Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nova Ljubljanska banka dd Ljubljana (FRA:N1V2, Financial) reported strong mid-single-digit growth in both retail and corporate sectors, indicating robust economic activity in the region.
- The bank successfully issued several notes, strengthening its capital base and meeting M&A requirements, which supports further growth.
- The acquisition of Summit Leasing is expected to close soon, enhancing the bank's position in the leasing market in Slovenia and expanding into Croatia.
- The bank has revised its return on equity guidance upwards from around 15% to higher than 15%, reflecting strong financial performance.
- The macroeconomic environment in the region is favorable, with low unemployment rates and healthy corporate cash flows, supporting future growth prospects.
Negative Points
- There is a subdued demand for corporate lending, which the bank is addressing through high sales team activity.
- The cost dynamic shows a lag from the high inflation environment experienced last year, impacting the cost base.
- The introduction of a balance sheet tax in Slovenia adds a burden to the cost side, estimated at around EUR30 million annually.
- The bank's net interest income (NII) has peaked, and there is a deliberate investment in NII stabilization, which may impact short-term revenue.
- The acquisition of Addiko Group is still pending, with complexities and competition from other bidders, creating uncertainty around the deal's success.
Q & A Highlights
Q: You had a very nice increase in fee income quarter on quarter, driven by payments and cards. What's behind that and how sustainable is this growth?
A: We revisited some arrangements with providers, leading to visible and sustainable upticks. The improvement is structural, and similar numbers are expected in H2.
Q: Regarding the new leasing M&A, will the margin generated on those assets be accretive or dilutive to group NIM?
A: Summit Leasing will place close to EUR1 billion in higher yield assets, which should show up in loan growth and revenue growth. This will translate into incremental revenues, though there will be associated costs.
Q: If the acquisition of Addiko goes through, will you continue listing Addiko on the Vienna Stock Exchange?
A: It depends on the outcome. If we achieve the 75% success threshold, we will decide based on the situation. We have had good experiences with minority listings in other markets.
Q: Who is expected to be the primary buyer of MREL bonds in countries outside Slovenia?
A: The bonds are intended for qualified investors, including intragroup lines, super nationals, and institutional investors. We aim to keep flows within the group where possible.
Q: Is there any scenario in which you would drop your 75% condition for the Addiko takeover at the last moment?
A: No, the 75% success threshold is firm. We need this level to effectively integrate Addiko Group and make necessary decisions.
Q: Are you going to apply the same process that yielded increases in Stage 2 retail exposures to SMEs?
A: No, the wider rating scale is already applied in the corporate area, so you will not see a comparable move on the corporate side.
Q: Can you disclose the primary countries whose government securities you are mostly invested in? Do you anticipate the percentage of your securities portfolio classified as held to maturity to increase?
A: We are primarily invested in European Union countries, the US, and some home sovereigns. The ratio of held to maturity securities is expected to remain stable.
Q: Do you plan to rename Mobile Leasing in Croatia after the acquisition is complete? What are your plans for its organic growth?
A: We like the name Mobile Leasing and plan to keep it. We will expand its focus beyond Mercedes vehicles to become a universal provider of leasing and mobility services.
Q: Do you have any idea about the timeline for the AT1 issuance?
A: The timeline is dependent on the outcome of the Addiko acquisition and potential regulatory changes. We are open-minded and will proceed when conditions are favorable.
Q: Why have you not upgraded the revenue outlook after lifting the loan growth outlook for 2024 and 2025?
A: We prefer to remain conservative in our projections. There are still uncertainties, such as ECB rate movements, that could impact revenues.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
