,197
Total
28,183,228
27,750,244
26,146,436
25,784,091
Fiduciary activities
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Assets
Clearing or transaction account claims for client assets
26,886,137
26,601,809
24,950,876
24,741,052
- from financial instruments
26,866,494
26,554,920
24,931,891
24,694,275
- receipt, processing, and execution of orders
10,004,881
10,085,409
9,166,585
9,346,002
- management of financial instruments portfolio
509,000
588,761
-
-
- custody services
16,352,613
15,880,750
15,765,306
15,348,273
- to Central Securities Clearing Corporation or bank
settlement account for sold financial instrument
891
180
233
68
- to other settlement systems and institutions
for bought financial instrument (debtors)
18,752
46,709
18,752
46,709
Clients’ money
49,731
69,897
39,199
65,842
- at settlement account for client assets
22,037
50,114
22,037
46,059
- at bank transaction accounts
27,694
19,783
17,162
19,783
Liabilities
Clearing or transaction liabilities for client assets
26,935,868
26,670,696
24,990,075
24,806,894
- to client from cash and financial instruments
26,931,466
26,659,703
24,986,135
24,797,057
- receipt, processing, and execution of orders
10,024,193
10,110,124
9,185,897
9,371,707
- management of financial instruments portfolio
519,728
591,772
-
-
- custody services
16,387,545
15,957,807
15,800,238
15,425,350
- to Central Securities Clearing Corporation or bank
settlement account for bought financial instrument
444
134
444
134
- to other settlement systems and institutions
for bought financial instrument (creditors)
3,540
10,472
3,078
9,316
- to bank or settlement bank account
for fees and costs, etc.
418
387
418
387
Fee income for funds managed on behalf of third parties
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Fiduciary activities (note 4.3.b)
11,025
11,385
9,395
8,911
Settlement and other services
1,372
1,567
1,363
1,552
Total
12,397
12,952
10,758
10,463
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Risk management in NLB Group is implemented in accordance
with the set strategic guidelines, established internal
policies, and procedures which take into account European
banking regulations, the regulations adopted by the Bank of
Slovenia, current EBA guidelines, and relevant good banking
practices. In addition, the Group is constantly enhancing and
complementing the existing approaches, methodologies, and
processes in all risk management segments with the aim to
proactively support decision-making.
Managing risks and capital efficiently is crucial for NLB
Group sustained long-term profitable operations. Robust Risk
Management framework is comprehensively integrated into
decision-making, steering, and mitigation processes within the
Group. NLB Group gives high importance to the risk culture and
awareness of all relevant risks within the entire Group.
NLB Group’s Risk management framework supports
business decision-making on strategic and operating levels,
comprehensive steering, proactive risk management, and
mitigation by incorporating:
•
risk appetite statement and risk strategy orientations;
•
yearly review of strategic business goals, budgeting, and the
capital planning process;
•
internal capital adequacy assessment process (ICAAP) and
internal liquidity adequacy assessment process (ILAAP);
• recovery plan activities;
•
other internal stress-testing capabilities, early warning
systems, and regular risk analysis;
•
regulatory and internal management reporting.
NLB Group uses the ‘three lines of defence framework’ as an
important element of its internal governance, whereby the
Risk management function acts as a second line of defence.
Set governance and different risk management tools enable
adequate oversight of the Group’s risk profile. Moreover,
they support business operations and enable efficient risk
management by incorporating escalation procedures and
different mitigation measures when necessary.
a) Risk management strategies and processes
The key goal of NLB Group’s Risk Management is to proactively
manage, assess, and monitor risks within the Group. Sound
and holistic understanding of risk management is embedded
into the entire organisation, focusing on risk identification at a
very early stage, efficient risk management, and mitigation of
them with the aim of ensuring the prudent use of its capital and
adequate liquidity structure to support the financial resilience of
the Group.
Key strategic risk management principles of NLB Group are
defined by its Risk Appetite and Risk Strategy, designed in
accordance with the Group’s business model, integrating
forward-looking perspective. The Strategy of NLB Group, the
Risk Appetite, Risk Strategy, and the key internal policies of
NLB Group – which are approved by the Management and
Supervisory Boards – specify the strategic goals, risk appetite
guidelines, approaches, and methodologies for monitoring,
measuring, and managing all types of risk in order to meet
internal strategic objectives and fulfil all external requirements.
The main strategic risk guidelines are comprehensively
integrated into decision-making, including the business plan
review and budgeting process.
NLB Group plans a prudent risk profile and optimal capital
usage, representing an important element of its business
strategy and related mid-term financial targets. The
management of credit risk, which is the most important risk
category in NLB Group, concentrates on taking moderate
risks – a diversified credit portfolio, adequate credit portfolio
quality, the sustainable costs of risk, and ensuring an optimal
return considering the risks assumed. As regards liquidity risk,
the tolerance is low, while the activities are geared towards
ensuring an adequate liquidity position on an ongoing basis.
The Group limited exposure to credit spread risk, arising
from the valuation risk of debt securities portfolio servicing
as liquidity reserves, to moderate level. The fundamental
orientation in the management of interest rate risk is to limit
unexpected negative effects on revenues and capital, therefore,
a moderate tolerance for this risk is stated. When assuming
operational risk, the Group pursues the orientation that such a
risk must not significantly impact its operations. On this basis,
changes of control activities, processes, and/or organisation
are performed. Besides the Group also focuses on proactive
mitigation, prevention, and minimisation of potential damage.
The conclusion of transactions with derivative financial
instruments at NLB is primarily limited to servicing customers
and hedging Bank’s own positions. In the area of currency risk,
NLB Group pursues the goals of low to moderate exposure. The
tolerance for other risk types is low and focuses on minimising
their possible impacts on NLB Group’s entire operations.
Environmental, social, and governance (ESG) risks do not
represent a new risk category, but rather one of risk drivers
of the existing types of risks, such as credit, liquidity, market
and operational risk. The Group integrates and manages
them within the established risk management framework. The
management of ESG risks follows ECB and EBA guidelines
with the tendency to comprehensively integrate them into all
relevant processes. Based on environmental and climate risk
assessment impact of these risks is estimated as low, except for
transition risk in the area of credit which is assessed as low to
medium. The availability of ESG data in the region where NLB
Group operates is still lacking. Nevertheless, the Group made a
large progress in the process of obtaining relevant ESG related
data from its clients, being prerequisite for adequate decision-
making and the corresponding proactive management of ESG
risks.
Risk management focuses on managing and mitigating risks
in line with the Group’s Risk Appetite and Risk Strategy. Within
these frameworks, the Group monitors a range of risk metrics,
including internal capital allocation in order to assure Group’s
risk profile is in line with its risk appetite. The usage of risk
limits and potential deviations from limits and target values
are regularly reported to the respective committees and/or
the Management Board of the Bank. The banking subsidiaries
within NLB Group adapted a corresponding approach to
monitor and manage their target risk profiles.
NLB Group established a comprehensive stress-testing
framework and other early warning systems in different risk
areas with the intention to strengthen the existing internal
controls and timely response when necessary. Robust and
uniform stress-testing programme includes all material types
of risk and relevant stress scenario analysis, according to
the vulnerability of the Group’s business model. The Group
established an internal ESG stress-testing concept to identify
most relevant financial vulnerabilities stemming from climate
risk, which will be further enhanced by considering disposable
ESG-related data. Stress testing is integrated into the risk
appetite, ICAAP, ILAAP, Recovery Plan, and budgeting process
to support proactive management of the Group’s risk profile,
namely the capital and liquidity positions in a forward-looking
perspective. In addition, the Group also performs reverse stress
tests with the aim to test its maximum recovery capacity. Other
partial risk assessments are covered by other risk analysis,
based on relevant risk parameters, and integrated into the
process of setting a risk management limit system.
For the purpose of an efficient risk mitigation process, NLB
Group applies a single set of standards to retail and corporate
loan collateral, representing a secondary source of repayment
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with the aim of efficient credit risk management and optimal
capital consumption. The Group has a system for monitoring
and reporting collateral at fair (market) value in accordance
with the International Valuation Standards (IVS). The eligibility
of collateral, by types and ratios referring to prudent lending
criteria, is set within internal lending guidelines. Credit risk
mitigation principles and rules in NLB Group are described in
more relevant details in the section ‘Credit risk management.’
When hedging market risks, namely interest rate risk and
foreign exchange risk, in line with the set risk appetite,
NLB Group follows the principle of natural hedge or using
derivatives in line with hedge accounting principles.
b) Risk management structure and organisation
NLB Group’s corporate governance framework is based
on the principles of sound and responsible governance, in
accordance with the applicable legislation of the Republic
of Slovenia, particularly the provisions of the Companies
Act (ZGD-1) and the Banking Act (ZBan-3), the Regulation on
Internal Governance Arrangements, the Management Body,
and the Internal Capital Adequacy Assessment Process for
Banks and Savings Banks, the EBA Guidelines on internal
governance, the EBA Guidelines on the assessment of the
suitability of members of the management body, and key
function holders, as well as the EBA Guidelines on remuneration
practices. Several layers of management provide cohesive risk
management governance in NLB Group.
NLB Group established three lines of a defence framework with
the aim of managing risks effectively. The three lines of defence
concept provides a clear division of activities and defines roles
and responsibilities for risk management at different levels
within the Group. Risk management in the Group acts as a
second line of defence, accountable for appropriate managing,
assessing, monitoring, and reporting of risks in the Bank as the
main entity in Slovenia, and as the competence centre in charge
of six banking members and other non-core subsidiaries which
are in a controlled wind-out.
Overall, the organisation and delineation of competencies in
NLB Group’s risk management structure is designed to prevent
conflicts of interest and ensure a transparent and documented
decision-making process, subject to an appropriate upward
and downward flow of information. Risk management in NLB
Group is managed within the Risk management competence
line, which is a specialised competence line encompassing
several professional areas for which the Global Risk
Department, the Credit Risk – Corporate Department, the
Credit Risk – Retail Department and the Evaluation and Control
Department are responsible within NLB, and which reports to
the Assets and Liabilities Committee (ALCO) of the Management
Board and the Risk Committee of the Supervisory Board. The
risk management competence line is in charge of formulating
and controlling the risk management policies of NLB Group,
setting limits, establishing methodologies, overseeing the
harmonisation of risk management policies within the NLB
Group, monitoring NLB Group’s risk exposures, and preparing
external and internal reports.
All members of NLB Group that are included in the financial
statements of NLB Group, report their exposure to risks to the
competent organisational units within the Risk management
competence line. These organisational units then report all
relevant risk information to the Assets and Liabilities Committee
(ALCO) of the Management Board, the Management Board and
the Risk Committee of the Supervisory Board, which is where
the Management Board and the Supervisory Board, adopt
appropriate measures.
The credit ratings of clients that are materially important
to NLB Group and the issuing of credit risk opinions are
centralised via the Credit Committee of NLB. The process
follows the co-decision principle, in which the credit committee
of the respective Group member first approves their decision,
following which the Credit Committee of NLB gives their
opinion. The resolution of the Credit Committee of NLB is
made on the basis of all available documentation, including
a non-binding rating opinion prepared by the underwriting
department of NLB. This same principle and process is also set
for the issuing of credit exposures for the materially important
clients of NLB Group.
Risk monitoring in NLB Group members is operating within
an independent and/or separate organisational unit. This
way, monitoring of risks is established based on standardised
and systemic risk management approaches. This monitoring
enables a comprehensive overview of the Group’s and of each
member’s statement of financial position. In compliance with
the risk appetite, risk management strategy, and policies of NLB
Group, risk monitoring in each NLB Group member is separated
from its management and/or business function to maintain
the objectivity required when assessing business decisions
(three lines of defence concept). The organisational unit for
managing risks directly reports to the Management Board and
its committees (Credit Committee, ALCO and the Operational
Risk Committee) and Management Board, which report to the
Supervisory Board (the Risk Committee of the Supervisory
Board or Board of Directors).
c) Risk measurement and reporting systems
As a systemic banking group, NLB Group is subject to the Single
Supervisory Mechanism (SSM), which is supervised by the Joint
Supervisory Team (JST) of the ECB and the Bank of Slovenia.
The Group member complies with the ECB regulation, while
NLB Group subsidiaries operating outside Slovenia are also
compliant with the rules set by the local regulators. A third-party
equivalent was approved in Serbia, Bosnia and Herzegovina,
and North Macedonia, resulting in alignment of local regulation
with CRR rules. With regards to capital adequacy, based on the
provisions of the Directive (CRD), Decision (CRR), NLB Group
applies a standardised approach to credit and market risk,
and the basic approach (a simplified approach with less data
granularity) to operational risks, with the exception of NLB
which applies the standardised approach.
Across the Group, risks are assessed, monitored, managed,
or mitigated in a uniform manner, as defined in the Group’s
Risk management standards, and consider the specifics of the
markets in which individual NLB Group members operate. For
the purposes of measuring exposure to credit risk, liquidity
risk, interest rate, and credit spread risk in the banking book,
operational risk, market risk, ESG, and non-financial risks,
in addition to the prescribed regulations, NLB Group uses
internal methodologies and approaches that enable more
detailed monitoring and management of risks. These internal
methodologies are aligned with ECB, EBA, and Basel guidelines,
as well as best practices in banking methodologies.
As for risk reporting, NLB Group’s internal guidelines reflect, in
addition to internal requirements, the substance and frequency
of reporting required by the Bank of Slovenia and the ECB.
In addition, each member of NLB Group also complies with
the requirements of its local regulations. Risk reporting is
carried out in the form of standardised reports, pursuant to
risk management policies based on common methodologies
for measuring exposure to risks, uniform database structure
within Data Warehouse (DWH), comprehensive data quality
assurance, and automated report preparation, which ensures
the quality of reports and reduces the possibility of errors.
d) Data and IT system
Risk data are calculated and stored in NLB Group DWH,
collected from NLB and other Group member’s DWH. The
established process provides an integrated information in
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common reference structure where business users can access
in a consistent and subject-oriented format. Data are regularly
checked and validated. Data used for internal risk assessment,
management, and reporting are the same as data which NLB
Group uses for regulatory reporting.
The Group has established a strong and robust data
governance program that aligns with the goals and objectives
of the Group’s risk management function. NLB Group data
governance and data quality framework consists of identifying
risks, developing policies and controls on data confidentiality,
integrity, accuracy, and availability, and by executing the
second line of defence controls by an independent validation
unit under the responsibility of Group Data Governance Officer.
This framework covers agreed service level standards for both
in-house and outsourced data-related processes.
e) Main emphasis of risk management in 2022
Efficient managing of risks and capital remains crucial for
NLB Group to sustain long-term profitable operations. The
Group further enhanced the robustness of its risk management
system in all respective risk categories in order to manage them
proactively, comprehensively, and prudently. Risk identification
in a very early stage, its efficient managing, and the
corresponding mitigation processes represent essential steps
in such a system. The business and operating environment
relevant for NLB Group operations is changing with trends, such
as sustainability, social responsibility, governance, changing
customer behaviours, emerging new technologies and
competitors, as well as increasing new regulatory requirements.
Respectfully, the risk management framework is regularly
adapted with the aim of detecting and managing new potential
emerging risks.
The NLB Group gives special focus on the inclusion of risk
analysis into the decision-making process on strategic and
operating levels, diversification in order to avoid a large
concentration, optimal usage of internal capital, appropriate
risk-adjusted pricing, regular education/trainings at all levels
of management, and the assurance of overall compliance with
internal policies/rules and relevant regulations.
In 2022, the war in Ukraine did not have a meaningful impact
on the quality of the credit portfolio, nor on the liquidity of the
Group. The Group’s direct and indirect exposures toward Russia
and Ukraine are quite limited. In the light of increasing energy
prices, inflationary pressures, and a forecast of a decrease in
economic growth, the Group has thoroughly analysed potential
impacts on its credit portfolio and made necessary adjustments.
The most affected industries or segments are carefully
monitored with the intention to detect any additional significant
increase in credit risk at a very early stage. The liquidity position
of the Group remains very robust. Even if a highly unfavourable
liquidity scenario would materialise, the Group holds a sufficient
level of high-quality liquidity reserves.
The Group is engaged in contributing to sustainable finance
by incorporating environmental, social, and governance
(ESG) risks into its business strategies, risk management
framework, and internal governance arrangements. With the
adoption of the NLB Group Sustainability programme, NLB
Group implemented sustainability elements into its business
model. Thus, sustainable finance integrates ESG criteria into
the Group’s business and investment decisions for the lasting
benefit of the Group’s clients and society. The NLB Group
Sustainability Committee oversees the integration of the ESG
factors to the NLB Group business model. As a systemically
important institution, the Group was included into 2022 ECB
Climate Stress test exercise. The exercise was conducted in the
first half of 2022 and aggregate results were published in July
2022.
The management of ESG risks follows ECB and EBA guidelines
with a tendency of their comprehensive integration into all
relevant processes. It addresses the Group’s overall credit
approval process and related credit portfolio management.
Sustainable ESG financing in accordance with Environmental
and Social Management System is integrated into the Group’s
Risk Appetite Statement. As part of its strategy, the Group
does not finance companies that extract fossil fuels or operate
coal-fired power plants. The availability of ESG data in the
region where NLB Group operates is still lacking. Nevertheless,
the Group made a large progress in the process of obtaining
relevant ESG-related data from its clients, being prerequisite
for adequate decision-making and corresponding proactive
management of ESG risks.
a) Introduction
In its operations, NLB Group is exposed to credit risk, or the risk
of losses due to the failure of a debtor to settle its liabilities to
NLB Group. For that reason, it proactively and comprehensively
monitors and assesses the aforementioned risk. In that process,
NLB Group follows the International Financial Reporting
Standards, regulations issued by the European Central Bank or
Bank of Slovenia, and the EBA guidelines. This area is governed
in greater detail by the internal methodologies and procedures
set out in internal acts.
Through regular reviews of the business practices and the
credit portfolios of NLB entities, NLB ensures that the credit risk
management of those entities function in accordance with NLB
Group’s risk management standards to enable meaningfully
uniform procedures at the consolidated level.
NLB Group manages credit risk at two levels:
•
At the level of the individual customer/group of customers
appropriate procedures are followed in various phases of
the relationship with a customer prior to, during, and after
the conclusion of an agreement. Prior to concluding an
agreement, a customer’s performance, financial position, and
past cooperation with NLB are assessed. To objectively assess
a client’s operation, internal scoring models for particular
client segments or product types have been developed. It is
also important to secure high-quality collateral even though
it does not affect a customer’s credit rating. This is followed
by various forms of monitoring a customer, in particular an
assessment of its ability to generate sufficient cash flows
for the regular settlement of its liabilities and contractual
obligations. In this part of the credit process, regular
monitoring of clients within the Early Warning System (EWS)
is important. In the case of client default, restructuring or
work-out is initiated depending on the severity of the client’s
position.
•
The quality and trends in the credit portfolio, including
on-balance and off-balance sheet exposures, are actively
monitored and analysed at the level of the overall portfolio of
NLB Group and single banking entities.
Comprehensive analyses are regularly performed to assure
monitoring of the portfolio quality through time and to identify
any breach of limits or targets. Great emphasis is placed on the
evolution of portfolio structure in terms of client segmentation,
credit rating structure, structure by stages (based on IFRS
9), and NPL ratios. Furthermore, the coverage of NPL is an
important indicator of potential future losses that is closely
monitored.
Apart from analysing the portfolio as a whole, vintage analysis
is used to monitor the quality of new loans production and
test the conservativity of the lending standards, which should
ensure the portfolio quality is maintained within the Group Risk
Appetite.
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Beside default risk, the portfolio management is also focused
on monitoring single name and industry concentration,
migration risk, and FX lending risk. Increasing emphasis is
also placed on stress tests that forecast the effects of adverse
negative macroeconomic movements on the portfolio, on the
level of impairments and provisions, and on capital adequacy.
Capital requirements for credit risk at NLB Group level within
the first pillar are calculated according to the Standardised
approach, while within the second pillar an internal IRB
approach is used to estimate the RWA for default, migration,
and FX lending risk. In addition, a single name concentration
add-on is based on the Granularity adjustment methodology,
and an industry concentration add-on is estimated based on
the HHI concentration indexes.
NLB and other NLB Group members assess the level of credit
risk losses on an individual basis for material claims, and at the
collective level for the rest of the portfolio.
An individual review is performed for material Stage 3 financial
assets which have been rated as non-performing based
on the information regarding significant financial problems
encountered by a customer, actual breaches of contractual
obligations such as arrears in the settlement of liabilities,
whether financial assets will be restructured for economic or
legal reasons, and the likelihood that a customer will enter
bankruptcy or a financial reorganisation. Expected future cash
flows (from ordinary operations and possible redemption of
collateral) are assessed following an individual review. If their
discounted value differs from the book value of the financial
asset in question, impairment must be recognised.
Collective ECL allowances are made for the remainder of
the portfolio, which is not assessed on an individual basis.
Based on IFRS 9 requirements, financial assets measured at
amortised cost or at fair value through other comprehensive
income are attributed to the appropriate stage based on the
estimated increase of credit risk of a single exposure since
initial recognition. The stage of financial assets determines
whether a 12-month or lifetime ECL must be considered. The
ECL calculation is based on the forward-looking probability
of default (PD) and loss given default (LGD), which are
calculated using historic data and statistical modelling, as
well as predicted macroeconomic parameters for different
scenarios. For off-balance financial assets, the probability of
the redemption of guarantees is considered when creating
collective provisions. The models used to estimate future risk
parameters are validated and backtested on a regular basis to
make loss estimations as realistic as possible.
The management of ESG risks addresses the Group’s
overall credit approval process and related credit portfolio
management. Sustainable financing is implemented through
amended documentary framework:
•
Lending Policy for Non-Financial Companies in NLB d.d.
and NLB Group where in special Chapter Environmental and
Social Framework three categories are defined (prohibited,
restricted, normal activities)
•
Policy Environmental and Social Transaction Policy
Framework in NLB d.d. and NLB Group applies to certain
transactions with greatest potential for significant E&S impact
(exclusion list, regulatory compliance check, category A list).
•
Methodology Environmental and Social Transaction
Categorisation Methodology Framework in NLB d.d. and
NLB Group provides a guide to the typical level of inherent
environmental and social risk according to NACE codes.
Beside addressing ESG risks in all relevant stages of the credit-
granting process relevant ESG criteria were considered also
in the collateral evaluation process. On the portfolio level, the
Group does not face any large concentration towards specific
NACE industrial sectors exposed to climate risk, whereby the
role of transitional risk is more prevailing. The availability of ESG
data in the region where NLB Group operates is still lacking,
nevertheless the Group has made material progress in this
respect in 2022 and has ambitious plans for the following year.
b) Main emphasis in 2022
In the process of constantly complementing and enhancing
credit risk management, NLB Group focuses on taking
moderate risks, and at the same time ensuring an optimal
return considering the risks assumed. Preserving high credit
portfolio quality represents the most important key aim, with a
focus on the quality of new placements leading to a diversified
portfolio of customers. The Group is actively present on the
market in the region, financing existing and new creditworthy
clients. To further enhance existing risk management tools,
the Group is constantly developing a wide range of advanced
approaches supported by mathematical and statistical models
in credit risk assessment in line with best banking practises,
while at the same time enabling faster responsiveness towards
clients.
Lending growth was observed in the Corporate, as well as in
the Retail segment in 2022. In the circumstances of growing
EURIBOR, there was certain transfer to fixed interest rates,
especially in the housing loans market, which led to increased
new production and the general increase in the volume of
retail exposures. In the Corporate segment, the Bank seized
opportunities to finance some of the top corporate clients in
the region while keeping the focus on SME as its key segment.
Credit portfolio remains well-diversified, there is no large
concentration in any specific industry or client segment. The
share of retail portfolio in the whole credit portfolio is quite
substantial, with still prevailing segment of mortgage loans.
In 2022, the Group’s credit portfolio quality remained solid
with a stable rating structure and diversified portfolio. Great
emphasis was placed on intensive and proactive handling of
problematic customers and early warning system for detecting
increased credit risk at a very early stage. The stock of NPE
volume decreased, as a result of active workout management.
As at 31 December 2022, the share of non-performing exposure
by EBA methodology in NLB Group was 1.3% (1.7% at the end of
2021). Moreover, the coverage ratio remains high at 57.1%, which
is well above the EU average published by the EBA (44.1% in 3Q
2022).
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c) Maximum exposure to credit risk
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Cash, cash balances at central banks, and
other demand deposits at banks
5,271,365
5,005,052
3,339,024
3,250,437
Financial assets held for trading
21,588
7,678
21,692
7,682
Non-trading financial assets mandatorily
at fair value through profit or loss
3,116
4,261
7,892
7,888
Financial assets at fair value through
other comprehensive income
2,838,796
3,395,261
1,291,277
1,541,042
Financial assets at amortised cost
Debt securities
1,917,615
1,717,626
1,597,448
1,436,424
Loans to governments
303,443
281,010
124,736
143,864
Loans to banks
222,965
140,683
350,625
199,287
Loans to financial organisations
116,078
141,709
286,504
226,144
Loans to individuals
6,621,670
5,519,290
3,036,499
2,656,935
Loans to companies
6,031,795
4,645,112
2,606,674
2,118,210
Other financial assets
177,823
122,229
114,399
92,404
Derivatives - hedge accounting
59,362
568
59,362
568
Total net financial assets
23,585,616
20,980,479
12,836,132
11,680,885
Guarantees
1,511,308
1,236,734
789,596
727,101
Financial guarantees
648,529
533,633
326,791
289,935
Non-financial guarantees
862,779
703,101
462,805
437,166
Loan commitments
2,388,468
1,878,988
1,635,498
1,259,489
Other potential liabilities
53,684
48,782
22,910
2,987
Total contingent liabilities
3,953,460
3,164,504
2,448,004
1,989,577
Total maximum exposure to credit risk
27,539,076
24,144,983
15,284,136
13,670,462
Maximum exposure to credit risk is a presentation of NLB
Group’s exposure to credit risk separately by individual types
of financial assets and contingent liabilities. Exposures stated
in the above table are shown for the balance sheet items in
their net book value as reported in the statement of financial
position, and for off-balance sheet items in the amount of their
nominal value.
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d) Collateral from financial assets that are credit-impaired
in EUR thousands
31 Dec 2022
NLB Group
NLB
Fully/over collateralised
financial assets
Financial assets not or not fully
covered with collateral
Fully/over collateralised
financial assets
Financial assets not or not fully
covered with collateral
Net value
of financial assets
Fair value
of collateral
Net value
of financial assets
Fair value
of collateral
Net value
of financial assets
Fair value of
collateral
Net value
of financial assets
Fair value
of collateral
Financial assets at amortised cost
Loans to individuals
32,322
135,480
19,235
5,607
16,518
50,403
8,876
3,311
Loans to other customers
69,180
426,805
19,227
22,607
17,154
93,719
4,077
2,130
Other financial assets
104
7,301
1,374
46
2
379
22
7
Total
101,606
569,586
39,836
28,260
33,674
144,501
12,975
5,448
in EUR thousands
31 Dec 2021
NLB Group
NLB
Fully/over collateralised
financial assets
Financial assets not or not fully
covered with collateral
Fully/over collateralised
financial assets
Financial assets not or not fully
covered with collateral
Net value
of financial assets
Fair value
of collateral
Net value
of financial assets
Fair value
of collateral
Net value
of financial assets
Fair value
of collateral
Net value
of financial assets
Fair value
of collateral
Financial assets at amortised
cost
Loans to individuals
32,372
122,205
18,718
7,645
17,785
49,518
8,114
3,924
Loans to other customers
79,120
446,308
23,364
23,694
21,490
117,862
4,037
4,478
Other financial assets
127
6,661
2,098
32
6
408
22
5
Total
111,619
575,174
44,180
31,371
39,281
167,788
12,173
8,407
e) Collateral from loans mandatorily at fair value through profit or loss
in EUR thousands
31 Dec 2022
31 Dec 2021
NLB
Fully/over
collateralised loans
Loans not or not fully
covered with collateral
Fully/over
collateralised loans
Loans not or not fully
covered with collateral
Net value of loans
Fair value of
collateral
Net value of loans
Fair value of
collateral
Net value of loans
Fair value of
collateral
Net value of loans
Fair value of
collateral
Loans mandatorily at fair value
through profit or loss
4,345
4,699
3,547
2,000
4,198
4,500
3,690
2,050
NLB Group applies a single set of standards to retail and
corporate loan collateral, as developed by NLB Group members
in accordance with regulatory requirements. The master
document regulating loan collateral in the NLB Group is the Loan
Collateral Policy in NLB d.d. and NLB Group. The Policy has been
adopted by the Management Board of NLB Group. The Policy
represents the basic principles that NLB Group’s employees must
take into account when signing, evaluating, monitoring, and
reporting collateral, with the aim of reducing credit risk.
In line with the policy, the primary source of loan repayment
is the debtor’s solvency, and the accepted collateral is a
secondary source of repayment in case the debtor ceases to
repay the contractual obligations.
NLB Group primarily accepts collateral complying with
the Basel II requirements with the aim of improving credit
risk management and consuming capital economically. In
accordance with Basel II, collateral may consist of pledged
deposits, government guarantees, bank guarantees, debt
securities issued by central governments and central banks,
bank debt securities, and real-estate mortgages (the real
estate must be, beside other criteria, located in the European
Economic Area or in country recognised in EBA’s third party
equivalent list for the effect on capital to be recognised).
Loans made to companies and sole proprietors may be
secured by other forms of collateral, as well (e.g., a lien on
movable property, a pledge of an equity stake, investment
coupons, collateral by pledged/assigned receivables, etc.) if it is
assessed that the collateral could generate a cash flow if it were
needed as a secondary source of payment. If there is of a lower
probability that this type of collateral would generate a cash
flow, NLB Group takes a conservative approach and accepts
the collateral while reporting its value as zero.
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g) The processes for valuing collateral
In compliance with relevant regulations, NLB Group has
established a system for monitoring and reporting collateral at
fair (market) value.
The market value of real estate used as collateral is obtained
from valuation reports of licensed appraisers. The market value
of movable property is obtained from valuation reports of
licensed appraisers or from sales agreements. Both, valuation
reports and sales agreements must not be older than one year.
In NLB and members of NLB Group, most reports of external
real estate appraisers are controlled. Controls are performed
by internal appraisers. The subject of control is the content,
value, scope, and format of the report, its compliance with
international valuation standards, and the estimated value. If
they notice deviations, they estimate needed correction of the
value of the external valuation (in %) and correct the value
of the external valuation. The value adjustment can only be
negative and can be applied only in a limited range. For the
purposes of business decisions and the calculation of the
necessary impairments and provisions, additional deductions
(haircuts) are applied to the eventual adjusted market value,
depending on the type of collateral. These haircuts for purpose
of liquidation value are for real estate in the range of 30 to
70%, depending on the type of real estate and location, and for
movables they range between 50 and 100%, depending on the
type of movable.
The market value of financial instruments held by NLB Group
is obtained from the organised market – such as the stock
exchange, for listed financial instruments or determined in
accordance with the internal methodology for unlisted financial
instruments (such collateral is used exceptionally and on a small
scale in loans granted to companies and sole proprietors).
NLB has compiled a reference list of licensed real estate
appraisers for real estate. All appraisals must be made for
the purpose of secured lending and in accordance with
the international valuation standards (IVS, EVS, and RICS).
Appraisals related to retail loans are generally ordered only
from appraisers with whom the NLB has a contract for real-
estate valuations. For corporate loans, appraisals are usually
submitted by clients. If a client submits an appraisal that is
not made by an appraiser included on the NLB’s reference
list, the NLB’s expert department which employs certified real
estate appraisers in construction with licences granted by the
Slovenian Ministry of Justice, and certified real-estate value
appraisers with licences granted by the Slovenian Institute of
Auditors, will verify the appraisal. The expert department is also
responsible for reviewing valuations of real estate serving as
collateral for large loans.
Other NLB Group members obtain valuations from in-house
appraisers and outsourced appraisers, all possessing the
necessary licences. NLB Group has compiled a reference list
of appraisers for valuations of real estate located outside the
Republic of Slovenia. Appraisals must be made in accordance
with the international valuation standards, and for larger
exposures, real-estate evaluations must also be reviewed by
an internal licensed appraiser with knowledge of the local
real-estate market. If the appraisal does not correspond to the
international valuation standards or if the value adjustment
is greater than certain limit, the appraisal is rejected as
inadequate.
When assuring collateral, NLB Group follows the internal
regulations which define the minimum security or pledge ratios.
NLB Group strives to obtain collateral with a higher value
than the underlying exposure (depending on the borrower’s
rating, loan maturity, etc.) with the aim of reducing negative
consequences resulting from any major swings in market prices
of the assets used as collateral. If real estate, movable property,
and financial instruments serve as collateral, NLB Group’s lien
on such assets should be top ranking. Exceptionally, where the
value of the mortgaged real estate is large enough, the lien can
have a different priority order.
NLB Group monitors the value of collateral during the loan
repayment period in accordance with the mandatory periods
and internal instructions. For example, the value of collateral
using mortgaged real estate is monitored annually by either
preparing individual assessments or using the internal
methodology for preparing an own value appraisal of real
estate (which applies to Republic of Slovenia, and partly, for
the housing segment to Serbia, Montenegro, and Bosnia
and Herzegovina) based on public records and indexes
of real-estate value published by the relevant government
authorities (the Surveying and Mapping Authority in the
Republic of Slovenia). The value of pledged movable property is
monitored once a year (in NLB automated, with a straight-line
depreciation over the period of the remaining useful life).
h) The main types of collateral taken by the NLB Group
NLB Group accepts different forms of material and personal
security as loan collateral.
Material loan collateral gives the right in the case of a debtor
(borrower) defaulting on their contractual obligations to sell
a specific property to recover claims, keep specific non-cash
property or cash, or reduce or offset the amount of exposure
against the counterparty’s debt to the Bank.
NLB Group accepts the following material types of loan
collateral:
•
Collateral in the form of business and residential real estate:
land, buildings, and individual parts of buildings in a storeyed
property intended for living in or performing a business
activity, such as land in the area foreseen for construction,
apartments, residential buildings, garages and holiday
homes, business premises, industrial buildings, offices, shops,
hotels, branches and warehouses, forests, parking spaces,
etc. The objects can be completed or under construction.
Priority is given to property where the pledge right of the
Bank is entered in the first place and real estate is already
owned by the debtor and/or the pledger. For real estate,
there must be a market, and it must be redeemable within a
reasonable time;
•
Collateral in the form of movable property: priority is given
to the types of movable property, that are highly likely to be
sold in the event of execution, and the funds received are
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used to repay the collateralised claims (their market value
must be estimated with considerable reliability). Among the
appropriate types of movable property, the Bank includes
motor vehicles, agricultural machinery, construction
machinery, production lines, and series-produced machines,
and some custom-made production machines;
•
Collateral by a pledge of financial assets (bank deposits or
cash-like instruments, debt securities of different issuers,
investment fund units, equity securities, or convertible bonds):
•
Cash receivable collateral: bank deposits and savings with
Bank are appropriate in domestic and foreign currency;
•
Debt and equity securities: bonds and shares which,
according to the Bank’s assessment, are suitable for
securing investments and are traded on a regulated market
(marketable securities of higher-quality Slovenian and
foreign issuers);
•
The pledge of investment coupons of mutual funds
managed by management companies (a priority company
NLB Skladi) and are, according to the Bank’s assessment,
suitable for insurance of investments.
•
A pledge of an equity stake: non-marketable capital shares
with a credit rating of at least B are adequate;
•
A pledge or assignment of receivables as collateral: cash
receivables must have longer maturities than the maturity of
the investment and they must not be due and not be paid;
•
Other material forms of loan collateral (e.g., life insurance
policies pledged to NLB): The Bank accepts products of
Vita, life insurance company d.d. Ljubljana – a pledge of an
investment life insurance policy and a life insurance policy
with a guaranteed return that includes saving, in addition to
insurance.
Personal loan collateral is a method for reducing credit risk
whereby a third party undertakes to pay the debt in case of the
primary debtor (borrower) defaulting.
NLB Group accepts the following types of personal loan
collateral:
•
Joint and several guarantees by retail and corporate
clients: for the collateralisation of private individuals’ loans,
employees, or pensioners are adequate guarantors. They
must not be in the process of personal bankruptcy. They are
responsible for fulfilling the debtor’s obligations for loans
with a repayment period not exceeding 60 months. For the
collateralisation of legal entities investments, legal entities,
individuals, or private individuals are adequate guarantors.
• Bank guarantees;
•
Government guarantees (e.g., of the Republic of Slovenia);
•
Guarantees by national and regional development agencies
with which the Bank has a contract on the acceptance of
guarantees (e.g. Slovene Enterprise Fund);
•
Other types of personal loan collateral.
Loans are very often secured by a combination of collateral
types. The general recommendations on loan collateral are
specified in the internal instructions and include the elements
specified below. The decision on the type of collateral and
the coverage of loan by collateral depends on the client’s
creditworthiness (credit rating), loan maturity, and varies
depending on whether the loan is granted to retail or a
corporate client.
NLB has also created, in the area of real-estate loan collateral,
an ‘online’ connection with the Surveying and Mapping
Authority in the Republic of Slovenia, which allows direct and
immediate verification of the existence of property.
NLB Group strives to ensure the best possible collateral for
long-term loans, in particular mortgages where possible. As a
result, the mortgaging of real estate is the most frequent form
of loan collateral of corporate and retail clients. In corporate
exposures, the next most frequent forms of collateral are
government and corporate guarantees, while in retail loans, it is
guarantors.
i) Risks, deriving from valuation of received collateral
Client/counterparty credit risk is the key decision parameter
when approving exposures. Collateral is a secondary source of
repayment, and therefore decisions on approvals of exposures
should not primarily be based on the provided collateral.
However, collateral is an important comfort element in the
approval process and, depending on the credit rating of the
client, a prerequisite. NLB Group has prescribed the minimum
ratios between the value of collateral and the loan amount,
depending on the type of collateral, loan maturity and the client
rating. The ratios are based on experience and regulatory
guidelines.
NLB Group pays particular attention to closely monitoring
the fair value of collateral, and to receiving regular and
independent revaluations by applying the International
Valuation Standards. Through a detailed examination of all
collateral received, NLB has ensured that only collateral from
which payment can be realistically expected if it is liquidated, is
considered.
NLB Group has the largest concentration of collaterals arising
from mortgages on real estate, which is a relatively reliable
and quality type of collateral. Due to the possible decrease of
real estate market prices, the Group closely monitors the real-
estate collateral values and, where required, establishes higher
amounts of impairments and provisions for non-performing
loans secured by real estate, based on estimated discounts
of the real-estate value, which are expected to be achieved in
a sale (expected payment from collateral). Priority is given to
property where the pledge right of the Group is entered in the
first place and the real estate is already owned by the debtor
and/or the pledger. For real estate, there must be a market, and
it must be redeemable within a reasonable time.
Collateral consisting of securities entails market risk, specifically
the risk of changes in the prices of securities on capital markets.
To limit such risks and restrict the possibility of the value of
instruments received as collateral falling below approved
limits, the Rules determine minimum pledge ratios for securing
loans based on pledged securities and equity shares in NLB.
Deviations from the Rules are subject to the prior approval of
the respective decision bodies of the Bank. The ratio between
the loan amount and the securities’ value is determined
regarding the rating of the issuer, the securities’ liquidity,
maturity and correlation with changes in market indexes, i.e., by
considering the key features reflecting the level of volatility of
market prices, and the ability to sell the securities at the market
price.
Collateral consisting of the sureties of corporate clients, sureties
of private individuals, and bank guarantees entail the credit risk
of the provider of the collateral. NLB Group includes the amount
of the guarantees received in the exposure of the guarantor,
and guarantees are only taken into account as collateral if the
guarantor has sufficient overall creditworthiness.
The Business Rules – Collateral for Retail and Corporate Loans
regulate which forms of collateral are acceptable, and which
preconditions a type of collateral needs to fulfil to be able to be
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j) Credit quality analysis for financial assets and contingent liabilities
in EUR thousands
NLB Group
NLB
31 Dec 2022
12-month
expected credit
losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Purchased
credit-impaired
financial assets
Total
12-month
expected credit
losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Purchased
credit-impaired
financial assets
Total
Debt securities at amortised cost
A
1,388,564
-
-
-
1,388,564
1,318,134
-
-
-
1,318,134
B
525,606
-
-
-
525,606
281,304
-
-
-
281,304
C
-
7,229
-
-
7,229
-
-
-
-
-
Loss allowance
(3,519)
(265)
-
-
(3,784)
(1,990)
-
-
-
(1,990)
Carrying amount
1,910,651
6,964
-
-
1,917,615
1,597,448
-
-
-
1,597,448
Loans and advances to banks
at amortised cost
A
87,422
-
-
-
87,422
350,138
-
-
-
350,138
B
135,704
-
-
-
135,704
703
-
-
-
703
C
-
-
-
-
-
-
-
-
-
-
D and E
-
-
108
-
108
-
-
-
-
-
Loss allowance
(161)
-
(108)
-
(269)
(216)
-
-
-
(216)
Carrying amount
222,965
-
-
-
222,965
350,625
-
-
-
350,625
Loans and advances to individuals
at amortised cost
A
6,327,508
82,441
-
772
6,410,721
2,915,578
37,725
-
-
2,953,303
B
80,749
40,465
-
50
121,264
7,329
29,299
-
-
36,628
C
14,620
67,215
-
1,514
83,349
-
34,720
-
-
34,720
D and E
-
-
122,350
5,760
128,110
-
-
59,680
-
59,680
Loss allowance
(31,385)
(14,582)
(76,306)
499
(121,774)
(6,161)
(7,385)
(34,286)
-
(47,832)
Carrying amount
6,391,492
175,539
46,044
8,595
6,621,670
2,916,746
94,359
25,394
-
3,036,499
Loans and advances to other
customers at amortised cost
A
1,366,495
1,405
-
-
1,367,900
1,007,159
91
-
-
1,007,250
B
4,508,706
146,749
-
15
4,655,470
1,907,775
23,418
-
-
1,931,193
C
153,084
275,517
-
1,898
430,499
45,521
28,397
-
2
73,920
D and E
-
-
178,206
21,465
199,671
-
-
47,824
3,307
51,131
Loss allowance
(59,840)
(31,230)
(114,288)
3,134
(202,224)
(14,880)
(800)
(29,262)
(638)
(45,580)
Carrying amount
5,968,445
392,441
63,918
26,512
6,451,316
2,945,575
51,106
18,562
2,671
3,017,914
Other financial assets at amortised cost
A
138,353
57
-
-
138,410
102,414
2
-
-
102,416
B
37,103
169
-
-
37,272
11,362
19
-
-
11,381
C
1,370
577
-
-
1,947
759
23
-
-
782
D and E
-
-
7,940
1,288
9,228
-
-
832
1
833
Loss allowance
(1,246)
(38)
(7,565)
(185)
(9,034)
(203)
(2)
(807)
(1)
(1,013)
Carrying amount
175,580
765
375
1,103
177,823
114,332
42
25
-
114,399
Debt instruments at fair value through
other comprehensive income
A
1,453,671
-
-
-
1,453,671
1,159,704
-
-
-
1,159,704
B
1,545,358
-
-
-
1,545,358
207,791
-
-
-
207,791
C
-
165
-
-
165
-
-
-
-
-
D and E
-
-
8,338
-
8,338
-
-
8,338
-
8,338
Loss allowance
(9,029)
(70)
(6,777)
-
(15,876)
(2,022)
-
(6,777)
-
(8,799)
Contingent liabilities
A
1,500,489
6,657
-
34
1,507,180
1,118,801
4,426
-
-
1,123,227
B
2,294,429
38,878
-
318
2,333,625
1,256,792
17,906
-
101
1,274,799
C
48,375
37,735
-
88
86,198
22,149
12,911
-
25
35,085
D and E
-
-
20,134
6,323
26,457
-
-
11,575
3,318
14,893
Loss allowance
(18,826)
(1,953)
(12,735)
(4,095)
(37,609)
(8,156)
(378)
(8,889)
(2,876)
(20,299)
Carrying amount
3,824,467
81,317
7,399
2,668
3,915,851
2,389,586
34,865
2,686
568
2,427,705
276
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
in EUR thousands
NLB Group
NLB
31 Dec 2021
12-month
expected credit
losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Purchased
credit-impaired
financial assets
Total
12-month
expected credit
losses
Lifetime ECL not
credit - impaired
Lifetime ECL
credit-impaired
Purchased
credit-impaired
financial assets
Total
Debt securities at amortised cost
A
1,218,597
-
-
-
1,218,597
1,183,578
-
-
-
1,183,578
B
495,114
-
-
-
495,114
254,672
-
-
-
254,672
C
-
7,220
-
-
7,220
-
-
-
-
-
Loss allowance
(3,253)
(52)
-
-
(3,305)
(1,826)
-
-
-
(1,826)
Carrying amount
1,710,458
7,168
-
-
1,717,626
1,436,424
-
-
-
1,436,424
Loans and advances to banks
at amortised cost
A
89,499
-
-
-
89,499
199,390
-
-
-
199,390
B
51,382
-
-
-
51,382
79
-
-
-
79
Loss allowance
(198)
-
-
-
(198)
(182)
-
-
-
(182)
Carrying amount
140,683
-
-
-
140,683
199,287
-
-
-
199,287
Loans and advances to individuals
at amortised cost
A
5,305,833
46,972
-
249
5,353,054
2,554,006
26,634
-
-
2,580,640
B
60,891
23,933
-
16
84,840
16,919
15,108
-
-
32,027
C
5,827
49,330
-
293
55,450
-
24,293
-
-
24,293
D and E
-
-
125,297
2,430
127,727
-
-
57,396
-
57,396
Loss allowance
(18,336)
(7,398)
(76,204)
157
(101,781)
(3,503)
(2,421)
(31,497)
-
(37,421)
Carrying amount
5,354,215
112,837
49,093
3,145
5,519,290
2,567,422
63,614
25,899
-
2,656,935
Loans and advances to other
customers at amortised cost
A
1,172,770
59
-
3
1,172,832
875,912
26
-
-
875,938
B
3,333,087
198,824
-
26
3,531,937
1,421,398
85,402
-
-
1,506,800
C
124,628
213,301
-
17
337,946
53,965
37,876
-
-
91,841
D and E
-
-
209,229
30,079
239,308
-
-
68,782
3,855
72,637
Loss allowance
(50,961)
(26,624)
(135,994)
(613)
(214,192)
(10,101)
(1,787)
(46,272)
(838)
(58,998)
Carrying amount
4,579,524
385,560
73,235
29,512
5,067,831
2,341,174
121,517
22,510
3,017
2,488,218
Other financial assets at amortised cost
A
92,430
37
-
-
92,467
83,943
1
-
-
83,944
B
26,908
128
-
-
27,036
5,223
19
-
-
5,242
C
319
694
-
-
1,013
3,224
29
-
-
3,253
D and E
-
-
6,703
1,236
7,939
-
-
1,107
11
1,118
Loss allowance
(476)
(36)
(6,322)
608
(6,226)
(62)
(1)
(1,084)
(6)
(1,153)
Carrying amount
119,181
823
381
1,844
122,229
92,328
48
23
5
92,404
Debt instruments at fair value through
other comprehensive income
A
1,587,032
-
-
-
1,587,032
1,308,690
-
-
-
1,308,690
B
1,809,069
-
-
-
1,809,069
218,282
-
-
-
218,282
C
-
184
-
-
184
-
-
-
-
-
D and E
-
-
798
-
798
-
-
798
-
798
Loss allowance
(11,148)
(70)
(798)
-
(12,016)
(2,203)
-
(798)
-
(3,001)
Contingent liabilities
A
1,405,533
6,451
-
38
1,412,022
1,041,295
5,657
-
-
1,046,952
B
1,574,401
67,514
-
11
1,641,926
844,526
34,180
-
-
878,706
C
48,037
23,571
-
18
71,626
27,751
9,265
-
-
37,016
D and E
-
-
24,565
14,366
38,931
-
-
19,252
7,651
26,903
Loss allowance
(12,912)
(1,640)
(14,545)
(4,344)
(33,441)
(3,909)
(141)
(12,469)
(4,041)
(20,560)
Carrying amount
3,015,059
95,896
10,020
10,089
3,131,064
1,909,663
48,961
6,783
3,610
1,969,017
277
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
The NLB Group’s client credit rating classification is based on
an internally developed methodology, drawing from internal
statistical analyses, good banking practices, as well as Bank
of Slovenia regulations, and ECB and EBA guidelines and
requirements. The aligned rating methodology is used across
the entire NLB Group. It includes a uniform credit grade scale of
12 rating classes, out of which nine represent performing clients
and three non-performing clients.
Rating Group A (AAA to A rating classes) includes the best
clients with a low degree of default probability, characterised
by high coverage of financial liabilities with free cash flow. The
Rating Group A is considered as investment grade classification.
Rating Group B (BBB to B rating classes) includes clients with
a low credit risk, starting one notch lower than ‘A’ rating group
clients. These clients show stable performance, acceptable
financial ratios, and qualitative elements, and have sufficient
cash flow to settle their obligations, but may be more sensitive
to changes in the industry or the economy. The Rating Group B
classification is an investment grade for BBB, and an ‘invest with
care’ for BB and B.
Rating Group C (CCC to C rating classes) includes clients who
are exposed to a higher and above-average level of credit
risk. CCC rated clients are financed by the Bank only in the
case when such support brings more positive effects for the
Bank; however, the Rating Group C is overall considered as a
substantial risk. The Bank reasonably restricts cooperation with
such clients and decreases its exposure to them.
Rating Groups D (D and DF rating classes) and E represent
non-performing clients that are treated as defaulted. D, DF,
and E rating classified clients are ordinarily transferred to the
specialised units for restructuring (which performs business
and financial restructuring with a goal of minimising losses and
restoring the client to a performing status) or workout and legal
support (with the goal of minimising losses due to default).
In 2020, NLB Group applied a new default definition based on
the EBA guidelines, where the materiality threshold for delays
is determined in absolute and relative terms (EUR 100 for
retail and EUR 500 for non-retail segment and 1% of the total
on-balance exposure on the client level). At the same time, the
assessment of rating for private individuals was improved by
establishing a common rating on the client level.
A standard corporate rating methodology, with the prescribed
set of parameters (qualitative and quantitative) applies to all
the NLB Group bank entities. Groups of connected clients are
treated as materially important for the NLB Group whenever
exposure exceeds EUR 7 million, or EUR 15 million for NLB
Group members with total assets greater than EUR 1 billion.
Materially important clients are submitted to the NLB Credit
Committee.
NLB regularly reviews the business practices and credit
portfolios of NLB Group entities to make sure they are operating
in accordance with the minimum risk management standards
of NLB Group. This ensures appropriate standard processes for
managing and reporting credit risks at the consolidated level.
k) Forborne loans
in EUR thousands
NLB Group
31 Dec 2022
All forborne exposures
Impairment, provisions and
value adjustments
Collateral
and financial
guarantees
received on
forborne
exposures
Gross
carrying
amount
Performing
Non - performing
Performing
forborne
exposures
Non-
performing
forborne
exposures
Impaired
Defaulted
Loans and advances (including at
amortised cost and fair value)
272,193
117,808
154,441
154,385
(9,929)
(79,535)
121,376
Governments
840
604
236
236
(12)
(234)
-
Other financial organisations
1,526
201
1,325
1,325
(6)
(1,325)
-
Non-financial organisations
207,417
89,871
117,602
117,546
(7,267)
(61,900)
87,245
Households
62,410
27,132
35,278
35,278
(2,644)
(16,076)
34,131
Debt instruments other than held for trading
272,193
117,808
154,441
154,385
(9,929)
(79,535)
121,376
Loan commitments given
1,392
743
649
649
(2)
(209)
740
Total exposures with forbearance measures
273,585
118,551
155,090
155,034
(9,931)
(79,744)
122,116
278
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
in EUR thousands
NLB Group
31 Dec 2021
All forborne exposures
Impairment, provisions and
value adjustments
Collateral
and financial
guarantees
received on
forborne
exposures
Gross
carrying
amount
Performing
Non - performing
Performing
forborne
exposures
Non-
performing
forborne
exposures
Impaired
Defaulted
Loans and advances (including at
amortised cost and fair value)
239,208
57,058
182,094
182,150
(4,602)
(100,963)
109,177
Governments
1,093
828
265
265
(11)
(265)
-
Other financial organisations
2,744
213
2,531
2,531
(8)
(2,531)
12
Non-financial organisations
180,754
35,422
145,276
145,332
(3,268)
(83,243)
79,260
Households
54,617
20,595
34,022
34,022
(1,315)
(14,924)
29,905
Debt instruments other than held for trading
239,208
57,058
182,094
182,150
(4,602)
(100,963)
109,177
Loan commitments given
718
96
622
622
-
(374)
294
Total exposures with forbearance measures
239,926
57,154
182,716
182,772
(4,602)
(101,337)
109,471
in EUR thousands
NLB
31 Dec 2022
All forborne exposures
Impairment, provisions and
value adjustments
Collateral
and financial
guarantees
received on
forborne
exposures
Gross
carrying
amount
Performing
Non - performing
Performing
forborne
exposures
Non-
performing
forborne
exposures
Impaired
Defaulted
Loans and advances (including at
amortised cost and fair value)
84,638
16,694
68,000
67,944
(1,628)
(37,260)
38,474
Other financial organisations
1,526
201
1,325
1,325
(6)
(1,325)
-
Non-financial organisations
42,414
3,521
38,949
38,893
(40)
(22,935)
19,073
Households
40,698
12,972
27,726
27,726
(1,582)
(13,000)
19,401
Debt instruments other than held for trading
84,638
16,694
68,000
67,944
(1,628)
(37,260)
38,474
Loan commitments given
687
41
646
646
(2)
(207)
416
Total exposures with forbearance measures
85,325
16,735
68,646
68,590
(1,630)
(37,467)
38,890
in EUR thousands
NLB
31 Dec 2021
All forborne exposures
Impairment, provisions and
value adjustments
Collateral
and financial
guarantees
received on
forborne
exposures
Gross
carrying
amount
Performing
Non - performing
Performing
forborne
exposures
Non-
performing
forborne
exposures
Impaired
Defaulted
Loans and advances (including at
amortised cost and fair value)
109,674
25,485
84,133
84,189
(1,130)
(48,898)
51,837
Other financial organisations
2,744
213
2,531
2,531
(8)
(2,531)
12
Non-financial organisations
69,299
13,100
56,143
56,199
(291)
(35,930)
31,564
Households
37,631
12,172
25,459
25,459
(831)
(10,437)
20,261
Debt instruments other than held for trading
109,674
25,485
84,133
84,189
(1,130)
(48,898)
51,837
Loan commitments given
688
96
592
592
-
(344)
294
Total exposures with forbearance measures
110,362
25,581
84,725
84,781
(1,130)
(49,242)
52,131
279
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Forborne exposures of debt instruments by periods of forbearance
in EUR thousands
NLB Group
31 Dec 2022
Up to 3 months
3 to 6 months
6 to 12 months
Over 12 months
Performing exposures
2,930
45,452
4,714
54,783
Non-performing exposures
4,343
3,472
13,351
53,684
Total exposures with forbearance measures
7,273
48,924
18,065
108,467
31 Dec 2021
Performing exposures
7,411
5,055
9,860
30,130
Non-performing exposures
26,835
4,856
18,540
30,956
Total exposures with forbearance measures
34,246
9,911
28,400
61,086
in EUR thousands
NLB
31 Dec 2022
Up to 3 months
3 to 6 months
6 to 12 months
Over 12 months
Performing exposures
2,063
608
1,864
10,531
Non-performing exposures
1,939
1,261
7,300
20,184
Total exposures with forbearance measures
4,002
1,869
9,164
30,715
31 Dec 2021
Performing exposures
2,819
3,898
7,008
10,630
Non-performing exposures
7,467
2,410
13,863
11,551
Total exposures with forbearance measures
10,286
6,308
20,871
22,181
The main forbearance measurements used by NLB Group
and NLB are: deferral of payment, reduction of interest rates,
acquisition of collateral for partial repayment of claims, and
others, either as a single forbearance measurement or as a
combination of those.
l) Repossessed assets
NLB Group and NLB received the following assets by taking
possession of collateral held as security and held them at the
reporting date:
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Net value
Net value
Nature of assets
Equity securities mandatorily measured at fair
value through profit or loss (note 5.3.a)
368
-
-
-
Investment property (note 5.9.)
25,326
36,009
1,901
4,176
Property and equipment (note 5.8.)
11,962
13,559
-
7
Investments in subsidiaries and associates
-
-
2,049
2,333
Real estates (note 5.13.)
50,913
74,717
3,170
4,827
Other assets (note 5.13.)
673
733
-
-
Non-current assets held for sale (note 5.7.)
651
699
-
-
Total
89,893
125,717
7,120
11,343
280
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
m)
Analysis of loans and advances by industry sectors
in EUR thousands
NLB Group
31 Dec 2022
31 Dec 2021
Industry sector
Gross loans
Impairment
provisions
Net loans
(%)
Gross loans
Impairment
provisions
Net loans
(%)
Banks
223,234
(269)
222,965
1.65
140,881
(198)
140,683
1.30
Finance
235,737
(2,579)
233,158
1.73
90,538
(2,851)
87,687
0.81
Electricity, gas, and water
601,556
(10,704)
590,852
4.39
361,520
(5,392)
356,128
3.28
Construction industry
547,251
(27,686)
519,565
3.86
420,173
(29,459)
390,714
3.60
Heavy industry
1,415,304
(25,553)
1,389,751
10.31
1,059,774
(30,352)
1,029,422
9.49
Education
13,246
(1,313)
11,933
0.09
12,888
(1,358)
11,530
0.11
Agriculture, forestry, and fishing
98,813
(3,063)
95,750
0.71
91,735
(3,530)
88,205
0.81
Public sector
285,495
(4,737)
280,758
2.08
231,488
(5,269)
226,219
2.08
Individuals
6,743,441
(121,771)
6,621,670
49.14
5,621,071
(101,781)
5,519,290
50.87
Mining
53,854
(2,747)
51,107
0.38
49,936
(1,604)
48,332
0.45
Entrepreneurs
389,376
(9,162)
380,214
2.82
341,670
(7,554)
334,116
3.08
Services
809,891
(41,343)
768,548
5.70
778,569
(34,587)
743,982
6.86
Transport and communications
920,149
(19,476)
900,673
6.68
798,822
(25,902)
772,920
7.12
Trade industry
1,239,161
(53,113)
1,186,048
8.80
1,008,369
(64,364)
944,005
8.70
Health care and social security
43,710
(751)
42,959
0.32
36,541
(1,970)
34,571
0.32
Other financial assets
186,857
(9,034)
177,823
1.32
128,455
(6,226)
122,229
1.13
Total
13,807,075
(333,301)
13,473,774
100.00
11,172,430
(322,397)
10,850,033
100.00
in EUR thousands
NLB
31 Dec 2022
31 Dec 2021
Industry sector
Gross loans
Impairment
provisions
Net loans
(%)
Gross loans
Impairment
provisions
Net loans
(%)
Banks
350,841
(216)
350,625
5.37
199,469
(182)
199,287
3.66
Finance
383,781
(3,167)
380,614
5.83
169,679
(3,109)
166,570
3.06
Electricity, gas, and water
371,356
(1,467)
369,889
5.67
228,423
(724)
227,699
4.18
Construction industry
150,715
(9,714)
141,001
2.16
71,989
(9,870)
62,119
1.14
Heavy industry
688,517
(6,161)
682,356
10.45
583,658
(6,747)
576,911
10.60
Education
3,529
(19)
3,510
0.05
4,045
(27)
4,018
0.07
Agriculture, forestry, and fishing
15,432
(70)
15,362
0.24
13,073
(100)
12,973
0.24
Public sector
104,303
(1,176)
103,127
1.58
94,176
(974)
93,202
1.71
Individuals
3,084,331
(47,832)
3,036,499
46.52
2,694,356
(37,421)
2,656,935
48.80
Mining
23,736
(185)
23,551
0.36
22,316
(514)
21,802
0.40
Entrepreneurs
64,471
(1,722)
62,749
0.96
54,600
(1,942)
52,658
0.97
Services
342,882
(12,336)
330,546
5.06
482,176
(11,421)
470,755
8.65
Transport and communications
589,152
(3,155)
585,997
8.98
556,786
(5,459)
551,327
10.13
Trade industry
308,724
(6,143)
302,581
4.64
248,823
(16,492)
232,331
4.27
Health care and social security
24,788
(265)
24,523
0.38
25,360
(1,619)
23,741
0.44
Other financial assets
115,412
(1,013)
114,399
1.75
93,557
(1,153)
92,404
1.70
Total
6,621,970
(94,641)
6,527,329
100.00
5,542,486
(97,754)
5,444,732
100.00
281
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Events After 2022
Financial Report
n) Analysis of net loans and advances by geographical sectors
in EUR thousands
NLB Group
NLB
Country
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Slovenia
6,704,603
4,861,968
5,824,477
4,856,305
Other European Union members
274,795
249,772
180,842
156,425
Serbia
2,790,892
2,320,491
184,530
136,696
Other countries
3,703,484
3,417,802
337,480
295,306
Total
13,473,774
10,850,033
6,527,329
5,444,732
As at 31 December 2022, Other countries include direct exposure
to Russia in the amount of EUR 284 thousand (31 December
2021: EUR 94 thousand) at the NLB Group level and EUR 4
thousand (31 December 2021: EUR 84 thousand) at the NLB
level. Direct exposure to Ukraine amounts to EUR 21 thousand
(31 December 2021: EUR 4 thousand) at the NLB Group level and
EUR 1 thousand (31 December 2021: EUR 2 thousand) at the NLB
level.
282
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SB Statement
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Strategy
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Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
o) Analysis of debt securities and derivative financial instruments by geographical sectors
in EUR thousands
31 Dec 2022
NLB Group
NLB
Country
Financial assets
measured at
amortised cost
Financial assets
held for trading
Financial assets
measured at fair
value through OCI
Non-trading
financial assets
mandatorily at FV
through profit
or loss
Derivative
financial
instruments
Financial assets
measured at
amortised cost
Financial assets
held for trading
Financial assets
measured at fair
value through OCI
Derivative
financial
instruments
Slovenia
360,623
-
331,539
-
2,450
347,976
-
241,095
2,449
Other members of
European Union
1,214,523
-
951,992
2,267
36,606
1,184,663
-
774,380
36,606
- Austria
96,349
-
79,119
-
-
96,349
-
51,193
-
- Belgium
129,217
-
94,088
-
11,397
129,217
-
55,622
11,397
- Bulgaria
41,233
-
3,029
-
-
41,233
-
3,029
-
- Czech Republic
12,901
-
-
-
-
12,901
-
-
-
- Cyprus
10,187
-
1,553
-
-
10,187
-
1,553
-
- Denmark
5,975
-
13,333
-
-
5,975
-
13,333
-
- Finland
57,440
-
114,292
-
-
57,440
-
84,477
-
- France
184,831
-
169,157
-
10,087
179,844
-
137,668
10,087
- Germany
139,370
-
105,082
-
10,447
114,497
-
70,207
10,447
- Greece
-
-
10,888
-
-
-
-
10,888
-
- Hungary
37,346
-
5,260
-
-
37,346
-
5,260
-
- Ireland
53,384
-
31,592
-
-
53,384
-
29,525
-
- Italy
37,472
-
13,544
99
-
37,472
-
13,544
-
- Latvia
15,507
-
-
-
-
15,507
-
-
-
- Lithuania
16,798
-
-
-
-
16,798
-
-
-
- Luxembourg
91,588
-
27,256
-
-
91,588
-
27,256
-
- Netherlands
57,523
-
112,907
2,168
4,675
57,523
-
99,933
4,675
- Poland
19,772
-
17,691
-
-
19,772
-
17,691
-
- Portugal
46,750
-
16,440
-
-
46,750
-
16,440
-
- Romania
37,802
-
4,827
-
-
37,802
-
4,827
-
- Slovakia
31,523
-
31,592
-
-
31,523
-
31,592
-
- Spain
55,076
-
39,097
-
-
55,076
-
39,097
-
- Sweden
24,753
-
61,245
-
-
24,753
-
61,245
-
- Other
11,726
-
-
-
-
11,726
-
-
-
United States of America
25,966
-
62,170
849
-
4,690
-
11,859
-
Other countries
316,503
203
1,493,095
-
41,691
60,119
203
263,943
41,796
- Bosnia and Herzegovina
7,648
-
177,746
-
-
4,056
-
2,905
-
- Kosovo
-
-
58,034
-
17
-
-
-
17
- Montenegro
40,672
-
20,949
-
-
6,780
-
2,819
-
- North Macedonia
189,383
-
134,268
-
5
15,260
-
54,590
31
- Serbia
25,490
-
898,531
-
-
-
-
3,913
79
- Albania
-
-
25,866
-
-
-
-
25,866
-
- Canada
3,007
-
21,147
-
-
3,007
-
21,147
-
- Great Britain
-
-
54,178
-
41,669
-
-
54,178
41,669
- Iceland
7,746
-
7,892
-
-
7,746
-
7,892
-
- Israel
-
-
9,053
-
-
-
-
9,053
-
- Kazakhstan
-
-
12,970
-
-
-
-
12,970
-
- Norway
16,186
-
11,206
-
-
16,186
-
11,206
-
- Russia
-
-
2,026
-
-
-
-
2,026
-
- Switzerland
19,287
203
54,572
-
-
-
203
50,721
-
- Other
7,084
-
4,657
-
-
7,084
-
4,657
-
Total
1,917,615
203
2,838,796
3,116
80,747
1,597,448
203
1,291,277
80,851
Other members of the European Union included in the line item
‘Other’ are Malta and Estonia.
Other members of the ‘Other countries’ in the line item ‘Other’
are Egypt, Uzbekistan, and Oman.
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SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
in EUR thousands
31 Dec 2021
NLB Group
NLB
Country
Financial assets
measured at
amortised cost
Financial assets
held for trading
Financial assets
measured at fair
value through OCI
Non-trading
financial assets
mandatorily at FV
through profit
or loss
Derivative
financial
instruments
Financial assets
measured at
amortised cost
Financial assets
held for trading
Financial assets
measured at fair
value through OCI
Derivative
financial
instruments
Slovenia
324,705
-
331,155
-
6,835
324,705
-
280,174
6,835
Other members of
European Union
1,076,225
-
1,180,521
2,428
1,388
1,041,207
-
970,192
1,388
- Austria
76,628
-
81,063
-
-
76,628
-
56,551
-
- Belgium
126,828
-
93,404
-
642
126,828
-
59,830
642
- Bulgaria
43,374
-
3,173
-
-
43,374
-
3,173
-
- Czech Republic
-
-
12,795
-
-
-
-
12,795
-
- Cyprus
12,447
-
1,755
-
-
12,447
-
1,755
-
- Denmark
-
-
20,234
-
-
-
-
20,234
-
- Finland
45,899
-
107,633
-
-
45,899
-
99,578
-
- France
170,425
-
193,668
-
528
160,423
-
162,625
528
- Germany
105,368
-
115,180
-
167
95,361
-
92,622
167
- Greece
-
-
14,805
-
-
-
-
14,805
-
- Hungary
21,719
-
6,547
-
-
21,719
-
6,547
-
- Ireland
51,906
-
100,689
-
-
51,906
-
32,639
-
- Italy
26,190
-
10,910
107
-
26,190
-
10,910
-
- Latvia
24,929
-
-
-
-
24,929
-
-
-
- Lithuania
15,321
-
27,226
-
-
15,321
-
27,226
-
- Luxembourg
78,097
-
30,087
-
-
78,097
-
30,087
-
- Netherlands
67,678
-
143,546
2,321
51
57,670
-
135,529
51
- Poland
17,829
-
18,989
-
-
17,829
-
18,989
-
- Portugal
47,842
-
18,704
-
-
47,842
-
18,704
-
- Romania
23,365
-
5,484
-
-
23,365
-
5,484
-
- Slovakia
21,603
-
34,627
-
-
21,603
-
34,627
-
- Spain
70,347
-
64,377
-
-
65,346
-
49,857
-
- Sweden
15,128
-
75,625
-
-
15,128
-
75,625
-
- Other
13,302
-
-
-
-
13,302
-
-
-
United States of America
5,061
-
75,498
1,833
-
5,061
-
8,667
-
Other countries
311,635
-
1,808,087
-
23
65,451
-
282,009
27
- Bosnia and Herzegovina
4,048
-
145,522
-
-
4,048
-
3,204
-
- Kosovo
-
-
76,533
-
1
-
-
-
1
- Montenegro
37,349
-
23,578
-
-
6,799
-
3,073
-
- North Macedonia
221,697
-
152,886
-
6
13,230
-
57,867
-
- Serbia
7,167
-
1,196,724
-
-
-
-
5,021
10
- Albania
-
-
29,823
-
-
-
-
29,823
-
- Canada
14,026
-
27,247
-
-
14,026
-
27,247
-
- Great Britain
-
-
81,218
-
16
-
-
81,218
16
- Iceland
5,768
-
8,857
-
-
5,768
-
8,857
-
- Israel
-
-
10,468
-
-
-
-
10,468
-
- Kazakhstan
-
-
14,254
-
-
-
-
14,254
-
- Norway
14,606
-
16,210
-
-
14,606
-
16,210
-
- Russia
-
-
20,105
-
-
-
-
20,105
-
- Other
6,974
-
4,662
-
-
6,974
-
4,662
-
Total
1,717,626
-
3,395,261
4,261
8,246
1,436,424
-
1,541,042
8,250
Other members of the European Union included in the line item
‘Other’ are Malta and Estonia.
Other members of the ‘Other countries’ in the line item ‘Other’
are Egypt, Uzbekistan, and Oman.
284
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Financial Report
p) Internal rating of derivatives counterparties
in %
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
A
88.90
74.08
90.18
74.25
B
11.10
25.69
9.82
25.53
C
0.00
0.03
0.00
0.03
D and E
0.00
0.19
0.00
0.19
Total
100.00
100.00
100.00
100.00
All derivatives in the banking book are entered into with
counterparties with an external investment-grade rating.
When derivatives are entered into on behalf of NLB Group’s
customers, such customers usually do not have an external
rating, but all such transactions are covered through back-
to-back transactions involving third parties with an external
investment-grade rating.
r) Debt financial instruments in NLB Group’s and NLB’s portfolio that represent subordinated liabilities for the issuer
in EUR thousands
31 Dec 2022
NLB Group
NLB
Internal rating
A
B
C
D
Total
A
B
C
D
Total
Financial assets measured at fair value
through other comprehwensive income
28,014
-
-
-
28,014
28,014
-
-
-
28,014
Financial assets measured at amortised cost
- debt securities
2,612
-
-
-
2,612
2,612
-
-
-
2,612
- loans and advances to banks
-
-
-
-
-
84,713
-
-
-
84,713
- loans and advances to customers
-
-
-
-
-
-
-
6,613
-
6,613
Total
30,626
-
-
-
30,626
115,339
-
6,613
-
121,952
in EUR thousands
31 Dec 2021
NLB Group
NLB
Internal rating
A
B
C
D
Total
A
B
C
D
Total
Financial assets measured at fair value
through other comprehensive income
48,099
-
-
-
48,099
33,107
-
-
-
33,107
Financial assets measured at amortised cost
- loans and advances to banks
-
-
-
-
-
84,399
-
-
-
84,399
- loans and advances to customers
-
-
-
-
-
-
-
6,522
-
6,522
Total
48,099
-
-
-
48,099
117,506
-
6,522
-
124,028
285
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SB Statement
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Strategy
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Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
s) Presentation of net financial instruments by measurement category
in EUR thousands
NLB Group
31 Dec 2022
Financial assets
held for trading
Non-trading
financial assets
mandatorily at
FV through P&L
Financial assets
measured at
FV through OCI
Financial assets
measured at
amortised cost
Financial leases
Derivatives for
hedge accounting
Total
Cash and obligatory reserves with central
banks, and other demand deposits at banks
-
-
-
5,271,365
-
-
5,271,365
Securities
203
19,031
2,919,203
1,917,615
-
-
4,856,052
- Bonds
-
3,116
2,506,224
1,917,615
-
-
4,426,955
- Shares
-
5,579
80,407
-
-
-
85,986
- Commercial bills
-
-
21,824
-
-
-
21,824
- Treasury bills
203
-
310,748
-
-
-
310,951
- Investment funds
-
10,336
-
-
-
-
10,336
Derivatives
21,385
-
-
-
-
59,362
80,747
Loans and receivables
-
-
-
13,102,729
193,222
-
13,295,951
- Loans to governments
-
-
-
303,086
357
-
303,443
- Loans to banks
-
-
-
222,965
-
-
222,965
- Loans to financial organisations
-
-
-
116,046
32
-
116,078
- Loans to individuals
-
-
-
6,550,704
70,966
-
6,621,670
- Loans to other customers
-
-
-
5,909,928
121,867
-
6,031,795
Other financial assets
-
-
-
177,823
-
-
177,823
Total financial assets
21,588
19,031
2,919,203
20,469,532
193,222
59,362
23,681,938
in EUR thousands
NLB Group
31 Dec 2021
Financial assets
held for trading
Non-trading
financial assets
mandatorily at
FV through P&L
Financial assets
measured at
FV through OCI
Financial assets
measured at
amortised cost
Financial leases
Derivatives for
hedge accounting
Total
Cash and obligatory reserves with central
banks, and other demand deposits at banks
-
-
-
5,005,052
-
-
5,005,052
Securities
-
21,161
3,461,860
1,717,626
-
-
5,200,647
- Bonds
-
4,261
3,191,280
1,707,960
-
-
4,903,501
- Shares
-
4,472
66,599
-
-
-
71,071
- Commercial bills
-
-
37,569
-
-
-
37,569
- Treasury bills
-
-
166,412
9,666
-
-
176,078
- Investment funds
-
12,428
-
-
-
-
12,428
Derivatives
7,678
-
-
-
-
568
8,246
Loans and receivables
-
-
-
10,619,525
108,279
-
10,727,804
- Loans to governments
-
-
-
280,961
49
-
281,010
- Loans to banks
-
-
-
140,683
-
-
140,683
- Loans to financial organisations
-
-
-
141,698
11
-
141,709
- Loans to individuals
-
-
-
5,473,278
46,012
-
5,519,290
- Loans to other customers
-
-
-
4,582,906
62,206
-
4,645,112
Other financial assets
-
-
-
122,229
-
-
122,229
Total financial assets
7,678
21,161
3,461,860
17,464,432
108,279
568
21,063,978
286
Contents
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SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
in EUR thousands
NLB
31 Dec 2022
Financial assets
held for trading
Non-trading financial
assets mandatorily at
FV through P&L
Financial assets
measured at
FV through OCI
Financial assets
measured at
amortised cost
Derivatives for
hedge accounting
Total
Cash and obligatory reserves with central
banks, and other demand deposits at banks
-
-
-
3,339,024
-
3,339,024
Securities
203
7,519
1,334,061
1,597,448
-
2,939,231
- Bonds
-
-
1,196,760
1,597,448
-
2,794,208
- Shares
-
5,211
42,784
-
-
47,995
- Treasury bills
203
-
94,517
-
-
94,720
- Investment funds
-
2,308
-
-
-
2,308
Derivatives
21,489
-
-
-
59,362
80,851
Loans and receivables
-
7,892
-
6,405,038
-
6,412,930
- Loans to governments
-
-
-
124,736
-
124,736
- Loans to banks
-
-
-
350,625
-
350,625
- Loans to financial organisations
-
-
-
286,504
-
286,504
- Loans to individuals
-
-
-
3,036,499
-
3,036,499
- Loans to other customers
-
7,892
-
2,606,674
-
2,614,566
Other financial assets
-
-
-
114,399
-
114,399
Total financial assets
21,692
15,411
1,334,061
11,455,909
59,362
12,886,435
in EUR thousands
NLB
31 Dec 2021
Financial assets
held for trading
Non-trading financial
assets mandatorily at
FV through P&L
Financial assets
measured at
FV through OCI
Financial assets
measured at
amortised cost
Derivatives for
hedge accounting
Total
Cash and obligatory reserves with central
banks, and other demand deposits at banks
-
-
-
3,250,437
-
3,250,437
Securities
-
4,472
1,585,751
1,436,424
-
3,026,647
- Bonds
-
-
1,526,237
1,436,424
-
2,962,661
- Shares
-
4,472
44,709
-
-
49,181
- Treasury bills
-
-
14,805
-
-
14,805
Derivatives
7,682
-
-
-
568
8,250
Loans and receivables
-
7,888
-
5,344,440
-
5,352,328
- Loans to governments
-
-
-
143,864
-
143,864
- Loans to banks
-
-
-
199,287
-
199,287
- Loans to financial organisations
-
-
-
226,144
-
226,144
- Loans to individuals
-
-
-
2,656,935
-
2,656,935
- Loans to other customers
-
7,888
-
2,118,210
-
2,126,098
Other financial assets
-
-
-
92,404
-
92,404
Total financial assets
7,682
12,360
1,585,751
10,123,705
568
11,730,066
As at 31 December 2022 and 31 December 2021, all of NLB
Group’s financial liabilities, except for derivatives designated as
hedging instruments, trading liabilities, and financial liabilities
measured at fair value through profit or loss, were carried at
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NLB Group defines market risk as the risk of potential financial
losses due to changes in rates and/or market prices (exchange
rates, credit spreads, and equity prices), or in parameters that
affect prices (volatilities and correlations). Losses may impact
profit or loss directly, for example in the case of trading book
positions. However, for the banking book positions they are
reflected in the revaluation reserve. The exposure to the market
risk is to a certain degree integrated into the banking industry
and offers an opportunity to create financial results and value.
The Global Risk Department of NLB is independent from the
trading activities and reports to the Bank’s Assets and Liabilities
Committee (ALCO). Global Risk also monitors and manages
exposure to market risks separately for the banking and trading
books. Exposures and limits are monitored daily and reported
to the ALCO committee on a regular basis.
The Bank uses a wide selection of quantitative and qualitative
tools for measuring, managing, and reporting market risks
such as value-at-risk (VaR), sensitivity analysis, stress-
testing, backtesting, scenarios, other market risk mitigants
(concentration of exposures, gap limits, stop-loss limits, etc.),
net interest income sensitivity, economic value of equity, and
economic capital. Stress-testing provides an indication of the
potential losses that could occur in severe market conditions.
In the area of currency risk, NLB Group pursues the goal of
low to medium exposure. NLB monitors the open position
of NLB Group on an ongoing basis. The orientation of NLB
Group in interest rate risk management is to prevent negative
effects on the net interest income and economic value of equity
arising from changed market interest rates. The conclusion
of transactions involving derivatives at NLB is limited to the
servicing of the clients’ and hedging of the Group’s own open
positions. In accordance with the provisions of the Strategy on
trading with financial instruments in NLB Group, the trading
activities in other NLB Group members are very restricted.
For monitoring and managing NLB Group’s exposure to
market risks, uniform guidelines and exposure limits for
each type of risk are set for individual NLB Group entities.
The methodologies are in line with regulatory requirements
on individual and consolidated levels, while reporting to the
regulator on the consolidated level is carried out using the
standardised approach. Pursuant to the relevant policies,
NLB Group entities must monitor and manage exposure to
market risks and report to NLB accordingly. The exposure of an
individual NLB Group entity is regularly monitored and reported
to the Assets and Liabilities Committee of NLB Group (NLB
Group ALCO).
6.2.1. Currency risk (FX)
Foreign currency risk (FX) is a risk of the potential losses
from the open FX positions due to the changes of the foreign
currency rates. The exposures of NLB to the movement of the FX
rates have an impact on the financial position and cash flows of
the Bank. The Bank measures and manages the FX risk with a
usage of combination of sensitivity analysis, VaR, scenarios, and
stress-testing.
In the trading book, similar to the other market risks, risk is
managed on the basis of VaR limits which are approved by
the Management Board of the Bank and in accordance to the
adopted policy of managing market risk in the trading book of
NLB. Trading FX risk is managed on an integrated basis at a
portfolio level.
NLB monitors and manages FX risk in the banking book
according to the policy of managing FX risk in NLB. The policy
is primarily composed to protect Common Equity Tier 1 against
the negative effects of the volatility of the FX rates, whilst limiting
the volatility in the income statement. FX exposures in banking
book result from core banking business activities.
Each member is responsible for its own currency risk policy,
which also includes a limit system and is in line with the parent
Bank’s guidelines and standards, as well as local regulatory
requirements. Policies are confirmed by either the local
Management Board or Supervisory Board. NLB monitors and
manages NLB Group currency risk exposure on a monthly basis
for each member and on the consolidated level.
NLB Group banks follow the guidelines for managing FX
lending in NLB Group. The guidelines’ goal is to address risks
stemming from the potential excessive growth of FX lending, to
identify hidden risks, and tail-event risks related to FX lending,
to mitigate the respective risk, to internalise the respective costs,
and to hold adequate capital with respect to FX lending.
The positions of all currencies in the statement of financial
position of NLB, for which a daily limit is set, are monitored
daily. FX positions are managed on the currency level so that
they are always within the limits.
Regarding structural FX positions on a consolidation level,
assets, and liabilities held in foreign operations are translated
into euro currency at the closing FX rate on the reporting date.
Foreign exchange differences of non-euro assets and liabilities
against euro are recognised in OCI, and therefore affect
shareholder’s equity and CET1 capital. NLB Group ALM employs
strategies to manage this foreign currency exposure, including
matched funding of assets and liabilities.
Exposure to currency risks is discussed at daily liquidity
meetings and monthly meetings of the ALCO committee of the
NLB Group, and quarterly on the consolidated level.
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a) Analysis of financial instruments by currency exposure
in EUR thousands
NLB Group
31 Dec 2022
EUR
RSD
USD
CHF
Other
Total
Financial assets
Cash, cash balances at central banks, and
other demand deposits at banks
4,371,725
275,809
46,277
78,264
499,290
5,271,365
Financial assets held for trading
21,385
-
-
203
-
21,588
Non-trading financial assets mandatorily
at fair value through profit or loss
8,704
5,116
5,211
-
-
19,031
Financial assets measured at fair value
through other comprehensive income
1,977,055
627,667
157,859
54,572
102,050
2,919,203
Financial assets measured at amortised cost
- debt securities
1,677,506
6,964
49,088
19,287
164,770
1,917,615
- loans and advances to banks
82,041
102,510
20,582
3,047
14,785
222,965
- loans and advances to customers
10,952,838
804,520
20,791
53,759
1,241,078
13,072,986
- other financial assets
108,884
12,280
23,935
44
32,680
177,823
Derivatives - hedge accounting
59,362
-
-
-
-
59,362
Fair value changes of the hedged items in
portfolio hedge of interest rate risk
(23,767)
-
-
-
-
(23,767)
Total financial assets
19,235,733
1,834,866
323,743
209,176
2,054,653
23,658,171
Financial liabilities
Financial liabilities held for trading
21,580
9
-
-
-
21,589
Financial liabilities measured at fair
value through profit or loss
1,157
155
-
-
484
1,796
Derivatives - hedge accounting
2,124
-
-
-
-
2,124
Financial liabilities measured at amortised cost
- deposits from banks and central banks
84,104
1,539
2,604
5,788
12,379
106,414
- borrowings from banks and central banks
184,920
-
13,689
-
-
198,609
- due to customers
16,639,644
1,156,350
370,113
201,228
1,660,391
20,027,726
- borrowings from other customers
82,266
-
216
-
-
82,482
- debt securities issued
815,990
-
-
-
-
815,990
- other financial liabilities
207,887
30,372
29,698
1,933
24,573
294,463
Total financial liabilities
18,039,672
1,188,425
416,320
208,949
1,697,827
21,551,193
Net on-balance sheet
financial position
1,196,061
646,441
(92,577)
227
356,826
2,106,978
Derivative financial instruments
(75,897)
42,632
82,411
(2,031)
51,477
98,592
Net financial position
1,120,164
689,073
(10,166)
(1,804)
408,303
2,205,570
31 Dec 2021
Total financial assets
16,625,162
1,886,101
365,955
213,497
1,980,345
21,071,060
Total financial liabilities
15,728,879
1,270,088
404,640
184,689
1,595,282
19,183,578
Net on-balance sheet
financial position
896,283
616,013
(38,685)
28,808
385,063
1,887,482
Derivative financial instruments
(27,149)
2,002
44,115
(24,124)
(13,568)
(18,724)
Net financial position
869,134
618,015
5,430
4,684
371,495
1,868,758
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in EUR thousands
NLB
31 Dec 2022
EUR
RSD
USD
CHF
Other
Total
Financial assets
Cash, cash balances at central banks, and
other demand deposits at banks
3,282,376
471
9,315
11,672
35,190
3,339,024
Financial assets held for trading
21,489
-
-
203
-
21,692
Non-trading financial assets mandatorily
at fair value through profit or loss
10,200
-
5,211
-
-
15,411
Financial assets measured at fair value
through other comprehensive income
1,215,923
-
51,641
50,721
15,776
1,334,061
Financial assets measured at amortised cost
- debt securities
1,566,474
-
27,812
-
3,162
1,597,448
- loans and advances to banks
326,513
-
-
16,776
7,336
350,625
- loans and advances to customers
6,002,314
-
14,902
36,418
779
6,054,413
- other financial assets
91,777
3
22,000
1
618
114,399
Derivatives - hedge accounting
59,362
-
-
-
-
59,362
Fair value changes of the hedged items in
portfolio hedge of interest rate risk
(23,767)
-
-
-
-
(23,767)
Total financial assets
12,552,661
474
130,881
115,791
62,861
12,862,668
Financial liabilities
Financial liabilities held for trading
22,150
-
-
-
-
22,150
Financial liabilities measured at fair
value through profit or loss
2,514
-
-
-
-
2,514
Derivatives - hedge accounting
2,124
-
-
-
-
2,124
Financial liabilities measured at amortised cost
- deposits from banks and central banks
172,334
102
11,423
8,397
20,400
212,656
- borrowings from banks and central banks
43,603
-
13,689
-
-
57,292
- due to customers
10,707,852
2
147,439
77,583
51,535
10,984,411
- borrowings from other customers
-
-
216
-
-
216
- debt securities issued
815,990
-
-
-
-
815,990
- other financial liabilities
138,753
-
24,009
265
1,540
164,567
Total financial liabilities
11,905,320
104
196,776
86,245
73,475
12,261,920
Net on-balance sheet
financial position
647,341
370
(65,895)
29,546
(10,614)
600,748
Derivative financial instruments
(79,626)
-
65,535
(29,451)
24,326
(19,216)
Net financial position
567,715
370
(360)
95
13,712
581,532
31 Dec 2021
Total financial assets
11,383,613
1,219
164,554
83,457
104,305
11,737,148
Total financial liabilities
10,759,098
18
194,704
57,960
65,416
11,077,196
Net on-balance sheet
financial position
624,515
1,201
(30,150)
25,497
38,889
659,952
Derivative financial instruments
(15,358)
-
35,825
(25,132)
(14,076)
(18,741)
Net financial position
609,157
1,201
5,675
365
24,813
641,211
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b) FX sensitivity analysis
NLB Group and NLB
Scenarios
31 Dec 2022
31 Dec 2021
USD
+/-9.27%
+/-5.74%
CHF
+/-7.88%
+/-4.23%
CZK
+/-5.70%
+/-4.55%
RSD
+/-0.40%
+/-0.35%
MKD
+/-1.62%
+/-1.34%
JPY
+/-12.35%
+/-5.66%
AUD
+/-9.91%
+/-6.77%
HUF
+/-13.43%
+/-6.53%
HRK
+/-0.98%
+/-1.38%
BAM
+/-0 %
+/-0%
in EUR thousands
NLB Group
NLB
31 Dec 2022
Effects on
income
statement
Effects on other
comprehensive
income
Effects on
income
statement
Effects on other
comprehensive
income
Appreciation of
USD
(333)
-
(482)
423
CHF
(662)
463
7
-
CZK
(2)
-
1
-
RSD
11
3,167
1
-
MKD
1
4,518
1
-
Other
251
48
144
-
Effects on comprehensive income
(734)
8,196
(328)
423
Depreciation of
USD
277
-
400
(351)
CHF
565
(396)
(6)
-
CZK
2
-
(1)
-
RSD
(11)
(3,142)
(1)
-
MKD
(1)
(4,375)
(1)
-
Other
(203)
(48)
(121)
-
Effects on comprehensive income
629
(7,961)
270
(351)
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in EUR thousands
NLB Group
NLB
31 Dec 2021
Effects on
income
statement
Effects on other
comprehensive
income
Effects on
income
statement
Effects on other
comprehensive
income
Appreciation of
USD
454
-
(132)
42
CHF
(358)
566
6
-
CZK
11
-
11
-
RSD
2
2,501
4
-
MKD
2
3,570
285
-
Other
23
70
(17)
-
Effects on comprehensive income
134
6,707
157
42
Depreciation of
USD
(405)
-
117
(38)
CHF
329
(520)
(5)
-
CZK
(10)
-
(10)
-
RSD
(2)
(2,484)
(4)
-
MKD
(2)
(3,476)
(277)
-
Other
(21)
(69)
15
-
Effects on comprehensive income
(111)
(6,549)
(164)
(38)
The effect on the other comprehensive income statement
of NLB Group has increased due to the higher translation
positions in MKD and RSD currencies and due to the higher
volatility growths’ scenarios for MKD and RSD currencies.
6.2.2. Managing market risks in the trading book
Market risk exposure in the trading book arises mostly as a
result of the changes in interest rates, credit spreads, FX rates,
and equity prices.
The Management Board determines low total risk appetite
and limits by the risk type. The limits are monitored daily by the
Global Risk Department.
NLB uses an internal VaR model based on the variance-
covariance method for other market risks. The daily calculation
of the VAR value is adjusted to Basel standards (99%
confidence interval, a monitored period of 250 business days, a
10-day holding position period).
6.2.3. Interest rate risk
Interest rate risk is the risk to NLB Group’s capital and profit
or loss arising from changes in market interest rates. Interest
rate risk management of NLB Group includes all interest rate-
sensitive on- and off-balance sheet assets and liabilities which
are divided into the trading and banking book according to
regulatory standards. It takes into account the positions in
each currency. Interest rate risk management in NLB Group is
adopted in accordance with the risk appetite and risk strategy,
based on general Basel standards on interest rate management
in the banking book (IRRBB; hereinafter: ‘Standards’) and
European Banking Authority guidelines.
In the trading book, interest rate risk is measured on the basis
of the VaR method and BPV method, in accordance with the
adopted policy for managing market risk in the trading book of
NLB.
The interest rate risk in the banking book is measured and
monitored within a framework of interest rate risk management
policy that establishes consistent methodologies, models, and
limit systems. NLB Group manages interest rate risk exposure
through application of two main measures:
•
Economic value sensitivity – using BPV method (Basis Point
Value), which measures the extent to which the economic
value of the banking book would change if interest rates
change according to the scenario.
•
Sensitivity of net interest income – using EaR method
(Earnings at Risk), which measures the impact of the interest
rate change on future net interest income over a one-year
period, assuming constant balance sheet volume and
structure.
NLB Group regularly measures interest rate risk exposure in
the banking book under various standardised and additional
scenarios of changes in the level and shape of interest rate
yield curve, including all significant sources of risk, taking
into account behavioural and modelling assumptions. Part of
non-maturing deposits, which is considered as a core part is
allocated long-term by using replicating portfolio approach.
Optionality risk is mainly derived from behavioural options,
reflected in prepayments and withdrawals, and embedded
options such as caps and floors. Moreover, considering
expected cash flows, non-performing exposures, as well as off-
balance sheet items are considered when measuring interest
rate risk exposure.
The interest rate risk is closely measured, monitored, and
managed within approved risk limits and controls. The Group
manages interest rate positions and stabilises its interest rate
margin primarily with the pricing policy and a fund transfer
pricing policy. An important part of the interest rate risk
management is presented by the banking book securities
portfolio, whose primary purpose is to maintain adequate
liquidity reserves, while it also contributes to the stability of
the interest rate margin, which is why valuation risk has been
included in the Group’s interest rate risk management model.
NLB Group also manages interest rates risk by using plain
vanilla derivative financial instruments (interest rate swaps,
overnight index swaps, cross currency swaps, and forward rate
agreements), most of which are treated according to hedge
accounting rules.
Each member of NLB Group is responsible for its own interest
rate risk policy, which includes the limit system and is in line
with the parent Bank’s guidelines and standards, as well as
with the local regulatory requirements. NLB regularly monitors
the interest rate risk exposure of each individual member
of NLB Group in accordance with the Standards for Risk
Management in NLB Group. The aforementioned document
comprises guidelines for uniform and effective interest rate risk
management within individual NLB Group members.
Interest rate risk in the banking book is measured, monitored,
and reported by the Global Risk Department (weekly in the
case of NLB and monthly on Group level), while positions are
managed by Financial Markets. Exposure to interest rate risk
is discussed on ALCO monthly on NLB’s individual level and
quarterly on the consolidated level.
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a) Analysis of financial instruments according to the exposure
to interest rate risk
The following table presents open net interest rate risk positions
by the most important currencies of NLB Group.
Financial instruments without maturity such as sight deposits
are presented in the first gap irrespective of their behavioural
characteristics and the NLB Group’s expectations.
in EUR thousands
31 Dec 2022
NLB Group
Currency
1 - 3 years
3 - 5 years
5 - 10 years
Over 10 Years
EUR
(2,061,940)
1,461,068
1,389,104
667,013
RSD
338,852
213,972
52,070
2
MKD
192,033
13,086
17,792
10,070
Other
(131,316)
73,414
52,832
6,652
in EUR thousands
31 Dec 2021
NLB Group
Currency
1 - 3 years
3 - 5 years
5 - 10 years
Over 10 Years
EUR
(2,404,620)
1,211,248
1,573,325
446,585
RSD
203,340
341,214
62,458
1,912
MKD
141,261
21,960
13,835
9,378
Other
(32,296)
124,132
66,726
3,234
in EUR thousands
31 Dec 2022
NLB
Currency
1 - 3 years
3 - 5 years
5 - 10 years
Over 10 Years
EUR
(1,871,890)
1,050,116
1,023,946
550,833
Other
(81,512)
29,436
395
7,189
in EUR thousands
31 Dec 2021
NLB
Currency
1 - 3 years
3 - 5 years
5 - 10 years
Over 10 Years
EUR
(1,803,603)
815,356
1,203,636
389,570
Other
1,626
32,325
1,242
6,627
b) Net interest income sensitivity analysis and an economic
view of interest rate risk in the banking book
The analysis of interest income sensitivity for the horizon of the
next 12 months assumes a sudden parallel interest rate shock
down by 50 basis points or 100 basis points. The analysis
assumes that the positions used remain unchanged.
The assessment of the impact of a change in interest rates of
50/100 basis points on the amount of net interest income of the
banking book position:
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Net interest income sensitivity
43,713
18,520
21,393
6,668
Net interest income sensitivity - as % of Equity
2.02%
0.94%
1.48%
0.49%
The values in the table are calculated on short-term interest
rate gaps, where the applied parallel interest rate shock down
by 50/100 basis points represents a realistic and practical
scenario. The calculations of the sensitivity of net interest
income are implemented in technological support.
The ‘EVE’ (Economic Value of Equity) method is a measure
of the sensitivity of changes in market interest rates on the
economic value of financial instruments. The EVE represents
the present value of net future cash flows and provides
a comprehensive view of the possible long-term effects of
changing interest rates at least under the six prescribed
standardised interest rate shock scenarios or more if necessary,
according to the situation on financial markets. Calculations are
considering behavioural and automatic options, as well as the
allocation of non-maturing deposits.
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The assessment of the impact of a change in interest rates of 200 basis points on the economic value of the banking book position:
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Interest risk in banking book - EVE
122,276
126,651
82,714
84,130
Interest risk in banking book - EVE as % of Equity
5.60%
6.42%
5.72%
6.14%
The applied sudden parallel interest rate shock up is by 200 basis
points, which represents a “worst case” scenario for NLB Group.
The calculation takes into the account allocation of the core part
of non-maturing deposits and other behavioural assumptions.
Exposure to the interest rate risk of the banking book mainly
arises from investments in long-term debt securities and
loans with fixed interest rate, as well as from transformation of
term to sight deposits due to a low interest rate environment.
Long-term interest positions of other members in NLB Group,
which present a majority of their exposure to interest-rate risk
(an economic point of view), mainly arise from a portfolio of
Liquidity risk is the risk of the NLB Group being unable to fulfil
current or future expected and unexpected cash requirements,
across all time horizons. The risk may stem from the reduction in
funding sources or a reduction in the liquidity of certain assets.
Liquidity risk is related to funding liquidity risk (the NLB
Group’s liquidity on the liabilities-side) and market liquidity
risk (counterbalancing capacity on the assets-side). On the
liabilities-side, liquidity risk can result in a loss if the Bank is
unable to settle all its liabilities or when the Bank, because of its
incapacity to provide sufficient funds to settle its obligations, is
forced to raise the necessary funds at a cost which significantly
exceeds the normal cost. On the assets-side, the liquidity risk
is related to the market value of counterbalancing capacity
and arises in case of significant reduction of market value of
an individual financial instrument and may result in insufficient
value of counterbalancing capacity to cover the NLB Group’s
liquidity needs.
Intraday liquidity risk is the capacity required during the
business day to enable financial institutions to make payments
and settle obligations.
In the risk identification process, first the reasons for the
realisation of each identified material risk are analysed and
grouped together in short risk descriptions. Material risks are
then classified into three groups based on what part of liquidity
is affected by the realisation of the material risks: liabilities
side, assets side, intraday liquidity risk. The origin of each risk
is determined as being internal, external, or a combination of
internal and external (internal shock, meaning it originates
within the bank, or external shock; meaning it comes from
outside the bank - e.g., a major macroeconomic event, physical
or transition event, ESG rating downgrade). Based on the
identified material risks, key liquidity risk drivers are defined.
Based on the identified material risks, key liquidity risk drivers
are defined. Key risk drivers of the liquidity position are factors
that are expected to trigger a substantial deterioration of the
Group’s liquidity position. This deterioration may take place in
the form of an increase in outflows, a decrease in inflows or a
decrease in the liquidity value of the counterbalancing capacity.
Liquidity risk is defined as an important risk type for NLB Group,
and one which must be managed carefully. NLB Group has
a liquidity risk management framework in place that enables
maintaining a low risk tolerance for liquidity risk. NLB Group
formulated a set of liquidity risk metrics and limits to manage
liquidity position within the requirements set by the regulator.
By maintaining a smooth long-term maturity profile, limiting
dependence on wholesale funding, and holding a solid liquidity
reserve, the NLB Group maintains a sound and robust liquidity
position, even under severely adverse conditions.
The Management Board approves the Liquidity Risk
Management Policy, which outlines the key principles for the
Bank’s liquidity management. ALCO receives a regular report
on the liquidity position and the performance against approved
limits and targets. ALCO oversees the development of the
Bank’s funding and liquidity position and decides on liquidity
risk-related issues in NLB Group.
Risk tolerance for liquidity risk is low, therefore NLB Group must
be able to provide sufficient funds for settling its liabilities at all
times, even if a specific stress scenario is realised. NLB Group
measures and manages its liquidity in two stages:
• Static view (current exposure),
• Forward-looking and stress-testing.
The objectives of monitoring and managing liquidity risk in NLB
Group are as follows:
•
ensuring a sufficient amount of liquidity for the settlement of
all NLB Group’s liabilities;
•
minimising the costs of maintaining liquidity;
•
determining an adequate amount of counterbalancing
capacity and optimal liquidity management;
• ensuring adequate control environment;
•
ensuring an appropriate level of liquidity for different
situations and stress scenarios;
•
anticipating emergencies or crisis conditions, and
implementing contingency plans in the event of extraordinary
circumstances;
•
ensuring regular projections of future cash flows and stress-
testing of liquidity risk;
•
preparing proposals for establishing additional financial
assets as collateral for sources of funding;
•
to ensure that climate-related and environmental risks which
could have a material impact on net cash outflows or liquidity
reserves, are incorporate into liquidity risk management and
liquidity reserves calibration.
Overall assessment of the liquidity position of NLB Group is
assessed in the Internal Liquidity Adequacy Assessment Process
(ILAAP) at least once per year for NLB Group, and it includes a
clear formal statement on liquidity adequacy, supported by an
analysis of ILAAP outcomes. The ILAAP process is integral to risk
management frameworks and is aligned with the NLB Group’s risk
appetite which is consistent with the business model and approved
by the management board. Based on the Risk Appetite, the NLB
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Group prepares a business plan and financial forecasts which are
crucial for defining internal capital needs (ICAAP process) and
internal liquidity assessment (ILAAP process). Both processes are
conducted from the normative and economic perspectives and
supplemented by the stress-testing programme.
NLB Group performs stress tests on a regular basis for a
variety of bank-specific and market-wide stress scenarios
(individually and in combination) to identify sources of potential
liquidity strain and to ensure that current exposures remain
in accordance with the NLB Group’s established liquidity risk
tolerance. Stress test outcomes are used to adjust its liquidity
risk management strategies, policies, and positions, define
minimum amount of counterbalancing capacity, and to develop
effective contingency plans.
NLB Group has a formal liquidity contingency plan (LCP)
that clearly sets out the procedures for addressing liquidity
shortfalls in stressed situations. The plan outlines procedures
to manage a range of stress environments, establish clear
lines of responsibility, include clear invocation and escalation
procedures, and is regularly tested and updated to ensure that
it is operationally robust.
NLB Group maintains a sufficient amount of liquidity reserves
in the form of high credit quality debt securities that are eligible
for refinancing via the ECB/central bank or on the market.
In the current situation, NLB Group also strives to follow as
closely as possible the long-term trend of diversification on
both the liability and asset sides of the balance sheet. NLB
Group regularly performs stress tests with the aim of testing
the liquidity stability and the availability of liquidity reserves
in various stress situations. In addition, special attention is
given to the fulfilment of the liquidity regulation (CRR/CRD),
with monitoring and reporting of the liquidity coverage ratio
(LCR) according to the Delegated Act and net stable funding
ratio (NSFR). This also includes monitoring and reporting
of Additional Liquidity Monitoring Metrics (ALMM) on solo
and consolidated levels. In accordance with the Commission
Implementing Regulation (EU), NLB Group regularly monitors
and issues quarterly reports on asset encumbrance.
The Group manages its liquidity position (liquidity within one
day) daily, for a period of several days or weeks in advance,
based on the planning and monitoring of cash flows. Each NLB
Group member is responsible for its own liquidity position and
carries out the following activities:
• managing intraday liquidity;
•
planning and monitoring cash flows;
•
monitoring and complying with the liquidity regulations of the
central bank;
• adopting business decisions;
•
forming and managing liquidity reserves; and
•
performing liquidity stress test to define the liquidity reserves
for smooth functioning of the payment system in stressed
circumstances.
NLB Group members actively manage liquidity over the course
of a day, taking into account the characteristics of payment
settlements to ensure the timely settlement of liabilities in
normal and stressed circumstances.
Liquidity risk management in NLB Group is under strict
monitoring by NLB as a parent bank. Reporting to NLB by all
Group members is performed daily. Global Risk gives guidelines
and defines minimal standards for Group members regarding
liquidity risk management in NLB Group Risk Management
Standards. Each Group member is responsible for ensuring
adequate liquidity via the necessary sources of funding
and their appropriate diversification and maturity, and by
managing liquidity reserves and fulfilling the requirements of
regulations governing liquidity. The exposure of an individual
NLB Group member towards liquidity risk is regularly monitored
and reported to ALCO, and to local Assets and Liabilities
Committees.
a) Managing NLB Group’s liquidity reserves
NLB Group has liquidity reserves available to cover liabilities
that fall or may become due. Liquidity reserves must become
available on short notice. Liquidity reserves are comprised of
cash, the settlement account at the central bank above reserve
requirement, debt securities, and loans eligible as collateral for
the Eurosystem’s liquidity providing operations on the basis of
which the Bank may generate the requisite liquidity at any time.
The available liquidity reserves are liquidity reserves decreased
by the required balances for the continuous performance of
payment transactions, encumbered securities, and/or credit
claims for different purposes (secured funding).
The minimum amount of liquidity reserves is determined on
the basis of the methodology pertaining to liquidity risk stress
tests. The amount represents a sum of liquidity reserves that
would enable the survival of a severe stress over a period of
one month in a combined stress scenario and comprises high
quality liquid assets according to LCR methodology, specified
in Commission Delegated Regulation (EU) 2015/61 and the later
amendments.
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The structure of liquidity reserves is shown in the following table.
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Liquidity reserves
Cash, cash balances at central banks*
3,918,043
3,567,873
3,180,523
3,068,123
Trading book securities
203
-
203
-
Banking book securities
4,665,913
4,615,374
2,831,685
2,479,952
ECB eligible loans
624,278
80,043
624,278
80,043
Total available liquidity reserves
9,208,437
8,263,290
6,636,689
5,628,118
Encumbered liquidity reserves
125,556
874,827
57,041
874,827
*above reserve requirement
As at 31 December 2022, 81.0% (31 December 2021: 79.8%)
of debt securities in the banking book of NLB Group were
government securities (including government guaranteed
bonds – GGB), and 9.1% (31 December 2021: 10.0%) were senior
unsecured bonds.
The purpose of banking book securities is to provide liquidity,
along with stabilisation of the interest margin and the interest
rate risk management, simultaneously. When managing the
portfolio, NLB Group uses conservative principles, particularly
with respect to the portfolio’s structure in terms of issuers’
ratings and asset class. The framework for managing the
banking book securities is the Policy for managing debt
securities in the Financial Markets’ banking book and the Policy
for Managing Domestic (Slovenian) Corporate Debt Securities
in Large Corporates, which clearly define the objectives and
characteristics of the associated portfolio.
The ECB-eligible credit claims comprise loans which fulfil the
high eligibility criteria set by the ECB itself and for domestic
loans are specified in the general terms about execution of
monetary policy framework (Part 4) adopted by the Bank of
Slovenia. NLB is the only member of NLB Group that complies
with the conditions set by the Eurosystem to classify as an
eligible counterparty. As such, these ECB credit claims are
included among liquidity reserves.
Members of NLB Group manage their liquid assets on a
decentralised basis in compliance with the local liquidity
regulation and valid policies of NLB Group.
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b) Encumbered/unencumbered assets
in EUR thousands
NLB Group
NLB
31 Dec 2022
Carrying amount
of encumbered
assets
Fair value
of encumbered
securities
Carrying amount
of unencumbered
assets
Fair value
of unencumbered
securities
Carrying amount
of encumbered
assets
Fair value
of encumbered
ecurities
Carrying amount
of unencumbered
assets
Fair value
of unencumbered
securities
Loans on demand
1,109,016
-
3,673,152
-
112,804
-
3,045,737
-
Equity instruments
742
742
95,580
95,580
-
-
50,303
50,303
Debt securities
77,522
74,992
4,682,208
4,516,292
57,041
54,510
2,831,887
2,679,423
Loans and advances
other than loans
on demand
27,000
-
13,446,808
-
11,413
-
6,515,916
-
Other assets
-
-
1,048,212
-
-
-
1,314,232
-
Total
1,214,280
22,945,960
181,258
13,758,075
in EUR thousands
NLB Group
NLB
31 Dec 2021
Carrying amount
of encumbered
assets
Fair value
of encumbered
securities
Carrying amount
of unencumbered
assets
Fair value
of unencumbered
securities
Carrying amount
of encumbered
assets
Fair value
of encumbered
ecurities
Carrying amount
of unencumbered
assets
Fair value
of unencumbered
securities
Loans on demand
1,083,713
-
3,411,743
-
101,854
-
2,970,538
-
Equity instruments
780
780
82,719
82,719
-
-
49,181
49,181
Debt securities
454,939
455,631
4,662,209
4,689,116
497,515
500,328
2,479,951
2,501,899
Loans and advances
other than loans
on demand
471,556
-
10,378,477
-
464,027
-
4,980,705
-
Other assets
-
-
1,031,360
-
-
-
1,155,761
-
Total
2,010,988
19,566,508
1,063,396
11,636,136
c) Collateral received – unencumbered
The nominal amount of collateral received, or own debt securities issued not available for encumbrance are shown in the table below:
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Equity instruments
262,947
242,682
239,405
203,620
Loans and advances other
than loans on demand
167,431
140,751
16,867
20,245
Other assets
12,876,402
9,839,848
4,721,729
4,120,940
Total
13,306,780
10,223,281
4,978,001
4,344,805
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d) Source of encumbrance
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Collateralised
liability
Assets given
as collateral
Collateralised
liability
Assets given
as collateral
Collateralised
liability
Assets given
as collateral
Collateralised
liability
Assets given
as collateral
Derivatives
3,238
13,753
42,292
53,744
9,607
20,051
42,292
53,744
Deposits
62,755
65,048
746,021
835,066
13,001
12,971
790,505
877,641
Other sources of
encumbrance
2,901
1,135,479
3,698
1,122,179
-
148,235
-
132,010
Total
68,894
1,214,280
792,011
2,010,989
22,608
181,257
832,797
1,063,395
As at 31 December 2022, NLB Group and NLB had a large
share of unencumbered assets. Other sources of encumbrance
mostly relate to the obligatory reserve. On the NLB Group level,
the amount of encumbered assets equalled EUR 1,214 million
(31 December 2021: EUR 2,011 million), relating to the deposit
guarantee scheme and to targeted longer-term refinancing
operations (TLTRO) which is held only by the N Banka.
e) Non-derivative cash flows
The tables below illustrate the cash flows from non-derivative
financial instruments by residual maturities at the end of the
year. The amounts disclosed in the table are the undiscounted
contractual cash flows determined on the basis of spot rates at
the end of the reporting period.
in EUR thousands
NLB Group
31 Dec 2022
Up to
1 Month
1 Month to
3 Months
3 Months to
1 Year
1 Year to
5 Years
Over
5 Years
Total
Financial liabilities and credit-
related commitments
Financial liabilities measured at fair
value through profit or loss
-
-
-
1,796
-
1,796
Financial liabilities measured at amortised cost
- deposits from banks and central banks
85,924
101
164
20,598
-
106,787
- borrowings from banks and central banks
1,386
2,067
5,809
129,289
63,074
201,625
- due to customers
17,972,715
301,188
958,293
819,684
17,148
20,069,028
- borrowings from other customers
651
1,413
6,247
35,338
41,846
85,495
- debt securities issued
-
4,427
52,572
473,176
646,795
1,176,970
- other financial liabilities
200,302
8,979
22,610
61,190
1,382
294,463
Credit risk related commitments
1,025,323
191,162
863,679
572,505
438,012
3,090,681
Non-financial guarantees
238,213
65,243
155,752
323,300
80,271
862,779
Total
19,524,514
574,580
2,065,126
2,436,876
1,288,528
25,889,624
Total financial assets
6,989,609
985,475
3,601,095
8,665,468
5,776,769
26,018,416
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in EUR thousands
NLB Group
31 Dec 2021
Up to
1 Month
1 Month to
3 Months
3 Months to
1 Year
1 Year to
5 Years
Over
5 Years
Total
Financial liabilities and credit-
related commitments
Financial liabilities measured at amortised cost
- deposits from banks and central banks
56,073
173
684
15,448
-
72,378
- borrowings from banks and central banks
954
480
748,496
99,842
6,048
855,820
- due to customers
15,772,513
270,238
859,204
743,774
22,543
17,668,272
- borrowings from other customers
614
1,929
6,824
29,554
40,862
79,783
- debt securities issued
-
4,427
6,803
41,400
318,201
370,831
- other financial liabilities
120,694
11,678
17,866
55,321
1,319
206,878
Credit risk related commitments
578,233
166,473
838,890
470,308
407,499
2,461,403
Non-financial guarantees
30,426
72,983
195,917
342,426
61,349
703,101
Total
16,559,507
528,381
2,674,684
1,798,073
857,821
22,418,466
Total financial assets
6,179,369
820,022
2,704,322
8,110,038
5,031,994
22,845,745
in EUR thousands
NLB
31 Dec 2022
Up to
1 Month
1 Month to
3 Months
3 Months to
1 Year
1 Year to
5 Years
Over
5 Years
Total
Financial liabilities and credit-
related commitments
Financial liabilities measured at fair
value through profit or loss
-
-
-
728
1,786
2,514
Financial liabilities measured at amortised cost
-
- deposits from banks and central banks
193,526
-
-
19,441
-
212,967
- borrowings from banks and central banks
13,086
681
-
45,052
-
58,819
- due to customers
10,604,437
60,516
119,935
208,066
3,417
10,996,371
- borrowings from other customers
1
-
-
215
-
216
- debt securities issued
-
4,427
52,572
473,176
646,795
1,176,970
- other financial liabilities
122,875
4,891
6,494
29,915
392
164,567
Credit risk related commitments
536,542
140,256
618,940
396,200
293,261
1,985,199
Non-financial guarantees
23,682
52,473
106,608
243,618
36,424
462,805
Total
11,494,149
263,244
904,549
1,416,411
982,075
15,060,428
Total financial assets
4,036,868
402,218
1,570,138
4,643,031
3,344,409
13,996,664
in EUR thousands
NLB
31 Dec 2021
Up to
1 Month
1 Month to
3 Months
3 Months to
1 Year
1 Year to
5 Years
Over
5 Years
Total
Financial liabilities and credit-
related commitments
Financial liabilities measured at fair
value through profit or loss
-
-
-
352
-
352
Financial liabilities measured at amortised cost
- deposits from banks and central banks
94,326
-
-
15,197
-
109,523
- borrowings from banks and central banks
44,569
-
742,584
82,882
-
870,035
- due to customers
9,303,784
65,745
125,834
158,637
8,706
9,662,706
- borrowings from other customers
-
-
-
406
-
406
- debt securities issued
-
4,427
6,803
41,400
318,201
370,831
- other financial liabilities
71,942
4,041
616
25,501
427
102,527
Credit risk related commitments
503,492
96,524
451,614
280,201
220,580
1,552,411
Non-financial guarantees
16,714
45,786
100,102
240,761
33,803
437,166
Total
10,034,827
216,523
1,427,553
845,337
581,717
13,105,957
Total financial assets
3,678,758
308,197
1,061,588
4,150,714
3,280,846
12,480,103
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When determining the gap between the financial liabilities and
financial assets in the maturity bucket of up to one month, it is
necessary to be aware of the fact that financial liabilities include
total demand deposits, and that NLB may apply a stability
weight of 60% to demand deposits when ensuring compliance
with the central bank’s regulations concerning calculation of
the liquidity position. To ensure NLB Group’s and NLB’s liquidity,
and based on its approach to risk, in previous years NLB
Group compiled a substantial amount of high-quality liquid
investments, mostly government securities and selected loans,
which are accepted as adequate financial assets by the ECB.
Liabilities and credit-related commitments are included in
maturity buckets based on their residual contractual maturity.
f) An analysis of the statement of financial position by residual contractual maturity
in EUR thousands
NLB Group
31 Dec 2022
Up to
1 Month
1 Month to
3 Months
3 Months to
1 Year
1 Year to
5 Years
Over
5 Years
Total
Cash, cash balances at central banks, and
other demand deposits at banks
5,271,365
-
-
-
-
5,271,365
Financial assets held for trading
21,385
203
-
-
-
21,588
Non-trading financial assets mandatorily
at fair value through profit or loss
6,028
-
-
-
13,003
19,031
Financial assets measured at fair value
through other comprehensive income
581,522
167,836
365,650
1,525,431
278,764
2,919,203
Financial assets measured at amortised cost
- debt securities
20,627
90,756
208,048
927,083
671,101
1,917,615
- loans and advances to banks
216,239
752
4,460
1,512
2
222,965
- loans and advances to customers
589,494
602,256
2,650,299
5,110,381
4,120,556
13,072,986
- other financial assets
145,171
5,804
3,100
23,699
49
177,823
Derivatives - hedge accounting
59,362
-
-
-
-
59,362
Fair value changes of hedged items in
portfolio hedge of interest rate risk
-
-
(166)
(2,770)
(20,831)
(23,767)
Non-current assets held for sale
-
-
15,436
-
-
15,436
Property and equipment
-
-
-
29,482
221,834
251,316
Investment property
-
-
-
31,399
4,240
35,639
Intangible assets
-
-
-
13,797
44,438
58,235
Investments in associates and joint ventures
-
-
-
-
11,677
11,677
Current income tax assets
-
-
1,696
-
-
1,696
Deferred income tax assets
-
-
4,610
35,781
15,136
55,527
Other assets
13,618
8,614
14,012
36,129
170
72,543
Total assets
6,924,811
876,221
3,267,145
7,731,924
5,360,139
24,160,240
Financial liabilities held for trading
21,589
-
-
-
-
21,589
Financial liabilities measured at fair
value through profit or loss
-
-
-
1,796
-
1,796
Derivatives - hedge accounting
2,124
-
-
-
-
2,124
Financial liabilities measured at amortised cost
- deposits from banks and central banks
85,864
101
164
20,285
-
106,414
- borrowings from banks and central banks
1,334
1,807
5,551
126,867
63,050
198,609
- due to customers
17,971,630
298,609
943,776
797,893
15,818
20,027,726
- borrowings from other customers
616
1,335
5,667
33,086
41,778
82,482
- debt securities issued
-
3,689
12,198
299,026
501,077
815,990
- other financial liabilities
196,862
8,548
19,697
44,890
626
270,623
- lease liabilities
3,440
431
2,913
16,300
756
23,840
Provisions
15,173
1,434
30,812
73,879
1,354
122,652
Current income tax liabilities
3,610
506
8,304
-
-
12,420
Deferred income tax liabilities
-
-
-
2,569
-
2,569
Other liabilities
30,797
1,311
2,788
10,409
3,776
49,081
Total liabilities
18,333,039
317,771
1,031,870
1,427,000
628,235
21,737,915
Credit risk related commitments
1,025,323
191,162
863,679
572,505
438,012
3,090,681
Non-financial guarantees
238,213
65,243
155,752
323,300
80,271
862,779
Total liabilities and credit-related commitments
19,596,575
574,176
2,051,301
2,322,805
1,146,518
25,691,375
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Financial Report
in EUR thousands
NLB Group
31 Dec 2021
Up to
1 Month
1 Month to
3 Months
3 Months to
1 Year
1 Year to
5 Years
Over
5 Years
Total
Cash, cash balances at central banks, and
other demand deposits at banks
5,005,052
-
-
-
-
5,005,052
Financial assets held for trading
7,678
-
-
-
-
7,678
Non-trading financial assets mandatorily
at fair value through profit or loss
6,739
-
921
3,340
10,161
21,161
Financial assets measured at fair value
through other comprehensive income
401,080
163,233
400,588
1,888,222
608,737
3,461,860
Financial assets measured at amortised cost
- debt securities
38,317
19,107
124,948
783,028
752,226
1,717,626
- loans and advances to banks
119,930
16,827
2,374
1,552
-
140,683
- loans and advances to customers
466,930
547,238
1,912,038
4,519,726
3,141,189
10,587,121
- other financial assets
92,505
3,309
773
25,538
104
122,229
Derivatives - hedge accounting
568
-
-
-
-
568
Fair value changes of hedged items in
portfolio hedge of interest rate risk
-
-
-
1,330
5,752
7,082
Non-current assets held for sale
-
-
7,051
-
-
7,051
Property and equipment
-
-
-
89,813
157,201
247,014
Investment property
-
-
-
43,693
3,931
47,624
Intangible assets
-
-
-
29,259
29,817
59,076
Investments in associates and joint ventures
-
-
-
-
11,525
11,525
Current income tax assets
-
-
3,948
-
-
3,948
Deferred income tax assets
-
-
620
31,934
6,423
38,977
Other assets
23,983
9,655
19,859
37,563
161
91,221
Total assets
6,162,782
759,369
2,473,120
7,454,998
4,727,227
21,577,496
Financial liabilities held for trading
7,585
-
-
-
-
7,585
Derivatives - hedge accounting
35,377
-
-
-
-
35,377
Financial liabilities measured at amortised cost
- deposits from banks and central banks
56,053
-
521
15,254
-
71,828
- borrowings from banks and central banks
889
442
751,773
99,418
6,009
858,531
- due to customers
15,771,461
268,484
852,576
727,308
20,980
17,640,809
- borrowings from other customers
535
1,770
6,186
27,074
38,486
74,051
- debt securities issued
-
3,689
1,759
-
283,071
288,519
- other financial liabilities
120,182
10,655
13,817
37,643
257
182,554
- lease liabilities
512
1,023
4,049
17,678
1,062
24,324
Provisions
7,314
1,183
39,914
69,863
1,130
119,404
Current income tax liabilities
2,722
3,156
-
-
-
5,878
Deferred income tax liabilities
-
-
-
3,045
-
3,045
Other liabilities
36,495
748
5,749
4,867
1,609
49,468
Total liabilities
16,039,125
291,150
1,676,344
1,002,150
352,604
19,361,373
Credit risk related commitments
578,233
166,473
838,890
470,308
407,499
2,461,403
Non-financial guarantees
30,426
72,983
195,917
342,426
61,349
703,101
Total liabilities and credit-related commitments
16,647,784
530,606
2,711,151
1,814,884
821,452
22,525,877
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in EUR thousands
NLB
31 Dec 2022
Up to
1 Month
1 Month to
3 Months
3 Months to
1 Year
1 Year to
5 Years
Over
5 Years
Total
Cash, cash balances at central banks, and
other demand deposits at banks
3,339,024
-
-
-
-
3,339,024
Financial assets held for trading
21,489
203
-
-
-
21,692
Non-trading financial assets mandatorily
at fair value through profit or loss
552
80
143
6,806
7,830
15,411
Financial assets measured at fair value
through other comprehensive income
65,845
103,900
203,422
792,812
168,082
1,334,061
Financial assets measured at amortised cost
- debt securities
20,601
28,445
131,802
790,360
626,240
1,597,448
- loans and advances to banks
112,181
55,033
34,255
76,880
72,276
350,625
- loans and advances to customers
315,265
185,007
1,043,235
2,417,414
2,093,492
6,054,413
- other financial assets
90,598
375
89
23,320
17
114,399
Derivatives - hedge accounting
59,362
-
-
-
-
59,362
Fair value changes of hedged items in
portfolio hedge of interest rate risk
-
-
(166)
(2,770)
(20,831)
(23,767)
Non-current assets held for sale
-
-
4,235
-
-
4,235
Property and equipment
-
-
-
15,054
63,538
78,592
Investment property
-
-
-
6,753
-
6,753
Intangible assets
-
-
-
5,661
24,764
30,425
Investments in subsidiaries,
associates and joint ventures
-
-
7,663
36,865
864,083
908,611
Deferred income tax assets
-
-
-
34,888
-
34,888
Other assets
417
-
5,494
7,250
-
13,161
Total assets
4,025,334
373,043
1,430,172
4,211,293
3,899,491
13,939,333
Financial liabilities held for trading
22,150
-
-
-
-
22,150
Financial liabilities measured at fair
value through profit or loss
-
-
-
728
1,786
2,514
Derivatives - hedge accounting
2,124
-
-
-
-
2,124
Financial liabilities measured at amortised cost
- deposits from banks and central banks
193,526
-
-
19,130
-
212,656
- borrowings from banks and central banks
13,086
517
-
43,689
-
57,292
- due to customers
10,604,203
59,717
116,014
201,162
3,315
10,984,411
- borrowings from other customers
1
-
-
215
-
216
- debt securities issued
-
3,689
12,198
299,026
501,077
815,990
- other financial liabilities
122,793
4,736
5,830
27,859
-
161,218
- lease liabilities
82
155
664
2,056
392
3,349
Provisions
360
756
16,665
27,435
-
45,216
Current income tax liabilities
-
-
3,940
-
-
3,940
Other liabilities
14,496
181
1,052
5,922
3,736
25,387
Total liabilities
10,972,821
69,751
156,363
627,222
510,306
12,336,463
Credit risk related commitments
536,542
140,256
618,940
396,200
293,261
1,985,199
Non-financial guarantees
23,682
52,473
106,608
243,618
36,424
462,805
Total liabilities and credit-related commitments
11,533,045
262,480
881,911
1,267,040
839,991
14,784,467
Investments in subsidiaries with expected residual maturity
between 3 months and 1 year include investment in N Banka
in the amount 5,109 EUR thousands, which is expected to be
merged with NLB during the year 2023.
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in EUR thousands
NLB
31 Dec 2021
Up to
1 Month
1 Month to
3 Months
3 Months to
1 Year
1 Year to
5 Years
Over
5 Years
Total
Cash, cash balances at central banks, and
other demand deposits at banks
3,250,437
-
-
-
-
3,250,437
Financial assets held for trading
7,682
-
-
-
-
7,682
Non-trading financial assets mandatorily
at fair value through profit or loss
614
29
306
6,939
4,472
12,360
Financial assets measured at fair value
through other comprehensive income
24,773
57,473
141,428
918,421
443,656
1,585,751
Financial assets measured at amortised cost
- debt securities
2,825
18,182
90,276
608,223
716,918
1,436,424
- loans and advances to banks
916
40,463
50,129
32,066
75,713
199,287
- loans and advances to customers
317,315
171,605
676,938
2,183,239
1,796,056
5,145,153
- other financial assets
66,454
658
3,100
22,192
-
92,404
Derivatives - hedge accounting
568
-
-
-
-
568
Fair value changes of hedged items in
portfolio hedge of interest rate risk
-
-
-
1,330
5,752
7,082
Non-current assets held for sale
-
-
4,089
-
-
4,089
Property and equipment
-
-
-
19,304
66,818
86,122
Investment property
-
-
-
9,181
-
9,181
Intangible assets
-
-
-
14,255
15,198
29,453
Investments in subsidiaries,
associates and joint ventures
-
-
24,282
37,984
723,757
786,023
Current income tax assets
-
-
3,761
-
-
3,761
Deferred income tax assets
-
-
-
31,902
-
31,902
Other assets
6,984
-
4,869
-
-
11,853
Total assets
3,678,568
288,410
999,178
3,885,036
3,848,340
12,699,532
Financial liabilities held for trading
7,602
-
-
-
-
7,602
Financial liabilities measured at fair
value through profit or loss
-
-
-
352
-
352
Derivatives - hedge accounting
35,377
-
-
-
-
35,377
Financial liabilities measured at amortised cost
- deposits from banks and central banks
94,326
-
-
15,003
-
109,329
- borrowings from banks and central banks
44,569
-
746,028
82,882
-
873,479
- due to customers
9,303,755
65,612
125,287
156,322
8,629
9,659,605
- borrowings from other customers
-
-
-
406
-
406
- debt securities issued
-
3,689
1,759
-
283,071
288,519
- other financial liabilities
71,866
3,895
2
23,495
13
99,271
- lease liabilities
76
146
614
2,006
414
3,256
Provisions
544
672
18,501
29,646
-
49,363
Other liabilities
14,216
166
1,442
3,683
1,532
21,039
Total liabilities
9,572,331
74,180
893,633
313,795
293,659
11,147,598
Credit risk related commitments
503,492
96,524
451,614
280,201
220,580
1,552,411
Non-financial guarantees
16,714
45,786
100,102
240,761
33,803
437,166
Total liabilities and credit-related commitments
10,092,537
216,490
1,445,349
834,757
548,042
13,137,175
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g) Derivative cash flows
The table below illustrates cash flows from derivatives,
broken down into the relevant maturity buckets based on
residual maturities. The amounts disclosed in the table are the
contractual undiscounted cash flows prepared on the basis of
spot rates on the reporting date.
in EUR thousands
NLB Group
31 Dec 2022
Up to
1 Month
1 Month to
3 Months
3 Months
to
1 Year
1 Year to
5 Years
Over
5 Years
Total
Foreign exchange derivatives
- Forwards
- Outflow
(31,846)
(22,128)
(5,856)
(6,475)
-
(66,305)
- Inflow
31,895
22,136
5,863
6,487
-
66,381
- Swaps
- Outflow
(194,674)
(52,726)
(10,042)
-
-
(257,442)
- Inflow
193,719
53,098
9,996
-
-
256,813
Interest rate derivatives
- Interest rate swaps and cross-currency swaps
- Outflow
(819)
(2,100)
(10,699)
(105,839)
(24,177)
(143,634)
- Inflow
816
2,560
19,982
76,356
44,616
144,330
- Caps and floors
- Outflow
(14)
(36)
(667)
(16,104)
(8,632)
(25,453)
- Inflow
45
30
850
1,468
15
2,408
Total outflow
(227,353)
(76,990)
(27,264)
(128,418)
(32,809)
(492,834)
Total inflow
226,475
77,824
36,691
84,311
44,631
469,932
in EUR thousands
NLB Group
31 Dec 2021
Up to
1 Month
1 Month to
3 Months
3 Months
to
1 Year
1 Year to
5 Years
Over
5 Years
Total
Foreign exchange derivatives
- Forwards
- Outflow
(26,202)
(10,460)
(16,853)
(12,180)
-
(65,695)
- Inflow
26,214
10,465
16,865
12,199
-
65,743
- Swaps
- Outflow
(96,742)
(2,362)
(17,335)
-
-
(116,439)
- Inflow
96,483
2,364
17,346
-
-
116,193
Interest rate derivatives
- Interest rate swaps and cross-currency swaps
- Outflow
(1,116)
(2,107)
(10,153)
(26,901)
(12,053)
(52,330)
- Inflow
34
237
3,321
7,179
7,287
18,058
- Caps and floors
- Outflow
-
-
(1)
(51)
-
(52)
- Inflow
-
-
2
52
-
54
Total outflow
(124,060)
(14,929)
(44,342)
(39,132)
(12,053)
(234,516)
Total inflow
122,731
13,066
37,534
19,430
7,287
200,048
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in EUR thousands
NLB
31 Dec 2022
Up to
1 Month
1 Month to
3 Months
3 Months
to
1 Year
1 Year to
5 Years
Over
5 Years
Total
Foreign exchange derivatives
- Forwards
- Outflow
(31,557)
(22,128)
(5,856)
(6,475)
-
(66,016)
- Inflow
31,618
22,136
5,863
6,487
-
66,104
- Swaps
- Outflow
(249,950)
(110,588)
-
-
-
(360,538)
- Inflow
248,993
110,595
-
-
-
359,588
Interest rate derivatives
- Interest rate swaps and cross-currency swaps
- Outflow
(844)
(2,027)
(12,366)
(41,180)
(22,621)
(79,038)
- Inflow
819
2,567
20,349
77,243
44,616
145,594
- Caps and floors
- Outflow
(50)
(55)
(919)
(1,824)
(41)
(2,889)
- Inflow
45
30
850
1,468
15
2,408
Total outflow
(282,401)
(134,798)
(19,141)
(49,479)
(22,662)
(508,481)
Total inflow
281,475
135,328
27,062
85,198
44,631
573,694
in EUR thousands
NLB
31 Dec 2021
Up to
1 Month
1 Month to
3 Months
3 Months
to
1 Year
1 Year to
5 Years
Over
5 Years
Total
Foreign exchange derivatives
- Forwards
- Outflow
(24,891)
(10,460)
(16,853)
(12,180)
-
(64,384)
- Inflow
24,902
10,465
16,865
12,199
-
64,431
- Swaps
- Outflow
(102,036)
(6,875)
(17,335)
-
-
(126,246)
- Inflow
101,772
6,864
17,346
-
-
125,982
Interest rate derivatives
- Interest rate swaps and cross-currency swaps
- Outflow
(1,116)
(2,107)
(10,153)
(26,901)
(12,053)
(52,330)
- Inflow
34
237
3,321
7,179
7,287
18,058
- Caps and floors
- Outflow
-
-
(1)
(51)
-
(52)
- Inflow
-
-
2
52
-
54
Total outflow
(128,043)
(19,442)
(44,342)
(39,132)
(12,053)
(243,012)
Total inflow
126,708
17,566
37,534
19,430
7,287
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6.4. Management of
non-financial risks
a) Operational risk
When assuming operational risks, NLB Group follows the
guideline that such risks may not materially impact its
operations and, therefore, the risk appetite for operational risks
is low to moderate. The risk is also gradually decreasing due
to the reduced complexity of operations in NLB Group, with
disinvestment process of non-core activities and optimisation of
internal processes. NLB Group has set up a system of collecting
loss events, identification, assessment, and management
of operational risks, all with the aim of ensuring quality
management of operational risks. This is particularly valid in
strategic banking members.
All NLB Group banking members monitor risk appetite limits
for operational risk. The upper tolerance limit is defined as the
limit amount of net loss that an individual member still allows
in its operations. If the sum of net loss exceeds the tolerance
limit, a special treatment of major loss events is required and,
if necessary, takes additional measures for the prevention or
mitigation of the same or similar loss events are taken. The
warning and critical limit of loss events are also defined, which in
case of exceeding require escalation procedures an acceptance
of possible additional risk management measures. In addition,
the Bank does not allow certain risks in its business – for them
a so-called ‘zero tolerance’ was defined. For monitoring some
specific more important key risk indicators that could show a
possible increase of an operational risk, the Bank developed a
specific methodology as an early warning system. Such risks
are periodically monitored in different business areas, and the
results are discussed at the Operational Risk Committee. The
latter was named as the highest decision-making authority in
the area of operational risk management. Relevant operational
risk committees were also appointed at other NLB Group banks.
The Management Board serves in this role at other subsidiaries.
The main task of the aforementioned bodies is to discuss
the most significant operational risks and loss events, and to
monitor and support the effective management of operational
risks including their mitigation within an individual entity. All NLB
Group entities, which are included in the consolidation, have
adopted relevant documents that are in line with NLB Group
standards. In banking members, these documents are in line
with the development of operational risk management and
regularly updated. The whole NLB Group uses uniform software
support, which is also regularly upgraded.
In NLB Group, the reported incurred net loss arising from loss
events in 2022 was significantly
lower than in the previous year
and remained within the set tolerance limits for operational risk.
In general, considerable attention is paid to reporting loss
events, their mitigation measures, and defining operational
risks in all segments. To treat major loss events appropriately
and as soon as possible, the Bank introduced an escalation
scale for reporting bigger or more important loss events to
the top levels of decision-making at NLB and the Supervisory
Board of NLB. Additional attention is paid to the reporting of
potential loss events in order to improve the internal controls,
and thus minimise those and similar events. Furthermore, the
methodology to monitor, analyse, and report key risk indicators
is established, servicing as an early warning system. The aim is
to improve business and supporting processes, as well enabling
prompt response.
Through comprehensive identification of operational
risks, possible future losses are identified, estimated, and
appropriately managed. Each year, special emphasis is
placed on current risks as a result of risk identification
process, including ESG risks. For the later key risk indicators
(KRIs) have been also addressed for ESG risks, servicing as
an early warning system. The major operational risks are
actively managed with the measures taken to reduce them.
An operational risk profile is prepared once a year based on
the operational risk identification. Special emphasis is put on
the most topical risks, among which in particular are those
with a low probability of occurrence and very high potential
financial influence. For this purpose, the Bank has developed
the methodology of stress-testing for operational risk. The
methodology is a combination of modelling loss event data and
scenario analysis for exceptional, but plausible events. Scenario
analyses are made based on experience and knowledge of
experts from various critical areas.
The capital requirement for operational risk is calculated using
the basic indicator approach at the NLB Group level and using
the standardised approach at the NLB level.
b) Business Continuity Management (BCM)
In NLB Group, business continuity management is carried out to
protect lives, goods, and reputation. Business continuity plans
are prepared to be used in the event of natural disasters, IT
disasters, epidemic/pandemic, and the undesired effects of the
environment to mitigate their consequences.
The concept of the action plan that is prepared each year
is such that the activities contribute to the upgrading or
improvement of the Business Continuity Management System.
In 2022, Business Continuity Management was upgraded
System according to external influence – we added list of all
critical employees and their deputies for all Organizational
Units.
The basis for modernising the business continuity plans is the
regular annual Business Impact Analysis (BIA). On its basis, the
adequacy of the plans for Organizational Unit Plans (merged
office buildings and HR plans) and IT plans are checked. The
best indicator of the adequacy of the business continuity plans
is testing. In 2022, NLB tested evacuation, Manual Procedures,
backup locations and IT. No major deviations were identified.
In NLB Group, know-how and methodologies are transferred
to the members. The members have adopted appropriate
documents which are in line with the standards of NLB and
revised in accordance with the development of business
continuity management. The activity of the members is
monitored throughout the year, and expert assistance is
provided if necessary.
For more efficient functioning of the business continuity
management system in NLB Group, training courses and visits
to individual banking members are also provided. All preventive
and response measures with regard to business continuity are
regularly sent to the members with the purpose to help and
act in the uniform way. Besides, workshops are performed
to present development of Business Continuity Management
System to all the NLB Group members to be more resilient in all
relevant circumstances.
With regards to IT failures, the Bank successfully used the IT
plans and instructions for manual procedures, and thus also
ensured business operations in emergency situations.
c) Management of other types of non-financial risks –
strategic risks, reputation risk, and profitability risk
Risks not included in the regulatory capital requirements
(standardised approach) but have or might have an important
influence on the risk profile of NLB Group, are regularly
assessed, monitored, and managed. In addition, they are
integrated into internal capital adequacy assessment process
(ICAAP). NLB Group established internal methodologies for
identifying and assessing specific types of risk, referring to
the Group’s business model or arising from other external
circumstances. If a certain risk is assessed as a materially
important risk, relevant disposable preventive and mitigation
measures are applied, including regular monitoring of their
effectiveness. On this basis, internal capital is considered and its
consumption regularly monitored.
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and non-financial assets and
liabilities
Fair value is the price that would be received when selling an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. NLB
Group uses various valuation techniques to determine fair
value. IFRS 13 specifies a fair value hierarchy with respect to the
inputs and assumptions used to measure financial and non-
financial assets and liabilities at fair value. Observable inputs
reflect market data obtained from independent sources, while
unobservable inputs reflect the assumptions of NLB Group. This
hierarchy gives the highest priority to observable market data
when available, and the lowest priority to unobservable market
data. NLB Group considers relevant and observable market
prices in its valuations, where possible. The fair value hierarchy
comprises the following levels:
•
Level 1 – Quoted prices (unadjusted) on active markets.
This level includes listed equities, debt instruments, gold,
derivatives, units of investment funds, and other unadjusted
market prices of assets and liabilities. When an asset or
liability may be exchanged in multiple active markets, the
principal market for the asset or liability must be determined.
In the absence of a principal market, the most advantageous
market for the asset or liability must be determined.
•
Level 2 – A valuation technique where inputs are observable,
either directly (i.e., prices) or indirectly (i.e., derived from
prices). Level 2 includes prices quoted for similar assets or
liabilities in active markets and prices quoted for identical or
similar assets, and liabilities in markets that are not active.
The sources of input parameters for financial instruments,
such as yield curves, credit spreads, foreign exchange rates,
and the volatility of interest rates and foreign exchange rates,
is Bloomberg.
•
Level 3 – A valuation technique where inputs are not based
on observable market data. Unobservable inputs are used to
the extent that relevant observable inputs are not available.
Unobservable inputs must reflect the assumptions that
market participants would use when pricing an asset or
liability. This level includes non-tradable shares and bonds,
and derivatives associated with these investments and
other assets and liabilities for which fair value cannot be
determined with observable market inputs.
Wherever possible, fair value is determined as an observable
market price in an active market for an identical asset or
liability. An active market is a market in which transactions for
an asset or liability are executed with sufficient frequency and
volume to provide pricing information on an ongoing basis.
Assets and liabilities measured at fair value in active markets
are determined as the market price of a unit (e.g., share) at the
measurement date, multiplied by the quantity of units owned
by NLB Group. The fair value of assets and liabilities whose
market is not active is determined using valuation techniques.
These techniques bear a different intensity level of estimates
and assumptions, depending on the availability of observable
market inputs associated with the asset or liability that is the
subject of the valuation. Unobservable inputs shall reflect the
estimates and assumptions that other market participants
would use when pricing the asset or liability.
For non-financial assets measured at fair value and not
classified at Level 1, fair value is determined based on valuation
reports provided by certified valuators. Valuations are prepared
in accordance with the International Valuation Standards (IVS).
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a) Financial and non-financial assets and liabilities measured at fair value in the financial statements
in EUR thousands
31 Dec 2022
NLB Group
NLB
Level 1
Level 2
Level 3
Total fair value
Level 1
Level 2
Level 3
Total fair value
Financial assets
Financial instruments held for trading
203
21,368
17
21,588
203
21,472
17
21,692
Debt instruments
203
-
-
203
203
-
-
203
Derivatives
-
21,368
17
21,385
-
21,472
17
21,489
Derivatives - hedge accounting
-
59,362
-
59,362
-
59,362
-
59,362
Financial assets measured at fair value
through other comprehensive income
1,746,405
1,169,306
3,492
2,919,203
1,282,584
49,182
2,295
1,334,061
Debt instruments
1,745,896
1,090,664
2,236
2,838,796
1,282,584
6,667
2,026
1,291,277
Equity instruments
509
78,642
1,256
80,407
-
42,515
269
42,784
Non-trading financial assets mandatorily
at fair value through profit and loss
11,512
-
7,519
19,031
-
7,892
7,519
15,411
Debt instruments
3,116
-
-
3,116
-
-
-
-
Equity instruments
8,396
-
7,519
15,915
-
-
7,519
7,519
Loans
-
-
-
-
-
7,892
-
7,892
Financial liabilities
Financial instruments held for trading
-
21,589
-
21,589
-
22,150
-
22,150
Derivatives
-
21,589
-
21,589
-
22,150
-
22,150
Derivatives - hedge accounting
-
2,124
-
2,124
-
2,124
-
2,124
Financial liabilities measured at fair
value through profit or loss
-
1,796
-
1,796
-
2,514
-
2,514
Non-financial assets
Investment properties
-
12,192
23,447
35,639
-
6,753
-
6,753
Non-current assets held for sale
-
15,436
-
15,436
-
4,235
-
4,235
Non-financial assets impaired during the year
Recoverable amount of property and equipment
-
-
30,636
30,636
-
-
-
-
Recoverable amount of investments in
subsidiaries, associates and joint ventures
-
-
-
-
-
-
3,301
3,301
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in EUR thousands
31 Dec 2021
NLB Group
NLB
Level 1
Level 2
Level 3
Total fair value
Level 1
Level 2
Level 3
Total fair value
Financial assets
Financial instruments held for trading
-
7,677
1
7,678
-
7,681
1
7,682
Derivatives
-
7,677
1
7,678
-
7,681
1
7,682
Derivatives - hedge accounting
-
568
-
568
-
568
-
568
Financial assets measured at fair value
through other comprehensive income
2,010,485
1,449,888
1,487
3,461,860
1,533,797
51,735
219
1,585,751
Debt instruments
2,009,699
1,385,211
351
3,395,261
1,533,797
7,245
-
1,541,042
Equity instruments
786
64,677
1,136
66,599
-
44,490
219
44,709
Non-trading financial assets mandatorily
at fair value through profit and loss
16,689
-
4,472
21,161
-
7,888
4,472
12,360
Debt instruments
4,261
-
-
4,261
-
-
-
-
Equity instruments
12,428
-
4,472
16,900
-
-
4,472
4,472
Loans
-
-
-
-
-
7,888
-
7,888
Financial liabilities
Financial instruments held for trading
-
7,585
-
7,585
-
7,602
-
7,602
Derivatives
-
7,585
-
7,585
-
7,602
-
7,602
Derivatives - hedge accounting
-
35,377
-
35,377
-
35,377
-
35,377
Financial liabilities measured at fair
value through profit or loss
-
-
-
-
-
352
-
352
Non-financial assets
Investment properties
-
19,982
27,642
47,624
-
9,181
-
9,181
Non-current assets held for sale
-
7,051
-
7,051
-
4,089
-
4,089
Non-financial assets impaired during the year
Recoverable amount of
property and equipment
-
-
2,990
2,990
-
-
-
-
Recoverable amount of intangible assets
-
-
872
872
-
-
-
-
Recoverable amount of investments in
subsidiaries, associates and joint ventures
-
-
-
-
-
201
2,618
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b) Significant transfers of financial instruments between levels of valuation
NLB Group’s policy of transfers of financial instruments between levels of valuation is illustrated in the table below.
Fair value
hierarchy
Equities
Equity stake
Gold
Funds
Debt securities
Loans
Derivatives
Equities
Currency
Interest
1
market value from
exchange market
market value from
spot market
regular valuation by
fund management
company
market value from
exchange market
2
valuation model
valuation model
valuation model
(underlying in level 1)
valuation model
valuation model
3
valuation model
valuation model
valuation model
valuation model
valuation model
valuation model
(underlying instrument
in level 3)
Transfers
from level 1 to 3
from level 1 to 3
from level 1 to 2
from level 2 to 3
from level 2 to 3
equity excluded from
exchange market
fund management
company stops
publishing regular
valuation
debt securities
excluded from
exchange market
counterparty
reclassified from
performing to NPL
underlying instrument
excluded from
exchange market
from level 1 to 3
from level 3 to 1
from level 1 to 2
from level 3 to 2
from level 3 to 2
companies
in insolvency
proceedings
fund management
company starts
publishing regular
valuation
debt securities not
liquid (not trading
for 6 months)
counterparty
reclassified from
NPL to performing
underlying
instrument included
in exchange market
from level 1 to 3
from level 1 to 3
and from 2 to 3
equity not liquid (not
trading for 2 months)
companies
in insolvency
proceedings
from level 3 to 1
from level 2 to 1
and from 3 to 1
equity included in
exchange market
start trading with
debt securities on
exchange market
from level 3 to 2
until valuation
parameters are
confirmed on
ALCO (at least on
quarterly basis)
Due to technical default of Russia in June 2022, there is no more
active market for Russian bonds. Consequently, NLB Group
and NLB transferred Russian bonds with notional amount of
USD 8 million from Level 1 to 3. Fair value at the date of transfer
was EUR 1,812 thousand. As of 31 December 2022, the bond is
evaluated according to three scenarios; 100% repayment at
maturity taking into account the required yield of the bond in
the market at the time of default, 100% repayment after four
years from maturity taking into account the required yield of
NPL on emerging markets, and no repayment. Each scenario
represents a third of the probability of an event occurring.
For 2021, neither NLB Group nor NLB had any significant
transfers between levels of valuation of financial instruments
measured at fair value in financial statements.
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c) Financial and non-financial assets and liabilities at Level 2
regarding the fair value hierarchy
Financial instruments on Level 2 of the fair value hierarchy at
NLB Group and NLB include:
•
debt securities: mostly bonds not quoted on active markets
and valuated by a valuation model;
•
derivatives: derivatives except forward derivatives and
options on equity instruments that are not quoted on active
markets;
•
performing loans measured at fair value, which according to
IFRS 9 do not pass SPPI test. Fair value is calculated on the
basis of the discounted expected future cash flows with the
required rate of return; and
• the National Resolution Fund.
Non-financial assets on Level 2 of the fair value hierarchy at
NLB Group and NLB include investment properties.
When valuing bonds classified on Level 2, NLB Group
primarily uses the income approach based on an estimation
of future cash flows discounted to the present value. The input
parameters used in the income approach are the risk-free
yield curve and the spread over the yield curve (credit, liquidity,
country).
Fair values for derivatives are determined using a discounted
cash flow model based on the risk-free yield curve. Fair values
for options are determined using valuation models for options
(the Garman and Kohlhagen model, binomial model, and
Black-Scholes model).
At least one of the three valuation methods are used for the
valuation of investment property. The majority of investment
property is valued using the income approach where the
present value of future expected returns is assessed. When
valuing an investment property, average rents at similar
locations and capitalisation ratios such as: the risk-free yield,
risk premium, and the risk premium to account for capital
preservation are used. Rents at similar locations are generated
from various sources, like data from lessors and lessees, web
databases, and own databases. NLB Group has observable
data for all investment property at its disposal. If observable
data for similar locations are not available, NLB Group uses
data from wider locations and adjusts it appropriately.
d) Financial and non-financial assets and liabilities at Level 3
of the fair value hierarchy
Financial instruments on Level 3 of the fair value hierarchy in
NLB Group and NLB include:
•
equities: mainly financial equities that are not quoted on
active markets;
•
derivative financial instruments: forward derivatives and
options on equity instruments that are not quoted on an
active organised market. Fair values for forward derivatives
are determined using the discounted cash flow model. Fair
values for equity options are determined using valuation
models for options (the Garman and Kohlhagen model,
binomial model, and Black-Scholes model). Unobservable
inputs include the fair values of underlying instruments
determined using valuation models. The source of observable
market inputs is the Bloomberg information system;
•
non-performing loans measured at fair value, which
according to IFRS 9 do not pass the SPPI test. Fair value is
calculated on the basis of the discounted expected future
cash flows with the required rate of return. In defining the
expected cash flows for non-performing loans, the value of
collateral and other pay off estimates can be used; and
•
Russian bonds due to technical default in June 2022.
Non-financial assets on Level 3 of the fair value hierarchy at
NLB Group include investment properties.
NLB Group uses three valuation methods for the valuation of
equity financial assets mentioned in first bullet: income, market,
and cost approaches.
NLB Group selects valuation model and values of unobservable
input data within a reasonable possible range, but uses model
and input data that other market participants would use.
At least one of the three valuation methods are used for the
valuation of investment property. The majority of investment
property is valued using the income approach where the
present value of future expected returns is assessed. When
valuing an investment property, average rents at similar
locations and capitalisation ratios such as: the risk-free yield,
risk premium and the risk premium to account for capital
preservation are used. Rents at similar locations are generated
from various sources, like data from lessors and lessees, web
databases, and own databases. NLB Group has observable
data for all investment property at its disposal. If observable
data for similar locations are not available, NLB Group uses
data from wider locations and adjusts it appropriately.
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Movements of financial assets and liabilities at Level 3
in EUR thousands
Financial instruments
held for trading
Financial assets
measured at fair
value through OCI
Non-trading financial assets
mandatorily at fair value
through profit or loss
Total financial
assets
NLB Group
Derivatives
Debt instruments
Equity instruments
Equity instruments
Loans and other
financial assets
Balance as at 1 January 2021
786
900
927
4,171
25,076
31,860
Effects of translation of foreign
operations to presentation currency
-
-
(2)
-
-
(2)
Valuation:
- through profit or loss
(785)
-
-
(56)
15,747
14,906
- recognised in other comprehensive income
-
-
266
-
-
266
Foreign exchange differences
-
-
-
357
9
366
Increases
-
63
-
-
3,017
3,080
Decreases
-
(612)
(55)
-
(43,849)
(44,516)
Balance as at 31 December 2021
1
351
1,136
4,472
-
5,960
Effects of translation of foreign
operations to presentation currency
-
-
(2)
-
-
(2)
Acquisition of subsidiaries
-
-
12
-
-
12
Valuation:
- through profit or loss
16
-
-
477
-
493
- recognised in other comprehensive income
-
239
110
-
-
349
Foreign exchange differences
-
(25)
-
262
-
237
Increases
-
-
-
2,873
-
2,873
Decreases
-
(141)
-
(565)
-
(706)
Transfers to Level 3
-
1,812
-
-
-
1,812
Balance as at 31 December 2022
17
2,236
1,256
7,519
-
11,028
in EUR thousands
Financial instruments
held for trading
Financial assets
measured at fair
value through OCI
Non-trading financial assets
mandatorily at fair value
through profit or loss
Total financial
assets
NLB
Derivatives
Debt instruments
Equity instruments
Equity instruments
Loans and other
financial assets
Balance as at 1 January 2021
786
-
274
4,171
22,988
28,219
Valuation:
- through profit or loss
(785)
-
-
(56)
13,749
12,908
Foreign exchange differences
-
-
-
357
9
366
Increases
-
-
-
-
3,005
3,005
Decreases
-
-
(55)
-
(39,751)
(39,806)
Balance as at 31 December 2021
1
-
219
4,472
-
4,692
Valuation:
- through profit or loss
16
-
-
477
-
493
- recognised in other comprehensive income
-
239
50
-
-
289
Foreign exchange differences
-
(25)
-
262
-
237
Increases
-
-
-
2,873
-
2,873
Decreases
-
-
-
(565)
-
(565)
Transfers to Level 3
-
1,812
-
-
-
1,812
Balance as at 31 December 2022
17
2,026
269
7,519
-
9,831
NLB Group and NLB recognise the effects from valuation of
trading instruments in income statement line item ‘Gains less
losses from financial assets and liabilities held for trading,’
effects from valuation of non-trading equity instruments and
loans mandatorily measured at fair value through profit or
loss in income statement line item ‘Gains less losses from non-
trading financial assets mandatorily at fair value through profit
or loss,’ and effects from valuation of financial assets measured
at fair value through other comprehensive income in the
accumulated other comprehensive income line item ‘Financial
assets measured at fair value through other comprehensive
income.’
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In 2022 and in 2021, NLB Group and NLB recognised the following unrealised gains or losses for financial instruments that were at Level
3 as at 31 December:
in EUR thousands
NLB Group
Financial assets held
for trading
Financial assets measured at fair value
through OCI
Non-trading financial
assets mandatorily
at fair value through
profit or loss
2022
Derivatives
Debt instruments
Equity instruments
Equity instruments
Items of Income statement
Gains less losses from financial assets
and liabilities held for trading
16
-
-
-
Gains less losses from non-trading assets
mandatorily at fair value through profit or loss
-
-
-
477
Foreign exchange translation gains less losses
-
(25)
-
262
Item of Other comprehensive income
Financial assets measured at fair value
through other comprehensive income
-
239
110
-
in EUR thousands
NLB Group
Financial assets held
for trading
Financial assets measured at fair value
through OCI
Non-trading financial
assets mandatorily
at fair value through
profit or loss
2021
Derivatives
Debt instruments
Equity instruments
Equity instruments
Items of Income statement
Gains less losses from non-trading assets
mandatorily at fair value through profit or loss
-
-
-
(56)
Foreign exchange translation gains less losses
-
-
-
357
Item of Other comprehensive income
Financial assets measured at fair value
through other comprehensive income
-
-
266
-
in EUR thousands
NLB
Financial assets held
for trading
Financial assets measured at fair value
through OCI
Non-trading financial
assets mandatorily
at fair value through
profit or loss
2022
Derivatives
Debt instruments
Equity instruments
Equity instruments
Items of Income statement
Gains less losses from financial assets
and liabilities held for trading
16
-
-
-
Gains less losses from non-trading assets
mandatorily at fair value through profit or loss
-
-
-
477
Foreign exchange translation gains less losses
-
(25)
-
262
Item of Other comprehensive income
Financial assets measured at fair value
through other comprehensive income
-
239
50
-
in EUR thousands
NLB
Financial assets held
for trading
Financial assets measured at fair value
through OCI
Non-trading financial
assets mandatorily
at fair value through
profit or loss
2021
Derivatives
Debt instruments
Equity instruments
Equity instruments
Items of Income statement
Gains less losses from financial assets
and liabilities held for trading
-
-
-
-
Gains less losses from non-trading assets
mandatorily at fair value through profit or loss
-
-
-
(56)
Foreign exchange translation gains less losses
-
-
-
357
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Movements of non-financial assets at Level 3
in EUR thousands
NLB Group
Investment property
2022
2021
Balance as at 1 January
27,642
32,210
Effects of translation of foreign operations to presentation currency
22
19
Acquisition of subsidiaries (note 5.12.c)
302
-
Additions
3
-
Disposals
(7,578)
(502)
Transfer from/(to) property and equipment
434
(7,568)
Transfer from/(to) non-current assets held for sale
-
22
Transfer from/(to) other assets
-
1,260
Net valuation to fair value
2,622
3,416
Disposal of subsidiary (note 5.12.d)
-
(1,215)
Balance as at 31 December
23,447
27,642
e) Fair value of financial instruments not measured at fair
value in financial statements
Financial instruments not measured at fair value in financial
statements are not managed on a fair value basis.
For respective instruments fair values are calculated for
disclosure purposes only, and do not impact NLB Group
statement of financial position or income statement.
The table below shows estimated fair values of financial instruments not measured at fair value in the statement of financial position.
in EUR thousands
NLB Group
NLB
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Carrying value
Fair value
Carrying value
Fair value
Carrying value
Fair value
Carrying value
Fair value
Financial assets measured at amortised cost
- debt securities
1,917,615
1,749,169
1,717,626
1,745,225
1,597,448
1,442,453
1,436,424
1,461,185
- loans and advances to banks
222,965
223,077
140,683
140,843
350,625
362,422
199,287
204,743
- loans and advances to customers
13,072,986
12,883,859
10,587,121
10,751,051
6,054,413
5,965,468
5,145,153
5,235,839
- other financial assets
177,823
177,823
122,229
122,229
114,399
114,399
92,404
92,404
Financial liabilities measured at amortised cost
- deposits from banks and central banks
106,414
106,627
71,828
69,720
212,656
212,880
109,329
109,522
- borrowings from banks and central banks
198,609
193,774
858,531
849,834
57,292
52,897
873,479
863,970
- due to customers
20,027,726
20,031,938
17,640,809
17,658,686
10,984,411
10,989,255
9,659,605
9,664,607
- borrowings from other customers
82,482
80,684
74,051
73,744
216
216
406
406
- debt securities issued
815,990
788,892
288,519
292,130
815,990
788,892
288,519
292,130
- other financial liabilities
294,463
294,463
206,878
206,878
164,567
164,567
102,527
102,527
Loans and advances to banks
The estimated fair value of deposits is based on discounted
cash flows using prevailing market interest rates for instruments
with similar credit risk and residual maturities. The fair value of
overnight deposits equals their carrying value.
Loans and advances to customers
The estimated fair value of loans and advances represents the
discounted amount of estimated future cash flows expected
to be received. Expected cash flows are discounted at current
market rates for debts with similar credit risk and residual
maturities to determine their fair value.
Deposits and borrowings
The fair value of sight deposits and overnight deposits equals
their carrying value. However, their actual value for NLB Group
depends on the timing and amounts of cash flows, current
market rates, and the credit risk of the depository institution
itself. A portion of sight deposits is stable, similar to term
deposits. Therefore, their economic value for NLB Group differs
from the carrying amount.
The estimated fair value of other deposits and borrowings from
customers is based on discounted cash flows using interest
rates for new deposits with similar residual maturities.
Other financial assets and liabilities
The carrying amount of other financial assets and liabilities is
a reasonable approximation of their fair value as they mainly
relate to short-term receivables and payables.
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Fair value hierarchy of financial instruments not measured at fair value in financial statements
in EUR thousands
31 Dec 2022
NLB Group
NLB
Level 1
Level 2
Level 3
Total fair value
Level 1
Level 2
Level 3
Total fair value
Financial assets measured at amortised cost
- debt securities
1,476,615
265,325
7,229
1,749,169
1,350,003
92,450
-
1,442,453
- loans and advances to banks
-
223,077
-
223,077
-
362,422
-
362,422
- loans and advances to customers
-
12,883,859
-
12,883,859
-
5,965,468
-
5,965,468
- other financial assets
-
177,823
-
177,823
-
114,399
-
114,399
Financial liabilities measured at amortised cost
- deposits from banks and central banks
-
106,627
-
106,627
-
212,880
-
212,880
- borrowings from banks and central banks
-
193,774
-
193,774
-
52,897
-
52,897
- due to customers
-
20,031,938
-
20,031,938
-
10,989,255
-
10,989,255
- borrowings from other customers
-
80,684
-
80,684
-
216
-
216
- debt securities issued
748,958
39,934
-
788,892
748,958
39,934
-
788,892
- other financial liabilities
-
294,463
-
294,463
-
164,567
-
164,567
in EUR thousands
31 Dec 2021
NLB Group
NLB
Level 1
Level 2
Level 3
Total fair value
Level 1
Level 2
Level 3
Total fair value
Financial assets measured at amortised cost
- debt securities
1,434,411
303,647
7,167
1,745,225
1,358,293
102,892
-
1,461,185
- loans and advances to banks
-
140,843
-
140,843
-
204,743
-
204,743
- loans and advances to customers
-
10,751,051
-
10,751,051
-
5,235,839
-
5,235,839
- other financial assets
-
122,229
-
122,229
-
92,404
-
92,404
Financial liabilities measured at amortised cost
- deposits from banks and central banks
-
69,720
-
69,720
-
109,522
-
109,522
- borrowings from banks and central banks
-
849,834
-
849,834
-
863,970
-
863,970
- due to customers
-
17,658,686
-
17,658,686
-
9,664,607
-
9,664,607
- borrowings from other customers
-
73,744
-
73,744
-
406
-
406
- debt securities issued
245,700
46,430
-
292,130
245,700
46,430
-
292,130
- other financial liabilities
-
206,878
-
206,878
-
102,527
-
315
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Risk Management
Events After 2022
Financial Report
financial liabilities
NLB Group has entered into bilateral foreign exchange netting
arrangements with certain banks and corporates. Cash flows
from such transactions that are due on the same day in the
same currency, are settled on a net basis, i.e., a single cash flow
for each currency. The settlement of all interest rates derivatives
is also carried out by netting of both legs of transaction. Assets
and liabilities related to these netting arrangements are not
presented in a net amount in the statement of financial position
because netting rules apply to cash flows and not to the entire
financial instrument.
In 2013, NLB Group also novated certain standardised
derivatives (some interest rate swaps) to a clearing house or
central counterparty. A system of daily margins assures the
mitigation and collateralisation of exposures, as well as the
daily settlement of cash flows for each currency.
All derivatives are conducted under the conditions of signed
Master Agreements (MA), with international banks ISDA MA is
in place along with CSA annex and for corporates domestic
MA is in place, which enable daily evaluation and exchange of
margining.
in EUR thousands
NLB Group
31 Dec 2022
Amounts not set off in the statement of financial position
Financial assets/liabilities
Gross amounts of recognised
financial assets/liabilities
Impact of master
netting agreements
Financial instruments
collateral
Net amount
Derivatives - assets
80,724
3,053
72,204
5,467
Derivatives - liabilities
17,482
3,053
1,959
12,470
in EUR thousands
NLB Group
31 Dec 2021
Amounts not set off in the statement of financial position
Financial assets/liabilities
Gross amounts of recognised
financial assets/liabilities
Impact of master
netting agreements
Financial instruments
collateral
Net amount
Derivatives - assets
8,239
998
445
6,796
Derivatives - liabilities
42,961
998
41,121
842
in EUR thousands
NLB
31 Dec 2022
Amounts not set off in the statement of financial position
Financial assets/liabilities
Gross amounts of recognised
financial assets/liabilities
Impact of master
netting agreements
Financial instruments
collateral
Net amount
Derivatives - assets
80,834
3,133
72,204
5,497
Derivatives - liabilities
24,273
3,133
8,251
12,889
in EUR thousands
NLB
31 Dec 2021
Amounts not set off in the statement of financial position
Financial assets/liabilities
Gross amounts of recognised
financial assets/liabilities
Impact of master
netting agreements
Financial instruments
collateral
Net amount
Derivatives - assets
8,249
1,008
445
6,796
Derivatives - liabilities
42,978
1,008
41,121
849
NLB Group and NLB have no financial assets/liabilities set off
316
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Performance Overview
Risk Management
Events After 2022
Financial Report
7. Analysis by segment for NLB Group
in EUR thousands
NLB Group
2022
Retail
Banking
in Slovenia
Corporate and
Investment
Banking in
Slovenia
Strategic
Foreign
Markets
Financial
Markets
in Slovenia
Non-Core
Members
Other
activities
Unallocated
Total
Total net income
211,474
105,198
427,519
46,601
4,697
10,024
805,513
Net income from external customers
227,590
121,042
429,999
5,558
4,426
9,934
-
798,549
Intersegment net income
(16,116)
(15,844)
(2,480)
41,043
271
90
-
6,964
Net interest income
104,809
52,930
298,042
47,304
267
1,570
-
504,922
Net interest income from
external customers
125,541
71,832
303,349
2,169
453
1,578
-
504,922
Intersegment net interest income
(20,732)
(18,902)
(5,307)
45,135
(186)
(8)
-
-
Administrative expenses
(132,893)
(60,471)
(199,593)
(8,812)
(12,109)
(7,309)
-
(421,187)
Depreciation and amortisation
(11,149)
(4,629)
(28,538)
(618)
(498)
(621)
-
(46,053)
Reportable segment profit/(loss) before
impairment and provision charge
67,432
40,098
199,388
37,171
(7,910)
2,094
-
338,273
Other net gains/(losses) from
equity investments in subsidiaries,
associates and joint ventures
781
-
-
-
-
-
-
781
Negative goodwill
-
-
68
-
-
172,810
-
172,878
Impairment and provisions charge
(21,435)
12,156
(12,325)
(3,363)
(829)
(3,073)
-
(28,869)
Profit/(loss) before income tax
46,778
52,254
187,131
33,808
(8,739)
171,831
-
483,063
Owners of the parent
46,778
52,254
176,160
33,808
(8,739)
171,831
-
472,092
Non-controlling interests
-
-
10,971
-
-
-
-
10,971
Income tax
-
-
-
-
-
-
(25,230)
(25,230)
Profit for the year
446,862
Reportable segment assets
3,665,110
3,372,047
10,179,396
6,514,047
61,563
356,400
-
24,148,563
Investments in associates
and joint ventures
11,677
-
-
-
-
-
-
11,677
Reportable segment liabilities
9,108,497
2,777,001
8,539,025
1,118,681
3,754
190,957
-
21,737,915
Additions to non-current assets
10,717
6,088
29,042
261
99
4,688
-
50,895
317
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SB Statement
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Strategy
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Risk Management
Events After 2022
Financial Report
in EUR thousands
NLB Group
2021
Retail
Banking
in Slovenia
Corporate and
Investment
Banking in
Slovenia
Strategic
Foreign
Markets
Financial
Markets
in Slovenia
Non-Core
Members
Other
activities
Unallocated
Total
Total net income
171,046
101,505
361,945
24,107
7,223
6,127
-
671,953
Net income from external customers
188,629
110,588
363,452
(8,855)
7,014
6,091
-
666,919
Intersegment net income
(17,583)
(9,083)
(1,507)
32,962
209
36
-
5,034
Net interest income
79,535
35,714
266,804
26,377
1,331
(401)
-
409,360
Net interest income from external customers
98,898
44,481
270,839
(6,188)
1,751
(421)
-
409,360
Intersegment net interest income
(19,363)
(8,767)
(4,035)
32,565
(420)
20
-
-
Administrative expenses
(104,844)
(40,829)
(198,589)
(7,963)
(10,534)
(10,259)
-
(373,018)
Depreciation and amortisation
(11,659)
(4,278)
(29,329)
(677)
(833)
(619)
-
(47,395)
Reportable segment profit/(loss) before
impairment and provision charge
54,543
56,398
134,027
15,467
(4,144)
(4,751)
-
251,540
Other net gains/(losses) from equity investments
in subsidiaries, associates and joint ventures
1,108
-
-
-
-
-
-
1,108
Impairment and provisions charge
(6,684)
30,450
(20,779)
329
5,403
39
-
8,758
Profit/(loss) before income tax
48,967
86,848
113,248
15,796
1,259
(4,712)
-
261,406
Owners of the parent
48,967
86,848
101,784
15,796
1,259
(4,712)
-
249,942
Non-controlling interests
-
-
11,464
-
-
-
-
11,464
Income tax
-
-
-
-
-
-
(13,538)
(13,538)
Profit for the year
236,404
Reportable segment assets
2,811,209
2,333,769
9,797,839
6,190,193
95,905
337,056
-
21,565,971
Investments in associates and joint ventures
11,525
-
-
-
-
-
-
11,525
Reportable segment liabilities
7,720,693
1,966,530
8,315,316
1,231,669
7,749
119,416
-
19,361,373
Additions to non-current assets
9,972
4,218
26,608
264
(10,036)
2,039
-
33,065
Segment reporting is presented in accordance with the
strategy on the basis of the organisational structure used in
management reporting of NLB Group’s results. NLB Group’s
segments are business units that focus on different customers
and markets. They are managed separately because each
business unit requires different strategies and service levels.
The business activities of NLB and N Banka are divided into
several segments. Interest income and expenses are reallocated
between segments on the basis of fund transfer prices (FTP).
Other NLB Group members are, based on their business
activity, included in only one segment except NLB Lease&Go
Ljubljana which is according to its business activities divided
into two segments.
The segments of NLB Group are divided into core and non-core
segments.
The core segments are the following:
•
Retail Banking in Slovenia, which includes banking with
individuals and micro companies (NLB and N Banka),
asset management (NLB Skladi), and part of subsidiary
NLB Lease&Go Ljubljana that includes operations with
retail clients, as well as the contribution to the result of the
associated company Bankart.
•
Corporate and Investment Banking in Slovenia, which
includes banking with Key Corporate Clients, SMEs, Cross-
border corporate financing, Investment Banking and Custody,
Restructuring and Workout in NLB and N Banka, and part
of the subsidiary NLB Lease&Go Ljubljana that includes
operations with corporate clients.
•
Strategic Foreign Markets, which consist of the operations
of strategic Group banks in the strategic markets (North
Macedonia, Bosnia and Herzegovina, Kosovo, Montenegro,
and Serbia), as well as investment company KomBank Invest,
Beograd, NLB DigIT, Beograd, NLB Lease&Go Skopje and
NLB Lease&Go leasing Belgrade. Komercijalna banka, Banja
Luka was sold outside the NLB Group on 9 December 2021;
its operations till that date are included in the result of the
segment for the year 2021.
•
Financial Markets in Slovenia include treasury activities and
trading in financial instruments, while they also present the
results of asset and liabilities management (ALM) in both NLB
and N Banka.
•
Other accounts in NLB and N Banka for the categories whose
operating results cannot be allocated to specific segments,
including negative goodwill from acquisition of N Banka NLB
Lease&Go leasing Belgrade, as well as the subsidiaries NLB
Cultural Heritage Management Institute and Privatinvest.
Non-Core Members include the operations of non-core
NLB Group members, namely REAM and leasing entities in
liquidation, NLB Srbija, and NLB Crna Gora. NLB Leasing
Ljubljana was sold to the strategic company NLB Lease&Go
Ljubljana within the NLB Group in 2021. Despite the change in
ownership, its operations continue to be monitored within the
segment of non-core members.
NLB Group is primarily a financial group, and net interest
income represents the majority of its net revenues. NLB Group’s
main indicator of a segment’s efficiency is net profit before tax.
No revenues were generated from transactions with a single
external customer that would amount to 10% or more of NLB
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Geographical analysis includes a breakdown of items with
respect to the country in which individual NLB Group entities
are located.
in EUR thousands
Revenues
Net income
Profit/(loss) before
income tax
Income tax
NLB Group
2022
2021
2022
2021
2022
2021
2022
2021
Slovenia
445,749
352,053
367,121
301,021
288,563
137,857
(9,719)
(5,043)
South East Europe
505,855
458,571
431,267
365,649
194,764
121,301
(15,487)
(8,462)
Bosnia and Herzegovina
84,065
83,087
71,205
52,735
33,475
15,236
(2,635)
(2,213)
Croatia
23
5
473
207
(170)
(181)
(45)
(1)
Kosovo
58,297
51,512
49,251
42,595
35,922
27,056
(3,693)
(2,787)
Montenegro
49,528
43,983
38,251
34,756
15,436
6,508
(1,838)
(1,484)
North Macedonia
94,660
87,936
78,369
70,157
41,807
43,277
(3,795)
(4,054)
Serbia
219,282
192,048
193,718
165,199
68,294
29,405
(3,481)
2,077
Western Europe
13
17
161
249
(264)
2,248
(24)
(33)
Germany
-
1
58
499
(647)
488
-
-
Switzerland
13
16
103
(250)
383
1,760
(24)
(33)
Total
951,617
810,641
798,549
666,919
483,063
261,406
(25,230)
(13,538)
The column ‘Revenues’ includes interest and similar income,
dividend income, and fee and commission income.
The column ‘Net Income’ includes net interest income, dividend
income, net fee and commission income, the net effect of
financial instruments, foreign exchange translation, the effect
on the derecognition of assets, net operating income, and gain
less losses from non-current assets held for sale.
in EUR thousands
Non-current assets
Total assets
Number of employees
NLB Group
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
31 Dec 2022
31 Dec 2021
Slovenia
152,037
150,829
13,935,167
11,716,270
2,833
2,619
South East Europe
204,802
214,380
10,216,136
9,845,128
5,392
5,563
Bosnia and Herzegovina
35,550
34,782
1,799,877
1,596,370
971
942
Croatia
377
383
3,557
4,025
6
6
Kosovo
14,289
14,988
1,082,474
930,383
467
463
Montenegro
17,416
18,328
825,400
775,238
380
374
North Macedonia
36,348
37,384
1,832,477
1,758,269
954
877
Serbia
100,822
108,515
4,672,351
4,780,843
2,614
2,901
Western Europe
28
30
8,937
16,098
3
3
Germany
28
30
691
971
1
1
Switzerland
-
-
8,246
15,127
2
2
Total
356,867
365,239
24,160,240
21,577,496
8,228
8,185
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Risk Management
Events After 2022
Financial Report
The table below presents data on NLB Group members before intercompany eliminations and consolidation journals:
in EUR thousands
Revenues
Net income
Profit/(loss) before
income tax
Income tax
NLB Group
2022
2021
2022
2021
2022
2021
2022
2021
Slovenia
523,774
448,559
431,187
387,692
191,900
225,706
(9,153)
(5,252)
South East Europe
507,243
459,405
429,307
374,776
199,981
146,496
(15,952)
(8,940)
Bosnia and Herzegovina
84,107
83,275
70,211
67,806
33,352
30,895
(2,635)
(2,213)
Croatia
128
3
617
274
(170)
(181)
(45)
(1)
Kosovo
58,296
51,509
48,391
41,833
36,095
27,223
(3,693)
(2,787)
Montenegro
49,738
43,978
37,822
35,417
18,374
7,969
(1,838)
(1,484)
North Macedonia
94,624
87,864
75,882
68,429
41,601
43,054
(3,795)
(4,054)
Serbia
220,350
192,776
196,384
161,017
70,729
37,536
(3,946)
1,599
Western Europe
25
19
(12)
86
(2,835)
2,247
(24)
(33)
Germany
1
1
54
493
(646)
489
-
-
Switzerland
24
18
(66)
(407)
(2,189)
1,758
(24)
(33)
Total
1,031,042
907,983
860,482
762,554
389,046
374,449
(25,129)
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Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
transactions
Group in such a manner that it has control or joint control,
has a significant influence, or is a member of the key
management personnel of the reporting entity. Related parties
of NLB Group and NLB include: key management personnel
(Management Board, other key management personnel and
their family members); the Supervisory Board; companies in
which members of the Management Board, key management
personnel, or their family members have control, joint control,
or a significant influence; a major shareholder of NLB with
other key management personnel, their family members and
companies these related parties have control, joint control, or
significant influence
A number of banking transactions are entered into with related
parties within regular course of business. The volume of
related-party transactions and the outstanding balances are as
follows:
NLB Group
Management Board and
other Key management
personnel
Family members of the
Management Board and
other key management
personnel
Companies in which
members of the
Management Board, key
management personnel or
their family members have
control, joint control or a
significant influence
Supervisory Board
2022
2021
2022
2021
2022
2021
2022
2021
Loans issued
Balance at 1 January
2,097
2,284
415
444
532
-
60
305
Increase
1,526
1,041
324
228
8
891
76
55
Decrease
(1,450)
(1,228)
(270)
(257)
(540)
(359)
(82)
(300)
Balance at 31 December
2,173
2,097
469
415
-
532
54
60
Interest income
41
39
10
7
-
6
-
4
Deposits received
Balance at 1 January
2,170
1,610
718
956
590
136
505
323
Increase
2,938
2,048
634
595
6,413
1,625
398
321
Decrease
(2,552)
(1,488)
(426)
(833)
(6,785)
(1,171)
(555)
(139)
Balance at 31 December
2,556
2,170
926
718
218
590
348
505
Interest expenses
(7)
(4)
-
-
-
-
(2)
(1)
Other financial liabilities
2
3
-
1
3
14
-
-
Other financial liabilities measured at fair
value through profit or loss (note 2.31.)
801
-
-
-
-
-
-
-
Other operating liabilities
6,559
2,265
-
-
-
-
-
-
Guarantees issued and loan commitments
237
215
70
72
-
194
17
23
Fee income
19
12
7
6
66
83
2
2
Other income
17
13
-
-
-
-
-
-
Other expenses
-
-
-
-
(382)
(78)
-
-
321
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Performance Overview
Risk Management
Events After 2022
Financial Report
in EUR thousands
NLB
Management Board and
other Key management
personnel
Family members of the
Management Board and
other key management
personnel
Companies in which
members of the
Management Board, key
management personnel or
their family members have
control, joint control or a
significant influence
Supervisory Board
2022
2021
2022
2021
2022
2021
2022
2021
Loans issued
Balance at 1 January
2,097
2,284
415
444
532
-
60
305
Increase
1,480
1,041
324
228
8
891
76
55
Decrease
(1,405)
(1,228)
(270)
(257)
(540)
(359)
(82)
(300)
Balance at 31 December
2,172
2,097
469
415
-
532
54
60
Interest income
41
39
10
7
-
6
-
4
Deposits received
Balance at 1 January
2,170
1,610
718
956
590
136
505
323
Increase
2,643
2,048
634
595
6,413
1,625
398
321
Decrease
(2,277)
(1,488)
(426)
(833)
(6,785)
(1,171)
(555)
(139)
Balance at 31 December
2,536
2,170
926
718
218
590
348
505
Interest expenses
(7)
(4)
-
-
-
-
(2)
(1)
Other financial liabilities
2
3
-
1
3
14
-
-
Other financial liabilities measured at fair
value through profit or loss (note 2.31.)
728
-
-
-
-
-
-
-
Other operating liabilities
6,539
2,265
-
-
-
-
-
-
Guarantees issued and loan commitments
223
215
70
72
-
194
17
23
Fee income
18
12
7
6
66
83
2
2
Other income
17
13
-
-
-
-
-
-
Other expenses
-
-
-
-
(382)
(78)
-
Key management compensation
The remuneration for the members of the Supervisory Board of
NLB d.d. and the Management Board of NLB d.d. is regulated in
Remuneration Policy for the Members of the Supervisory Board
of NLB d.d. and the Members of the Management Board of NLB
d.d. The remuneration for the identified employees and other
employees is regulated in Remuneration Policy for employees of
NLB d.d. and NLB Group.
In 2022, NLB d.d. in accordance with the EBA Guidelines on
sound remuneration policies under Directive 2013/36/EU,
Companies Act (ZGD-1) and the Banking Act (ZBan-3), adopted
a new Remuneration Policy for members of the Supervisory
Board of NLB d.d. and members of the Management Board of
NLB d.d., which was adopted by the Supervisory Board of NLB
d.d. and then submitted to the General Meeting of Shareholders
of NLB d.d., where it was voted in December 2021. Pursuant
to Article 294.a of the Companies Act (ZGD-1), the Bank must
in case of every significant change submit the Remuneration
Policy to the General Meeting of Shareholders for voting, and in
any case at least every four years.
In the Remuneration Policy and based thereon and in
accordance with Commission Delegated regulation (EU)
2021/923, the Bank designates identified employees. In
designating identified employees, the internal organisation
and the nature, scope and complexity of the Bank’s activities
are taken into account. The criteria fully take into account the
risks that the Bank or the NLB Group is or could be exposed to
its given risk profile and risk appetite. The Remuneration Policy
includes members of the Supervisory Board, members of the
Management Board, senior management, and other identified
employees who are included in the Policy on the basis of the
Bank’s self-assessment.
Members of the Supervisory Board may, in relation to their
function of a member of the Supervisory Board, only receive
remuneration that is compliant with the relevant resolutions of
the Bank’s General Meeting. The Supervisory Board members
are entitled to a remuneration for performing their function
and/or attendance fees for their membership in the Supervisory
Board of the Bank and the committees of the Supervisory
Board of the Bank, which are determined in accordance with
respective applicable resolution by the General Meeting of
the Bank, and to reimbursement of travel expenses, daily
allowances, and accommodation costs up to the amount
provided by the regulations governing reimbursement of costs
related to work and other income not included in the tax base.
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The Bank’s General Meeting may determine and change
the remuneration of the members of the Supervisory Board
independently from the Remuneration Policy, and may change,
repeal, or replace any of its resolutions in relation to the
remuneration of the Supervisory Board members at any time,
or adopt a new resolution in relation to the remuneration of the
Supervisory Board members.
The performance of key management is defined by financial
and non-financial criteria. In addition to the salary determined
in their employment contract, they are entitled to the annual
variable part of the salary based on their achievement of
the financial and non-financial performance criteria, which
encompass the goals of NLB Group or NLB, the goals of the
organisational unit, and the personal goals of the employee
performing special work.
The objectives and criteria of each member of the Management
Board shall be determined each year by the Supervisory Board
NLB d.d. at the time of adoption of the Bank’s annual business
plan. The objectives and criteria for the identified employees
are determined by the Management Board.
The variable portion of receipts for a given financial year may
not exceed seven salaries of a member of the Management
Board in the financial year. Other identified employees are
entitled to a variable part of remuneration according to the
category of employee in the maximum amount of three to six
salaries. Key management shall be entitled to a variable part
of the performance benefit only in proportional part to the
actual period of employment (duration of the term of office) of
the Bank during the period to which the variable part of the
performance benefit relates.
The non-deferred part of variable remuneration is paid no
later than three months after the adoption of the Annual Report
of NLB Group for the business year to which the variable
remuneration relates. Variable remuneration part of payment of
an identified employee is awarded and paid in cash, provided
that the amount does not exceed EUR 50 thousand or/and is
higher than one-third of his/her total remuneration for each
financial year, and if this is permissible in accordance with the
relevant regulation.
If the variable remuneration part of payment of an identified
employee exceeds EUR 50 thousand or/and is higher than
one-third of his/her total remuneration for each financial
year and if this is permissible in accordance with the relevant
regulation, then at least 50% of the variable remuneration must
consist of instruments. The part of the variable remuneration
of an identified employee consisting of instruments shall be
awarded and paid, under the terms and conditions in the valid
Remuneration Policy, in instruments whose value is based on
the value of the share of NLB d.d. (with these instruments not
giving any dividends or other yields).
The deferred part of the variable part of the salary must be
deferred for a period of at least five years of the day on which
the non-deferred part of such variable remuneration is paid
and it is paid in proportional shares, according to the relevant
legislation.
The table below shows payments in presented periods:
in EUR thousands
NLB Group and NLB
Management Board
Other key
management
personnel
Supervisory Board
2022
2021
2022
2021
2022
2021
Short-term benefits
2,282
1,589
6,148
5,480
696
705
Cost refunds
6
4
98
83
74
26
Long-term bonuses:
- severance pay
-
385
-
5
-
-
- other benefits
7
5
77
70
-
-
- variable part of payments
276
394
1,425
2,898
-
-
Total
2,571
2,377
7,748
8,536
770
731
Short-term benefits include:
•
monetary benefits (gross salaries, supplementary insurance,
holiday allowances and other bonuses);
•
non-monetary benefits (company cars, health care,
residential facilities, etc.).
The reimbursement of cost comprises food allowances, travel
expenses, and use of own resources.
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Financial Report
Payments to individual members of the Management Board
in EUR
Member
2022
2021
Blaž Brodnjak
Short-term benefits:
01.12.2012
- gross salary and holiday allowance
542,370
441,770
- benefits and other short-term bonuses
6,908
2,310
Costs refunds
1,318
1,302
Long-term bonuses:
- other benefits
1,912
1,410
- variable part of payments
95,214
130,211
Total
647,722
577,003
Andreas Burkhardt
Short-term benefits:
18.09.2013
- gross salary and holiday allowance
486,438
405,092
- benefits and other short-term bonuses
33,588
32,672
Costs refunds
1,243
1,290
Long-term bonuses:
- other benefits
1,452
1,410
- variable part of payments
89,132
122,919
Total
611,853
563,383
Archibald Kremser
Short-term benefits:
31.07.2013
- gross salary and holiday allowance
517,370
420,809
- benefits and other short-term bonuses
39,220
34,117
Costs refunds
1,302
1,249
Long-term bonuses:
- other benefits
1,452
1,410
- variable part of payments
91,870
126,044
Total
651,214
583,629
Antonio Argir
Short-term benefits:
28.04.2022
- gross salary and holiday allowance
205,291
-
- benefits and other short-term bonuses
30,077
-
Costs refunds
796
-
Long-term bonuses:
- other benefits
859
-
- variable part of payments
-
-
Total
237,023
-
Andrej Lasič
Short-term benefits:
28.04.2022
- gross salary and holiday allowance
205,292
-
- benefits and other short-term bonuses
4,216
-
Costs refunds
796
-
Long-term bonuses:
- other benefits
859
-
- variable part of payments
-
-
Total
211,163
-
Hedvika Usenik
Short-term benefits:
28.04.2022
- gross salary and holiday allowance
205,292
-
- benefits and other short-term bonuses
5,512
-
Costs refunds
782
-
Long-term bonuses:
- other benefits
859
-
- variable part of payments
-
-
Total
212,445
-
Petr Brunclík
Short-term benefits:
18.05.2020 - 30.06.2021
- gross salary and holiday allowance
-
221,963
- benefits and other short-term bonuses
-
30,092
Costs refunds
-
476
Long-term bonuses:
- severance payments
-
385,000
- other benefits
-
705
- variable part of payments
-
14,633
Total
-
652,869
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Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Payments to individual members of the Supervisory Board
in EUR
Member
2022
2021
Primož Karpe
Session fees
-
-
11.02.2016
Annual compensation
96,000
96,000
Other bonuses - benefit
382
447
Costs refunds
10,952
4,629
Andreas Klingen
Session fees
-
-
22.06.2015
Annual compensation
90,000
90,000
Other bonuses - benefit
382
447
Costs refunds
7,360
4,947
David Eric Simon
Session fees
-
-
04.08.2016
Annual compensation
81,000
81,000
Other bonuses - benefit
382
447
Costs refunds
7,931
5,251
Gregor Rok Kastelic
Session fees
-
-
10.06.2019
Annual compensation
81,000
81,000
Other bonuses - benefit
382
447
Costs refunds
9,340
758
Shrenik Dhirajlal Davda
Session fees
-
-
10.06.2019
Annual compensation
72,000
72,000
Other bonuses - benefit
382
447
Costs refunds
8,767
2,367
Mark William Lane Richards
Session fees
-
-
10.06.2019
Annual compensation
81,000
81,000
Other bonuses - benefit
382
447
Costs refunds
9,493
2,643
Verica Trstenjak
Session fees
-
-
15.06.2020
Annual compensation
66,000
65,790
Other bonuses - benefit
382
447
Costs refunds
1,473
-
Sergeja Kočar
Session fees
-
-
17.06.2020
Annual compensation
8,327
11,856
Other bonuses - benefit
382
447
Costs refunds
1,183
-
Islam Osama Bahgat Zekry
Session fees
-
-
14.06.2021
Annual compensation
72,000
38,608
Other bonuses - benefit
382
447
Costs refunds
17,622
5,705
Tadeja Žbontar Rems
Session fees
-
-
22.01.2021
Annual compensation
31,215
26,656
Other bonuses - benefit
382
447
Costs refunds
185
-
Bojana Šteblaj
Session fees
-
-
17.06.2020 - 12.09.2022
Annual compensation
12,014
15,655
Other bonuses - benefit
-
447
Costs refunds
-
-
Janja Žabjek Dolinšek
Session fees
-
-
20.11.2020 - 08.07.2022
Annual compensation
1,473
6,839
Other bonuses - benefit
-
447
Costs refunds
32
-
Peter Groznik
Session fees
-
-
08.09.2017 - 14.06.2021
Annual compensation
-
32,800
Other bonuses - benefit
-
-
Costs refunds
-
325
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Performance Overview
Risk Management
Events After 2022
Financial Report
Related-party transactions with subsidiaries, associates and joint ventures
in EUR thousands
NLB Group
Associates
Joint ventures
2022
2021
2022
2021
Loans issued
Balance at 1 January
1,011
1,106
201
851
Acquisition of subsidiaries
77
-
-
-
Increase
145
89
2
7
Decrease
(176)
(184)
(2)
(657)
Balance at 31 December
1,057
1,011
201
201
Interest income
39
38
3
4
Impairment
(8)
26
2
69
Deposits received
Balance at 1 January
7,967
3,973
3,492
3,434
Effects of translation of foreign operations to presentation currency
-
-
3
3
Increase
5,982
7,610
1,073
7,706
Decrease
(8,574)
(3,616)
(1,497)
(7,651)
Balance at 31 December
5,375
7,967
3,071
3,492
Interest expenses
-
-
(46)
(59)
Other financial assets
7
20
-
-
Other financial liabilities
1,116
1,148
1
1
Guarantees issued and loan commitments
2,034
2,032
-
-
Income/(expenses) provisions for guaranties and commitments
(1)
-
-
-
Fee income
69
38
-
1
Fee expenses
(12,894)
(13,583)
-
-
Other income
92
162
5
2
Other expenses
(571)
(726)
-
-
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Events After 2022
Financial Report
in EUR thousands
NLB
Subsidiaries
Associates
Joint ventures
2022
2021
2022
2021
2022
2021
Loans issued
Balance at 1 January
250,303
169,176
1,011
1,106
201
851
Increase
536,279
170,308
145
89
2
7
Decrease
(448,682)
(89,181)
(174)
(184)
(2)
(657)
Balance at 31 December
337,900
250,303
982
1,011
201
201
of which at amortised cost
328,641
241,840
982
1,011
201
201
of which at fair value through profit or loss
9,259
8,463
-
-
-
-
Interest income
7,461
4,906
39
38
3
4
Impairment
(645)
1,075
27
26
2
69
Valuation
(2,225)
(558)
-
-
-
-
Deposits
Balance at 1 January
83,948
69,386
-
-
-
-
Increase
2,171,418
433,380
-
-
-
-
Decrease
(2,031,874)
(418,818)
-
-
-
-
Balance at 31 December
223,492
83,948
-
-
-
-
Interest income
940
3
-
-
-
-
Interest expenses
(5)
-
-
-
-
-
Impairment
(18)
2
-
-
-
-
Loans received
Balance at 1 January
44,484
-
-
-
-
-
Increase
13,001
44,484
-
-
-
-
Decrease
(44,484)
-
-
-
-
-
Balance at 31 December
13,001
44,484
-
-
-
-
Interest income
9
1
-
-
-
-
Interest expenses
(2)
-
-
-
-
-
Deposits received
Balance at 1 January
68,372
19,415
7,967
3,973
27
284
Increase
23,967,799
7,558,162
5,982
7,610
82
213
Decrease
(23,870,393)
(7,509,205)
(8,574)
(3,616)
(69)
(470)
Balance at 31 December
165,778
68,372
5,375
7,967
40
27
Interest expenses
(465)
(2)
-
-
-
-
Derivatives
Fair value
(6,681)
(7)
-
-
-
-
Contractual amount
113,711
9,789
-
-
-
-
Interest income
312
-
-
-
-
-
Interest expenses
(181)
-
-
-
-
-
Other financial assets
2,514
25,491
7
20
-
-
Impairment
5
(8)
-
-
-
-
Other financial liabilities
2,710
1,860
972
1,001
-
-
Guarantees issued and loan commitments
46,366
34,016
2,034
2,032
-
-
Income/(expenses) provisions for guaranties and commitments
(85)
584
(1)
-
-
-
Received loan commitments and financial guarantees
10,983
14,541
-
-
-
-
Fee income
10,200
9,720
69
38
-
1
Fee expenses
(280)
(21)
(9,964)
(10,782)
-
-
Other income
1,543
1,078
92
162
2
2
Other expenses
(5,864)
(2,133)
(559)
(708)
-
-
Gains less losses from financial assets and liabilities held for trading
(7,132)
(298)
-
-
-
-
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Events After 2022
Financial Report
Related-party transactions with major shareholder with significant influence
The volumes of related party transactions with major shareholder are as follows:
in EUR thousands
NLB Group
NLB
2022
2021
2022
2021
Loans issued
Balance at 1 January
20,534
23,219
20,534
23,219
Increase
3,708
13,199
3,708
13,199
Decrease
(6,647)
(15,884)
(6,647)
(15,884)
Balance at 31 December
17,595
20,534
17,595
20,534
Interest income
713
713
713
713
Investments in securities
Balance at 1 January
534,522
691,868
483,656
597,123
Exchange difference on opening balance
36
-
-
-
Acquisition of subsidiaries
151,047
-
-
-
Increase
672,692
1,247,211
553,823
947,581
Decrease
(746,698)
(1,392,356)
(521,066)
(1,049,482)
Valuation
(47,312)
(12,201)
(43,024)
(11,566)
Balance at 31 December
564,287
534,522
473,389
483,656
Interest income
5,816
6,021
5,844
6,389
Interest expenses
-
(652)
-
(652)
Other financial assets
31,141
659
31,141
659
Other financial liabilities
2
4
2
4
Guarantees issued and loan commitments
1,194
1,184
1,194
1,184
Fee income
350
309
350
309
Fee expenses
(28)
(27)
(28)
(27)
Other income
257
212
257
212
Other expenses
(3)
(5)
(3)
(5)
Gains less losses from financial assets and liabilities held for trading
(66)
(158)
(66)
(158)
328
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Key Highlights
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Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
NLB Group and NLB disclose all transactions with the major
shareholder with significant influence. For transactions with
other government-related entities, NLB Group discloses
individually significant transactions.
in EUR thousands
NLB Group and NLB
Amount of significant
transactions concluded
during the year
Number of significant
transactions concluded
during the year
2022
2021
2022
2021
Guarantees issued and loan commitments
188,000
70,000
3
1
in EUR thousands
NLB Group and NLB
Year-end balance of all
significant transactions
Number of significant
transactions at year-end
2022
2021
2022
2021
Loans
565,330
507,159
10
7
Debt securities measured at amortised cost
64,913
72,633
1
1
Borrowings, deposits and business accounts
108,606
184,267
3
3
Guarantees issued and loan commitments
152,500
152,500
2
2
in EUR thousands
NLB Group and NLB
Effects in income
statement
during the year
2022
2021
Interest income from loans
5,130
3,141
Fees and commissions income
777
241
Interest income from debt securities measured at amortised cost and
net valuation effects from hedge accounting
(4,940)
(990)
Interest expenses from borrowings, deposits, and business accounts
(99)
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Risk Management
Events After 2022
Financial Report
the reporting date
USA regional banks & Credit Suisse
turmoil
In March 2023, two regional banks in the USA, Silicon Valley
Bank and Signature Bank collapsed. Developments in the
USA also had impacts in Europe and put European banks
under stress. Credit Suisse was impacted by the collapse in
confidence as the demise of regional banks in the USA. To
increase confidence in the banking sector, Swiss financial
regulators engineered an emergency rescue plan for Credit
Suisse resulting in the UBS Group AG buying Credit Suisse. As
of 31 March 2023, the NLB Group has only a small exposure to
Credit Suisse, deriving mainly from limited investment in bonds.
From a capital management point of view, most of the
cumulative negative valuations of FVOCI securities (except
for a smaller part which as of 31 December 2022 was carved
out by the temporary treatment of sovereign debt introduced
by COVID-19 related ‘quick-fix’ – see
Note 5.23.
) have already
been reflected in the NLB Group’s capital ratios and thus going
forward are rather supportive in terms of capital levels as those
exposures mature and new investments are made only with a
short duration (i.e. low valuation risks).
From a liquidity point of view, no material deviations from the
normal intra-monthly deposit dynamics were identified at the
NLB Group Directory
Nova Ljubljanska banka d.d., Ljubljana
Trg republike 2
1000 Ljubljana, Slovenia
Tel: +386 1 476 39 00, +386 1 477 20 00
E-mail: info@nlb.si
www.nlb.si
Blaž Brodnjak, CEO
Antonio Argir, Responsible for Group governance, payments
and innovations
23
Andreas Burkhardt, CRO
Archibald Kremser, CFO
Andrej Lasič, CMO (responsible for Corporate and Investment
Banking)
24
Hedvika Usenik
,
CMO (responsible for Retail Banking and
Private Banking)
25
Slovenian network
Area Branch Ljubljana
Trg republike 2
1000 Ljubljana, Slovenia
Tel: +386 1 476 23 30
Area Branch Northwest and Central Slovenia
Ljubljanska cesta 62
1230 Domžale, Slovenia
Tel: +386 1 724 55 01
Area Branch East Slovenia
26
Titova cesta 2
2000 Maribor, Slovenia
Tel: +386 2 234 45 20
Area Branch Northeast Slovenia
27
Rudarska cesta 3
3320 Velenje, Slovenia
Tel: +386 2 234 45 04
23 Since 28 April 2022.
24 Since 28 April 2022.
25 Since 28 April 2022.
26 From 1 January 2023, new area branch.
27 From 1 January 2023, relocated.
Area Branch Southeast Slovenia
Seidlova cesta 3
8000 Novo mesto, Slovenia
Tel: +386 7 339 14 56
Area
Branch Southwest Slovenia
Cesta Zore Perello - Godina 7
6000 Koper, Slovenia
Tel: +386 5 610 30 10
Private Banking
Trg republike 2
1000 Ljubljana, Slovenia
Tel: +386 1 476 23 66
Micro Enterprises
Trg republike 2
1000 Ljubljana, Slovenia
Tel: +386 1 476 50 01
Mobile banking
Trg republike 2
1000 Ljubljana, Slovenia
Tel: +386 1 476 44 39
Small and
Mid-corporates
Central region
Trg republike 2
1000 Ljubljana, Slovenia
Tel.: +386 1 476 26 11
Northwest region
Ljubljanska cesta 62
1230 Domžale, Slovenia
Tel.: +386 1 724 54 75
Primorsko-Goriška region
28
Cesta Zore Perello - Godina 7
6000 Koper, Slovenia
Tel.: +386 5 610 30 17
28 From 1 January 2023, reorganized.
Podravsko-Pomurska region
Titova cesta 2
2000 Maribor, Slovenia
Tel.: +386 2 234 45 00
Savinjsko-Koroška region
Kocenova 1
3000 Celje, Slovenia
Tel.: +386 3 424 01 11
Dolenjsko-Posavska region
29
Seidlova cesta 3
8000 Novo mesto, Slovenia
Tel.: +386 7 339 14 13
CSA & Cross-border
Financing
Trg republike 2
1000 Ljubljana, Slovenia
Tel: +386 1 476 26 18
Large corporates
Institutional Investors
Trg republike 2
1000 Ljubljana, Slovenia
Tel: +386 1 476 24 92
Large Corporates
Trg republike 2
1000 Ljubljana, Slovenia
Tel: +386 1 476 26 92
29 From 1 January 2023, new business centre.
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Risk Management
Events After 2022
Financial Report
Members of NLB Group
NLB Komercijalna Banka AD Beograd
Svetog Save 14
11000 Belgrade, Serbia
Tel: +381 11 30 80 100
Email: kontakt.centar@nlbkb.rs
www. nlbkb.rs
Vlastimir Vuković, President of the Management Board
Dejan Janjatović, Deputy of the president of the Management
Board
Dragiša Stanojević, Member of the Management Board
Bojana Kaličanin - Stojanović, Member of the Management
Board
NLB Banka AD Skopje
Majka Tereza 1
1000 Skopje, North Macedonia
Tel: +389 2 15 600
E-mail: info@nlb.mk
www.nlb.mk
Branko Greganović, President of the Management Board
Günter Friedl, Member of the Management Board
30
Peter Zelen, Member of the Management Board
Igor Davčevski, Member of the Management Board
NLB Banka a.d. Banja Luka
Milana Tepića 4
78000 Banja Luka, Republic of Srpska,
Bosnia and Herzegovina
Tel: +387 51 248 588
E-mail: helpdesk@nlb-rs.ba
www.nlb-rs.ba
Goran Babić, President of the Management Board
Marjana Usenik, Member of the Management Board
Ljiljana Krsman, Member of the Management Board
NLB Banka d.d., Sarajevo
Ul. Koševo br. 3
71000 Sarajevo, Bosnia and Herzegovina
Tel: +387 33 720 300
E-mail: info@nlb.ba
www.nlb.ba
Lidija Žigić, President of the Management Board
Denis Hasanić, Member of the Management Board
Jure Peljhan, Member of the Management Board
30 Until 18 December 2022.
NLB Banka sh.a., Prishtina
Rr. Ukshin Hoti nr. 124
10000 Prishtina, Kosovo
Tel: +383 38 744 000
E-mail: info@nlb-kos.com
www.nlb-kos.com
Albert Lumezi, President of the Management Board
Gem Maloku, Member of the Management Board
Lavdim Koshutova, Member of the Management Board
NLB Banka a.d., Podgorica
Bulevar Stanka Dragojevića 46
81000 Podgorica, Montenegro
Tel: +382 20 402 000
E-mail: info@nlb.me
www.nlb.me
Martin Leberle, President of the Management Board
Vujošević Dražen, Member of the Management Board
Lana Đurasović, Member of the Management Board
31
N Banka d.d. Ljubljana
Dunajska cesta 128a
1000 Ljubljana, Slovenia
Tel: +386 80 22 65
E-mail: info@nbanka.si
www.nbanka.si
Heribert Fernau, President of the Management Board
Elena Burdakova, Member of the Management Board
Martin Mavrič, Member of the Management Board
NLB DigIT d.o.o. Beograd
Bulevar Mihajla Pupina 165v 11070 New Belgrade, Serbia
Tel.: +381 11 7220 112
E-mail: office@nlbdigit.rs
www.nlbdigit.rs
Vladimir Rupar, Director
Dragana Marjanović Gencel, Director
KomBank Invest a.d. Beograd
Kralja Petra 19
11000 Belgrade, Serbia
Tel.: +381 11 330 8310
E-mail: vladimir.garic@kombankinvest.com
www.kombankinvest.com
Vladimir Garić, Director
31 From 3 June 2022.
NLB Lease&Go, leasing, d.o.o., Ljubljana
Šlandrova ulica 2
1231 Ljubljana - Črnuče, Slovenia
Tel: +386 1 586 29 00
E-mail: info@nlbleasego.si
www.nlbleasego.si
Andrej Pucer, Director
Anže Pogačnik, Director
Claus-Peter Martin Mueller, Director
NLB Lease&Go d.o.o. Skopje
Majka Tereza 1,
1000 Skopje, North Macedonia
Tel.: + 389 2 5100 845
E-mail: info@nlbleasego.mk
Gregor Martinuč, Director
Gjore Andonovski, Director
NLB Lease&Go Leasing d.o.o.
Beograd
Bulevar Despota Stefana 12 11000 Belgrade, Serbia
Tel.: +381 11 3342 644
E-mail: office@nlbleasego.rs
Boris Stević, Chairman of the Executive Board
Michael Krenn, member of the Executive Board
NLB Cultural Heritage Management Institute, Ljubljana
Čopova ulica 3
1000 Ljubljana, Slovenia
Tel: +386 1 476 42 63
E-mail: irena.cuk@nlb.s
i
Irena Čuk, Director
NLB Leasing d.o.o., Ljubljana – v likvidaciji
Šlandrova ulica 2
1231 Ljubljana - Črnuče, Slovenia
Tel: +386 1 586 29 41
E-mail: anze.pogacnik@nlbleasing.si
Anže Pogačnik, Liquidator
NLB Leasing d.o.o. Beograd – u likvidaciji
Bulevar Mihajla Pupina 165 v
11070 New Belgrade, Serbia
Tel: +381 11 222 01 16
E-mail: veljko.tanic@nlbleasing.rs
Veljko Tanić, Liquidator
331
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Optima Leasing d.o.o. u likvidaciji, Zagreb
Miramarska 24
10000 Zagreb, Croatia
Tel: +385 1 632 99 79
E-mail: vjekoslav.budimir@optima-leasing.hr
Vjekoslav Budimir, Liquidator
Prvi faktor d.o.o., v likvidaciji, Ljubljana
Slovenska cesta 17
1000 Ljubljana, Slovenia
E-mail: france.zupan@prvifaktor.si
E-mail: iztok.zupanc@prvifaktor.si
France Zupan, Liquidator
Iztok Zupanc, Liquidator
Prvi faktor – faktoring d.o.o., Beograd – u likvidaciji
Bulevar Mihajla Pupina 165 v
11070 New Belgrade, Serbia
Tel: +381 64 642 4915
E-mail: zeljko.atanaskovic@prvifaktor.rs
Željko Atanasković, Liquidator
Prvi faktor d.o.o. u likvidaciji, Zagreb
Miramarska cesta 24
10000 Zagreb, Croatia
Tel: +385 1 6165 000
E-mail: info@prvifaktor.hr
Vjekoslav Budimir, Liquidator
NLB InterFinanz AG in Liquidation, Zürich
Beethovenstrasse 48
8002 Zürich, Switzerland
E-mail: info@nlbinterfinanz.ch
Jean-David Barnezet Llort, Liquidator
Polona Žižmund, Liquidator
NLB InterFinanz d.o.o., Beograd – u likvidaciji
Bulevar Mihajla Pupina 165 v
11070 New Belgrade, Serbia
Tel: +381 11 22 25 351
Liljana Zoraja, Liquidator
NLB Skladi, upravljanje premoženja, d.o.o., Ljubljana
Tivolska cesta 48
1000 Ljubljana, Slovenia
Tel: +386 1 476 52 70
E-mail: info@nlbskladi.si
www.nlbskladi.si
Kruno Abramovič, President of the Management Board
32
Blaž Bračič, Member of the Management Board
Bankart d.o.o., Ljubljana
Celovška cesta 150
1000 Ljubljana, Slovenia
Tel: +386 1 583 42 02
E-mail: info@bankart.si
www.bankart.si
Aleksander Kurtevski, Director
Jure Kvaternik, Director
LHB Aktiengesellschaft, Frankfurt am Main
Silberbornstrasse 14
D-60320 Frankfurt, Germany
Tel: +49 69 95 62 58 27
E-mail: matjaz.jevnisek@lhb.de
Matjaž Jevnišek, President of the Management Board
PRIVATINVEST d.o.o. Ljubljana
Dunajska cesta 128A
1000 Ljubljana, Slovenia
Tel: +386 80 22 65
E-mail: info@nbanka.si
Heribert Fernau, Director
Miha Hiršl, Director
PRO-REM d.o.o., Ljubljana - v likvidaciji
Čopova 3
1000 Ljubljana, Slovenia
Tel: +386 1 586 29 16
E-mail: info@s-ream.si
www.nlbrealestate.com
Jovica Jakovac, Liquidator
Nataša Batagelj, Liquidator
32 From 16 February 2023 new President of the Management Board Luka
Podlogar.
REAM d.o.o., Podgorica
Bul. Džordža Vašingtona br. 102, I. sprat/20
81000 Podgorica, Montenegro
Tel: +382 20 674 900
E-mail: gligor.bojic@nlb.me
Gligor Bojić, Director
Marko Furlan, Authorised Representative
REAM d.o.o., Zagreb
Ulica Damira Tomljanovića - Gavrana 11
10000 Zagreb, Croatia
Tel: +385 99 636 46 77
E-mail: josip.zurga@ream-cro.com
E-mail: julijana.milic@ream-cro.com
Josip Žurga, Director
Julijana Milić, Director
OL Nekretnine d.o.o. u likvidaciji, Zagreb
Miramarska 24
10000 Zagreb, Croatia
Tel: +385 1 56 25 919
E-mail: ivan.strek@ream-cro.com
Vjekoslav Budimir, Liquidator
Ivan Štrek, Liquidator
REAM d.o.o., Beograd – Novi Beograd
Bulevar Mihaila Pupina 165 v
11070 New Belgrade, Serbia
Tel: +381 11 22 25 374
E-mail: vladimir.vasilijevic@ream-srb.com
Vladimir Vasilijević, Director
Marko Bradić, Director
33
Miroslav Živković, Director
34
SPV2 d.o.o., Beograd – Novi Beograd
Bulevar Mihaila Pupina 165 v
11070 New Belgrade, Serbia
Tel: +381 11 22 25 374
E-mail: office@ream-srb.com
Vladimir Vasilijević, Director
33 Until 31 December 2022.
34 From 1 January 2023.
332
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Tara Hotel d.o.o., Budva
Bulevar Džordža Vašingtona 102, Podgorica
81000 Podgorica, Montenegro
Tel: +:382 20 674 900
E-mail: gligor.bojic@nlb.me
Gligor Bojić, Director
NLB Srbija d.o.o., Beograd
Bulevar Mihajla Pupina 165 v
11070 New Belgrade, Serbia
Tel: +381 11 22 25 366
E-mail: office@nlbsrbija.co.rs
www.nlbsrbija.co.rs
Veljko Tanić, Director
35
Željko Atanasković, Director
NLB Crna Gora d.o.o., Podgorica
Bulevar Džordža Vašingtona 102,
II sprat/38
81000 Podgorica, Montenegro
Tel: +382 68 886 441
E-mail: goran.lalicevic@nlb.me
Goran Laličević, Executive Director
Barbara Šink, Authorised Representative
Marko Čelebić, Authorised Representative
S-REAM d.o.o., Ljubljana
Čopova 3
1000 Ljubljana, Slovenia
Tel: +386 1 586 29 16
E-mail: info@s-ream.com
www.nlbrealestate.com
Jovica Jakovac, Director
Lamija Hadžiosmanović, Director
ARG - Nepremičnine d.o.o.
Vrhniška cesta 30,
1354 Horjul, Slovenia
Tel: +386 59 784 943
E-mail: matic.kermavnar@cbre.com
Matic Kermavnar, Director
35 Until 31 December 2022.
Branches and representative
offices of NLB Group
members outside their
country of residence
NLB InterFinanz AG in liquidation
Ljubljana Branch in liquidation
Puharjeva ulica 3
1000 Ljubljana, Slovenia
Marko Čelebić, Director
333
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
Definitions and Glossary of Selected Terms
AC
Amortised Costs
ALCO
Asset and Liability Committee
ALM
Asset and Liability Management
ALMM
Additional Liquidity Monitoring Metrics
AML/CTF
Anti-Money Laundering and Counter-Terrorism Financing
AT1
Additional Tier 1 capital
BCM
Business Continuity Management
BIA
Business Impact Analysis
BiH
Bosnia and Herzegovina
BMR
Benchmarks Regulation
BoS
Bank of Slovenia
bps
Basis Points
BPV
Basis Point Value
CB
Central Bank
CBR
Combined Buffer Requirement
CCF
Credit Conversion Factor
CEE
Central Eastern Europe
CEO
Chief Executive Officer
CET1
Common Equity Tier 1 capital
CFO
Chief Financial Officer
CGU
Cash-Generating Units
CIR
Cost-to-Income Ratio
CIRS
Currency Interest Rate Swaps
CISO
Chief Information Security Officer
CMO
Chief Marketing Officer
CoR
Cost of Risk
CRD
Capital Requirements Directive
CRM
Customer Relationship Management
CRO
Chief Risk Officer
CRR
Capital Requirements Regulation
CSA
Credit Support Annex
CSD
Central Security Depository
CSI
Customer Satisfaction Index
CSR
Corporate Social Responsibility
CVA
Credit Value Adjustments
DGS
Deposit Guarantee Scheme
DWH
Data Warehouse
EAD
Exposure at Default
EaR
Earnings at Risk
EBA
European Banking Authority
EBRD
European Bank for Reconstruction and Development
ECB
European Central Bank
ECL
Expected Credit Losses
ECRA
Enterprise Compliance Risk Assessment
EEA
European Economic Area
EIB
European Investment Bank
EMIR
European Market Infrastructure Regulation
EPS
Earnings Per Share
ESEF
European Single Electronic Format
ESG
Environmental, Social and Governance
ESMS
Environmental and Social Management System
EU
European Union
EVE
Economic Value of Equity
EVS
European Valuation Standards
EWS
Early Warning System
FATF
Financial Action Task Force
FTP
Fund Transfer Pricing
FURS
Financial Administration of the Republic of Slovenia
FVOCI
Fair Value Through Other Comprehensive Income
FVTPL
Fair Value Through Profit or Loss
FX
Foreign Exchange
GDP
Gross Domestic Product
GDPR
General Data Protection Regulation
GDR
Global Depositary Receipts
GGB
Government Guaranteed Bonds
GRI GS
Global Reporting Initiative - Global Standards
HHI
Herfindahl-Hirschman Index
HR
Human Resources
IAS
International Accounting Standard
IASB
International Accounting Standards Board
ICAAP
Internal Capital Adequacy Assessment Process
IFRIC
International Financial Reporting Interpretations Committee
IFRS
International Financial Reporting Standard
ILAAP
Internal Liquidity Adequacy Assessment Process
IRRBB
Interest Rate Risks for Banking Book
IRS
Interest Rate Swaps
ISDA
International Swaps and Derivatives Association
IVS
International Valuation Standards
JST
Joint Supervisory Team
KB
Komercijalna Banka
KDD
Central Securities Clearing Corporation
KPI
Key Performance Indicator
KRI
Key Risk Indicators
LCP
Liquidity Contingency Plan
LCR
Liquidity Coverage Ratio
LECL
Lifetime Expected Credit Losses
LGD
Loss Given Default
LPD
Lifetime Probability of a Default
LRE
Leverage Ratio Exposure
LTD
Loan-to-Deposit Ratio
M&A
Mergers and Acquisitions
MA
Master Agreements
MAR
Market Abuse Regulation
MiFID II
Markets in Financial Instruments Directive
MiFIR
Markets in Financial Instruments Regulation Rules
MIGA
Multilateral Investment Guarantee Agency (part of the World
Bank Group)
MREL
Minimum Requirement of Own Funds and Eligible Liabilities
NACE
Statistical Classification of Economic Activities in the European
Community
NLB or the
Bank
NLB d.d.
NPE
Non-Performing Exposures
NPL
Non-Performing Loans
NPS
Net Promoter Score
NPV
Net Present Value
NSFR
Net stable funding ratio
OBM
Operational Business Margin
OCR
Overall Capital Requirement
OEM
Original Exposure Method
O-SII
Other Systemically Important Institutions
OU
Organisational Units
p.p.
Percentage Point(s)
P1R
Pillar 1 Requirement
P2eM
Person to e-Merchant
P2G
Pillar 2 Guidance
P2M
Person to Merchant
P2P
Person to Person
P2R
Pillar 2 Requirements
PD
Probability of Default
POCI
Purchased or Originated Credit-Impaired
POS
Point of Sale
PSD2
Payments Services Directive
REAM
Real Estate Asset Management
RFR
Risk-Free Rates
RICS
Royal Institution of Chartered Surveyors
ROA
Return on Assets
ROE
Return on Equity
RoS
Republic of Slovenia
RPA
Robotic Process Automation
RWA
Risk Weighted Assets
SEE
South-Eastern Europe
SICR
Significant Increase of Credit Risk
SLA
Service Level Agreements
SME
Small and Medium-sized Enterprises
SPPI
Solely Payment of Principal and Interest
SRB
Single Resolution Board
SREP
Supervisory Review and Evaluation Process
SRF
Single Resolution Fund
SSM
Single Supervisory Mechanism
TCR
Total Capital Ratio
TDI
Traded Debt Instruments
The Group
NLB Group
TLTRO
Targeted Longer-Term Refinancing Operations
TREA
Total Risk exposure Amount
TSCR
Total SREP Capital Requirement
UN SDG
United Nations Sustainable Development Goals
UNEP FI PRB
United Nations Environment Programme Finance Initiative’s
Principles for Responsible Banking
VaR
Value-at-Risk
VAT
Value Added Tax
ZBan-3
Slovenian Banking Act
ZGD-1
Companies Act
ZPIZ
Slovenian Pension and Disability Insurance Act
ZPPDFT-2
Prevention of Money Laundering and Terrorist Financing Act
ZPPDFT-2A
Act Amending the Prevention of Money Laundering and
Terrorist Financing Act
ZTFI-1
Financial Instruments Market Act
ZVKNNLB
Slovenian Act for Value Protection of Republic of Slovenia’s
Capital Investment in Nova Ljubljanska banka d.d., Ljubljana
ZVOP-2
Slovenian Personal Data Protection Act
ZVPot-1
Consumer Protection Act
334
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report
NLB d.d., Ljubljana
nlb.si
NLB d.d.
Production: Saatchi & Saatchi Ljubljana
Photographs: Archive NLB Group members and IStock
Copyright: NLB d.d., Ljubljana
Ljubljana, April 2023
335
Contents
MB Statement
SB Statement
Key Highlights
Strategy
Risk Factors & Outlook
Sustainability
Performance Overview
Risk Management
Events After 2022
Financial Report