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Annual Report 2020
Annual Report 2020
Contents
Statement by the Management Board of NLB
Statement by the Chairman of the Supervisory Board of NLB
Strategic Members Overview
Key Highlights
Key Events
Macroeconomic Environment
Regulatory Environment
Business Report
Acquisition of Komercijalna banka a.d. Beograd
Strategy
Risk Factors and Outlook
Sustainability
Overview of Financial Performance
Segment Analysis
Retail Banking in Slovenia
Corporate and Investment Banking in Slovenia
Strategic Foreign Markets
Financial Markets in Slovenia
Non-Core Members
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Risk Management
IT and Cyber Security
Human Resources
Corporate Governance
Compliance and Integrity
Internal Audit
Corporate Governance Statements
Disclosure on Shares and Shareholders of NLB
Events after the end of the 2020 financial year
Financial Report
Alternative Performance Indicators
NLB Group Chart
Organisational Structure of NLB
NLB Group Directory
Definitions and Glossary of Selected Terms
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Report format
Forward-looking statements
The Annual Report in PDF format
The expectations, forecasts and statements
represents its unofficial version. The
regarding future developments that are
Annual Report in ESEF format is pursuant
contained in this report are based on
to Commission Delegated Regulation
assumptions and are contingent on a
(EU) 2019/815 and paragraph one of
number of factors that will come into play
Article 134 of the Market in Financial
in the future. Consequently, the actual
Instruments Act (ZTFI-1) and represents
situation may turn out to be different.
its official version published on SEOnet.
Further information on sustainability
is available in the NLB Group
Sustainability Report 2020.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Home is where people
who matter the most are.
Our home is here in this region. With you, among you.
Who we are
Vision
Mission
Our
strategic
focus
Enablers
Sustainable
banking
The Group, headquartered in
The Group will take
Ljubljana, is the largest banking
care of the financial
and financial group in Slovenia
needs of its clients and
with a strategic focus on selected
improve the quality of
The Group values
and understands its
home region, and strives
to improve and develop
• Become regional
champion
• Investments
in NLB brand
NLB is the first bank in Slovenia
that has signed the UN Principles
of Responsible Banking and has
• Putting clients first
• Availability and
also made decisive steps on the
markets in SEE – our home region.
life in its home region.
it for all generations.
support anytime/
path of sustainable banking by
It covers markets with a population
of approximately 17 million people.
The Group is comprised of NLB as
the main entity in Slovenia and
nine subsidiary banks in SEE, several
companies providing ancillary
services (asset management, real
estate management, leasing, etc.),
and a limited number of non-core
subsidiaries in a controlled wind-
down. NLB has an investment grade
rating by S&P and is a publicly listed
company owned by a diversified
investor base and whose largest
shareholder is the RoS with a
25% plus one share. With the
acquisition of Komercijalna Banka,
Beograd in December 2020, the
Group further strengthened its
strategic and systemic position in
the region and now holds a top 3
position in six out of seven markets
where it has a banking presence.
• Defend our market
anywhere
position
undertaking commitments to
EBRD and MIGA on the Group
• Robust cyber security
level. With the sustainability
• Exploit opportunities
ambition anchored in the purpose
and synergies
• Improved human
of our functioning, the Group
talent management
ensures products and services
meet the needs of this generation
• Simplification and
and simultaneously preserve
quality of services
the opportunities of future
generations.
• Benefiting
from emerging
opportunities
• Prudent risk
management
The Group employees operate in
a family-friendly environment.
The Bank received the ‘Top
Employer’ certificate already for
the 6th consecutive year. The
Group has one of the broadest
• Capital optimisation
social responsibility programmes
in the region. It supports many
• Cost and investment
humanitarian and cultural projects,
optimization
as well as promotes sports among
young people – all this to ensure a
better quality of life in the region
it calls and treats as its home.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
A new boost
for sustainable
development
The COVID-19 pandemic caused a downturn in the
economy, but on the other hand it also brought us some
positives. We pay more attention to what is happening in
the environment and wonder how we influence it with
our actions. In doing so, we have become enthusiastic
about finding sustainable, especially local solutions.
One of the most recognised projects of 2020 in the entire
region of SEE is certainly the #HelpFrame project. With
the #HelpFrame project, we offered our own advertising
space to 274 entrepreneurs, farmers, and micro and small
businesses – which would be difficult for them to afford
in these times – and thus helped them to reach potential
customers, thereby making an important contribution
to strengthening the domestic small business.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Statement by the
Management
Board of NLB
Dear Stakeholders,
2020 was an extremely challenging and, yet in many ways, a ground-breaking year, not soon
to be forgotten. In more ways than one it was also very memorable for the Group, although
by far not only due to the COVID-19 pandemic and its consequences as one might think. The
pandemic has, of course, had an impact on our business operations and day-to-day work, but
even more notable were the lessons learned and new practices we have since adopted.
Also notable are a couple of essential milestones. In the middle of the year
we managed to complete a divestment of insurance company NLB Vita as
the last commitment to the EC, by which a highly limiting state aid process
was officially completed and after many years the Group could resume
Contact Centre with a closing capacity for the majority of services. With
that, NLB has already surpassed the client experience levels of majority
of FinTech challengers. We have a clear plan for further enhancements
and consistent replication of this delivery model in all our markets.
After witnessing economic hibernation during a substantial part of the
first half-year, various factors contributed to a robust revival of especially
industrial activities by the end of the year. As a result, in the second half of
the year the Group recorded a normalisation of revenues to pre-COVID-19
levels and generated a sound net profit of EUR 141.31 million, with all SEE
subsidiary banks reporting solidly positive net earnings and contributing
36%1 to the result.
This outcome was clearly strongly supported by a quick and determined
response from governments and regulators with measures that helped
stabilise the economic environment, but also by a very proactive response
of our whole Group. We have learnt our lessons in the period from
2008-2014 and we are fully aware that concrete actions speak the loudest,
especially in times of crisis. That is why we decisively addressed clients’
needs as soon as the pandemic hit, and its potential consequences were
assessed. We have, for instance, secured stable liquidity by instituting
significant working capital lines to vital businesses, maintaining regular
lending activity and releasing eventual liquidity squeeze to all client
segments through moratoria.
High responsibility,
supported by
knowledge,
experience,
professionalism,
and finally strong
market position
of NLB Group as
a regional player
proved once again
to be especially
effective in times
of crisis, brought
by the COVID-19
pandemic.
A divestment
of insurance
company NLB Vita
fulfilled the last
commitment to
the EC, by which
a highly limiting
state aid process
was officially
completed and
after many years
the Group could
resume its full
business capacity.
its full business capacity. This enabled us to again address eventual value
We enhanced relationships and maintained the high quality of portfolios
accretive business opportunities, and we very proudly ended the year
with very limited NPL migration by intensified daily contacts with clients
with the game-changing acquisition of Komercijalna banka a.d. Beograd
and prompt reactions. During the first wave of epidemic we anticipated
(Komercijalna Banka, Beograd). With this transaction, we further solidified
material impacts to credit quality, resulting in significant pool impairments
the Group’s presence in all our markets in SEE, our home region.
and provisions and cautious guidance regarding the cost of risk. However,
High responsibility, supported by knowledge, experience, professionalism,
and finally the strong market position of NLB Group as a regional player
proved once again to be especially effective in times of crisis, brought by
the COVID-19 pandemic. We have responded successfully and effectively
in the second half of the year the economy and clients proved to be more
resilient and actual cost of risk did not follow the initial estimates. This is
clear proof that the underwriting criteria and practices we introduced in
2013 have been very robust across economic cycles.
to the new circumstances, maintaining as a priority the concern for the
Structural profitability challenges, in contrast, escalated further. Due to
health of our employees. We provided protective equipment in our
lockdowns, prohibiting consumption, along with governmental measures,
offices, while enabling as many of them as possible to work from home.
defending employment and boosting household income, and the influx
In the meantime, the latter has also been supported as the regular
of predominantly retail deposits introduced further significant drag on
working mode, wherever applicable and mutually acceptable. As the
interest income. We managed to partially mitigate this impact by strongly
utmost priority, we also protected the health of our customers by securing
focusing on additional fee and commission income, thus defending the
preventive measures in our branches, while at the same time providing
financial intermediation margin, though it has become obvious that in the
significantly enhanced accessibility and quality of our key services through
EUR-denominated Slovenian market there is no alternative to following
online channels. Clients of NLB in Slovenia can now get cash loans,
the logic of corporate deposits and also introducing charges for household
overdrafts, credit cards and can order any other services 24/7 via a mobile
balances. Given that a decision was taken to start charging fees from
bank without direct personal interaction, and as unique experience can
1 April 2021 on for the balances exceeding EUR 250 thousand with the
sign any contract with the Bank digitally through our mobile bank Klikin.
ambition to reduce the threshold to EUR 100 thousand in the second half
All of that is supported by 24/7 chat and the video chat service from our
of 2021.
Significantly
enhanced
accessibility and
quality
of our key services
through online
channels.
1. Without the effect of the acquisition
of Komercijalna Banka, Beograd.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Blaž
Brodnjak
CEO & CMO
Petr
Brunclík
COO
Archibald
Kremser
CFO
Andreas
Burkhardt
CRO
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 269.7 million
EUR
net profit including EUR 137.9
million negative goodwill from
acquisition of Komercijalna Banka,
Beograd, while net profit would be
141.3
million
EUR
without the effect of acquisition
of Komercijalna Banka, Beograd.
With the implementation of capital relief measures, the inclusion of two
we are in the position to truly influence the environment and the quality
successfully issued subordinated Tier 2 bonds and undistributed profit
of life. We know that sustainability is an ongoing series of decisions and
for the year 2019 into capital (due to the BoS restricted dividend payout in
actions. We thus aim to create a regional sustainability platform with an
2020 following ECB recommendation) the Group even after the sizeable
important positive impact on the environment and society, while being
acquisition concluded the year with a diversified capital structure and solid
recognised as a role model in governance. By that we strive to become one
capital position above the regulatory requirements and management buffer.
of the most meaningful businesses and the most desirable employers in our
This besides very high liquidity reserve balances provides a solid foundation
region. We wish to partner in these endeavours with like-thinking clients,
for our further business operations and resumed targeted dividend payouts
associations and other entities to create an ecosystem of relevant services,
as soon as supported by regulators. This position has been also shared by
delivered in a sustainable way.
Moody’s rating agency when upgrading the long-term local and foreign
currency deposit ratings of the Bank from Baa2 to Baa1.
All this cannot be secured without a dedicated team of colleagues who
truly care about our customers and our mission and go the extra mile when
Despite the pandemic and numerous related challenges, measures,
needed. Year 2020 was truly an exceptional year and colleagues deserve
key activities and achievements, we positioned the Group in the most
clear recognition of extraordinary efforts and a resounding gratitude. We
important growth market through the successfully completed acquisition of
have learnt that in times of great uncertainty and concern, things that
Komercijalna Banka, Beograd. Consequently, we have assumed a unique top
once seemed unfeasible, undesirable, or even unacceptable, can become
3 banking positions with more than a 10% market share in six out of seven
possible.
of our markets. Moreover, we further improved our international footprint
by supporting selected cross-border corporate projects, we reintroduced
leasing services in Slovenia through the subsidiary NLB Lease&Go with the
firm ambition of a regional roll-out, we adopted a consistent and decisive
IT strategy with the aim to build the best digital bank and IT team in the
SEE with cyber security being at its core, and we undertook several strategic
initiatives and measures for strategic cost optimisation and boosting sales -
among them an ambitious channel strategy with further swift digitization,
paperless operations, corporate real-estate optimisation, etc.
The Group closed 2020 in a very good shape. We realised that this crisis
offered us many opportunities to differentiate in the market and above all
by being relevant and further strengthening our relationships with clients.
One of these insights resulted in the first Group-wide CSR project that has
In 2020 the Supervisory Board of NLB added members, appointed by the
Workers’ Council, enabling the inclusion of employees in the strategic
steering of the Group. The Supervisory Board acknowledged the team’s
efforts and demonstrated trust in the Management Board by extending
the mandates of the CEO/CMO, CFO and CRO until July 2026.
Our plan for 2021 is to continue to act prudenly to leave COVID-19 behind
us as soon as possible, while in parallel to further enhance our capabilities
in the field of knowing our clients, in order to provide even more relevant,
personalised services, whenever and wherever necessary. Our goal is no
longer to just be an excellent distributor of universal financial services, but
also one of the most ambitious, technologically-driven banking groups
in our home region providing top quality experience to our existing and
a clearly defined sustainability component, #HelpFrame project, with which
prospective clients.
we further demonstrated our genuine interest in improving the quality
of life in our region we call and therefore treat as home. We have been
supporting people with an entrepreneurial spirit and creative ideas who
have introduced products and services with a sustainable local footprint.
In the Group, we acknowledged their efforts and provided almost 274
entrepreneurs, farmers, and micro and small businesses from all our markets,
not only with our financial mentorship and professional support, but also
with advertising space that they would otherwise not have been able to
afford.
We consciously and decisively committed to sustainability by signing the
UN Principles for Responsible Banking and commitments toward EBRD and
MIGA. NLB Group decided to discontinue any financing support to coal-
based technologies and has been actively seeking and supporting energy
efficiency improvement and renewable energy production projects. We
are genuinely focusing on the sustainability of our business decisions and
actions, as well as customers’ needs and expectations. As a systemic player,
We truly believe that the best for the Group is yet to come and we
confidently look forward to the challenges in front of us. We are convinced
that we will not only overcome them, but also learn from them and
become even stronger. With full motivation and energy we will take the
Group to another level as one of the most meaningful businesses in the
region with great positive impact in the environment and society we live
in. This is our home, we respect it and we will support it, nurture it, invest
in it, and make sure that it is ready – for whatever may come.
Yours truly,
Management Board of NLB
Archibald Kremser
Andreas Burkhardt
Petr Brunclík
Blaž Brodnjak
CFO
CRO
COO
CEO & CMO
Normalisation of
revenues to pre-
COVID-19 levels.
The acquisition
of Komercijalna
Banka, Beograd
further solidified
the Group’s
presence in all our
markets in SEE.
We aim to
create a regional
sustainability
platform with
an important
positive impact
on environment
and society.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Statement by
the Chairman
of the Supervisory
Board of NLB
To Our Shareholders,
A simple statement, like ‘Not only we have survived,
but we came out leaner, fitter, and readier to run . . .
for the ride that is ahead of us, and for whatever may
come,’ would probably fit well into the Darwinism of the
moment. But it actually describes the year 2020 and our
banking business model, as run by your bank, our NLB.
Primož Karpe
Chairman of the
Supervisory Board
As McKinsey rightfully points out, unlike many past shocks, the COVID-19
We grew our capital base and acquired Komercijalna banka a.d. Beograd
crisis is not a banking crisis; it is a crisis of the real economy, caused by a
(Komercijalna Banka, Beograd), in what we believe will be a major value
tiny virus particle. Banks will naturally be affected, as credit losses cascade
accretive transaction, increasing both our DPS and EPS potentials by
down their balance sheets. Still, the problems are not self-made. The Group
more than 30% and 20%, respectively, over the course of the next few
entered the crisis extremely well-capitalised and is far more resilient than it
years. Furthermore, we see opportunities on both the numerator and
was 12 years ago. I dare to say we are actually in the best shape ever, when
denominator of our ROE: not only in the capital management exercises
it comes to regulatory capital robustness.
However, the road ahead is not so much the road of credit impairments and
loan loss provisions, it’s the road that tackles the real issue of the forgone
banking revenue years down the line – the foregone revenue for those
we regularly promote, such as RWA consumption and optimisation, but
predominantly on the side of an increased productivity. But most of all,
we are transitioning towards the core of our strategy, to be the talent
magnet for tech and consumer behaviour savvy job-seekers.
not adapted. And I wholeheartedly believe that the traditional banks that
We will remain and further strengthen our unique banking play
allow their cost bases to evolve quickly, and digitize their service delivery
proposition. We will stay focused on our core region, where fragmented
efficiently, will win. The incumbency of multi-product relationship sales
geographies sometimes represent some challenges for us, but also
performs better than monoline product-based businesses. The seemingly
provides solid protection from most other regional bank players. In the
never-ending cash burn rate of banking FinTechs proves this point.
aftermath of the Komercijalna Banka, Beograd acquisition, we will hold
Rest assured, the Group responded extraordinarily well to the first phases of
meaningful market shares in all our core markets. We now simply have to
continue focusing on our dividend capacity as the main shareholder value
the crisis, keeping employees and customers safe and keeping the financial
proposition.
system operating well across all our core markets. Not only that, 2020 was a
year marked by our strong pursuit of our strategic goals, a set of promises
we made in order to deliver for you, our employees, and our society.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 If I tell you that we know we have to: (i) speed up our going-to-digital
2020 – a year that will never be forgotten – and a year
NLB Group maintains its corporate governance
transformation, (ii) take costs out faster, (iii) place a focus on a ‘charge or
that brought new energy into our business story
principles in line with the highest standards
change’ commercial policy at the retail level, (iv) further increase of our fee
vs. net interest ratio with an alternative business mix on the corporate level,
(v) quickly integrate Komercijalna Banka, Beograd and optimise this
joint market undertaking, and (vi) last but not least, further increase
the productivity of our employees, then you know we are aware of the
challenges ahead. Even more, we are aware of our focus in value creation
efforts. Additionally, Supervisory Board is committed to promote and
monitor the implementation of sustainability governance in the Group,
as well as giving special focus on raising the overall level of cyber security
resilience.
That said, I believe the Group will deliver on its promises to all of its key
constituencies (shareholders, clients, employees, and society), not only in
the year of 2021, but over the mid- to long- term cycle as well.
In the financial year 2020, we all faced a challenging environment, due
The Supervisory Board performed its work in accordance with applicable
to the already mentioned challenges of the COVID-19 pandemic and
laws (predominantly, but not exclusively the Companies Act (ZGD-1)
following economic hibernation, but for us it was also a year that brought
and the Banking Act (ZBan-2)), as well as powers and procedures as set
new energy into our business story. The Group has further strengthened
by the Articles of Association of NLB and the Rules of Procedure of the
the position in SEE market with acquisition of Komercijalna Banka,
Supervisory Board of NLB. It carried out its function of assuring efficient
Beograd, that increased the Group’s total assets to almost EUR 20 billion
supervision over the management of NLB and the Group in its duty of
and to a more than 12% market share in the Serbian market. The Group
careful and scrupulous performance, while adhering to the internal acts of
also managed to defend a stable level of profit before impairments and
the Bank.
provisions of EUR 210.5 million, supported by non-recurring income from
the sale of NLB Vita and debt securities.
In performing its duties, the Supervisory Board followed the
recommendations of the Corporate Governance Code for Listed Companies,
Profit after tax amounted to an impressive EUR 269.7 million, and was
exclusively. The Corporate Governance Statement of NLB adopted by the
strongly affected by the acquisition of Komercijalna Banka, Beograd, with
Supervisory Board on its session dated 18 February 2021 reveals deviations
positive impact of negative goodwill in the amount of EUR 137.9 million.
from the mentioned code, as well as explains key aspects of the Bank’s
2020 business developments
Without this acquisition the profit after tax of the Group would amount
corporate governance, particularly the composition and work of the
The course of the global economy in 2020 was determined by the COVID-19
pandemic, and consequently the Group’s region was not able to remain
intact because of the pandemic and its economic implications. The Group’s
region recorded a substantial drop in economic growth, although the
implications of the COVID-19 pandemic hit countries of the Group’s
region disproportionally due to underlying differences in exposure to the
hardest hit sectors. For instance, countries with a strong reliance on the
to a solid EUR 141.3 million, lower than a year before due to additional
Bank’s Management Board and Supervisory Board and its committees,
impairments and provisions related to the COVID-19 pandemic. The Bank
internal control mechanisms, and internal control functions (Internal
reached a profit after tax in the amount of EUR 114.0 million, lower than
Audit, Risk Management, Compliance, Information Security Function and
a year before, but mostly due to retained dividends in the Group member
AML/CTF Function). It also provides a description of the implementation
banks and established impairments and provisions, both related to the
of the Diversity Policy related to representation in the management and
COVID-19 pandemic. All SEE subsidiaries finished the year with a profit
supervisory bodies and senior management. This statement is published in
and significantly contributed to the Group’s result.
the business report of this annual report.
tourism sector were particularly more affected by the imposed COVID-19
The operations of the Group were underpinned by strong liquidity
In 2020, there were seven regular and 12 correspondence sessions. The
containment measures.
and capital positions, with the TCR reaching 16.6%, which is above the
Supervisory Board received expert assistance from its five operational
In general, economic contraction was driven by a reduction in demand,
with restrictive containment measures negatively affecting all demand
components except government consumption that partially offset the
reduction. Fiscal measures aimed at mitigating COVID-19 economic
regulatory requirements, demonstrating the Group’s financial resilience.
committees, namely Audit, Risk, Nomination, Remuneration, Operations,
In these COVID-19 circumstances, the Group has been perceived as a safe
and IT. The committees of the Supervisory Board met at its regular meetings
heaven, and therefore faced growing excess liquidity. The impacts of the
and discussed topics and adopted decisions related to the areas that they
pandemic did not cause any material liquidity outflows.
oversee.
implications weighed on fiscal balances and public debts, while external
The overall risk appetite profile of the Group continues to be moderately
The Supervisory Board issued approvals to the Management Board related
sector was influenced by restrictive measures abroad.
conservative. Despite the crises, the NPL ratio (EBA definition) of the
to the Bank’s business policy and financial plan, adopted NLB Group Annual
Nevertheless, the pandemic also initiated or accelerated some structural
shifts, most notably the digitization of work and consumption which was
reflected in an increase of online purchases and working from home.
Thereby, the world became much more digital due to the COVID-19
pandemic.
But digital or non-digital, what we could not avoid were the restrictions
of regulators (ECB and BoS) regarding dividend payments, therefore the
General Meeting of shareholders on 15 June 2020 adopted the decision
that the total distributable profit for 2019 in the amount of EUR 228.04
million would remain undistributed, representing the profit carried
forward. We do aim to reverse no-dividend trend with meaningful dividend
distribution subject to regulatory approval during this year.
Group remained below 5%, which shows the strong resilience of the
Report, adopted decisions with regards to the convocation of the General
Group. The acquired Komercijalna Banka group has a similar business
Meeting of shareholders, adopted decisions related to management of risk,
model to the existing NLB Group, and its impact on the Group’s risk
adopted the annual Internal Audit Plan and annual Plan of Compliance and
profile was moderate. The overall slow-down of the economy caused by
Integrity, and reported on their activities.
pandemic, had some negative impacts on the loan portfolio, though its
quality remained solid and well diversified. The cost of risk increased due
to the impact of the downturn in the macroeconomic environment, still, it
remains within the set outlook.
The Supervisory Board also adopted decisions on establishment of new
companies, cross-border financing and international syndicated financing,
large exposures, sale of receivables, claim write-offs, the divestment of the
Group companies, legal proceedings involving NLB and the Group members,
transactions with persons in special relations with the Bank, etc. Supervisory
Board endorsed Sustainability programme together with roadmap with key
milestones in the mid-term period.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Additionally, the Supervisory Board approved achievements of the
Throughout the year, the Supervisory Board has maintained a well-
Review and approval of the NLB Group Annual Report 2020
Management Board and proposed new goals for the Management Board,
balanced professional relationship with the Management Board and
adopted decisions on succession planning for members of the Management
enjoyed timely, comprehensive, and data-supported inputs from the latter,
Board, and acknowledged new candidates for members of the Supervisory
enabling the Supervisory Board to adopt all its decisions in line with the
Board. In addition to the already appointed Petr Brunclík, the Supervisory
professional interests of the Bank, whilst adhering at all times to banking
Board in its session in November 2020, also reappointed Blaž Brodnjak as
regulations and its statutory powers.
CEO & CMO, Archibald Kremser as CFO, and Andreas Burkhardt as CRO of the
Bank.
The Supervisory Board continued to act in accordance with the highest
The NLB Group Annual Report 2020 and unaudited financial statements
of NLB Group were examined by the Supervisory Board at the meeting on
18 February 2021. The external audit firm, Ernst & Young d.o.o., Ljubljana,
reported to the Audit Committee on the findings and 2020 audit
procedures on session of the Supervisory Board held on 11 March 2021.
ethical standards of management, considering the prevention of conflict
Within the legal deadline, the Management Board of NLB submitted
Through the year the Supervisory Board acknowledged regular reports on
of interest. Throughout the year, there were some potential conflicts of
documents received from the regulator(s), namely BoS and ECB, and on the
interest identified and all were handled with due care. Supervisory Board
implementation of the requirements of mentioned regulators, adopted
members took precautionary measures to avoid any conflicts of interest
changes to the Corporate Governance Policy of the NLB, and adopted other
that might have influenced their decisions.
amendments to the internal policies.
to the Supervisory Board the NLB Group Annual Report 2020, including
the Business Report and Financial Report, with the audited financial
statements of the Bank, the audited consolidated financial statements of
the Group and the auditor’s opinion. The Supervisory Board considered
mentioned reports on 8 April 2021. According to the auditor, the
Despite extremely demanding times during the COVID-19 pandemic, the
financial statements with accompanying notes present fairly, in all
The year 2020 was remarkably challenging also from the corporate
Supervisory Board members assess NLB’s operations in 2020 as strong and
material respects, the financial position of the Bank and the Group as of
governance perspective, as NLB, as the first bank in Slovenia, implemented
solid and performance of the NLB Management Board as successful and
31 December 2020, and their financial performance and cash flows for
Constitutional Court’s decision dated June 2019 that enabled workers’
trustworthy. As per that special appreciation needs to be extended to
that year in accordance with the IFRS as adopted by the EU. It was also
participation in the management bodies. To that extent, amendments to
the Management Board and the employees for their contributions and
established that the information contained in the business section of the
the Articles of Association of NLB were adopted on the General Assembly
achievements. Additionally, it has to be highlighted that due to COVID-19
Annual Report is consistent with the audited financial statements of the
of shareholders in June 2020 that changed the composition of the
and its impact on the performance the voluntary solidaritary salary
Bank and the Group.
Supervisory Board, that now consists of 12 members, out of which eight
reduction was introduced for the Supervisory Board, Management Board,
are representatives of the capital and four are employee representatives.
and employees holding service contracts.
At the end of 2020, the Supervisory Board was composed of 11 members,
of which eight were representatives of shareholders (in addition to Primož
Karpe and Andreas Klingen, members were also Gregor Rok Kastelic, Mark
William Lane Richards, Shrenik Dhirajlal Davda, Peter Groznik, David Eric
Simon, and Verica Trstenjak) and three were representatives of employees
(Sergeja Kočar, Bojana Šteblaj, and Janja Žabjek Dolinšek). The procedure
for election of another member of the Supervisory Board – worker
representative was still ongoing at the end of December 2020.
While members of the Supervisory Board have proper and complementary
knowledge, experience and skills to perform their duties, they all have
different professional, national, and educational backgrounds. All the
members of the Supervisory Board have the necessary personal integrity
and professional ethics to hold their positions, which was confirmed by
the positive Fit & Proper assessment. This provides the assurance that they
can carry out their supervisory roles in a responsible manner and make
decisions that benefit NLB and add value to the Group. The delivery of
critical and assertive opinions has been and will always remain at the
core of our decision-making principles through the expected engaged
participation of all the members.
For the session dated 8 April 2021, the Supervisory Board also prepared
a written report on the verification results for the General Meeting of
shareholders. This report was made in accordance with Article 34 of the
Articles of Association of NLB and the second paragraph of Article 282 of
the Companies Act (ZGD-1). At the end of its report, the Supervisory Board
indicated that as a result of completion of its verification it does not have
any comments in relation to the NLB Group Annual Report 2020, and gave
its approval to it, therefore it is considered adopted.
Yours truly,
Supervisory Board of NLB
Primož Karpe
Chairman
10
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 298
(i)
269.7
1,874,804
(ii)
Number of branches in NLB Group
Result after tax in EUR million
Total active clients of NLB Group
We are from this region and understand business
environment, customs and, most of all, its people. With our
commitment, knowledge, and innovative solutions, the
Group takes superior care of its customers and creates a
better life, a better future for us all. Welcome to our home.
Strategic Members Overview
Presentation of the NLB Group
NLB, Ljubljana
Slovenia
NLB Banka,
Banja Luka
Komercijalna
Banka, Banja Luka
Bosnia and Herzegovina
NLB Banka,
Sarajevo
Slovenia
North
Macedonia
Bosnia and Herzegovina
Kosovo
Montenegro
Serbia
NLB
Group
NLB,
Ljubljana
NLB
Banka,
Skopje
NLB
Banka,
Banja Luka
NLB
Banka,
Sarajevo
Komercijalna
Banka,
Banja Luka
NLB
Banka,
Prishtina
NLB
Banka,
Podgorica
Komercijalna
Banka,
Podgorica
NLB
Banka,
Beograd
Komercijalna
Banka,
Beograd
Market position in 2020
Branches(i)
Active clients (ii)
298(i)
80
50
51
36
19
34
19
19
28
203
1,874,804(ii)
668,270
417,298
214,634
136,511
46,173
231,490
64,735
15,491
141,866
849,488
Total assets (in EUR million)
19,566
11,027
Net loans to customers (in EUR million)
9,645
4,595
Deposits from customers
(in EUR million)
16,397
8,851
1,586
957
1,289
796
431
634
Result after tax (in EUR million)
269.7
114.0
19.2
10.1
647
399
522
5.9
236(viii)
155(viii)
153(viii)
879
559
748
0.7(viii)
13.3
538
367
432
1.4
155(viii)
104(viii)
687
472
3,907(viii)
1,630(viii)
120(viii)
496
3,194(viii)
0.5(viii)
2.6
24.9(viii)
Market share by total assets
-
24.7%
16.5%
18.6%(v)
5.3%(vi)
5.5%(v,ix)
17.2%
11.7%
3.4%(vii, ix)
1.9%(vii)
10.2%(vii, ix)
NLB Banka,
Beograd
Komercijalna
Banka, Beograd
Serbia
Macroeconomic indicators for 2020
GDP (real growth in %)
Average inflation (in %)
Unemployment rate (in %)
Current account of the balance
of payments (as a % of GDP)
Budget deficit/surplus
(as a % of GDP)
-6.0
0.2
15.5
-4.7
-7.7
-5.5
-0.3
4.9
7.3
-8.5
-4.5
1.2
16.4
-3.5
-8.1
-5.2
-1.0
18.0
-4.9
-4.6
-7.0
0.2
26.5
-7.5
-6.7
-13.0
-0.3
18.0
-15.4
-9.9
-1.0
1.6
9.0
-4.3
-8.1
Montenegro
NLB Banka,
Podgorica
Komercijalna
Banka, Podgorica
NLB Banka,
Prishtina
Kosovo
NLB Banka,
Skopje
North Macedonia
11
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020(i) Branch offices of Komercijalna Banka, Banja Luka, Komercijalna Banka, Podgorica and Komercijalna Banka, Beograd not included in total number of NLB Group branches.(ii) Number of active clients of Komercijalna Banka, Banja Luka, Komercijalna Banka, Podgorica and Komercijalna Banka, Beograd not included in total number of NLB Group active clients due to different definitions.(iii) Assets under management.(iv) Market share of assets under management in mutual funds.(v) Market share in the Republic of Srpska as at 30 September 2020.(vi) Market share in the Federation of BiH as at 30 September 2020.(vii) Market share as at 30 September 2020.(viii) Data from internal reports of Komercijalna Banka group.(ix) Data from CBs and own calculations.-1.11,626(iii)5.534--------------24NLBLease&Go,LjubljanaNLBSkladi,LjubljanaKombankINvest,Beograd1(viii)34.9%(iv) Shift to local and
regional market
Grandfather of Samra Čomor
CoolTour, Bosnia and Herzegovina
Business ceased to exist for Vedran Grebo and Samra
Čomor, owners of the touristic agency CoolTour
Sarajevo, as it absolutely stopped with borders closing
during the COVID-19 pandemic. The focus was shifted
to local and regional market through offering of
the hiking tours to Lukomir Village. The benefit of
the tour is in establishing personalised experience
through offering knowledgeable local guides and
whose roots originate from the village, with family
members still living in the area. The new situation
considerably decreased their assets and required
investments in promotion. The #HelpFrame project
significantly helped Vedran and Samra reach a wider
audience and be recognised as an authentic provider
of touristic experiences locally and regionally.
12
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Key Highlights
Financial Performance
Business Overview
Asset Quality
Capital & Liquidity
Response to COVID-19 Pandemic
Robust performance given
Strengthened market
challenging environment
position in Serbia
Well diversified
asset portfolio
Well-capitalised, well
Quick adaptation of business
above regulatory
requirements
operations, proactive
response to clients
Strategy & Outlook
Committed to pursue its
strategic objectives
Very solid year with core
The divestment of insurance
Large share of retail in the credit
Capital position comfortably
Instant adaptation of processes
Integration of Komercijalna Banka
revenues from lending and
company NLB Vita (on 29 May the
portfolio structure – positively
above regulatory requirements
to ensure higher availability and
group enabling synergy extraction.
fee and commission business
Bank sold its 50% stake in the share
contributing to the diversification
(TCR of 16.6%, 0.3 p.p. higher
use of digital channels – a wider
at pre-COVID-19 levels.
capital of the company in a joint
and credit portfolio quality.
YoY). Due to acquisition of
range of 24/7 accessible digital
Defending a stable level of
profit before impairments and
provisions (EUR 210.5 million,
-1% YoY), supported by non-
sales process together with the
KBC) fulfilled the last commitment
to the EC, by which state aid
process was officially completed.
The COVID-19 pandemic impacted
the realised cost of risk (62 bps2),
however, remaining within
TCR was reduced by 5.7 p.p.
Adequate capitalisation
Supporting clients through
the downturn by offering
Komercijalna Banka, Beograd
solutions offered to clients.
the set outlook.
throughout 2020 due to inclusion
moratoriums (EUR 2.4 billion),
recurring income (the sale of
Acquisition of Komercijalna
NLB Vita and debt securities).
Banka, Beograd added EUR 4.3
Profit after tax (EUR 269.7 million)
strongly affected by the acquisition
of Komercijalna Banka, Beograd
billion to the Group’s balance
sheet, becoming top 3 market
player on the Serbian market.
with positive impact of negative
Although business in 2020 has
goodwill in the amount of EUR
been marked by COVID-19, the
137.9 million and additional
Group’s results demonstrated
impairments and provisions in the
the robustness and resilience of
amount of EUR 71.4 million, mostly
its sustainable business model.
related to COVID-19 outbreak.
Continuing focus on the cost
client confidence in the Group.
Strong deposit base demonstrating
Stable NPE (EBA def.) of 2.3% with
confident coverage ratio of 57.3%.
Proactive workout approaches
and other precautionary measures
to minimise potential future
losses; NPL reduction recorded.
2. Komercijalna Banka group
is excluded from calculation.
of subordinated Tier 2 bonds
and new financing (EUR 148.9
into capital, undistributed profit
million), of which majority is
from 2019, minority capital and
subject to public guarantee
other capital relief measures.
schemes (EUR 134.6 million).
Liquidity position of the Group
remains very strong, with high level
Most of approved moratoria
(81%) already expired.
of unencumbered liquidity reserves.
Due to positive experience
and effects during the
COVID-19, the Bank will
continue with work-from-
home initiative in the future.
Special focus on stable revenues
and cost sustainability.
Dividend payout in 2021 will
be conditional on regulatory
requirements and in line
with NLB’s capacity.
Striving to become regional
champion, whereby clients
remain the first priority.
Continue to serve the community
aiming to improve the quality
of life in the region.
Meeting stakeholder needs and
expectations and driving business
value through sustainability.
discipline (4% lower costs YoY;
CIR 58.3%). Costs remain well
contained through all cost
categories and geographies.
Wider array of digital solutions
(increased number of digital users
and number of digital payments)
and improved customer experience.
Healthy generation of
housing loans.
New business opportunities
pursued to generate
additional revenues.
13
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 2020
2019
2018
NLB Group
NLB
NLB Group
NLB
NLB Group
2020
2019
2018
Key performance indicators
Table 1a: Key financial indicators for NLB Group and NLB
Income statement data (in EUR million)
Net interest income
Net non-interest income(i)
Net non-interest income (BoS)(i)
Total costs(i)
Operating costs (BoS)(i)
Result before impairments and provisions(ii)
Impairments and provisions
Gains less losses from capital investments in
subsidiaries, associates, and joint ventures
Result before tax
Result of non-controlling interests
Result after tax
Financial position statement data (in EUR million)
Total assets
Gross loans to customers
Impairments and deviations from FV
Net loans to customers
Financial assets
Deposits from customers
Equity
Non-controlling interests
Total off-balance sheet items
Key financial indicators
a) Capital adequacy
Total capital ratio
Tier 1 ratio
CET 1 ratio
Total RWA (in EUR million)
RWA / Total assets
b) Asset quality
NLB Group
NLB
NLB Group
NLB
NLB Group
NLB
300
205
360
-294
-311
211
-71
1
278
3
270
19,566
10,033
-388
9,645
5,120
16,397
1,953
170
4,671
16.6%
14.2%
14.1%
12,421
63.5%
139
173
180
-180
-188
131
-17
-
114
-
114
318
199
219
-305
-321
212
-1
4
215
8
194
11,027
14,174
4,753
-158
4,595
3,017
8,851
1,451
-
3,684
27.1%
22.3%
22.3%
6,029
54.7%
7,938
-334
7,605
3,830
11,612
1,686
45
4,222
16.3%
15.8%
15.8%
9,186
64.8%
158
197
204
-191
-198
164
14
-
178
-
176
9,802
4,718
-129
4,589
3,169
7,761
1,333
-
3,644
22.6%
21.8%
21.8%
5,225
53.3%
313
184
206
-292
-309
205
23
5
233
8
204
12,740
7,627
-479
7,148
3,399
10,464
1,616
41
3,996
16.7%
16.7%
16.7%
8,678
68.1%
158
167
175
-180
-189
144
33
-
177
-
165
8,811
4,704
-226
4,478
2,869
7,033
1,295
-
3,473
24.1%
24.1%
24.1%
5,024
57.0%
NPL coverage ratio 1 (coverage of gross non-
performing loans with impairments for all loans)
NPL coverage ratio 2 (coverage of gross non-performing
loans with impairments for non-performing loans)
NPL coverage ratio (EBA definition)(iii)
NPL coverage ratio (EBA definition) (BoS)(iv)
NPL volume (in EUR million)
NPL ratio (internal def.; NPL/ Total loans)
Net NPL ratio (internal def.; net NPL / Total net loans)
NPL ratio (EBA definition)(iii)
NPL ratio (EBA definition) (BoS)(iv)
81.8%
76.0%
89.2%
76.2%
77.1%
65.8%
57.3%
57.9%
65.0%
56.7%
64.6%
57.1%
56.9%
56.9%
475
3.5%
1.5%
4.5%
3.4%
55.3%
55.3%
208
3.0%
1.3%
4.0%
2.8%
64.5%
64.5%
375
3.8%
1.4%
4.6%
3.8%
55.5%
55.5%
169
2.8%
1.3%
3.3%
2.7%
63.7%
63.7%
622
6.9%
2.6%
7.9%
6.8%
55.0%
55.0%
343
6.3%
2.8%
6.8%
6.0%
NPE ratio (EBA definition)
Received collaterals / NPL
NPL Collateral received / NPL (EBA definition)
Credit impairments and provisions / RWA
c) Profitability
Net interest margin (BoS)(v)
Financial intermediation margin (BoS)(i)
Operational business margin(vi)
ROE b.t.
ROA b.t.
ROE a.t.
ROA a.t.
d) Business costs
Operating costs / Average total assets (BoS)(i)
CIR(i)
Total costs / RWA(i)
Total costs / Total assets(i)
e) Liquidity
Liquidity assets / Short-term financial
liabilities to non-banking sector
2.3%
60.7%
42.4%
0.5%
2.0%
4.4%
3.2%
15.4%
1.8%
15.4%
1.8%
2.1%
58.3%
2.4%
1.5%
1.9%
65.8%
43.5%
0.1%
1.3%
3.1%
2.5%
8.2%
1.1%
8.2%
1.1%
1.8%
57.9%
3.0%
1.6%
2,7%
66.6%
35.4%
-0.1%
2.4%
4.0%
3.8%
12.7%
1.6%
11.7%
1.5%
2.4%
59.0%
3.3%
2.2%
2.0%
72.0%
33.6%
-0.3%
1.7%
3.9%
2.9%
13.4%
1.9%
13.3%
1.9%
2.2%
53.9%
3.7%
2.0%
4.7%
67.4%
41.2%
-0.3%
2.5%
4.1%
3.9%
13.2%
1.9%
11.8%
1.6%
2.5%
58.8%
3.4%
2.3%
56.1%
65.8%
54.7%
63.8%
54.1%
Liquidity assets / Average total assets
51.8%
54.9%
44.7%
52.1%
38.0%
f) Other
Market share in terms of total assets
LTD
Total revenues / RWA(i)
Key indicators per share
Shareholders(vii)
Shares
The corresponding value of one share (in EUR)
Book value (in EUR)
International credit ratings
S&P
Fitch
Moody's(viii)
Employees
24.7%
51.9%
5.2%
2,455
20,000,000
10
72.5
-
58.8%
4.1%
-
-
-
97.6
BBB-
BB+
Baa1
23.8%
59.1%
6.8%
2,100
20,000,000
10
66.7
-
65.5%
5.6%
-
-
-
84.3
BBB-
BB+
Baa2
-
68.3%
5.7%
-
-
-
80.8
BB+
BB+
Baa2
NLB
3.9%
71.1%
39.9%
-0.6%
1.8%
3.8%
3.0%
12.4%
2.0%
11.6%
1.9%
2.1%
55.5%
3.6%
2.0%
48.2%
42.5%
22.7%
63.7%
6.5%
1,716
20,000,000
10
64.8
Number of employees
8,792
2,591
5,878
2,659
5,887
2,690
Further details on the definition of certain indicators in this table are available in chapter Alternative Performance Indicators.
(i) Data for 2019 and 2018 are adjusted to the changed schemes as prescribed by the BoS (relocation of some items from net other income to other general and administrative expenses). More details are
available in note 2.3. of the Audited Financial Statements of NLB Group and NLB d.d. of this report.
(ii) Result before impairments and provisions of NLB Group for the year 2020 does not include Negative Goodwill.
(iii) Loans and advances without loans and advances classified as held for sale, cash balances at CBs and other demand deposits.
(iv) Loans and advances including cash balances at CBs and other demand deposits.
(v) Calculated on the basis of average total assets.
(vi) Calculated as Net income from operational business (NII - Tier 2 bonds expenses + Net fee and commission income + Recurring net income from financial operations) / Average total assets.
(vii) As per share register of 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.
14
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Table 1b: Selected indicators presenting performance with and without inclusion of Komercijalna Banka group
Table 3: Market performance and outlook for the period 2021-2023
Outlook
2020
2019
NLB Group
NLB Group (w/o
Komercijalna
Banka group)
NLB Group
Regular income
Costs
ROE a.t.
Loan growth
Cost of risk
Dividend payout
Performance in 2020
Outlook 2021
Outlook 2023
EUR 504.5 million
EUR 293.9 million
> EUR 600 million
~ EUR 430 million(i)
> EUR 700 million
< EUR 400 million
8.1%(ii)
3%(ii)
62 bps(ii)
/
High single digit
> 10% (RORAC(iii) > 12%)
Mid single digit number
High single digit CAGR (2021-2023)
70-90 bps
40-60 bps
EUR 92.2 million
> EUR 300 million(iv)
(i) Initial increase in cost base in 2021; projected costs include restructuring charges.
(ii) Komercijalna Banka group is excluded from calculation to ensure comparability with previous years.
(iii) RORAC calculated as Result after tax excl. Tier 2 bonds expenses divided by average RWA at 15.25% capital requirement.
(iv) Cumulative in the period 2021-2023.
Net loans to customers (in EUR million)
Financial assets (in EUR million)
Deposits from customers (in EUR million)
ROE a.t.
NPL coverage ratio 1 (coverage of gross non-performing
loans with impairments for all loans)
NPL coverage ratio 2 (coverage of gross non-performing
loans with impairments for non-performing loans)
NPL volume (in EUR million)
NPL ratio (internal def.; NPL/ Total loans)
NPE ratio (EBA definition)
Table 2: Information on the LCR(i) (in EUR thousands)
9,645
5,120
16,397
15.4%
81.8%
57.3%
475
3.5%
2.3%
7,778
3,755
12,954
8.1%
86.9%
62.6%
435
3.9%
2.6%
7,605
3,830
11,612
11.7%
89.2%
65.0%
375
3.8%
2.7%
Q1 2020
Q2 2020
Q3 2020
Q4 2020
NLB Group
NLB
NLB Group
NLB
NLB Group
NLB
NLB Group
NLB
Liquidity Coverage Ratio (LCR)
333.4%
381.5%
321.3%
370.1%
311.4%
357.8%
302.9%
351.2%
High Quality Liquid Assets (HQLA)
3,538,373
3,274,751
3,853,203
3,553,904
4,187,441
3,857,502
4,493,341
4,119,661
Net Liquidity Outflows
1,066,212
864,163
1,208,445
967,226
1,353,319
1,083,882
1,495,611
1,177,269
(i) Table 2 illustrates the values and data for each of the four calendar quarters.
They are calculated as a simple average of observations on the last calendar day of each month for a period of 12 months before the end of each quarter.
15
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Shareholder structure of NLB
The Bank 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, representing 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 4: NLB’s main shareholders as at 31 December 2020(i)
Jan 2020
Feb 2020
M ar 2020
A pr 2020
M ay 2020
Ju n 2020
Jul 2020
A u g 2020
Sep 2020
O ct 2020
N ov 2020
D ec 2020
Source: Ljubljana Stock Exchange.
Shareholder
Number of shares
Percentage of shares
Figure 1: NLB shares’ price movement on the Ljubljana Stock Exchange (in EUR)
Bank of New York Mellon on behalf of the GDR holders (ii)
11,769,972
58.85
of which Brandes Investment Partners, L.P. (iii)
of which EBRD(iii)
of which Schroders plc(iii)
Republic of Slovenia (RoS)
Other shareholders
Total
/
/
/
5,000,001
3,230,027
20,000,000
>5 and <10
>5 and <10
>5 and <10
25.00
16.15
100.00
(i) Information is sourced from NLB’s shareholders book accessible at the web services of CSD (Central Security Depository, Slovenian:
KDD - Centralna klirinško depotna družba) and available to CSD members. Information on major holdings is based on the self-
declarations by individual holders pursuant to the applicable provisions of Slovenian legislation, which requires 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.
Market performance of NLB’s securities (shares and GDRs)
The COVID-19 pandemic weighed heavily on banking sector stocks in 2020.
After reaching an annual peak in the middle of February 2020, European
banking sector stocks dropped significantly as the COVID-19 pandemic
spread. A moderate pick-up in value followed during the summer, but with
the arrival of autumn, banking sector stocks returned to levels observed in the
middle of March 2020. Despite rising at the end of the year, banking sector
stocks still recorded an annual decrease in value of around 25%.
Jan 2020
Feb 2020
M ar 2020
A pr 2020
M ay 2020
Ju n 2020
Jul 2020
A u g 2020
Sep 2020
O ct 2020
N ov 2020
D ec 2020
Source: Bloomberg.
Figure 2: NLB GDR’s price movement on the London Stock Exchange (in EUR)
Table 5: NLB share information
Share information
Total number of shares issued
Highest closing price (in 2020)
Lowest closing price (in 2020)
Closing price as at 30 December 2020(i)
NLB Group book value per share
NLB Group earnings per share (EPS)
Price / NLB Group book value (P/B)
Dividend per share (for the previous business year)
31 December 2020
20,000,000
EUR 65.0
EUR 34.1
EUR 45.8
EUR 97.6
EUR 13.5
0.47
/
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
Indices
The Bank’s shares are included in several indices: the SBITOP index and
ADRIA prime index of the Ljubljana Stock Exchange, the FTSE Frontier
Index, MSCI Frontier and MSCI Slovenia, 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, 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.
Investor Relations’ function
Since the listing of the Bank’s shares and GDRs in November 2018, the
importance of the Investor Relations (IR) function has increased substantially,
requiring engagement with investors and the broader community. The Bank
participated in varied forms of engagement, such as investor meetings,
calls, and conferences, reflecting the diverse nature of the Bank’s ownership
structure. Open and regular communication with investors and analysts
allowed for dialogue promotion on strategic developments, as well as on the
recent 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.
The IR section of the Bank’s website is an important communication channel
that provides comprehensive information on the Group and share price
performance of the Bank. In addition, it enables the effective distribution of
information to the market in a clear and consistent manner. IR presentations,
financial reports, and important information are uploaded to the Bank’s
website in line with IR’s Financial Calendar.
Since the listing, four analysts released research reports about the Group. The
Bank’s share is covered by analysts from JP Morgan, Deutsche Bank, Wood &
Company, Citi, InterCapital, and Raiffeisen Bank International.
The price movement of the Bank’s stocks did not differ substantially in
Market capitalisation(i)
EUR 916,000,000
comparison to European banking sector stocks. The Bank stocks experienced
(i) No market on 31 December 2020.
approximately a 25% drop in value in 2020. The difference was that the Bank’s
stocks decreased at a higher pace over the summer and reached levels similar
to March 2020 already by the end of August 2020. Nevertheless, a subsequent
uptick in value caused that by the beginning of September 2020. The Bank’s
stocks price movement was relatively synchronized with the price movement of
European banking sector stocks. Similar to those stocks, the price of the Bank’s
stocks rose in the last couple of months in 2020. However, it should be noted
that the substantial drop in price in the February–March period was not offset.
16
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Key Events
Signed SPA
for Komercijalna
Banka, Beograd
Top Employer
certificate
COVID-19
outbreak
Sale of NLB Vita
completed
NLB Lease&Go
founded
35th General
Meeting
NLB joined
UN Principles for
Responsible Banking
Moody’s upgrade to Baa1
Acquisition of
Komercijalna
Banka, Beograd
JANUARY
FEBRUARY
MARCH
APRIL
MAY
JUNE
JULY
AUGUST
SEPTEMBER
OCTOBER
NOVEMBER
DECEMBER
February
April
June
October
On 4 February, the Bank announced that for the fifth
On 9 April, the Bank disclosed the amended decision on the
On 9 June, the Workers’ Council of NLB elected and
On 6 October, Moody’s upgraded the long-term local and
consecutive year it is ranked among the best employers
composition of Pillar 2 additional own funds requirement
appointed Petra Kakovič Bizjak, Sergeja Kočar, and
foreign currency deposit ratings of NLB from Baa2 to Baa1.
in the world. Top Employers Institute, an independent
(P2R) of the currently applicable decision establishing
Bojana Šteblaj as members of the Supervisory Board – and
international certification company, has once again awarded
prudential requirements (SREP). The decision was applied
representatives of the employees.
November
the Bank the acclaimed ‘Top Employer’ Slovenia certificate.
retroactively from 12 March 2020.
On 20 November, the Bank received information from the
On 15 June, the shareholders of the Bank gathered at the
Workers’ Council of NLB that they elected Janja Žabjek
On 5 February, the Bank issued 10NC5 subordinated Tier
On 9 April, the Bank received the decision of the BoS
35th General Meeting of NLB where 56.85% shares with
Dolinšek as member of the Supervisory Board of the Bank -
2 bonds in the amount of EUR 120 million (ISIN code
relating to the MREL requirement, which amounts to 15.56%
voting rights were present. Primož Karpe and David Eric
and representative of the workers. Her term of office shall
XS2113139195) on international debt capital markets to
of TLOF on a sub-consolidated level of the NLB Resolution
Simon were re-elected for a new term of office; additionally,
run from 20 November 2020 and will last until the conclusion
strengthen and optimise its capital structure. On 25 March,
Group (consisting of the Bank and non-core part of the
Verica Trstenjak was elected as a new member of the
of the Annual General Meeting of NLB that decides on the
the Bank obtained the ECB’s permission for the instrument’s
Group). The MREL requirement shall be reached by 31
Supervisory Board.
inclusion in the calculation of Tier 2 capital.
December 2021 and shall be met at all times from that date
allocation of distributable profit for the fourth financial
year after her election, counting the year in which she was
onwards.
On 26 June, the members of the Supervisory Board of the
appointed as the first one.
On 26 February, NLB entered into a share purchase
Bank elected Primož Karpe as their Chairman for the second
agreement with the Republic of Serbia for the acquisition
The NLB Cultural Heritage Management Institute, Ljubljana
time in a row. Andreas Klingen remains his deputy.
On 12 November, the existing members of the Bank’s
of an 83.23% ordinary shareholding in Komercijalna Banka,
(entered in the register of companies on 16 April 2020) was
Management Board were reappointed for another term in
Beograd for EUR 387 million.
established based on the concept of the Bank art collection
On 30 June, the Bank entered into contracts with MIGA
office; Blaž Brodnjak as the CEO & CMO, Archibald Kremser
management.
(part of the World Bank Group) in the amount of EUR 303.1
as the CFO; and Andreas Burkhardt as CRO of the Bank, all
March
On 4 March, NLB obtained the ECB’s permission to include
May
million for the purpose of risk-weighted assets optimisation.
for a period of five years from the end of their term on 6
July, 2021.
the 10NC5 subordinated Tier 2 bonds in the amount of EUR
On 13 May, the ECB gave its consent to the appointment
August
120 million the Bank issued on 19 November 2019 (ISIN code
of Petr Brunclík as a member of the Management Board of
Between 14 and 18 August, the Management Board
December
XS2080776607) in the calculation of Tier 2 capital.
the Bank and COO. Petr Brunclík, who was appointed by the
members of NLB, Blaž Brodnjak, CEO & CMO; Andreas
In relation to the completion of the transaction
In March, the COVID-19 pandemic became a global
joined NLB in February 2020.
COO together acquired 1,382 ordinary shares of NLB, ISIN:
to 83.23% of the ordinary shares of Komercijalna Banka,
phenomenon with wide and far-reaching consequences
SI0021117344, LJSE ticker NLBR, in the total amount of EUR
Beograd, dated 26 February, 2020 (the ‘SPA’), concluded
Supervisory Board of the Bank at the end of November 2019,
Burkhardt, CRO; Archibald Kremser, CFO; and Petr Brunclík,
contemplated in the Sale and Purchase Agreement relating
including implications for the global and regional banking
On 29 May, having met all the suspensive conditions under
51,031.20.
sector and therefore for the Group as well.
the sales agreement of 27 December 2019, the Bank sold its
50% stake in the share capital of NLB Vita in a joint sales
September
between the Republic of Serbia as the Seller, and NLB as
the Buyer, the Bank announced on 22 December that it has
obtained all the required regulatory approvals contemplated
process together with the KBC.
On 1 September, the Bank received a letter of resignation
by the SPA, while on 30 December the Bank completed the
On 29 May, the Bank announced that the newly founded
Board (the workers’ representative).
company, NLB Lease&Go, provider of leasing services, has
entered the Slovenian market and joined the Group. The
At the end of September, NLB as the first bank in Slovenia,
company offers leasing for personal vehicles and lorries,
joined more than 180 banks from all over the world as a
buses, and agricultural and construction machinery.
signatory of the UN Principles for Responsible Banking.
from Petra Kakovič Bizjak, a member of the Supervisory
acquisition.
17
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
-6.6%
economic growth in
the Euro-area in 2020.
-5.5%
economic growth in
Slovenia in 2020.
-6.0%
economic growth in the
Group’s region in 2020.
Macroeconomic
Environment
Global and European Economy
and recalibrated existing and new monetary policy instruments several times
over 2020. Key interest rates remained unchanged, though. Most importantly,
the ECB introduced and recalibrated the Pandemic Emergency Purchases
Programme (PEPP). The envelope of PEPP was increased over the year to a
total of EUR 1,850 billion, and the duration of the programme was extended
to March 2022. The ECB recalibrated Temporary Long-Term Refinancing
Operations (TLTRO-III) and introduced Pandemic Emergency Long-Term
Refinancing Operations (PELTRO).
In the US, the Fed ramped up its asset purchases programme to prevent
financial tightening in the markets and introduced a monetary policy
shift by allowing for a temporary overshoot in inflation after a period of
undershooting the inflation target.
European governments in particular managed to achieve that the COVID-19
The course of the global economy in 2020 was determined by the COVID-19
shock had only a very moderate effect on the unemployment rate, mainly
pandemic, causing unprecedented contraction. Governments were forced
due to jobs retention schemes masking the real impact of the crisis on the
to implement drastic measures to contain the pandemic despite significant
labour market. The downward pressures on prices amplified over the year.
economic implications. The COVID-19 shock disrupted production chains
Nevertheless, a significant part of the downward pressure on prices could
around the world when manufacturing in China came to a standstill. This
be credited to temporary factors, e.g. energy prices and the German VAT
caused supply-side disruptions while containment measures disrupted the
reduction.
demand side by weighing heavily on private consumption. Supported by the
Chinese recovery, world trade and industrial production recovered after a
The global economy is expected to rebound in 2021. However, countries
significant decline in Q2 2020. A clear divergence between manufacturing
all over the world are likely to continue with the alternating relaxations and
and services sectors was observed as measures for containing the spread of
restrictions until the broad vaccine rollout enables a sustainable easing of
the virus hit sectors disproportionally. The manufacturing sector remained
containment measures. The Euro area economy is expected to grow 4.0%
somehow resilient to further waves while the services sector contracted on the
in 2021. The rebound in the Euro area should be underpinned by fiscal
back of re-introduced containment measures. To mitigate adverse negative
measures on the national, as well as European levels and the accommodative
impacts of the pandemic, governments and CBs provided fiscal support and
monetary policy. The revival of private consumption and pent-up demand,
monetary policy easing which mutually reinforced. Large-scale fiscal support
underpinned by preserved stable incomes and households gradually releasing
and liquidity assistance have been extended to economies to avoid mass
accumulated savings, should be important drivers of the rebound in the Euro
lay-offs, preserve incomes, and protect businesses. They could be categorised
area. Inflation is expected to rise in 2021, as drivers of deflation in 2020 are
into (i) jobs retention schemes, (ii) household and self-employed income
set to become drivers of reflation in 2021. The economic recovery should
support, (iii) tax and loans forbearance and deferment, and (iv) liquidity and
also play its part as an upward pressure on prices. Nevertheless, inflation
guarantees.
is expected to remain in check due to the substantial output gap, as well
as elevated unemployment in comparison to pre-crisis levels. The cost of
In the EU, fiscal measures adopted on the national level were complemented
mitigating the pandemic will continue to be felt in 2021, although pressures on
by a common European rescue package, which included (i) precautionary
public finances are expected to ease. Fiscal deficits are expected to narrow due
credit lines for member states, (ii) a programme to finance loans to businesses,
to a growth-induced rise in budget revenues, gradual unwinding of pandemic-
and (iii) a jobs support programme. The agreement on a recovery plan, Next
related emergency measures, and the projected rebound in economic activity.
Generation EU, and the EU’s long-term budget is set to ensure support to
Public debts are expected to move in line with narrowing fiscal deficits and the
the hardest hit member states and underpin growth in subsequent years.
economic rebound.
National authorities also implemented capital, liquidity, and borrower-based
macroprudential measures to support banks facilitating the real economy. The
ECB provided abundant liquidity and conducted large-scale asset purchases
with the objective to keep favourable financing conditions and to maintain
the smooth working of the transmission mechanism. The ECB introduced
18
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 The Economy in the Group’s region
In Montenegro, the COVID-19 pandemic had devastating implications for
the economy due to its underlying features of being particularly vulnerable to
The Group’s region was not able to circumvent the COVID-19 pandemic
external shocks and being exposed to hardest hit sectors. The pandemic and
and its economic implications. As a consequence, the Group’s region recorded
travel restrictions weighed heavily on Montenegro’s tourism sector. The latter
a substantial drop in economic growth. However, economic implications of
had spillover effects on domestic consumption and investment, which together
the COVID-19 pandemic differed between countries of the Group’s region
with the weakened external demand weighed heavily on economic growth.
due to underlying differences in features of economies. Countries with the
strong reliance on the tourism sector were severely affected by restrictions
In North Macedonia, notable economic contraction was recorded as output
on domestic and international travel. The disruption to global supply chains
contracted on the back of decreased private consumption with household
and a decline in remittances and FDI inflows weighed on economies as well.
spending being adversely affected by a drop in remittances and with the
The lowest annual contraction was registered by Serbia, while the highest
external sector being influenced by containment measures abroad. Despite
contraction was experienced by Montenegro. In general, inflation fell
fiscal measures and the toned-down effect on the labour market, domestic
mainly because of downward pressure on consumer prices due to depressed
demand was suppressed.
domestic demand and a drop in oil prices. Fiscal balances and public debts
were affected by implementation of fiscal measures aimed at cushioning
In Serbia, the economy experienced a moderate contraction as a consequence
COVID-19 economic implications. Current accounts worsened and deficit
of a swift and sizeable fiscal and monetary support measures. Another factor
financing needed to be complemented by external loans due to a decrease in
was the underlying feature of the economy being less exposed to sectors
regular sources of financing, i.e., FDIs and remittances.
Table 6: Movement of key macroeconomic indicators in the Euro area and NLB Group region
GDP
(real growth in %)
Average inflation
(in %)
Unemployment rate
(in %)
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
Euro area
Slovenia
BiH
Montenegro
N. Macedonia
Serbia
Kosovo
1.9
4.4
3.1
5.1
2.8
4.5
3.8
1.3
3.2
2.9
4.1
3.2
4.2
4.9
-6.6
-5.5
-5.2
-13.0
-4.5
-1.0
-7.0
4.0
4.5
3.5
6.5
4.5
4.5
5.0
3.5
4.0
3.5
4.5
3.5
4.0
5.0
1.8
1.9
1.4
2.6
1.4
2.0
1.1
1.2
1.7
0.6
0.4
0.8
1.9
2.7
0.3
-0.3
-1.0
-0.3
1.2
1.6
0.2
1.2
1.3
0.7
1.0
1.5
2.0
1.4
1.3
1.7
1.0
1.5
1.8
2.3
1.7
8.2
5.1
7.6
4.5
8.0
4.9
9.0
5.5
8.5
5.0
18.4
15.7
18.0
17.5
16.0
15.2
15.1
18.0
18.0
16.0
20.7
17.3
16.4
17.5
16.5
12.7
10.4
9.0
9.0
8.5
29.6
25.7
26.5
26.0
25.0
Source: Statistical offices, Focus Economics.
Note: NLB Forecasts are highlighted in grey.
hardest hit by the pandemic in relation to their peers in the Group’s region.
The contraction was mostly driven by a reduction in private consumption,
which was only partially offset by increased government consumption and net
exports.
In BiH, the COVID-19 pandemic has pushed the country into a recession
underpinned by the drop in domestic and external demand, and a drop in
remittances.
In Kosovo, the COVID-19 pandemic had severe implications for the economy
due to shortcomings in its consumption-based growth model. The economy
contracted on the back of a decline in services exports due to lower diaspora
visits, and a drop in private consumption and investment due to uncertainty
and containment measures. Strong remittances inflows managed to offset some
of the pandemic impact.
In Slovenia, the economic growth had a similar path as other Euro area
economies throughout 2020. After a significant contraction in H1 2020 due
to containment measures negatively affecting all demand components except
government consumption, the economy experienced a strong rebound in
Q3 2020. However, re-imposed stringent containment measures due to a
surge in COVID-19 infections interrupted the recovery in Q4 2020. The
labour market was supported by policy measures, so, losses in employment
were protected from a large drop in GDP, and much smaller than expected.
The measures taken have also avoided a surge in insolvencies. Sizeable fiscal
measures taken to support the economy and lost revenues reflected in a large
deficit of public finances and elevated public debt.
Table 7: 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)
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
Euro area
Slovenia
BiH
2.9
5.8
2.3
6.5
2.2
7.3
2.4
5.3
2.4
5.3
-3.3
-3.0
-4.9
-4.6
-3.9
Montenegro
-17.0
-15.0
-15.4
-14.0
-12.4
N. Macedonia
Serbia
Kosovo
-0.1
-4.8
-7.6
-2.8
-6.9
-5.7
-3.5
-4.3
-7.5
-3.0
-5.6
-6.1
-2.8
-5.4
-5.8
-0.5
-0.6
0.7
2.3
-3.6
-1.8
0.6
-2.6
0.5
1.9
-2.9
-2.0
-0.2
-2.9
-9.1
-8.5
-4.6
-9.9
-8.1
-8.1
-6.7
-6.2
-4.7
-2.9
-4.7
-4.4
-3.2
-5.1
-3.8
-3.0
-1.7
-3.4
-3.3
-1.7
-3.7
85.8
84.0
100.7
101.4
99.9
70.3
65.6
79.6
78.8
77.6
34.3
32.8
38.4
38.6
37.5
70.1
76.5
90.6
90.7
87.7
40.4
40.7
51.0
51.2
50.9
53.6
52.0
56.8
58.7
57.0
16.9
17.5
24.4
28.7
31.0
Source: Statistical offices, Focus Economics.
Note: Consensus Forecasts are highlighted in grey.
19
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 In Slovenia, in 2021 economic activity is expected to rebound, backed
The Banking System in the Group’s region
by growth in private consumption. However, the household saving rate is
expected to remain elevated in 2021 with households only gradually releasing
The banking systems in the Group’s region were not able to remain intact by
accumulated savings. Investment growth is expected to be supported by
the overall pandemic implications. Nevertheless, lending exhibited diverging
large public investments and the recovery of private investment. Net exports
degrees of resilience to the adverse effects of weakened economies on the
are also expected to have a positive contribution to growth. However, a
banking systems in the Group’s region. The highest corporate loans growth
sustainable recovery is conditional on the vaccine rollout and containment of
was recorded in Serbia and Kosovo, while BiH and Slovenia recorded
the pandemic.
negative growth in corporate loans. The highest surge of household loans was
registered by Serbia, North Macedonia, and Kosovo, while BiH recorded a
In Montenegro, the economy should rebound in 2021 on the back of
slight decrease in household loans, as well. With the exception of Montenegro,
investments supporting construction works and the revival of private
where corporate and household deposits registered negative annual growth,
consumption driven by remittances and bank lending.
all countries of the Group’s region recorded high growth in corporate and
In North Macedonia, the rebound in 2021 is expected to be underpinned
by Slovenia and BiH. Household deposits recorded the highest annual growth
by strengthening domestic demand with remittances inflow boding well for
in Kosovo, which was closely followed by Serbia and Slovenia. The net
household deposits. Corporate deposits increased the most in Serbia, followed
consumption.
interest margin was the highest in Kosovo and Montenegro. In Slovenia, the
decrease in net interest margin was driven by the decline in credit growth and
In Serbia, a recovery to pre-crisis levels is expected already in 2021. The
falling returns on assets. The NPL ratio as a measure of the quality of bank
rebound is projected to be driven by investment and private consumption,
portfolio improved in Slovenia, BiH, North Macedonia, and Serbia, while
while a positive contribution from net exports depends on the recovery in the
it deteriorated in Montenegro and Kosovo. The improvement in the NPL
EU.
In BiH, the economy is expected to rebound in 2021 as a consequence
of a revival in domestic demand and the gradual easing of COVID-19
ratio could be deceiving due to macroprudential measures put in place by
regulatory and supervisory institutions, e.g. moratoria. The capital adequacy
of the banking systems remains solid and resilient to the increased risks, with
banking systems remaining well-capitalised. The capital adequacy either
containment measures in main export markets – which bodes well for the
improved or stagnated in almost all countries of the Group’s region, with
external sector.
Serbia being an exception in this regard.
In Kosovo, the economy should rebound in 2021 on the back of pent-up
Table 8: Movement of key banking systems indicators in the NLB Group region, 2020
underpinned by a revival in consumer and investment spending, assuming that
BiH
4,392
-4.9
5,059
-0.8
2,407
16.1
7,036
demand following the easing of domestic restrictions, while the external sector
should be supported by gradual reopening of economies.
The economic growth in the Group’s region could be around 4.8% in 2021.
The return to growth of the economies of the Group region should be
consumer and business confidence are restored when the pandemic is under
control. Gradual easing of COVID-19 restrictions across the globe should
boost external demand and release travel restrictions, resulting in tourism-
dependent countries experiencing a more robust rebound. Nevertheless,
lingering uncertainty regarding the course of the pandemic and the vaccine
rollout cloud the outlook, in general. The economic growth in the Group’s
region also depends on the pace of the recovery in the EU because it affects
the external trade and determines the remittance inflows, underpinning a
significant part of consumption in several countries of the Group’s region.
Corporate loans Household loans
Corporate deposits Household deposits Net interest margin
NPL
CAR
in million
in million
in million
in million
EUR ∆ % YoY
EUR ∆ % YoY
EUR ∆ % YoY
EUR ∆ % YoY
2018,
in %
2019,
in %
in % ∆ pp YoY
in % ∆ pp YoY
Slovenia
8,750
-1.4
10,712
0.1
8,031
18.8
22,437
10.2
Montenegro
1,186
N. Macedonia
2,761
1.7
1.1
1,411
3,021
2.7
8.0
1,277
-5.5
1,750
2,004
10.1
4,638
Serbia
Kosovo
14,856
10.9
9,544
13.8
9,600
26.3
14,897
2,055
7.2
1,180
7.1
943
15.1
2,844
Source: Statistical offices, CBs, NLB.
Note: Net interest margin calculated on interest-bearing assets; Net interest margin calculated on average total assets for Serbia; (i) Data in Q3 2020.
1.8
2.6
4.5
3.4
3.3
4.8
1.6
2.4(i)
4.3(i)
3.2(i)
3.0
4.5
2.6
6.6(i)
5.5
3.4(i)
3.7
2.7
-0.3
18.3
-0.2
-1.1
18.3 (i)
0.7
-1.6
-0.4
0.7
18.5
16.9(i)
22.4(i)
16.5
0.2
0.8
0.0
-1.2
0.8
3.9
-1.3
4.6
12.4
13.2
20
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Kosovo
Montenegro
N. Macedonia
BiH
Serbia
Slovenia
Euro area
Kosovo
Montenegro
N. Macedonia
BiH
Serbia
Slovenia
Euro area
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0%
3%
6%
9%
12%
15%
18%
21%
2020
2019
Source: ECB, National CBs, NLB.
Note: Q3 2020 data for Serbia.
2020
2019
Source: ECB, National CBs.
Note: Return on average equity (ROAE) used for BiH; Q3 2020 data for BiH, N. Macedonia, and Euro area.
Figure 3: LTD ratio in the Euro area and NLB Group region
Figure 4: ROE ratio in the Euro area and NLB Group region
The LTD ratio increased in Montenegro, while in other countries of the
Group’s region the LTD ratio registered a decrease. The profitability of
banking systems in the Group’s region was not immune to the economic
implications of the pandemic, hence the ROE ratio decreased in all countries
of the Group’s region with North Macedonia being an exception.
Kosovo
Montenegro
N. Macedonia
BiH
Serbia
Slovenia
Euro area
0%
10%
20%
30%
40%
50%
60%
70%
Households loans, % GDP
Loans to non-financial corporations, % GDP
Source: National CBs, National Statistical Offices.
Note: Q3 2020 annualised data for BiH and Kosovo.
Figure 5: Loans to non-financial corporations and households’ loans in the Euro area and the NLB Group region in 2020
Looking at the loans to non-financial corporations and households’ loans as a
percentage of GDP, it can be observed that the whole Group has the potential
for further growth compared to the levels in the Euro area. The expected
return of economies in the Group’s region to growth in 2021 bode well for
loans potential. The economic recovery should be underpinned by the revival
in private consumption and fixed investments, both important components
of loans potential, and both expected to exhibit growth in 2021 after the
pandemic-induced drop in 2020. Private consumption, as the strongest part of
the GDP, is forecasted to increase somewhere between 3.3%, as is the case for
BiH, and 6.2%, as is the case for Montenegro. Fixed investment is forecasted
to increase somewhere between 5.3%, as is the case for Montenegro, and
8.9%, as is the case for Serbia. The projected government consumption
growth, although lower than in 2020, should support the expected return to
economic growth in 2021 as well.
21
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Regulatory Environment
During 2020, more than 100 changes in the EU and Slovenian
The Group also takes into account and complies with the regulations in the
Regulatory Environment in the Group’s region
regulatory environment were adopted with material effects
field of preventing money laundering and terrorist financing. In 2020, an
on the Bank and its Group. The Group strives to be fully
amendment to the Prevention of Money Laundering and Terrorist Financing
The regulatory environment in the rest of the region where the Group
compliant with the existing and new requirements. Disclosure
Act was adopted that transposed the AMLD 5 into the Slovenian legislation.
operates was dominated by legislative and regulatory changes related to
of the most relevant changes of legislation and regulation
At the end of 2020, a new amendment to the law was proposed.
COVID-19 pandemic and minimising its consequences in the financial
which has an effect on the Group is presented herein.
sector and economies. There were also local regulatory (prudential and
Compliance with the Payments Act (PSD2) and regulatory technical standards,
macroeconomic) measures adopted to ensure stable functioning of the
which brought open banking into the financial environment, required major
financial systems.
The Regulatory Environment in Slovenia
changes to the Bank’s information systems. The Bank is constantly monitoring
The Bank is subject to capital adequacy and liquidity rules imposed by the
them, taking into account the best user experience.
factoring, as well as changes to the DGS and labour law. The local regulator
EU (CRR/CRD), which govern the activities in which banks may engage,
also adopted a number of regulations related to changes of regulatory reporting
and are designed to maintain the safety and soundness of banks as well as
Due to the COVID-19 epidemic in 2020, the RoS adopted several intervention
and risk management rules (liquidity, operational risk, collateral valuation,
new regulatory requirements imposed by the regulator and is adapting to
In BiH, there were important changes related to introduction of the law on
limit their exposure to risk. Even though the majority of the new provisions
laws and measures which mainly affected the Bank in the area of credit
outsourcing, ICAAP/ILAAP, LCR).
will apply from June 2021, the Bank started its implementation activities to
moratoriums. The Bank was also involved in economic measures as a lender
ensure the timely implementation of CRR2 provisions. The CRD V, which
with state guarantees on loans.
will be further transposed into the Banking Act (ZBan-2), will also regulate the
Montenegro was, adding to the COVID-19 related changes, highly active,
changing banking laws (together with a number of by-laws) and bank recovery
participation of employees in the management of the Bank, which the Bank
An ongoing activity from 2019 included the amendment of policies and
and resolution law (together with a number of by-laws), which were later
already encourages.
contracts due to EBA Guidelines on outsourcing arrangements, that provide a
postponed to come into force on 1 January 2022, bankruptcy and liquidation law,
As a financial institution offering benchmark-based products, the Bank meets
an outsourced activity, service, process, or function (or part of it) is critical or
its obligations under the Regulation 2016/1011 (BMR) and regularly monitors
important.
developments in this area by adapting its operations to the requirements of
In Kosovo, the local CB adopted a number of regulatory rules on reporting,
IT management, the advertising of financial services, electronic
regulators and industry.
In the EU’s policy context under the European Green Deal, ‘sustainable
money issuance and electronic payment systems, credit risk management,
clear definition of outsourcing and specify the criteria to assess whether or not
law on DGS (together with a number of bylaws), and the law on companies.
finance’ is understood as finance to support economic growth while reducing
NPL, and restructuring prudential treatment.
Due to the constant care for the interests of its customers, especially the
pressures on the environment, and taking into account social and governance
protection of their data, the legislation in the field of personal data protection
aspects. The Bank is approaching the development of a comprehensive policy
Serbia made important legislative steps towards implementation of FATCA,
is also important for the Bank. The Bank strictly adheres to its obligations
on sustainable finance, comprising the action plan on financing sustainable
additionally there were changes to CB’s rules on regulatory reporting and risk
imposed on it by GDPR in both Slovenia and the Group. As the Slovenian
growth and the development of a renewed sustainable finance strategy in the
management rules (liquidity, operational risk, collateral valuation, outsourcing,
law, which would further supplement the regulation, was not adopted either in
ESG EU regulatory framework as well.
2020, further obligations for the Bank may arise when the law will be adopted.
ICAAP/ILAAP, LCR, FX transactions). Serbia also made changes to the
corporate and personal income tax law, law on VAT, and introduced digital
Regarding upcoming legislation in the corporate governance area, an
property law and amended the AML law related to the treatment of digital assets.
As a provider of services and products in the field of financial markets, the
amendment to the Companies Act (ZGD-1) is in the process of adoption,
Bank complies with the provisions of MIFIR / MIFID 2 regarding financial
which will have an impact on the Bank, mainly in the area of relations with
markets transactions, enhanced investor protection, transparency, and
shareholders and the exercise of shareholders’ rights, as well as information on
reporting obligations.
corporate actions (following SRD2).
In North Macedonia, COVID-19 pandemic-related laws focused mostly on social
support for vulnerable social groups, loan restructuring, and write-offs, but there
were also important EU-accession activities in legislation, introducing new rules
for trade companies (in line with EU laws on cross-border mergers). AML law
was amended to transpose the EU legislation in the relevant area, the law on
classified information, the law on personal data protection, harmonising with
GDPR regime in the EU, and last but also important were CB decisions on risk
management rules and on the use of banking laws in emergency situations.
22
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Combining ancient
techniques with
modern aesthetics
increasing in
popularity
Bogdan Darmanović
SHIMMPO, Montenegro
SHIMMPO is a team of young people, led by sculptor
Bogdan Darmanović, gathered around the idea of
applied sculpture.Their starting point is to combine
ancient techniques with modern aesthetics, offering a
new dimension of ceramic products, for full enjoyment
around the table. All plates and cups are made in a
studio in Podgorica, from 100 % natural materials.
Each piece is hand sculpted, baked and glazed to a
most beautiful shine. Thanks to NLB Banka, Podgorica
and the #HelpFrame project, their products are
becoming increasingly popular in restaurants and
hotels. The team is grateful for such generous support.
23
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Business Report
24
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Acquisition of
Komercijalna banka
a.d. Beograd
Table 9: Market shares of Komercijalna Banka group(i)
Total assets
Loans
Deposits
Serbia
Republic of Srpska
Montenegro
10.2%
7.5%
12.0%
5.5%
5.9%
4.9%(ii)
3.4%
3.6%
3.7%
(i) Data from CBs and own calculations as at 30 September 2020.
(ii) Includes deposits from banks.
By acquiring the most attractive
target in the region, NLB Group
became the third largest bank on
the promising Serbian market.
On 30 December 2020, NLB Group achieved another key milestone by
of approximately 1.9% to over 12% (measured by total assets). Komercijalna
balance: EUR 10,033.3 million) and deposits by EUR 3,443.5 million (NLB
successfully concluding the acquisition process of an 83.23% shareholding
Banka, Beograd adds more than 800,000 active retail customers and 203
Group year-end balance: EUR 16,397.2 million). The acquired Komercijalna
in Komercijalna banka a.d. Beograd (Komercijalna Banka, Beograd) on the
branches, the largest distribution network in Serbia to NLB Group’s existing
Banka, Beograd with a similar business model to the existing NLB Group, has
Serbian market. The final purchase price was EUR 394.7 million. As a result
operations. The business operations of NLB Group in Serbia will be (besides
moderate impact on the Group’s risk profile and cost of risk. The Group’s
of the acquisition of Komercijalna Banka, Beograd the Group obtained four
the Slovenian market) the largest and the most important one. Through the
TCR after acquisition (16.6%) remained above regulatory requirements and
new members – Komercijalna Banka group:
subsidiary banks of Komercijalna Banka, Beograd in BiH and Montenegro,
management TCR target. The acquisition is expected to positively contribute
NLB Group further solidified its already strong position in those two markets.
to the achievement of NLB Group’s outlook.
• three banks in Serbia, BiH and Montenegro: Komercijalna banka a.d.
Beograd (Komercijalna Banka, Beograd), Komercijalna Banka a.d.,
The enlarged Group will benefit from the diversification of its portfolio
Banja Luka (Komercijalna Banka, Banja Luka), Komercijalna Banka a.d.
and given the improved product offering of Komercijalna Banka, Beograd
Podgorica (Komercijalna Banka, Podgorica); and
combined with NLB Group staff local expertise, cost, and capability-related
business synergies derived from its integration within the Group. It is
• one investment fund company in Serbia: Kombank INvest a.d.
estimated that synergy effects could be over EUR 20 million p.a. from 2023.
Beograd (Kombank INvest, Beograd).
In addition to classic banking products, the Group will also be able to extend
the number of products and services on the Serbian market by distributing
The acquisition further strengthened the Group’s long-standing presence
insurance products and asset management as well. Besides that, greater cross-
in the SEE region and ensured strategic and systemic position on all the
border activity within the Group could be achieved by using the untapped
markets where the Group operates. NLB Group now consists of nine
potential for enhanced intra-regional trade in the Western Balkans.
banking members, locally even more firmly embedded as important financial
institutions and market leader in various business segments. Going forward,
Since the transaction was closed on 30 December 2020, only negative
the strategy for the next two years is to merge three pairs of banks that
goodwill in the amount of EUR 137.9 million and 12-month expected credit
operate on the same market and by that simplify the Group’s steering and
losses on the performing portfolio in the amount of EUR 13.4 million are
provide benefit for clients and shareholders.
included in the NLB Group income statement for 2020 (partial influence also
on income tax and result of non-controlling interests). This contributed to the
Serbia has long been a strategically important market for the Group in the
strong result of NLB Group in 2020 (EUR 269.7 million of net profit).
context of its strategy to be the leading international bank headquartered in
and focused on the SEE region. The acquisition has significantly increased
Komercijalna Banka group contributed EUR 4,252.2 million to the balance
NLB Group’s presence in Serbia whose market is among the fastest growing
sheet of NLB Group which reached EUR 19,565.9 million as at 2020 YE.
in the region and will offer opportunities for long-term growth, profitability,
This is close to the EUR 20 billion, the mark NLB Group once already
and regional contribution due to stable core deposits and strong capital
achieved, this time, however, with substantially better dispersed risk and
position. Following the acquisition, NLB became the third largest banking
stronger capital and liquidity positions. The acquisition increased gross loans
group in Serbia, with the market share increasing from pre-acquisition share
to customers of NLB Group by EUR 1,877.3 million (NLB Group year-end
25
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Strategy
Despite the challenging and uncertain economic environment caused by COVID-19 pandemic,
the Group has not changed its course and continues to pursue its strategy, putting focus on
protecting and strengthening its market position in its home region, and actively participating
in the growth and consolidation of the market. Digitalization, client centricity and cost efficiency
remain some of key strategic orientations in order to deliver the Group’s mission and vision.
Strategic focus
For us, this region
is not just a point
on the map, it
is our home.
Become regional champion
Defend our market position
The Group aims to further strengthen its role as a systemically important
The Group is working to protect and strengthen its market position as a
financial institution in SEE region and strives to become a market leader in all
systemic player in its home region. It also works to actively participate in
of its core markets. With the completion of the acquisition of Komercijalna
the expected growth and consolidation of the market, while focusing on
Banka, Beograd in 2020, the Group made an important step in this direction.
increasing profitability through a more customer-centric approach and
The Group believes there is a significant potential from the deal for the whole
digitalization.
region given the complementing product offerings of Komercijalna Banka,
Beograd combined with cost- and capability-related business synergies derived
from its integration within the Group. It is estimated that synergy effects could
be over EUR 20 million p.a. from 2023.
As a leading
Putting clients first
Exploit opportunities and synergies
player, the Bank
would like to best
serve its clients’
financial needs.
In retail banking, the Bank continues to strive to get closer to its clients by
Significant strategic business efforts are undertaken to achieve business
offering anchor products and personalised, most accessible digital services (e.g.
synergies across the Group, both in costs and operational efficiency. The
omnichannel, marketplace) that suit their lifestyles. In corporate banking, the
Group believes these can help offset significant negative economic effects of
Bank is looking to provide more complex, cross-border products and services,
the COVID-19 pandemic on the Group’s future business results. The Bank
and find new entry points in order to suit all its clients’ financial needs. The
is pursuing growth through entering/expanding its presence into selected
whole Group strives to have a prominent role in the region’s development.
adjacencies (e.g. leasing, bancassurance) and diversifying its services on a
horizontal level. By publishing takeover bid for the remaining regular and
One of the key efforts is improved availability for all clients. The Group has
priority shares of Komercijalna Banka, Beograd, we reaffirmed our belief
made itself available anywhere and anytime by building a strong customer
in the bank and confirmed strong investment case aimed at securing all
centre and upgrading its portfolio of digital sales channels. These now offer
synergy potential. The Bank is simultaneously monitoring additional M&A
a growing set of banking products and services, both for retail and corporate
opportunities (within consolidation processes in banking sectors in the SEE),
clients. This has also become a very important issue due to the COVID-19
which are not part of the immediate strategic plan.
outbreak.
As a systemic
bank, it is our
responsibility to
keep and protect
our current strong
market position.
One of the more
important strategic
topics for the
Group is the full
exploitation of
potential synergies
within the Group.
26
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Continuing transformation
delivering our vision and mission. The deal was completely in line with
Brexit’s impact on the Group’s performance
Group’s strategic focus and has enabled the Group to reinforce and strengthen
To facilitate the aforementioned strategic focus and support continuous
its strategic position as a market leader in the SEE region. Also, the Group will
Due to the limited focus of the Group’s operations beyond the SEE region,
transformation in an everchanging environment, the Group is following an
be able to extend the number of products and services in the Serbian market,
the estimation is that Brexit will not have any significant impact on the
elaborated, comprehensive, and detailed program plan to deliver its mission
and allow greater cross-border activity within the Group.
Group’s business performance.
and financial targets. The Group has identified a series of projects and
initiatives and has also dedicated considerable investment funds for their
Further information is available in the chapter
Other strategic priorities
implementation. With the projects, all major running change efforts are
Acquisition of Komercijalna banka a.d. Beograd.
channelled into one overall strategic transformation program.
The backbone of the strategy is strengthening customer-centricity
Digitalization
by establishing customer-based market management, improving the
Due to the positive effects from working remotely during the pandemic, the
Bank will continue the work-from-home initiative in the future, thus offering
more flexibility to its workforce and achieving cost benefits at the same time.
understanding of the clients, reimagining digital client journeys, and
Highly correlated with the COVID-19 pandemic, the Group continues to
Following the lifting of EC State Aid constraints, the Group is now fully
accelerating innovation to provide lifestyle and value chain services to lock
implement comprehensive and substantial strategic efforts toward digital
engaged in re-establishing some of the key financial services that were subject
relationships.
transformation. The new circumstances related to the pandemic and the
to restrictions (leasing, factoring, etc.).
The transformation program also focuses some efforts into increased
channels by our customers. The Group was prepared for such a market trend,
The Group is also putting more efforts into cross-border loan activity.
operational efficiency, cost management and the improved utilisation of the
since it was already the leading provider and innovator in its core markets
The Group’s knowledge of the region and its presence are opening new
economic uncertainty continue to affect the growth and acceptance of digital
Group’s capital. Simultaneously, overall operational capabilities are being
before the outbreak.
possibilities.
enhanced by improving human capital, optimising IT, digitalizing internal
processes, and leveraging information capital. To drive transformation, a new
At the same time, the Group is striving to simplify and automate processes in
change management platform was set up.
COVID-19 response
order to minimise costs and uses digitalization as the main tool. The focus on
digitalization is to enable quicker and better customer service, a higher level
of internal processes efficiency, and consequently additional cost savings.
COVID-19 pandemic resurfaced in the second part of 2020, on an even
The Group will continue to invest substantially in IT infrastructure and its
larger scale than during the first wave in H1. This reignited economic
capabilities. The focus will be on improving the speed IT can deliver results
uncertainty across Europe. However, the Group entered the crisis well
by adopting agile methodology principles, the provision and implementation
capitalised and prepared and has managed to exhibit profit resilience
of the best online experience for customers in the SEE, and how to enhance
in 2020 results.
capabilities for processing data, modelling, and the relevance of services to
The Bank responded successfully to the COVID-19 pandemic, maintaining a
concern for the health of our employees and customers as a top priority.
Sustainable development vision
clients.
Customers have been offered an even wider range of 24/7 accessible digital
The Group has an important social responsibility mission, which is to
solutions, while also providing uninterrupted branch operations and cash
contribute to a higher quality of life for all inhabitants in the environment
services. The Bank was continuously supporting its customers and their vital
where it operates. The Bank recognises its responsibility toward clients, its
businesses and households by offering them moratoria and liquidity lines
employees, the environment, and society as a whole.
Further information is available in the
NLB Group Sustainability Report 2020.
where needed.
Acquisition of Komercijalna Banka, Beograd
Sustainability became a Group-wide initiative. In 2020, we developed the
basis for the intensive integration of ESG factors into the Group’s business
model. Moreover, NLB became the first bank from Slovenia to commit to the
After receiving all relevant regulatory approvals, at the end of December
UN Principles for Responsible Banking. By meeting stakeholder needs and
2020, the Bank successfully completed the formal process of acquiring
expectations and driving business value through sustainability, the Bank will
Komercijalna Banka, Beograd. This represents an important step toward
reinforce its efforts towards delivering the 2025 strategy.
27
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Risk Factors
and Outlook
Risk Factors
at the end of March 2020, a drop in market yields resulted in positive
Outlook
valuation effects. Respectively, the related investment strategy of the
Group adapts to the expected market trends in accordance with the set
The indicated outlook constitutes forward-looking statements which are
risk appetite. The liquidity position of the Group is expected to remain
subject to a number of risk factors and are not guarantees of future financial
very solid; the pandemic did not result in any material liquidity outflows.
performance.
In this regard, the Group closely follows the macroeconomic indicators
The Group is pursuing a range of strategic activities to enhance its business
relevant to its operations:
• GDP trends and forecasts
Risk factors affecting the business outlook are (among others): the economies’
• Economic sentiment
sensitivity to a potential slowdown in the Euro area or globally, widening
• Unemployment rate
credit spreads, potential liquidity outflows, worsened interest rate outlook,
• Consumer confidence
regulatory and tax measures impacting the banks, and other geopolitical
• Construction sentiment
uncertainties.
• Deposit stability and growth of loans in the banking sector
• Credit spreads and related future forecasts
The economic momentum in the region where the Group operates has
• Interest rate development and related future forecasts
worsened due to the COVID-19 pandemic that started at the end of Q1
• FX rates
performance. The economic environment has visibly changed, especially in
the eurozone. Interest rate outlook is uncertain given the possible changes of
the ECB deposit rates. The main ambition is that despite deteriorating market
conditions, the Bank is committed to delivering sound financial performance.
The measures and potentials outlined in the above strategy are reflected
in the Group’s outlook for the 2021 to 2023 period:
2021
2023
2020. The governments in the region implemented different measures to
• Other relevant market indicators
Regular income
> EUR 600 million
> EUR 700 million
mitigate its adverse negative impacts. In 2021, the Group region is expected
to return to growth on the back of revival in private and investment
The Group developed a set of new macroeconomic scenarios, based on the
consumption assuming that consumer and investment confidence are restored
ECB baseline, of mild and severe scenarios for the initial period from 2020 to
Costs
~ EUR 430 million(i)
< EUR 400 million
when the pandemic is successfully curbed.
2022. For the two-year period from 2023 to 2024, the normal pre-COVID-19
methodology and IMF projections were used. These scenarios, which are
Based on the measures taken by the governments in Slovenia and other
based on the expected U-crisis (severe deterioration of macroeconomic
ROE a.t.
High single digit
> 10% (RORAC(ii) > 12%)
countries, the Group is granting an option of moratoriums on the payment
indicators in 2020 and moderate positive growth in the following years), are
of obligations to all eligible borrowers due to COVID-19, which is not treated
included in the calculation of expected credit losses in accordance with IFRS 9.
as a trigger for a significant increase in the credit risk. In accordance with
EBA guidelines, all the clients requiring the moratorium are closely monitored
The Group established a comprehensive internal stress-testing framework
as their financial situation and identification of credit deterioration will
and early warning systems in various risk areas with built-in risk factors
lead to a downgrade and will impact the IFRS 9 staging. Those clients will
relevant to the Group’s business model. The stress-testing framework
Loan
growth
Mid-single digit
High-single digit
growth rate
CAGR (2021-2023)
not automatically fall into the forbearance category. The Group regularly
is integrated into Risk Appetite, ICAAP, ILAAP, and Recovery Plan
Cost of risk
70–90 bps
40–60 bps
assesses the credit quality of the exposures benefiting from these measures and
to determine how severe and unexpected changes in the business and
identifies any situation in which payment is unlikely. During the year 2020, the
macro environment might affect the Group’s capital adequacy or liquidity
Group additionally reviewed IFRS 9 provisioning by testing a set of relevant
position. Both the stress-testing framework and recovery plan indicators
Dividend payout
EUR 92.2 million
> EUR 300 million(iii)
macroeconomic scenarios to adequately reflect the current circumstances and
support proactive management of the Group’s overall risk profile in these
the related impacts in the future.
circumstances, including capital and liquidity positions from a forward-
looking perspective.
The economic slowdown had some negative impacts on the existing loan
portfolio quality, namely as an increase of Stage 2 and Stage 3 exposures,and
Risk Management actions that might be used by the Group are determined
the related cost of risk. Furthermore, it also impacted new loan generation.
by various internal policies and applied when necessary. Moreover, the
In the initial stage of outbreak in Q1 2020, credit spread expansion arising
selection and application of mitigation measures follows a three-layer
from the Group’s bond portfolio kept for liquidity purposes negatively
approach, considering the feasibility analysis of the measure, its impact on
influenced on the valuation. Following the intervention of the ECB
the Group’s business model, and the strength of available measure.
(i) Initial increase in cost base in 2021; projected costs include restructuring charges.
(ii) RORAC calculated as Result after tax excl. Tier 2 bonds expenses divided by average RWA at 15.25% capital requirement.
(iii) Cumulative in the period 2021-2023.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Outlook 2021
The commitment to cost containment remains strong and the Group will
Due to the ECB recommendations on dividend distributions during the
continue to pursue a strong cost agenda addressing both labour and non-labour
COVID-19 pandemic for European banks, and also the BoS restriction on
The global economy is expected to rebound in 2021. However, economies are
cost elements. Nevertheless, costs are expected to moderately increase in 2021,
dividend distributions applicable for Slovenian banks with the aim to lower
likely to continue to be faced with the alternating relaxations and restrictions
given pressure on labour cost inflation throughout the region and continued
the impact and consequences of the COVID-19 pandemic, the Bank did not
until the broad vaccine rollout enables a sustainable easing of containment
investment activities into information technology upgrades, amid the growing
pay out any dividends in 2020.
measures. According to the Bank’s estimation, the Eurozone economy is seen
relevance of digital banking and, last but not least, integration cost associated
expanding 4.0%, while GDP in Slovenia could grow by around 4.5% and in
with the acquisition of Komercijalna Banka, Beograd.
Pursuant to the ECB recommendation of 15 December 2020 the dividend
the SEE where the Group operates by around 4.8% in 2021. The rebound
distribution in 2021 should remain prudent and below 15% of the cumulated
should be backed by fiscal policies at national and EU levels, accommodative
After a few years of a negative cost of risk, the NPL stopped its multi-year
profit for the year 2019 and 2020 and not higher than a 20 b.p. CET1 ratio
monetary policy, and the gradual reopening of economies. The main driver
declining trend in the Group. Similar to last year, the cost of risk in 2021
for the year 2020 on consolidated basis, whichever is lower, and for which the
of the growth should be the revival in consumer and investment spending.
should remain within the set outlook at least in the regular course of business,
distribution is subject to prior ECB approval. The prudent level of distribution
The return to growth of the economies of the Group’s region should be
since one-off effects are difficult to predict. The main circumstances influencing
for NLB on consolidated level amounts to approximately EUR 25 million, and
underpinned by revival in consumer and capital spending as well as the
cost of risk shall be the length and severity of disruptions of COVID-19 on
JST does not object to such a distribution plan. According to the BoS decision
gradual easing of COVID-19 restrictions across the globe that boosts external
corporate operations and consumer spending, and the impact of off-setting
of April 2020 on macroprudential restriction on profit distribution, banks in
demand and releases travel restrictions. Nevertheless, lingering uncertainty
measures by governments.
regarding the course of the pandemic and the vaccine rollout cloud the
Slovenia are restricted to dividend payouts until April 2021. Based on the new
BoS decision on macroprudential restriction on profit distribution of February
outlook, in general. The pace of the recovery in the EU trading partners is yet
Further uncertainties and the related economic slowdown might have an
2021, the Bank is allowed to distribute dividends only in the case of a positive
another important factor expected to weigh on the recovery of the Group’s
additional negative impact on the existing loan portfolio quality, namely as
cumulative profit achieved in Q1 2021, whereas the amount of distribution
region.
a potential increase of Stage 2 and Stage 3 exposures. However, due to the
may not exceed 15% of the bank’s cumulative profit for years 2019 and 2020
quite stable quality of the portfolio in the year 2020, and other precautionary
on an individual basis or 0.2% of the Bank’ CET1 ratio on an individual
During the COVID-19 pandemic, the Group has taken the necessary
measures to minimise potential future losses, including paying special attention
basis as at the end of 2020, whereas distribution is also subject to prior BoS
measures to protect its customers and employees by ensuring the relevant
to continuous provision of services to clients and their monitoring, this impact
notification. In consequence this would mean the split of the envisaged
safety conditions and making sure services offered by the Group are provided
should not be excessive.
without disruptions. As the COVID-19 situation continues, it is challenging to
approved dividend portion as per ECB recommendation into two tranches,
the second one being paid upon expiry of the BoS decision and taking into
predict the full extent and duration of its business and economic implications.
From a liquidity perspective, the Group did not register any material liquidity
account applicable regulation. In addition to the currently allowed distribution
To adjust to such circumstances, the Group is aiming to further support its
outflows, on the contrary, deposits at the Group level are still increasing (in the
plan, the Bank envisages, subject to regulatory requirements, additional
clients, also by constant development of its digital channels and adjusted scope
Bank and in subsidiary banks). The liquidity position of the Group is expected
incremental dividends in 2021 to reach a cumulative payout ratio of 70% of
of services offered to our clients.
to remain solid even if a highly unfavourable liquidity scenario materialises, as
the 2020 Group result (without considering the impact of negative goodwill)
the Group holds sufficient liquidity reserves in the form of placements at the
totaling EUR 92.2 million. The Bank in the period 2021-2023 envisages the
Following stagnation in 2020, and in line with the economic rebound,
ECB, prime debt securities, and money market placements. Significant deposit
cumulative amount of dividends payout in excess of EUR 300 million.
moderate loan growth in Retail Banking in Slovenia is expected in 2021, with
inflows are putting an additional strain on profitability.
an emphasis on mortgage lending and a slow recovery in consumer lending.
The distributable profit of the Bank as at 31 December 2020 amounts to
Corporate and Investment Banking in Slovenia is also expected to grow
The capital position represents a strong base to cover all regulatory
EUR 341,992,219.43, which consists of net profit for the year 2020 in the
with the predominance of cross-border lending. Growth in Strategic Foreign
capital requirements, including capital buffers and other currently known
amount of EUR 113,952,339.70 and retained earnings from previous years in
Markets will remain robust and will greatly improve with the acquisition
requirements, as well as the Pillar 2 Guidance, also in the aggravated
the amount of EUR 228,039,879.73.
of Komercijalna Banka, Beograd. The customer deposit base will remain
circumstances during the COVID-19 pandemic. Also, in 2021 the Group
high. Revenues are expected to improve, with fee business growth returning
will continue with the activities for further strengthening the capital position,
Once the ECB and BoS restrictions cease to apply, the Bank would resume
to pre-COVID-19 levels. However, net interest income will continue to be
predominantly by measures to reduce RWAs.
with regular dividend payouts in line with its capacity and regulatory
under pressure due to shrinking margins in all markets and high balance
of low-yield liquidity sources. The Group continues to strive for increasing
Dividend policy
margins over time by stimulating loan growth (especially retail) and pursuing
requirements.
new opportunities. In addition, the Bank as at 1 April, 2021 started charging
The Bank’s general intention with regards to the dividend policy is to distribute
retail deposits with balances exceeding EUR 250 thousand; consequently, it
dividends in excess of the Group’s target TCR, which currently amounts
is expected that certain portion of retail deposits will be transferred into asset
to 15.75%. The Bank’s dividend policy envisages a yearly distribution of
management and insurance products.
dividends in the approximate amount of 70% of the Group’s result, while
fulfilling all regulatory requirements, including the Pillar 2 Guidance.
29
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Sustainability
In 2020, the Group embarked on a path of more intensive
integration of sustainability into banking operations. If
until this year it was possible to detect the activities of
banks in the Slovenian financial sector in the direction
of more ecologically and socially acceptable operations,
the COVID-19 pandemic strengthened banking agendas
related to environmental and social risk management,
and thus more comprehensive implementation of the ESG
factors. The Group’s social role is stipulated in its Social and
Environmental Policy,3 which has paved the way for more
than a decade’s work on sustainability. However, the Bank’s
ambition is to increasingly focus on sustainability integration
and translate it into real value-added. The transition to
NLB Group records
sustainable financial
performance and
actively contributes to
a more balanced and
inclusive economic
and social system.
sustainable banking requires the adaptation of most processes
in the Group, as well as changes in the banking culture.
In Sept. NLB Group became
a signatory to the UN PRB.
Contribution to
the Society
Sustainable
Operations
Sustainable
Finance
Key impact areas:
Environmental
Climate Mitigation & Adaptation
Biodiversity
Resource Efficiency & Circular Economy
Social
Gender Equality
Human Rights
Financial Inclusion
Decent Employment
Internal Change
Strategy Alignment
Impact and Targets
Clients and Customers
Stakeholders
Governance and Culture
Transparency and Accountability
Implementation of sustainability into the Group business model
Throughout the year, the Group systematically followed the emerging EU
One of the major CSR projects in the Bank was to provide help to young families
regulations in the field of sustainability, and at the same time regularly
on their road to their first home with professional advice and material incentives
With the adoption of the Group’s Sustainability programme at the end of
monitored recommendations and guidelines from leading financial institutions
given to hundreds of borrowers. One hundred young families were randomly
2020, the Bank has moved from the raising awareness phase to the phase of
and authorities, such as the ECB and the EBA. Plans, how to integrate the new
chosen and helped to take out a housing loan, and repaid them three monthly
actively implementing sustainability elements into the business model. The
regulation into the Group’s operations, are prepared to meet the expectations
instalments in a total amount of a maximum of EUR 1,000 for each family. At the
goal of this organisation-wide initiative is to ensure sustainable financial
of key stakeholders.
end of the year, the Bank also distributed EUR 140,000 to young borrowers below
performance of the Bank by considering social and environmental risks and
the age of 40.
opportunities in its operations, and to actively contribute to a more balanced
Corporate social responsibility
and inclusive economic and social system.
Despite a drastic decline in public life, the Group maintained most of the agreed
The Group’s CSR has been continuously upgraded with projects that follow
sponsorships and donor partnerships in the field of culture and sports. By
The Bank in recent years signed Framework Agreements with EBRD and
the UN Sustainable Development Goals (UN SDG). The Group’s first such
supporting virtual festivals and events, the Group helped affected artists who were
in 2020 Contract of Guarantees with MIGA. Based on this, the Bank and/
regional project was launched in spring 2020. #HelpFrame project intensively
left without income almost overnight. In the field of sports, the Bank remained
or Group subsidiaries are obliged to develop ESMS and comply with certain
addresses the Bank’s environmental and social role in all markets of the
among the main supporters of all sports federations and
E&S requirements. In 2020, considerable progress was made in the area of
Group, as the goal is to establish a regional sustainability platform. The
clubs, with which we have been cooperating for many years.
establishing a basic mechanism for E&S screening. Also, the ESMS Officers
project provides advertising space to selected local entrepreneurs, farmers, as
were appointed in the Group banking subsidiaries. Further actions to
well as micro and small companies, thus helping their business to recover from
strengthen ESMS are in progress.
the COVID-19 pandemic.
On 4 September, the Bank became a signatory to the UN Principles for
Most of the Bank’s CSR financial budget was used to mitigate the
Responsible Banking (and UNEP FI member), which is a unique framework for
consequences of the COVID-19 pandemic. Since March 2020, medical teams
ensuring that signatory banks’ strategy and practice align with the vision society
have been working around the clock to save the lives of patients infected with
has set out for its future in the Sustainable Development Goals and the Paris
the virus, which has spread rapidly to all regions where the Group operates
Climate Agreement. More than 200 banks, which represent around a third of
and all of the Group banks participated with financing or procurement of
More information on the corporate social responsibility and the
implementation of sustainability into the Group business model
(together with information on the GRI standards) is available in the
NLB Group Sustainability Report 2020.
the global banking industry have joined, leading the way towards a future in
medical supplies.
which the banking community makes a positive contribution to people and the
planet that society expects.
3. Published on www.nlb.si.
30
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Helping hand in
crisis means a lot
Emire Duraku
B.K.M Agro Krusha, Kosovo
The company Agro Krusha comes from the agricultural
village Krusha e Madhe in the municipality of Rahovec,
Kosovo. It is led by Emire Duraku, an entrepreneur who
together with her family cultivated about 15 hectares
planted with vegetables for the production of ajvar and
pickles. When COVID-19 hit the country, the company
suffered a major fallback due to decrease in demand
even though the company had reserves from good
performance in the past. Knowing the importance
of advertising Emire decided to join #HelpFrame
project presented to her by her banking advisor and
has received many offers for cooperation since.
31
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Overview of
Financial Performance
ROE a.t.
7.4%
14.4%
11.8%
11.7%
8.1%(i)
The Group achieved a profit in the amount of EUR 269.7 million, 39% more than the year before
110.0
225.1
203.6
193.6
128.4(i)
141.3
(2019: EUR 193.6 million). The strong result was affected by the acquisition of Komercijalna Banka,
Beograd,4 with positive impact of negative goodwill in the amount of EUR 137.9 million. Without
this acquisition, the profit of the Group would amount to EUR 141.3 million, a 27% lower YoY,
2016
2017
2018
2019
2020
(i) Acquisition of Komercijalna Banka, Beograd’s contribution to the result after tax; the acquisition effects are excluded from ROE calculation.
affected mostly by additional impairments and provisions related to the COVID-19 outbreak.
Figure 6: Profit after tax of NLB Group (in EUR million) / ROE after tax (in %)
The Group’s result is based on the following key drivers:
• Additional net impairments and provisions were established in the amount
of EUR 71.4 million, out of which EUR 18.4 million due to changed
• The acquisition of Komercijalna Banka, Beograd with a positive impact
macroeconomic parameters, that incorporate estimated impacts of the
of negative goodwill in the amount of EUR 137.9 million and a negative
COVID-19 outbreak and EUR 13.4 million for expected credit losses on
impact of the expected credit losses on the performing portfolio for
Komercijalna Banka group5 in the amount of EUR 13.4 million;
the performing portfolio for Komercijalna Banka group;
• Continued loan growth, especially to individuals, despite the COVID-19
• Lower net interest income YoY (EUR 18.9 million or 6%), mostly related
outbreak and the negative impact of macroprudential measures on the
to lower yields due to reinvestment of debt securities, higher volume of
consumer loans introduced in November 2019, causing an adverse effect on
cash and balances with the CB, the raised subordinated Tier 2 bonds, and
the new production of loans to individuals. An increase was recorded also
continued pressure on interest margins in the Bank and banking members
in the corporate loan book YoY exclusively as a result of COVID-19 impact
in SEE continues;
on ensuring liquidity to clients;
269.7 million
EUR
net profit including EUR 137.9
million negative goodwill from
acquisition of Komercijalna Banka,
Beograd, while net profit would be
141.3
million
EUR
without the effect of acquisition
of Komercijalna Banka, Beograd.
• Net fee and commission income on the same level YoY, influenced by
• A strong TCR of 16.6% while ROE a.t. dropped to 8.1%6 (2019: 11.7%);
the COVID-19 outbreak and its negative impact on card operations and
payment transactions, but was compensated by increased package fees,
• As a consequence of the COVID-19 outbreak the NPL credit portfolio
higher assets management and bancassurance fees, and achieved discounts
stock stopped its multi-year declining trend. Besides, changed treatment
on card operations;
of excluded interest and acquisition of Komercijalna Banka, Beograd
contributed additionally to its increase, while different workout measures
• Sale of NLB Vita with a positive effect of EUR 11.0 million and sale of
positively influenced the stock of NPL. Nevertheless, the gross NPL ratio
debt securities in the Bank with a realised non-recurring profit of EUR
(EBA def.) decreased from 4.6% to 4.5% YoY, while the NPE ratio (EBA
17.1 million;
def.) decreased by 0.4 p.p. YoY to 2.3%;
• Lower costs YoY due to lower employee costs and positive effects of cost
• Liquid assets portfolio amounted to EUR 9,751 million
management projects, which remain well contained through all cost
(50% of total assets).
categories and geographies;
4. More information is available in the chapter ‘Acquisition of Komercijalna banka a.d. Beograd’.
5. Komercijalna Banka, Beograd; Komercijalna Banka, Banja Luka; Komercijalna Banka, Podgorica; Kombank INvest, Beograd.
6. Komercijalna Banka group is excluded to ensure comparability with previous years.
32
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Income statement
Table 10: Income statement of NLB Group and NLB(i)
2020
2019
Change YoY Q4 2020 Q3 2020 Q2 2020 Q1 2020 Q4 2019
Change QoQ
NLB Group
in EUR million
Net interest income
299.6
318.5
-18.9
Net fee and commission income
170.3
170.3
Dividend income
0.1
0.2
Net income from financial
transactions
32.0
33.8
Net other income
2.6
-5.7
Net non-interest income
204.9
198.7
-0.1
-0.1
-1.9
8.3
6.2
-6%
0%
-47%
-6%
-
3%
75.1
45.1
0.0
2.0
-1.0
46.1
74.4
43.7
0.0
5.7
-0.5
48.9
72.7
39.0
0.1
20.5
3.9
63.5
77.4
42.4
0.0
3.8
0.2
79.7
43.5
0.0
5.8
0.8
46.4
50.1
Total net operating income
504.5
517.2
-12.7
-2%
121.2
123.3
136.2
123.8
129.8
Employee costs
-165.0
-171.2
Other general and
administrative expenses
-97.3
-102.8
Depreciation and amortisation
-31.7
-31.0
Total costs
-293.9
-305.0
6.2
5.6
-0.8
11.0
4%
5%
-2%
4%
-42.0
-40.2
-39.8
-42.9
-48.0
-27.6
-23.5
-22.5
-23.7
-32.3
-4.2
-18%
-8.0
-7.8
-7.9
-8.1
-7.7
-77.7
-71.4
-70.2
-74.6
-88.0
-0.2
-6.2
-2%
-9%
Result before impairments
and provisions
Impairments and provisions
for credit risk
210.5
212.2
-1.7
-1%
43.5
51.9
66.0
49.2
41.9
-8.4
-16%
-62.3
13.3
-75.6
-13.2
-16.3
-4.6
-28.2
-2.3
3.0
19%
o/w-KB
-13.4
-13.4
-13.4
Other impairments and provisions
-9.1
-14.3
5.2
37%
-7.9
-0.7
Impairments and provisions
-71.4
-1.0
-70.4
-
-21.1
-17.0
-0.3
-4.9
-0.2
-8.4
-28.3
-10.7
-13.4
-7.2
-4.1
-
-
-24%
-
-
Gains less losses from capital
investments in subsidiaries,
associates, and joint ventures
0.9
4.2
-3.3
-79%
0.0
0.5
0.2
0.2
0.0
-0.5
Negative goodwill
137.9
137.9
-
137.9
-137.9
Result before tax
277.9
215.4
62.5
29%
160.2
35.4
61.3
21.0
31.2
124.9
Income tax
Result of non-controlling interests
-5.2
3.0
-13.6
8.2
8.4
-5.2
62%
-63%
3.8
-1.1
Result after tax
269.7
193.6
76.1
39%
165.1
Result after tax w/o KB
141.3
193.6
-52.3
-27%
36.6
-3.4
1.0
31.0
31.0
-3.9
2.0
55.4
55.4
-1.6
1.2
18.3
18.3
2.2
2.0
31.3
31.3
(i) Data for 2019 are adjusted to the changed schemes as prescribed by the BoS (relocation of some items from net other income to other general
and administrative expenses). More details are available in note 2.3. of the Audited Financial Statements of NLB Group and NLB d.d.
0.6
1.5
0.0
1%
3%
-50%
-3.7
-65%
-0.5
-2.8
-2.2
-1.9
-99%
-6%
-2%
-5%
-
-
-
-
-
-
7.2
-2.1
134.1
5.6
18%
36.3
29.7
24.1
159.3
19.0
4.2 4.6
Restructuring
and Workout
89.0
81.4
Key/SME/Cross
Border Corporates
& Investment
Banking
178.8
NGW
137.9
42.0
41.2 42.4
34.0
49.8
30.8
23.5
16.2
Retail Banking
in Slovenia
Corporate and Investment
Banking in Slovenia
Strategic
Foreign Markets
Financial
Markets in Slovenia
1.2 4.2
7.7
0.2
-4.6
Non-Core Members
-11.5
Other
Net interest income
Net non-interest income
Result before tax
Figure 7: Segment results of NLB Group (in EUR million)
Strong result achieved in all Core segments of the Group
The Core segments achieved a result before tax of EUR 282.5 million.
Strategic Foreign Markets contributed the largest share to result before tax
in the amount of EUR 178.8 million due to acquisition of Komercijalna
Banka, Beograd and its positive effect of negative goodwill in the amount of
EUR 137.9 million. Corporate and Investment Banking in Slovenia recorded
a profit before tax in the amount of EUR 42.4 million, Retail Banking in
Slovenia EUR 42.0 million, and Financial Markets in Slovenia EUR 30.8
million. The Other segment recorded a loss before tax in the amount of EUR
11.5 million, mostly due to establishment of provisions for legal risk (EUR 3.8
million) and HR provisions (EUR 3.5 million).
Strategic Foreign Markets achieved the highest net interest income in the
amount of EUR 159.3 million, followed by Retail Banking in Slovenia and
Corporate and Investment Banking in Slovenia, with EUR 81.4 million and
EUR 34.0 million, respectively. Financial Markets in Slovenia contributed
EUR 23.5 million to the net interest income of the Group.
The net non-interest income was the highest in the segment Retail Banking
in Slovenia, EUR 89.0 million, followed by Strategic Foreign Markets and
Corporate and Investment Banking in Slovenia, EUR 49.8 million and EUR
41.2 million, respectively.
Non-core Members: Negative result due to continuing divestments
Total assets of Non-core Members decreased by EUR 38.3 million and the
segment realised a loss before tax of EUR 4.6 million, which is in line with the
restructuring plan.
33
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 2020
2019
Change YoY Q4 2020 Q3 2020 Q2 2020 Q1 2020 Q4 2019
Change QoQ
NLB
in EUR million
Result reflects solid revenues despite COVID-19
negative impact on business operations
Net interest income
138.9
158.1
-19.2
-12%
Net fee and commission income
104.5
104.0
0.5
0%
Dividend income
6.3
71.2
-65.0
-91%
Net income from financial
transactions
28.1
24.0
4.2
17%
Net other income
33.9
-2.6
36.6
-
Net non-interest income
172.8
196.5
-23.7
-12%
Total net operating income
311.7
354.7
-43.0
-12%
Employee costs
-102.6
-108.6
Other general and
administrative expenses
-60.0
-64.5
Depreciation and amortisation
-17.8
-18.0
6.0
4.5
0.2
Total costs
-180.5
-191.1
10.7
5%
7%
1%
6%
Result before impairments
and provisions
Impairments and provisions
for credit risk
Other impairments and provisions
Impairments and provisions
-9.0
-8.3
-17.4
17.1
-26.1
-
-2.8
14.2
-5.5
-193%
-31.6
-
Result before tax
113.9
177.7
-63.9
-36%
Income tax
0.1
-1.6
1.7
-
Result after tax
114.0
176.1
-62.2
-35%
34.5
27.3
5.5
3.0
1.5
37.4
72.0
33.6
26.9
0.7
3.6
0.8
31.9
65.5
33.6
24.2
0.0
18.3
30.0
72.5
106.1
37.2
26.1
0.0
3.2
1.6
31.0
68.1
39.1
25.9
0.0
2.6
1.4
29.9
69.1
1.0
0.5
4.8
3%
2%
-
-0.5
-14%
0.8
5.5
6.5
104%
17%
10%
-1%
-25.4
-25.1
-24.9
-27.1
-31.2
-0.3
-17.0
-14.4
-14.1
-14.5
-21.8
-2.7
-18%
-4.3
-4.4
-4.5
-4.7
-4.6
-46.8
-43.8
-43.5
-46.3
-57.6
0.0
-2.9
0%
-7%
8.5
-7.9
0.6
25.8
2.6
28.4
-2.8
0.1
-2.7
18.9
-1.2
17.7
-0.6
-14.2
2.2
11.3
-0.5
-1.1
61.5
-1.2
60.3
0.0
-14.2
7.6
-0.1
7.5
-6.2
-4.0
7.4
5.7
-8.0
3.3
6.8
3.9
-
-
-
36%
-
13.2
10.7
61%
131.2
163.5
-32.3
-20%
25.2
21.6
62.6
21.8
11.5
3.5
16%
(i) Data for 2019 are adjusted to the changed schemes as prescribed by the BoS (relocation of some items from net other income to other general
and administrative expenses). More details are available in note 2.3. of the Audited Financial Statements of NLB Group and NLB d.d.
-27%
YoY w/o KB
269.7
-9.4
193.6
-18.9
-0.1
6.3
11.0
-56.9
-3.3
6.6
141.3
3.0
137.9
2019
Net
interest
income
Net fee &
commission
income
Other net
non-interest
income
Total
costs
Impairments
and
provisions
Gains and
losses(i)
Income
tax
Result of
non-
controlling
interests
2020
w/o KB
Negative
goodwill
2020
KB
expected
credit
losses(ii)
(i) Gains less losses from capital investments in subsidiaries, associates, and joint ventures.
(ii) Effect partially also shown on Income tax and Non-controlling interests.
Figure 8: Profit after tax of NLB Group (in EUR million) – evolution YoY
The Group generated EUR 269.7 million of profit after tax, EUR 76.1
million or 39% more YoY and was based on the following key drivers and
YoY evolution:
• Lower net interest income, EUR 18.9 million YoY (6%), mostly related
to lower yields due to reinvestment of debt securities (realised non-
recurring profit of EUR 17.1 million in the Bank), a higher volume of cash
and balances with the CB, and the raised subordinated Tier 2 bonds. The
pressure on interest margins in the Bank and banking members in SEE
continues. The decline was partially compensated with loan volume growth
and growth in net interest income in some members (NLB Banka, Prishtina,
NLB Banka, Podgorica and NLB Banka, Beograd);
• Net fee and commission income on the same level YoY, influenced by
the COVID-19 outbreak and its negative impact on card operations and
payment transactions however, was compensated by increased package fees,
higher assets management and bancassurance fees, and achieved discounts
on card operations;
• Non-recurring net income from financial transactions was affected by the
One-off effects from the
sale of debt securities in the Bank (EUR 17.1 million); in 2019 by partial
repayment of large exposure measured at fair value through profit and loss
sale of NLB Vita
in the amount of EUR 5.1 million and revaluation of non-core equity stake
and
in the amount of EUR 6.3 million. Non-recurring net other income was
affected by the sale of NLB Vita with a positive effect of EUR 11.0 million
debt securities
in the Bank.
71.4 million
EUR
established impairments
and provisions mostly due
to COVID-19 outbreak.
in May 2020;
• Total costs were EUR 11.0 million lower (4%) YoY, mostly due to lower
employee costs and positive effects from cash management and paperless
projects, and cost of services (consulting). Costs remain well contained
through all cost categories and geographies;
• Negative goodwill in the amount of EUR 137.9 million due to acquisition
of Komercijalna Banka, Beograd at the end of the year;
• Additional net impairments and provisions were established in the amount
of EUR 71.4 million, out of which EUR 18.4 million due to changed
macroeconomic parameters, that incorporate estimated impacts of
COVID-19 outbreak and EUR 13.4 million for expected credit losses on
the performing portfolio for Komercijalna Banka group.
34
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
-35%
-42%
-41%
-35%
-32%
-82%
-37%
Net interest income
176.1
114.0
-6% YoY
318.5
299.6
32.9
19.2
17.1
10.1
9.0 5.9
19.5
13.3
7.6
1.4
4.1
2.6
364.8
355.2
NLB
NLB Banka,
Skopje
NLB Banka,
Banja Luka
NLB Banka
Sarajevo
NLB Banka,
Prishtina
NLB Banka,
Podgorica
NLB Banka,
Beograd
2019
2020
Figure 9: Profit after tax of NLB Group banks (on a stand-alone basis, in EUR million)
Despite the COVID-19 outbreak, all banks in the Group reported a profit.
Lower profit YoY was recorded in all the banks, mainly due to establishment
of credit impairments and provisions related to COVID-19 outbreak.
The result of the Bank decreased by 35% YoY to EUR 114.0 million
from EUR 176.1 million achieved in 2019. Banking subsidiaries refrained
from paying out dividends due to COVID-19 restrictions, and additional
impairments and provisions related to COVID-19 outbreak were formed
which materially lowered the final result. Sale of NLB Vita and debt
securities, as well as an efficiently managed cost base partially neutralised the
COVID-19 effects.
+4% QoQ
66.0
45.7
29.8
-9.5
51.9
50.9
3.4
-2.4
43.5
47.1
-1.2
-2.4
41.9
40.2
4.0
-2.4
49.2
49.8
1.7
-2.4
-6% QoQ
+1% QoQ
79.7
92.1
-12.4
74.4
88.6
-14.2
75.1
89.3
-14.2
Q4 2019
Q3 2020
Q4 2020
3.59%
2.48%
1.85%
3.43%
2.29%
1.65%
3.37%
2.19%
1.54%
3.35%
3.33%
2.14%
1.47%
2.11%
1.44%
1-12 2019
1-3 2020
1-6 2020
1-9 2020
1-12 2020
NLB
NLB Group
Strategic foreign banks
(i) Calculated on the basis of average interest bearing assets; without the effect of acquisition of
Komercijalna Banka, Beograd for NLB Group and Strategic foreign banks in the period 1-12 2020.
-46.3
2019
-55.6
2020
Interest income
Interest expenses
Figure 11: Net interest income of NLB Group (in EUR million)
Figure 13: Net interest margin(i) of NLB Group (in %)
318.5
299.6
-5.5
-0.8
-1.6
3.7
-0.6
-9.6
2.6
-6.8
-0.3
2019
Balance
with CB
Loans to
banks
Loans to
corporate
Loans to
individuals
Loans to
state
Securities
Deposits
from
customers
Refinancing
Other
2020
Figure 12: Effects on net interest income change (in EUR million) – evolution YoY
Net interest income of the Group accounted for 59% of the Group’s total net
Net interest margin in the Group decreased 0.37 p.p. YoY and amounted
revenues (2019: 62%), decreasing by 6% YoY to EUR 299.6 million. The decrease
to 2.11%. The interest margin for the Bank and the Group banking members
in interest income was mostly related to lower income from financial assets related
in the SEE region decreased YoY, totalling 1.44% and 3.33%, respectively.
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
to reinvestment of debt securities with lower yields, higher cash volumes and
A substantial YoY decrease in the interest margin was recorded due to:
Result before impairments and provisions w/o non-recurring income and regulatory costs
Non-recurring net non-interest income
Regulatory costs
balances with the CB (bearing negative interest in line with the expansionary
monetary policy), and continued pressure on interest rates achieved on the loan
• the sale of debt securities in H1 2020 (realised one-off effect in the amount
portfolio in the Bank and Group banking members in the SEE region. Higher
of EUR 17.1 million) and their reinvestment at lower yields, mostly in Q3
Figure 10: Result before impairments and provisions of NLB Group (in EUR million)
interest expenses are related to the subordinated Tier 2 bonds raised by the Bank
2020, in the Bank;
Profit before impairments and provisions of the Group totalled EUR 210.5
decreased.
million, EUR 1.7 million or 1% lower YoY. In Q2 2020, the result before
(EUR 7.3 million);
• higher cash volumes and balances with the CB bearing negative interest;
impairments and provisions was higher due to non-recurring net non-interest
Net interest income was negatively affected by lower yields on securities, excess
• continued pressure on interest rates in the Bank and banking members
to optimize the capital structure, while interest expenses for customer deposits were
• higher cost of funding due to subordinated Tier 2 bonds raised by the Bank
income (sale of NLB Vita and debt securities in the Bank), but partially offset
liquidity at CB, and higher volume of liabilities, especially subordinated debt. In
in SEE.
by regulatory costs in the Bank (EUR 1.7 million for SRF and EUR 5.5
contrast, there was a positive effect from the increase of interest income from loans
million for DGS).
to individuals (due to volume growth, despite lower interest rates), and the decrease
of expenses for deposits (due to lower interest rates, despite increased volume).
35
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Net non-interest income
+3% YoY
198.7
24.1
4.0
0.2
204.9
33.7
0.8
0.1
170.3
170.3
-8% QoQ
-6% QoQ
4.0
2.6
50.1
43.5
3.4
1.8
48.9
43.7
46.1
45.1
2.1
-1.1
Operating costs
-4% YoY
305.0
31.0
102.8
293.9
31.7
97.3
171.2
165.0
-12% QoQ
+9% QoQ
71.4
7.8
23.5
40.2
77.7
8.0
27.6
42.0
88.0
7.7
32.3
48.0
2019
2020
Q4 2019
Q3 2020
Q4 2020
2019
2020
Q4 2019
Q3 2020
Q4 2020
Net fee and commission income
Recurring other net non-interest income
Employee costs
Other general and administrative expenses
Depreciation and amortisation
Dividend income
Non-recurring other net non-interest income
(i) Please refer to note (i) under Table 10.
(i) Please refer to note (i) under Table 10.
Figure 14: Net non-interest income of NLB Group (in EUR million)(i)
Figure 15: Total costs of NLB Group (in EUR million)(i)
Net non-interest income reached EUR 204.9 million and increased by EUR
Total costs amounted to EUR 293.9 million and are thus by EUR 11.0 million
6.2 million or 3% YoY. The YoY dynamic was influenced by the following
or 4% lower YoY. The overall decrease was achieved due to lower employee
Establishment of net impairments and provisions
-8.4
-2.3
-10.7
-0.7
-16.3
-17.0
0.2
-7.9
-13.4
-21.1
e
s
a
e
l
e
R
t
n
e
m
h
s
i
l
b
a
t
s
E
13.3
-14.3
-1.0
-9.1
-13.4
-48.9
-71.4
2019
2020
Q4 2019
Q3 2020
Q4 2020
Impairments and provisions for credit risk
KB expected credit losses
Other impairments and provisions
factors:
costs (lower number of branches and employees, mainly in the Bank), positive
Figure 16: NLB Group impairments and provisions (in EUR million)
effects from cash management and paperless projects, and the lower cost of
• Net fee and commission income on the same level YoY. COVID-19
services (consulting). Conversely, the Group recorded higher IT costs, costs of
The Group established EUR 71.4 million of net impairments and provisions,
outbreak had negative impact mostly on card operations and payment
material (mostly due to COVID-19 protection material), and supervisory costs
out of which EUR 18.4 million due to changed macroeconomic parameters,
transactions, but was compensated by increased package fees, higher assets
in the Bank.
management and bancassurance fees, and achieved discounts on card
that incorporate estimated impacts of COVID-19 outbreak. In addition,
expected credit losses on the performing portfolio for Komercijalna Banka
operations;
CIR stood at 58.3%, a 0.7 p.p. decrease YoY.
group in the amount of EUR 13.4 million were created.
• A decrease in the last quarter mainly related to the modification losses
caused by changes of contractual cash flows for loans subject to COVID-19
moratoria in a total amount of EUR 3.6 million (o/w EUR 2.1 million in
NLB Banka, Skopje and EUR 1.1 million in NLB Banka, Beograd);
• Net non-interest income was positively impacted by non-recurring income.
Non-recurring net income from financial transaction was affected by the
sale of debt securities in the Bank (EUR 17.1 million) and non-recurring net
other income by the sale of NLB Vita with a positive effect of EUR 11.0
million in May 2020;
• In 2019, non-recurring net income was affected by partial repayment of a
larger exposure measured at fair value through profit and loss in the amount
of EUR 5.1 million and revaluation of a non-core equity stake in the
amount of EUR 6.3 million.
The Group’s cost of risk was positive (62 bps7), as it was in all Group bank
members as well. This can mostly be attributed to established provisions
related to the COVID-19 outbreak, although partially neutralised with the
successful resolution of business cases in restructuring and workout (net
release of approximately EUR 18 million in the Bank).
Other impairments and provisions were established in the amount of EUR
9.1 million, of which there were provisions for legal disputes (EUR 4.2
million in the Bank and EUR 1.3 million in NLB Banka, Podgorica) and HR
provisions (EUR 3.5 million in the Bank).
7. Komercijalna Banka group is excluded from calculation to ensure comparability with
previous years (excluded expected credit losses on the performing portfolio for Komercijalna
Banka group and loans to customers acquired from Komercijalna Banka group).
36
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Statement of financial position
Table 11: Statement of financial position of NLB Group and NLB
NLB Group
in EUR million
NLB
in EUR million
31 Dec
2020
31 Dec
2019
Change YoY
31 Dec
2020
30 Sep
2020
30 Jun
2020
31 Mar
2020
31 Dec
2019
Change QoQ
31 Dec
2020
31 Dec
2019
Change YoY
31 Dec
2020
30 Sep
2020
30 Jun
2020
31 Mar
2020
31 Dec
2019
Change QoQ
ASSETS
Cash, cash balances at
central banks, and other
demand deposits at banks
3,961.8
2,101.3
1,860.5
89%
3,961.8
3,010.9
3,084.6
2,095.4
2,101.3
950.9
32%
Loans to banks
197.0
93.4
103.6
111%
197.0
112.5
94.9
93.6
93.4
84.5
Net loans to customers
9,644.9
7,604.7
2,040.3
27%
9,644.9
7,749.0
7,686.7
7,759.8
7,604.7
1,895.9
Gross loans to customers
10,033.3
7,938.3
2,095.0
26% 10,033.3
8,111.1
8,048.9
8,125.6
7,938.3
1,922.2
- Corporate
- Individuals
- State
Impairments and valuation
of loans to customers
4,631.7
3,646.3
985.5
27%
4,631.7
3,702.4
3,751.7
3,823.6
3,646.3
929.3
5,027.6
4,013.5
1,014.1
25%
5,027.6
4,119.4
4,002.6
4,016.1
4,013.5
908.2
374.0
278.6
95.5
34%
374.0
289.3
294.7
286.0
278.6
84.7
ASSETS
Cash, cash balances at
central banks, and other
demand deposits at banks
2,261.5
1,292.2
969.3
75%
2,261.5
2,179.3
2,239.9
1,355.9
1,292.2
82.2
4%
Loans to banks
158.3
144.4
14.0
10%
158.3
187.8
214.2
160.3
144.4
-29.5
-16%
Net loans to customers
4,595.1
4,589.2
Gross loans to customers
4,753.1
4,718.0
5.9
35.0
14.0
35.2
0%
4,595.1
4,554.0
4,526.2
4,682.7
4,589.2
1%
4,753.1
4,697.5
4,671.4
4,834.1
4,718.0
1%
2,168.5
2,143.7
2,178.3
2,303.4
2,154.5
1%
2,411.9
2,381.0
2,317.6
2,354.2
2,376.8
2,168.5
2,154.5
2,411.9
2,376.8
172.6
186.8
-14.2
-8%
172.6
172.8
175.5
176.4
186.8
41.1
55.6
24.8
31.0
-0.2
1%
1%
1%
1%
0%
- Corporate
- Individuals
- State
Impairments and valuation
of loans to customers
-388.4
-333.6
-54.8
-16%
-388.4
-362.1
-362.2
-365.8
-333.6
-26.3
-7%
-158.0
-128.9
-29.1
-23%
-158.0
-143.5
-145.3
-151.4
-128.9
-14.5
-10%
Financial assets
5,119.5
3,829.7
1,289.8
34%
5,119.5
3,783.8
3,504.8
3,711.2
3,829.7
1,335.8
35%
Financial assets
3,017.2
3,168.6
-151.4
-5%
3,017.2
3,123.4
2,847.6
3,053.2
3,168.6
-106.2
- Trading book
84.9
24.0
60.8
-
84.9
16.8
22.6
25.6
24.0
68.1
-
- Trading book
18.8
24.1
-5.3
-22%
18.8
17.0
22.7
25.6
24.1
1.9
- Non-trading book
5,034.7
3,805.7
1,229.0
32%
5,034.7
3,767.0
3,482.2
3,685.6
3,805.7
1,267.7
34%
- Non-trading book
2,998.4
3,144.5
-146.1
-5%
2,998.4
3,106.5
2,824.9
3,027.6
3,144.5
-108.1
-3%
11%
-3%
Investments in subsidiaries,
associates, and joint ventures
Property and equipment,
investment property
Intangible assets
Other assets
8.0
7.5
0.5
7%
8.0
7.7
7.9
7.7
7.5
0.3
3%
304.0
247.9
56.0
23%
304.0
240.0
243.6
245.4
247.9
63.9
27%
61.7
39.5
268.9
250.0
22.1
19.0
56%
61.7
37.5
37.6
37.9
39.5
8%
268.9
204.2
231.7
337.2
250.0
24.2
64.7
Investments in subsidiaries,
associates, and joint ventures
Property and equipment,
investment property
Intangible assets
Other assets
750.7
353.2
397.5
113%
750.7
356.3
356.3
353.2
353.2
394.5
111%
100.0
99.2
28.1
26.0
0.8
2.1
1%
8%
100.0
95.6
97.5
98.5
99.2
28.1
23.7
24.2
24.4
26.0
4.4
4.4
115.6
128.8
-13.2
-10%
115.6
118.7
142.8
217.6
128.8
-3.1
TOTAL ASSETS
19,565.9
14,174.1
5,391.8
38% 19,565.9
15,145.7
14,891.9
14,288.3
14,174.1
4,420.1
LIABILITIES
Deposits from customers
16,397.2
11,612.3
4,784.9
41% 16,397.2
12,408.8
12,190.8
11,652.9
11,612.3
3,988.4
3,949.1
2,772.0
1,177.2
42%
3,949.1
2,915.0
2,781.2
2,641.7
2,772.0
1,034.1
12,023.5
8,582.9
3,440.6
40% 12,023.5
9,197.2
9,146.9
8,728.6
8,582.9
2,826.3
424.5
257.4
167.1
65%
424.5
296.5
262.7
282.5
257.4
128.0
72.6
42.8
29.8
70%
72.6
49.7
54.3
63.1
42.8
23.0
46%
Subordinated liabilities
288.3
210.6
249.8
234.8
434.9
342.6
14.9
92.3
77.8
6%
249.8
218.6
220.9
232.5
234.8
27%
434.9
359.0
360.1
328.4
342.6
37%
288.3
290.0
287.4
286.6
210.6
31.2
76.0
-1.7
Equity
1,952.8
1,685.9
266.9
16%
1,952.8
1,770.8
1,730.6
1,678.9
1,685.9
182.0
Non-controlling interests
170.3
45.0
125.2
-
170.3
48.9
47.7
45.9
45.0
121.3
- Corporate
- Individuals
- State
Deposits form banks
and central banks
Borrowings
Other liabilities
TOTAL ASSETS
11,026.6
9,801.6
1,225.0
12% 11,026.6
10,638.8
10,448.5
9,945.9
9,801.6
387.8
LIABILITIES
Deposits from customers
8,850.8
7,760.7
1,090.0
14%
8,850.8
8,405.6
8,266.3
7,834.7
7,760.7
445.2
5%
- Corporate
- Individuals
- State
Deposits form banks
and central banks
Borrowings
Other liabilities
1,916.6
1,674.9
241.7
14%
1,916.6
1,750.0
1,640.7
1,576.0
1,674.9
166.6
10%
6,812.4
5,985.0
827.4
14%
6,812.4
6,529.6
6,516.5
6,146.1
5,985.0
282.7
121.8
100.9
20.9
21%
121.8
125.9
109.2
112.7
100.9
-4.1
4%
-3%
41.6
89.8
-48.2
-54%
41.6
110.6
89.5
102.3
89.8
-69.0
-62%
143.5
164.1
-20.6
-13%
143.5
151.6
152.7
163.6
164.1
-8.1
251.4
243.1
8.3
3%
251.4
266.5
263.5
239.8
243.1
-15.1
Subordinated liabilities
288.3
210.6
77.8
37%
288.3
290.0
287.4
286.6
210.6
Equity
1,451.0
1,333.2
117.8
9%
1,451.0
1,414.4
1,389.2
1,318.9
1,333.2
-1.7
36.5
TOTAL LIABILITIES AND EQUITY
11,026.6
9,801.6
1,225.0
12% 11,026.6
10,638.8
10,448.5
9,945.9
9,801.6
387.8
75%
24%
24%
25%
22%
29%
65%
32%
29%
32%
35%
31%
43%
14%
21%
-1%
10%
-
5%
19%
-3%
4%
-5%
-6%
-1%
3%
4%
TOTAL LIABILITIES AND EQUITY
19,565.9
14,174.1
5,391.8
38% 19,565.9
15,145.7
14,891.9
14,288.3
14,174.1
4,420.1
29%
37
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Table 12: Effects of Komercijalna Banka group acquisition on
selected balance sheet items of NLB Group
Assets
31 Dec 2020
consolidated
31 Dec 2020
w/o KB
31 Dec
2020 KB
contribution
31 Dec 2019
in EUR million
Change YoY
w/o KB
Loans to banks
197.0
150.1
46.9
93.4
56.7
61%
2%
3%
2%
4%
Net loans to customers
9,644.9
7,777.9
1,867.0
7,604.7
173.3
Gross loans to
customers
10,033.3
8,156.0
1,877.3
7,938.3
217.7
- Corporate
4,631.7
3,712.7
- Individuals
5,027.6
4,178.2
- State
374.0
265.1
919.0
849.4
108.9
3,646.3
66.4
4,013.5
164.7
278.6
-13.4
-5%
Impairments and
valuation of loans
to customers
-388.4
-378.0
-10.3
-333.6
-44.4
-13%
Financial assets
5,119.5
3,755.5
1,364.1
3,829.7
-74.2
- Trading book
84.9
18.5
66.4
24.0
-5.5
- Non-trading book
5,034.7
3,737.0
1,297.7
3,805.7
-68.7
Deposits from
customers
16,397.2
12,953.7
3,443.5
11,612.3
1,341.4
- Corporate
3,949.1
3,110.5
838.6
2,772.0
338.6
- Individuals
12,023.5
9,577.2
2,446.3
8,582.9
994.3
- State
424.5
265.9
158.6
257.4
8.5
-2%
-23%
-2%
12%
12%
12%
3%
51.8%
66.0%
25.4%
Slovenia
Serbia
4.5%
N. Macedonia
BiH
Kosovo
Montenegro
10.2%
8.1%
9.7%
7.3%
5.6%
4.5%
3.8%
2.9%
Other 0.2%
0.1%
31 Dec 2019
31 Dec 2020
+38% YoY
+11% YoY
w/o KB
19,565.9
642.6
18%
5,119.5
34%
9,644.9
27%
15,708.4
504.5
-7%
3,755.5
-2%
7,777.9
2%
4,158.8
89%
3,670.4(i)
67%
12,740.0
485.3
3,399.2
7,148.4
1,707.0
14,174.1
544.9
3,829.7
7,604.7
2,194.7
(i) Geographical analysis based on the location of NLB Group entities.
Figure 17: NLB Group total assets by location of NLB Group entities (in %)(i)
31 Dec 2018
31 Dec 2019
31 Dec 2020
31 Dec 2020
w/o KB
Cash equivalents, placements with banks and loans to banks
Net loans to customers
Financial Assets
Other Assets
51.8% of the total assets were related to Group members located in Slovenia
(i) Including cash for the purchase of Komercijalna Banka, Beograd.
(2019: 66.0%). The change of the structure is due to increased share of assets
Figure 18: Total assets of NLB Group (in EUR million) – structure
in Serbia (from 4.5% to 25.4%), due to acquisition of Komercijalna Banka,
Beograd.
+28% YoY
+3% YoY
w/o KB
Balance sheet volume of the Group increased by EUR 5,391.8 million
The Group recorded 26% growth in gross loans to customers to EUR
YoY totaling to EUR 19,565.9 million, with substantial increase related
10,033.3 million, of which EUR 1,877.3 million due to the Komercijalna
to acquisition of Komercijalna Banka, Beograd. Without its inclusion, the
Banka, Beograd acquisition. Despite the COVID-19 outbreak and the
balance sheet volume of the Group would also increase, mainly due to the
negative impact of macroprudential measures on consumer loans introduced
continued inflow of deposits from individuals (EUR 994.3 million YoY) and
in November 2019, this caused an adverse effect on the new production of
corporate (EUR 338.6 million) and higher subordinated debt (EUR 77.8
loans to individuals, the retail loan book without Komercijalna Banka group
million). Excess liquidity was deposited on the account with the CB, while the
loans would increase YoY (EUR 164.7 million or 4%), especially housing
net loans to customers would increase by EUR 173.3 million, predominantly
loans. The Group without the inclusion of Komercijalna Banka group, would
to individuals. Substantial deleveraging of banking book securities in H1
recorded a EUR 66.4 million or 2% increase of the corporate loan book YoY
7,019.6
1,843.5
2,243.4
7,559.6
1,987.3
2,410.2
9,673.7
1,988.2
0%
2,450.7
2%
5,234.8
66%
2020 (EUR 323.5 million) was already reinvested in Q3 (EUR 284.8 million),
exclusively as a result of the pandemic’s impact on ensuring liquidity (working
2,932.7
3,162.1
followed by modest deleverage in Q4 (EUR 30.0 million).
capital loans, revolving loans and overdraft facilities for daily liquidity) in Q1
and Q4 2020, while decreases in outstanding loans were recorded in Q2 and
31 Dec 2018
31 Dec 2019
31 Dec 2020
Q3.
7,796.4
1,988.2
0%
2,450.7
2%
3,357.4
6%
31 Dec 2020
w/o KB
Key business activities recorded an 28% increase of gross loans to customers
(i) Including Gross loans to Corporate and to State.
YoY to EUR 9,673.7 million, mostly in Strategic Foreign Markets due to
Figure 19: NLB Group gross loans to customers by Key business activities (in EUR million)
Key/SME/Cross Border Corporates(i)
Retail Banking in Slovenia
Strategic Foreign Markets
the Komercijalna Banka, Beograd acquisition. Without it, the Key business
activities would record 3% increase YoY, still mostly due to an increase in
Strategic Foreign Markets (EUR 195.3 million or 6%). Retail Banking in
Slovenia recorded an increase of EUR 40.5 million (2%), and the Key/SME/
Cross Border Corporates stayed on the same level, with a slight EUR 0.9
million increase.
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CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 NLB Group w/o KB banks
NLB Group after acquisition of KB banks
Liabilities
Institutions
299
3%
SME
2,045
State(ii)
3,290
Institutions
446
3%
24%
18%
24%
20%
SME
2,687
State(ii)
2,661
Retail
consumer
1,907
17%
EUR
11.1 billion
21%
EUR
13.7 billion
17%
Corporates
1,876
17%
Retail
consumer
2,300
20%
16%
Corporates
2,235
Retail mortgages
2,273
Retail mortgages
2,729
by segment(iv)
12,740.0
256.5 1,657.4
15.1
347.0
261.1
2,337.3
14,174.1
1,730.9
342.6
210.6
277.7
257.4
2,772.0
+38% YoY
+11% YoY
w/o KB
19,565.9
2,123.1
23%
65%
3,949.1
42%
434.9
288.3
322.4
424.5
12,023.5
40%
15,708.4
1,872.7
8%
3%
3,110.5
12%
345.1
288.3
248.5
265.9
NLB Group w/o KB banks
NLB Group after acquisition of KB banks
7,865.6
8,582.9
9,577.2
12%
Other(iii)
478
Serbia
660
4%6%
7%
Kosovo
736
Other(iii)
604
4%
Serbia
2,771
5%
10%
10%
EUR
11.1 billion
58%
Kosovo
745
Montenegro
656
20%
5%
5%
EUR
13.7 billion
Montenegro
518
N. Macedonia
1,156
BiH
1,100
47%
Slovenia
6,412
8%
10%
BiH
1,345
Slovenia
6,412
N. Macedonia
1,156
by geography
Floating
40%
Other 2%
BAM 5%
MKD 5%
RSD 8%
EUR
13.7 billion
EUR 80%
Currency
EUR
13.7 billion
Fixed
60%
Interest rate
(i) Loan portfolio also includes reserves at CBs and 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.
Figure 20: Loan portfolio(i) by segment, geography, currency, and rate type (in EUR million)
31 Dec 2018
31 Dec 2019
31 Dec 2020
31 Dec 2020
w/o KB
Total equity
Other liabilities
Suboridnated liabilities
Borrowings and Deposits from banks and centra banks
State deposits
Coroporate deposits
Deposits from individuals
Figure 21: Total liabilities of NLB Group – structure (in EUR million)
Total liabilities of the Group increased and amounted to EUR 17,442.8
million. The Group’s funding base is dominated by customer deposits
accounting for 84% in which sight deposits prevail (85%, compared to 81% as
at 2019 YE). The majority of customer deposits (73%) were from individuals.
54% of deposits were collected in Slovenia (67% at 2019 YE), 24% in Serbia
(substantial increase due to Komercijalna Banka, Beograd), and the rest in
other Group banking members in SEE.
8.2%
27.0%
91.8%
73.0%
Slovenia
International
Deposits from customers increased by 41% YoY, 12% without inclusion of
Term deposits
Sight deposits
deposits from Komercijalna Banka group. An increase without inclusion of
Komercijalna Banka group was recorded in deposits from individuals (EUR
994.3 million or 12%), corporate (EUR 338.6 million or 12%), and state
(EUR 8.5 million or 3%). The Komercijalna Banka group increased the
Figure 22: Deposits from customers by type
deposit base of NLB Group by EUR 3,443.5 million, of which EUR 2,446.3
68.3%
65.5%
million was from individuals.
58.8%
16,397.2
Wholesale funding activities in the Group are conducted with the aim of
achieving diversification, improving structural liquidity and capital position,
10,464.0
11,612.3
7,148.4
7,604.7
9,644.9
As at 31 December 2020, with acquisition of Komercijalna Banka, Beograd,
and fulfilling regulatory requirements. The Bank in February raised the
there were no major changes in the corporate and retail credit portfolio structure.
subordinated Tier 2 bonds in the amount of EUR 120.0 million to strengthen
2018
2019
2020
Credit portfolio remains well diversified, and there is no large concentration in any
and optimise the capital position. Two Group banking subsidiaries raised
specific industry or client segment. The share of retail portfolio in the whole credit
funds in a total amount of EUR 10 million.
portfolio is quite substantial, with the segment of mortgage loans still prevailing.
LTD
Deposits (in EUR million)
Net loans (in EUR million)
Figure 23: LTD ratio movement
The majority of the loan portfolio refers to euro currency, while the rest originates
The LTD ratio (net) was 58.8% at the Group level; a decrease of 6.7 p.p., of
from local currencies of the Group banking members. From interest rate type,
which the Komercijalna Banka group contributed 1.2 p.p. of LTD decrease.
more than 60% of the loan portfolio is linked to the fixed interest rate, and the rest
to floating rate (mostly to the Euribor reference rate).
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CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Capital and capital adequacy
Table 13: NLB Group Capital Requirements and buffers
2,065
297
1,768
1,453
1,496
45
1,453
1,451
16.75%
16.75%
16.28%
15.80%
15.75%
14.75%
13.75%
14.75%
16.63%
15.25%
14.25%
14.12%
Pillar 1 (P1R)
Pillar 2 (P2R)
31 Dec 2018
31 Dec 2019
31 Dec 2020
Tier 1
Tier 2
31 Dec 2018
31 Dec 2019
31 Dec 2020
Total capital ratio
CET1 ratio
OCR = MDA threshold (Total capital)
OCR+P2G (Total capital)
Figure 24: NLB Group capital (in EUR million)
Figure 25: NLB Group capital ratios and regulatory thresholds (in %)
Total SREP Capital Requirement (TSCR)
Combined Buffer requirement (CBR)
Conservation buffer
O-SII buffer
Countercyclical buffer
From 1 January 2020, NLB is required to maintain the OCR at the level of
Overall capital requirement (OCR) = MDA threshold
from 12 March
2020 onwards
as at 1 January till
11 March 2020
CET1
AT1
T2
Total Capital
CET1
Tier 1
4.5%
1.5%
2.0%
2.75%
6.05%
8.06%
4.5%
1.5%
2.0%
2.75%
7.25%
8.75%
2019
4.5%
1.5%
2.0%
3.25%
7.75%
9.25%
2018
4.5%
1.5%
2.0%
3.5%
8.0%
9.5%
Total Capital
10.75%
10.75%
11.25%
11.5%
CET1
CET1
CET1
CET1
Tier 1
Total Capital
CET1
CET1
2.5%
1.0%
0.0%
9.55%
11.56%
14.25%
1.0%
2.5%
1.0%
0.0%
10.75%
12.25%
14.25%
1.0%
2.5%
1.0%
0.0%
11.25%
12.75%
14.75%
1.0%
1.875%
0.0%
0.0%
9.875%
11.375%
13.375%
1.5%
10.55%
11.75%
12.25%
11.375%
Total SREP (TSCR)
CET1: 6.05%
Tier 1: 8.06%
Total capital: 10.75%
Pillar 2
Total capital (to incl:
CET1: 1.55% and
Tier 1: 2.06%): 2.75%
Tier 2: 2.00%
AT1: 1.50%
CET1: 4.50%
Pillar 1
Figure 26: NLB Group capital
requirements as at 31 December 2020
14.25% on a consolidated basis, consisting of:
• 10.75% TSCR (8% Pillar 1 Requirement and 2.75%
Pillar 2 Requirement); and
• 3.5% CBR (2.5% Capital Conservation Buffer,
1% O-SII Buffer and 0% Countercyclical Buffer).
Pillar 2 Guidance (P2G)
OCR + P2G
(10NC5) issued in November 2019 in the amount of EUR 120 million. Non-
controlling interest (minority capital) was included in the capital – as of June
The Pillar 2 Requirement decreased by 0.5 p.p. to 2.75%, as a result of better
2020 in the amount of EUR 31.7 million, and as of December 2020 in the total
overall SREP assessment. Pillar 2 Guidance (P2G) amounts to 1.0% of CET1.
amount of EUR 99.0 million (of which EUR 66.1 million due to acquisition of
In 2021 NLB is required to maintain the same level of OCR at 14.25% on a
RWA on consolidated basis were concluded with MIGA in the total amount of
consolidated basis, with unchanged structure.
up to EUR 303.1 million and became effective as of 31 July 2020.
Komercijalna Banka, Beograd). In addition, risk mitigation contracts to reduce
Several measures have been taken by the ECB in relation to COVID-19. The
The TCR for the Group stood at 16.6% (or 0.3 p.p. higher than at the 2019
ECB has effectively, as of 12 March 2020, amended the applicable decision for
YE), and for NLB at 27.1% (or 4.4 p.p. higher than at the 2019 YE). As at 31
NLB in relation to the Pillar 2 Requirement composition, whereby the Pillar 2
December 2020, the CET1 ratio stood at 14.1% (1.7 p.p. YoY decrease). The
Requirement shall be held in the form of 56.25% of CET1 capital and 75%
higher NLB Group total capital adequacy compared to the end of 2019 derives
of Tier 1 capital as a minimum, and not entirely as CET1 capital as required
from higher capital (increase of EUR 569.7 million YoY) which compensated
in the previous years. Additionally, the CRR ‘quick fix,’ as of 26 June 2020,
RWA increase of EUR 3,235.5 million YoY for the Group. Higher RWA derives
allowed the Group to benefit from lower capital requirements.
from the acquisition of Komercijalna Banka, Beograd. Total capital increased
mainly due to inclusion of the subordinated Tier 2 bonds (EUR 240.0 million),
The Bank and Group’s capital covers all the current and announced regulatory
inclusion of undistributed profit for the year 2019 (EUR 157.5 million), partial
capital requirements, including capital buffers and other currently known
inclusion of 2020 profit (EUR 63.6 million), and inclusion of minority interest
requirements, as well as the P2G.
in capital calculation from June 2020 onwards (EUR 99.0 million as at 31
The Bank continued to strengthen and optimise its capital structure. On 5
February 2020, the Bank issued subordinated Tier 2 bonds (10NC5) in the
The RWA for credit risk increased by EUR 2,502.7 million YoY mainly due
amount of EUR 120 million. On 25 March 2020, the Bank obtained the ECB’s
to completion of the acquisition process of Komercijalna Banka, Beograd.
permission to include them in the capital, and the subordinated notes have been
Excluding the purchase of Komercijalna Banka, Beograd, RWA decreased by
included as of 31 March 2020. On 4 March 2020, the Bank also obtained the
EUR 173.9 million as the result of changes in regulation CRR and implemen-
ECB’s permission to include in the capital subordinated Tier 2 bonds
tation of MIGA guarantee for obligatory reserves in NLB Group banks.
December 2020).
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 66
19
n.a.
2,065
CRR QF brought more favourable treatment of SME (changes in the
1,496
240
221
33
27
n.a.
2,018
22.4%
0.4%
0.3%
0.4%
0.7%
-0.2%
16.3%
2.4%
2.6%
16.6%
-6.3%
31 Dec 2019
New T2 notes
Profit inclusion
NCI inclusion
Other
RWA impact
Pre-KB
acquisition
NCI inclusion KB
Other KB
RWA impact
KB
31 Dec 2020
Figure 27: Capital of NLB Group (in EUR million) – evolution YoY
Table 14: Total risk exposure for NLB Group
prescribed SME supporting factor) and temporary treatment of public debt
issued in the currency of another Member State. Furthermore, the inclusion
of Serbia in the list of third countries whose supervisory and regulatory
requirements are considered equivalent as to EEA countries contributed
significantly to RWA reduction at the beginning of 2020 (EUR 100.0 million).
RWA declined also due to the NLB Vita sale and due to the higher volume
of impairments and provisions formed on the performing portfolio due to the
worse macro forecasts related with COVID-19. In contrast, new production
on the corporate and retail segment, including new project financing loans,
resulted in RWA increase. New defaults also contributed to the RWA increase
as well as the changed treatment of intangible assets.
The increase in RWA for market risks and CVA (EUR 727.1 million YoY) is
mainly due to completion of the acquisition process of Komercijalna Banka,
Total risk exposure amount (RWA)
12,421.0
9,014.6
8,863.2
9,185.5
3,235.5
3,557.8
CRR, which represents the basis for the calculation.
RWA for credit risk
10,222.9
7,546.3
7,374.4
7,720.2
2,502.7
2,848.6
31 Dec 2020
31 Dec 2020
w/o KB
30 Sep 2020
31 Dec 2019
YoY
QoQ
The increase in the RWA for operational risks (EUR 5.7 million) derives from
the higher three-year average of relevant income, as defined in Article 316 of
Central governments or central banks
1,892.2
977.9
Balance at
in EUR million
Change
Beograd.
Regional governments or local authorities
Public sector entities
Institutions
Corporates
Retail
Secured by mortages on immovable property
Exposures in default
Items associated with particulary high risk
Covered bonds
Claims in the form of CU
Equity exposures
Other items
RWA for market risk + CVA
RWA for operational risk
135.5
248.8
311.7
64.1
99.6
243.4
878.3
62.6
101.8
235.5
1,234.6
58.9
102.1
208.1
2,224.2
1,898.3
1,869.3
2,044.9
3,891.8
3,067.9
3,055.5
2,934.4
355.7
231.5
344.2
40.9
18.7
47.1
480.9
1,250.8
947.3
355.7
170.7
230.5
40.9
13.0
29.5
354.9
520.9
947.3
349.2
156.9
256.0
41.6
12.5
25.0
330.2
534.7
954.1
363.8
140.0
204.3
39.6
13.3
35.4
340.9
523.7
941.6
657.6
76.5
146.7
103.6
179.4
957.4
-8.1
91.5
139.9
1.3
5.4
11.7
140.0
727.1
5.7
1,013.9
72.9
147.0
76.1
354.9
836.2
6.4
74.6
88.2
-0.7
6.2
22.1
150.7
716.0
-6.8
Further information on capital and capital adequacy is available in the Note
5.22 to the Audited Annual Financial Statements and in Pillar 3 Disclosures.
Liquidity position
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
n
o
i
l
l
i
m
R
U
E
324.9%
303.8%
297.2%
303.1%
3,985
3,974
4,738
4,710
1,226
1,308
1,594
1,554
257.5%
5,003
1,943
31 Dec 2019
31 Mar 2020
30 Jun 2020
30 Sep 2020
31 Dec 2020
Stock of HQLA
Net liquidity outflow
LCR
Figure 28: LCR quarterly dynamic of NLB Group
The Group’s liquidity remains strong, with a high level of liquid assets in total
assets (49.8%) that is reflected in the LCR ratio standing at 257.5%, compared
to 324.9% as at 31 December 2019 (the acquisition of Komercijalna Banka
group contributed to decrease of LCR, due to high increase of outflows on
account of extremely higher amounts of National Bank of Serbia deposits).
The Group holds a comfortable liquidity position at both the Group
and subsidiary bank levels, standing well above the targeted risk appetite
limit.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Segment Analysis
Core Segments
Non-core Segments
Retail Banking
in Slovenia
includes banking with individuals and
micro companies, asset management
(NLB Skladi), and one part of the new
Corporate and
Investment Banking
in Slovenia
Strategic
Foreign Markets
includes the operations of strategic Group
banks in the strategic markets (North
Macedonia, BiH, Kosovo, Montenegro,
and Serbia). As a result of the acquisition
of Komercijalna Banka, Beograd at the
subsidiary NLB Lease&Go that deals with
includes banking with Key corporate
end of the year 2020, the NLB Group
retail clients as well as the contribution to
clients, SMEs, and Cross Border corporates,
obtained three banks: Komercijalna
Financial Markets
in Slovenia
Other
accounts for the Banks categories
Non-core
NLB
Group
(in EUR million)
the result from the associated company
Investment Banking and Custody,
Banka, Beograd, Komercijalna Banka,
covers treasury activities and trading
whose operating results cannot be
includes the operations of non-core
Bankart (in 2019 also from the joint
Restructuring and Workout, and one part
Podgorica, and Komercijalna Banka,
in financial instruments, while they
allocated to specific segments as well
Group members, namely REAM and
venture NLB Vita(ii) and in 2020 the gains
of the new subsidiary NLB Lease&Go that
Banja Luka as well as an investment fund
also present the results of asset and
as a new subsidiary The NLB Cultural
leasing entities – except NLB Lease&Go,
made from the sale of this investment).
renders services to corporate clients.
company Kombank INvest, Beograd.
liabilities management (ALM).
Heritage Management Institute.
NLB Srbija and NLB Crna Gora.
Profit b.t.
277.9
42.0
Contribution to
Group’s profit b.t.
100%
15%
Total assets
19,566
2,554
% of total assets
100%
13%
CIR
58.3%
67.0%
42.4
15%
2,043
10%
55.6%
Cost of risk (bps)
62(i)
63
-44
178.8
30.8
-11.5
64%
11%
9,346
5,218
48%
27%
-4%
273
1%
-4.6
-2%
131
1%
52.1%
140(i)
19.2%
147.4%
236.2%
-396
The data for 2019 are adjusted to the changed schemes as prescribed by the BoS (relocation of some items from the net other income to other general and administrative expenses), so there may be certain differences between the previously
reported numbers and those presented below. Consequently, the CIR may also be different than the one published in 2019. More details are available below in note 2.3. of the Audited Financial Statements of NLB Group and NLB d.d.
(i) Komercijalna Banka group is excluded from calculation.
(ii) In 2019, the segment also included the result of the JV company NLB Vita. In December 2019, the NLB and KBC Insurance NV, in a joint process, agreed to sell their respective stakes. The sale was completed in May 2020.
42
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
effectiveness and knowledge of its customers, who turned to digital channels which are available in
Total costs
Retail Banking
in Slovenia
With knowledge and professionalism, the Bank continues to have a leading position in market
shares in loans and deposits. In retail banking, the Bank is striving to get closer to its clients through
anchor products and by offering personalised digital services to suit their lifestyles. With a successful
response to circumstances in the time of the COVID-19 pandemic, the Bank once again proved its
various channels 24/7. If customers wish to do business in the traditional way and stay in personal
contact, the Bank continues to be available through its branch office network and new mobile branch.
Contribution to NLB Group
15%
27%
43%
Result b.t.
Net interest
income
Net
non-interest
income
Figure 29: Contribution to NLB Group (result b.t., net interest income, net non-interest income)
The segment’s profit before tax amounted to EUR 42.0 million, a 12%
decrease YoY; this decrease is mostly related to higher impairments for
credit losses and lower deposit margin from deposits, which was partially
compensated by effects from NLB Vita sale.8
Net interest income was 7% lower YoY. Due to overliquidity of the Bank,
the policy to de-stimulate the deposit collection triggered the reduction of
retail deposits margin after transfer price (FTP) in the amount of EUR 8.5
million YoY. The interest income from loans to individuals was EUR 2.5
million higher YoY due to higher volumes and higher interest margin. In 2020
COVID-19 outbreak affected the new production of loans to individuals, as
well as change of legislation that tightened the measures in consumer lending.
The production of new consumer loans in 2020 amounted to EUR 196.7
million and was lower than in 2019 (EUR 368.6 million). The YoY decline in
the balance of consumer loans (EUR 36.6 million) is largely due to a lower
production of new consumer loans in H1 2020, while the H2 recorded a
recovery (as a result of several activities – marketing campaigns, individualised
preapproved loan campaigns, process improvements). The decrease was
recorded also in the portfolio of overdrafts and cards (EUR 32.2 million
YoY). The production of new housing loans amounted to EUR 303.1 million
8. In 2019, the segment also included the result
of the JV company NLB Vita. In December
2019, the NLB and KBC Insurance NV, in a
joint process, agreed to sell their respective
stakes. The sale was completed in May 2020.
22.5%
market share in housing loans.
Over 1 billion
EUR
of assets under management as an
important milestone for Private banking.
-7%
3%
-74%
14%
1%
3%
3%
18%
-79%
-12%
1%
2%
8%
Table 15: Performance of the Retail Banking in Slovenia segment
2020
2019
Change YoY
in EUR million consolidated
Net interest income
Net interest income from Assets(i)
Net interest income from Liabilities(i)
Net non-interest income
o/w Net fee and
commmission income
Total net operating income
Result before impairments
and provisions
Impairments and provisions
Net gains from investments in
subsidiaries, associates, and JVs’
Result before tax’
81.4
78.4
3.0
89.0
82.7
170.4
-114.1
56.2
-15.1
0.9
42.0
87.4
75.9
11.5
78.3
81.9
165.7
-118.0
47.7
-4.4
4.2
47.5
-6.0
2.5
-8.5
10.7
0.8
4.7
3.9
8.5
-10.7
-3.3
-5.5
31 Dec 2020
31 Dec 2019
Change YoY
Net loans to customers
2,415.4
2,385.1
Gross loans to customers
2,450.7
2,410.2
30.3
40.5
Housing loans
1,534.7
1,425.0
109.6
Interest rate on housing loans
Consumer loans
Interest rate on consumer loans
Other
2.51%
651.7
6.43%
264.3
2.54%
688.3
6.33%
296.9
Deposits from customers
7,356.8
6,456.2
-0.03 p.p.
-36.6
-5%
0.10 p.p.
-32.6
900.6
-11%
14%
Interest rate on deposits
0.04%
0.05%
-0.01 p.p.
Non-performing loans (gross)
Cost of risk (in bps)(ii)
CIR
Interest margin
52.4
2020
63
67.0%
1.75%
40.8
2019
19
71.2%
2.04%
11.6
28%
Change YoY
44
-4.2 p.p.
-0.29 p.p.
(i) Net interest income from assets and liabilities with the use of FTP.
(ii) Cost of risk for 2019 is adjusted to new methodology.
43
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Video call
service 24/7
NLB is the only bank in Slovenia
offering video calls; the number
of which increased 132% YoY.
M-bank
Klikin
now, with an extended set of
products and services available, allows
digital signing of all documents,
becoming a true branch office.
(2019: EUR 242.6 million) as a result of a more attractive offer for clients and
Digital sales channels are gaining prominence, and the Bank can also be
intensive marketing campaigns and led to an increase in the portfolio (EUR
reached through Slovenia’s market-leading 24/7 NLB Contact Centre.
109.6 million YoY).
The segment recorded the net non-interest income of EUR 89.0 million,
providers in Slovenia for almost 20 years, with increasing assets under
EUR 10.7 million (14%) increase YoY, due to the sale of NLB Vita with
management, complementing the asset management of the market-leading
Private banking has positioned itself as a leader among private banking
positive effect of EUR 11.0 million.
NLB Skladi, whose market share and annual net inflows have increased every
year. With 2020 bancassurance volumes, the Bank once again proved to be the
Net impairments and provisions were established in the amount of EUR
best insurance retailer among banks.
15.1 million due to additional credit impairments and provisions related to
COVID-19 outbreak.
The Bank is retaining its role as a market leader in payments by being a
reliable and trustworthy provider of payments services with a focus on
Deposits from customers increased substantially by EUR 900.6 million (14%)
providing a positive user experience. This is reflected in the Bank’s achieved
YoY, driven mostly by uncertain macroeconomic environment which led
high market share in recent years. The competition on this market is fierce,
to lower consumption and also affected by received social transfers due to
and users require an ever-increasing flexibility of services.
COVID-19 measures taken.
In the segment exposures subject to COVID-19 moratorium were concluded
joined the national alliance for a green, smart, and technologically advanced
in the amount of EUR 123.3 million, with 20.0% already expired by the
Slovenia. The Bank’s offer reflects this path, following its new sustainability
In line with the UN Principles for Responsible Banking, the Bank also
2020 YE.
The market leader in retail banking in Slovenia
strategy, by gradually transitioning to the most possible paperless banking
being one of the measures to a sustainable environment.
Further information is available in the
NLB Group Sustainability Report 2020.
30.3%
25.2%
23.2%
22.2%
30.5%
26.2%
23.1%
21.8%
31.3%
26.4%
23.4%
22.5%
33%
31%
29%
27%
25%
23%
21%
19%
17%
15%
Response to COVID-19
In spite of the COVID-19 pandemic, the Bank managed to provide 24/7
client support by enhancing the availability of digital channels and adjusting
operations in the period of the lock-down. The Bank quickly adapted the
sales process to the situation by introducing changes to its offer, namely
the approval of new extraordinary overdrafts was made possible via digital
channels, the prolongation of extraordinary overdrafts with no personal
presence of the client necessary, and allowing clients to onboard to m- and
e-bank via video call. The number of payments via e- and m-bank increased
and indicates that clients are opting for digital payments over in-person
31 Dec 2018
31 Dec 2019
31 Dec 2020
payments via branch offices.
Market share in housing loans
Market share in loans to customers
Market share in consumer loans
Market share in deposits from customers
Figure 30: NLB’s market share in Retail Banking in Slovenia
The Bank’s main sales channel remains its branch network in Slovenia with
80 branches,9 and is supported with the largest ATM network (552 or a 39.2%
market share in Slovenia) of which 74% are contactless. To improve customer
In order to maintain continuous 24/7 operations, the NLB Contact Centre
was moved ‘overnight’ to several locations to split operational risk. In response
to the circumstances, clients were more prone to use online and mobile
banking services.
An Intervention Act adopted at the end of March and prolonged at the
end of December, allowing borrowers to defer payment obligations with a
experience, the refurbishment of branch offices continued, including as well
moratorium of up to 12 months, helped clients mitigate the effects of the
the relocation of two branches. Furthermore, the Bank introduced a different
lock-down. The Bank prepared the relevant measures with all the necessary
type of branch – the first mobile branch in Slovenia – bringing banking
instructions and processes.
services to local residents who don’t have the ability to contact the Bank
through modern channels.
9. As of 1 January 2021 79 branches.
44
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Distribution channels
Digitalisation and improved client experience
Digitalisation trends place an emphasis on the use of mobile phones, which is
why the Bank focuses on improving user experience through mobile devices.
Changed client habits affected the visits of the Bank’s branch offices, and this
The Bank remains the leader in the Slovenian market because of the
For many tasks, where until recently there was no permissible alternative
is also expected to have effects in the future. So, the Bank further optimised
knowledge, experience, and understanding of customers’ needs, resulting in
to a physical visit to the branch, effective, user-friendly solutions have
the branch office network by closing 10 branch offices.
many solutions that pave the way for new customers and changing customer
quickly emerged. It is not just about signing forms, but above all about the
habits. Every year, customer experience is confirmed by the customer
comprehensive placement of business in the digital world, which enables
Just before the period of the second lock-down, the Bank introduced the first
satisfaction index (6 points higher YoY). In the context of COVID-19
remote business, especially from home. An extensive upgrade of m-bank
mobile branch in Slovenia – NLB Bank & Go, which will enable the Bank to
pandemic, the Bank has become even closer to customers and improved their
Klikin resulted in new functionalities for ordering services and distance-
get closer to residents in the local environment. The new mobile branch is a
satisfaction in all monitored areas. Customers are especially satisfied with
signing of all opening documents, financial transactions, and loans. This is an
‘branch on wheels,’ equipped with everything that ‘static’ branches have, and
attitudes toward customers, modern banking products and products included,
important milestone in furthering digitalisation processes. Klikin is becoming
its advantage is that the Bank will also be able to be present in the areas where
and user experience, which also includes digital services. The reputation of and
more and more like a true branch office.
no bank office is available.
trust in the Bank also increased and exceeded the average of the competition.
With the improvement in satisfaction, the level of loyalty and the share of
NLB is the only bank in Slovenia that has offered video call service 24/7 for
recommendations also increased (2020 Valicon Client Satisfaction Survey).
the last three years. With video call, the digital experience is getting closer to
the classic branch office, which can also be noticed in the large pick-up in the
use of this channel. In 2020, the Bank experienced extensive growth across
all digital channels of communication and significant change in the structure
of the channels used by customers occurred. This is mostly evident by the
extensive growth of video call and chat. A YoY comparison shows increases
of 4% in inbound calls, 53% in chats, and even 132% in video call usage. The
NLB Contact Centre has successfully remained a customer service channel,
NLB 2020
Competitor banks'
average 2020
NLB 2019
NLB 2018
87
79
83
80
but also intensively fosters the role as an important sales channel by adding a
Source: 2020 Valicon Client Satisfaction Survey.
range of products and services that can be executed on the spot, and a contact
channel with an increasingly important role in efficient client relationship
Figure 32: Satisfaction with the attitude towards customers
management.
501,453
481,464
The purchase, new construction, or renovation of a home is a demanding
34.5%
financial venture, therefore the involvement of an experienced adviser is
important. To help young families toward independence, the Bank introduced
the #HelpFrame project also to individuals by granting 100 borrowers of
housing loans three free monthly instalments up to EUR 1,000. Record sales
results of new housing loans supported by successful campaigns were recorded
8.6%
in the second half of 2020.
30.4%
16.4%
In 2020, the WEBSI web champions project,10 Klikin also won two first places
for digital achievement, one awarded by the expert jury composed of jurors
from the financial sector and the other, most importantly, by the public.
The number of digital users (unique users of e-bank and m-bank) continued
to increase, stopping roughly at 9% YoY. The number of m-bank Klikin
and e-bank NLB Klik users recorded a YoY increase, 17% (+38,300 users)
and 5% (+10,655 users) respectively. The YoY increase of the total volume
and number of payments processed in the e-bank and m-bank was 13% and
15%, respectively, again proving that the clients more and more prefer digital
payments over in-person payments in branch offices.
34.6%
27.4%
35.9%
35.4%
41.7%
37.9%
115,071
75,247
100,397
43,289
In line with the new sustainability strategy, the NLB Green housing loan with
special benefits in financing the purchase or building of a passive house was
Klikin
NLB Klik
introduced.
Figure 33: Online and mobile banking penetration
31 Dec 2016
31 Dec 2017
31 Dec 2018
31 Dec 2019
31 Dec 2020
Inbound calls
Chat
Video call
The packages offer, which has been modified based on customer feedback and
The mobile wallet, NLB Pay app was downloaded by over 18 thousand
2019
2020
needs, customers transparent and simple daily banking services. In June, the
Android users and additionally over 8 thousand iOS users, who carried out
new ‘NLB Digital Package’ was introduced as a response to clients’ feedback
33% more transactions YoY with the total volume increasing by 55% YoY.
Figure 31: NLB Contact Centre no. of contacts
based on measures undertaken by the Bank due to pandemic, followed by the
The number of digitised cards grew 46% YoY and the number of users
also new NLB Package ‘My World’ (Moj svet), primarily intended for young
by 43.5% YoY (+5,575 users). The implementation of NLB Pay is almost
customers.
finished in other Group banking subsidiaries.
10. Organized by WEBSI, Digital excellence institute.
45
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Volume (in 000 EUR)
7,357
2,879
142,286
# of transactions
2020
2019
2018
348,529
10,883
457,780
Private banking
Ancillary businesses complementing banking products
Private banking has positioned itself among the leading private banking
The market share of NLB Skladi increased to 34.9% (31 December 2019:
providers in Slovenia for almost 20 years. In 2020, its leading position even
34.0%). The company ranked first among its peers in Slovenia, accounting
strengthened as an important milestone was reached, namely over EUR 1
for 69.6% of net inflows in the market with EUR 101.9 million in net inflows
billion of assets under management. By adding relevant products and services,
in 2020. The company remains the largest asset management company and
it proves that the Bank knows their customers, their lifestyles, habits, goals, and
the second largest mutual funds management company in Slovenia. The total
challenges, and take care of their wealth with dedication and knowledge. With
assets under management amounted to EUR 1,625.5 million (31 December
the increased assets under management (18% YoY), the number of clients also
2019: EUR 1,513.8 million) of which EUR 1,125.5 million consisted of
Figure 34: NLB Pay purchases in numbers
increased (21% YoY).
NLB Pay offers a new instant based payment method ‘Flik,’ facilitating
payments from personal accounts between different bank clients using the
contacts stored in the mobile device. A special version of NLB Pay with the
Flik functionality is available to iOS users. To follow the PSD2 requirements,
NLB Pay’s functionality enables confirming e-commerce purchases which
will replace the SMS OTP authentication. If the NLB Pay user’s device has
the right kind of functionality, confirmation can be done with biometric
recognition.
The Bank’s card market share remained at 26.5% (2019: 27.2%) of the
Slovenian market. Individuals’ debit and credit card volumes of payment
transactions and cash withdrawals, despite two lock-down periods, remained
approximately at 2019 levels.
As the first bank in Slovenia, clients receive an SMS message with their PIN
for all new NLB cards (Maestro, Mastercard, and Visa). Clients are also no
longer receiving new PIN numbers upon renewal of the NLB cards to a
contactless card, since their existing PIN number remains valid.
The period for instalment purchases using pay-later payment cards was
prolonged from 24 months to 60 months.
The Bank adhered to European and Slovenian payments infrastructure in
order to be able to provide crossborder, as well domestic instant payments
and improve the user experience of their customers. On the domestic market,
instant payments Flik, i.e. payments which are executed in only few seconds
were successfully introduced with the volumes increasing. By meeting PSD2
requirements, more efficient fraud prevention and higher protection of user
payments is provided.
1,168
1,231
746.9
752.5
1,309
911.1
1,077
554.0
1,580
mutual funds (31 December 2019: EUR 1,023.8 million), and EUR 500.0
million in the discretionary portfolio (31 December 2019: EUR 490.0 million).
The insurance company Vita remains the Bank’s strategic partner. Their
products are sold through the Bank’s distribution network, such as savings and
investment insurance products, risk, and health insurance products.
1,075.1
Non-life insurance products, including car and home insurance, are provided
to clients in cooperation with the GENERALI Zavarovalnica. Despite
challenging circumstances, encouraging results were achieved, namely gross
written premiums increased YoY by 5%, and the number of car insurance
and home insurance policies by 6% and 5%.
31 Dec 2016
31 Dec 2017
31 Dec 2018
31 Dec 2019
31 Dec 2020
Assets under management (EUR million)
# of clients
14.9%
15.2%
Figure 35: Assets under management and the number of private banking clients
12.9%
13.4%
14.0%
6.5%
4.9%
7.5%
8.3%
1.5%
1.5%
1.7%
1.9%
3.7%
1.2%
31 Dec 2016
31 Dec 2017
31 Dec 2018
31 Dec 2019
31 Dec 2020
Vita
NLB Skladi
Generali
Figure 36: Customers’ penetration of ancillary business
46
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Corporate and
Investment Banking
in Slovenia
The Bank wants to strengthen its market position as a systemic player in its home region, and actively
participate in the growth of the market by supporting a large infrastructure projects with sustainability
being the focus of the future business model. As a leading player, the Bank is looking to cover more
complex, cross-border needs of clients and find entry points to suit their needs. The Bank would also
like to accelerate growth through its presence on international financial markets, and thus diversify
services for its clients. To overcome and mitigate the impact of COVID-19, responsive measures were
taken that prove the Bank’s full spectrum of services is also available to clients in such circumstances.
Table 16: Performance of the Corporate and Investment Banking in Slovenia segment
in EUR million consolidated
2020
2019
Change YoY
Net interest income
Net interest income from Assets(i)
Net interest income from Liabilities(i)
Net non-interest income
o/w Net fee and
commmission income)
Total net operating income
34.0
36.8
-2.8
41.2
33.2
75.2
37.3
37.4
-0.1
43.0
32.4
80.2
Total costs
-41.8
-44.5
Result before impairments
and provisions
Impairments and provisions
Result before tax
33.4
9.0
42.4
35.8
21.0
56.8
-3.3
-0.6
-2.7
-1.8
0.8
-5.0
2.7
-2.4
-12.1
-14.4
31 Dec 2020
31 Dec 2019
Change YoY
Contribution to NLB Group
Net loans to customers
2,047.1
2,049.6
Gross loans to customers
2,167.5
2,150.9
Corporate
2,006.4
1,976.8
15%
11%
20%
Key/SME/Cross Border Corporates
1,827.6
1,819.3
-2.5
16.7
29.5
8.2
Interest rate on Key/SME/
Cross Border Corporates loans
Investment Banking
Restructuring and Workout
NLB Lease&Go
State
Interest rate on State loans
1.79%
1.82%
-0.03 p.p.
0.2
160.8
17.8
160.7
2.20%
0.1
157.4
-
173.6
1.88%
0.1
3.4
17.8
-12.9
0.32 p.p.
Deposits from customers
1,487.4
1,299.1
188.3
14%
Interest rate on deposits
Non-performing loans (gross)
Cost of risk (in bps) (ii)
CIR
Interest margin
0.06%
156.0
2020
-44
55.6%
1.90%
0.07%
128.7
2019
-102
55.4%
2.20%
-0.01 p.p.
27.4
21%
Change YoY
59
0.2 p.p.
-0.30 p.p.
(i) Net interest income from assets and liabilities with the use of FTP.
(ii) Cost of risk for 2019 is adjusted to new methodology.
Result b.t.
Net interest
income
Net
non-interest
income
Figure 37: Contribution to NLB Group (result b.t., net interest income, net non-interest income)
Corporate and investment banking in Slovenia
The segment’s profit before tax was EUR 42.4 million, EUR 14.4 million
(25%) lower YoY. The decrease was mostly due to lower release of credit
impairments and provisions as well as lower net operating income.
Net interest income decreased by EUR 3.3 million YoY, mostly due to
reduction of corporate deposits margin after transfer price (FTP), despite
higher deposit base (EUR 188.3 million). Key, SME and Cross Border
clients recorded a growth in gross loans of EUR 8.2 million YoY, due to
substantial growth in Cross Border (EUR 67.3 million) and in SME (17.8
million) segment, while Key segment recorded substantial decrease (EUR 76.9
million), due to maturity of few larger loans. The newly established company
NLB Lease&Go also contributed significantly to the increase of the gross
loans portfolio of the segment (EUR 17.8 million).
Net fee and commission income recorded slight, 3% increase YoY, while total
costs decreased by EUR 2.7 million (6%) YoY.
31.4%
market share in guarantees
and letters of credit.
Arranging of
178.9
million
EUR
in syndicated loans.
Arranging of
191.4
million
EUR
of instruments issuances
on debt capital markets.
-9%
-2%
-
-4%
3%
-6%
6%
-7%
-57%
-25%
0%
1%
1%
0%
57%
2%
-
-7%
47
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Successful
Net impairments and provisions were released in the amount of EUR 9.0
The economy and society can be transformed and steered towards greater
#HelpFrame
project
for the small and micro segment.
million due to substantial release in Restructuring and Workout that offset
sustainable growth. Following the Bank’s sustainability strategy, the business
additional credit impairments and provisions related to COVID-19 outbreak.
model is changing and a sustainable product portfolio is emerging. Business
The Investment Banking and Custody recorded net non-interest income in
business where gas technology will replace the existing coal, only underscore
the amount of EUR 9.4 million and increased by EUR 0.5 million YoY. The
the sense of cooperation in engaging the economy and the state in the
total income growth was the result of a larger volume of transactions and
direction of sustainable development.
opportunities, such as energy renovations of buildings and the financing of a
Supporting the
fund administration services, increased to EUR 16.2 billion (2019 YE: EUR
Response to COVID-19
higher margins. The total value of assets under custody, together with the
largest
infrastructure
project
14.8 billion).
In the segment exposures subject to COVID-19 moratorium were concluded
and prepared adequate responsive measures by approving measures for the
in the amount of EUR 366.5 million, with 34.8% already expired by the 2020
prevention of clients’ financial problems and liquidity issues. The Bank also
Following the development of the COVID-19 outbreak, the Bank envisaged
YE.
fully implemented relevant intervention acts by adopting special processes,
while the moratorium of payments by clients is also possible under the Bank’s
in Slovenia.
Market leader focusing on customers’ needs
regular offer.
The Bank remains the leading bank servicing corporate clients in Slovenia,
Micro and small enterprises, which present an important pillar of the
with by far the largest client base, whereas it has maintained its stronghold
Slovenian economy, are expected to be the most affected by the economic cool
in all client segments. It has a 17.3% market share in corporate loans (2019
down due to the COVID-19 pandemic. The Bank supported them through
YE: 17.5%), and 31.4% (2019 YE: 30.0%) in guarantees and letters of credit
the #HelpFrame project. This is a project of the Bank and its partners aimed
(including guarantee lines). The Bank is increasingly focused on small and
at giving the initiative to these enterprises and helping them restart.
Further information is available in the
NLB Group Sustainability Report 2020.
mid-sized enterprises.
35%
30%
25%
20%
15%
10%
24.5%
18.2%
14.9%
30.0%
17.5%
16.5%
31.4%
17.3%
17.0%
31 Dec 2018
31 Dec 2019
31 Dec 2020
Market share in guarantees and letters of credit
Market share in loans to customers
Market share in deposits from customers
Figure 38: NLB’s market share in Corporate Banking in Slovenia
The positive experience from digital signing during the first lock-down was
implemented as a regular process, which enabled paperless, faster, and simpler
client treatment.
Diversified product mix
The Bank’s offer of financial services, including lending, cash management,
payment services, as well as capital markets’ advisory services supports various
clients’ needs.
The Bank is a leading Slovenian bank in the field of trade finance with
products that also support the export economy, representing an important
part of the Slovenian economy. The trade finance product range and tailor-
made solutions are comprehensive from 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 aims to
The Bank maintains its relationship with different Slovenian institutions, such
offer exporters and importers international purchase of receivables, thus
as SID Bank and the Slovenian Enterprise Fund, among them in the long-
providing them with a modern, fast, and easy way of financing, which is an
term lending to micro companies, SMEs, and the issuance of guarantees.
additional incentive for international business. Special attention is given to
Large infrastructural projects are extremely important for the economy due
in Slovenia and the wider home region. The stronger market position reflects
to their multiplying effects. The Bank participated in the financing of the
an active advisory approach to the Group customers.
letter of guarantees by which the Bank supports major infrastructure projects
construction of the second rail track in Slovenia with a long-term loan of
EUR 112.5 million.
48
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 NLB Business Account for private individuals was implemented to support
The Bank also enriched its offering in domestic payments with the
Investment banking and securities services
clients with unregistered activity, especially in the segment of farmers. The
introduction of a P2M (peer-to-merchant) instant payments service
Bank would like to position itself in the agricultural segment, especially with
which enables corporations to improve their liquidity management and
The Bank, as a mandated lead arranger, successfully organised syndicated loans in
young farmers investing in digitalisation and automation (flexible loans up to
reconciliation, and at the same time offers a more cost-effective service.
the amount of EUR 178.9 million, and as a lead manager or joint-lead manager
10 years).
International corporate business
successfully organised issuance of financial instruments in the amount of EUR
191.4 million on the domestic and international debt capital markets.
The Bank is a leader in merchant-acquiring by accepting all major cards, with
modern contactless POS network, with market share in merchants acquiring
In addition, the Group’s goal is to build up clients’ trust and satisfaction on the
Within brokerage services the Bank executed clients’ buy and sell orders in a total
of 37.9%.
basis of proactive support and collaboration among the banking members in
amount of EUR 941.3 million (2019: EUR 979.5 million), while in the area of
+33%
2,054
1,803
1,894
the Group. Such teamwork creates added-value opportunities that support the
dealing in financial instruments the Bank executed foreign exchange spot deals
clients’ plans across the Group’s home region in SEE.
totalling EUR 724.0 million (2019: EUR 777.8 million) and for transactions
involving derivatives in the amount of EUR 242.6 million (2019: EUR 309.6
2,261
2,395
Since 2019, when the Bank re-entered financing of international corporate
million). Shrinking world trade and recession resulted in lower volumes of FX spot
businesses, a total of EUR 170.5 million loan facilities (in 2020: EUR 54.5
and FX derivatives deals, conversely extremely low and even negative interest rates
million) were approved for projects in the home region, of which the Bank
proved to be unattractive for concluding interest rate derivatives.
participated in the amount of EUR 142.0 million (in 2020: EUR 33.0
million), and other Group members in the amount of EUR 28.5 million
The Bank remains one of the top Slovenian players in custodian services for
(in 2020: EUR 21.5 million).
Slovenian and international customers. The total value of assets under custody
was, together with the fund administration services, EUR 16.2 billion (2019: EUR
2016
2017
2018
2019
2020
The Bank’s entering into large European syndicated corporate loan market
14.8 billion).
Figure 39: Transaction volume at NLB POSes (in EUR million)
(via secondary market) increased its visibility among international banks and
boosted the possibility of new collaboration in similar transactions. The Bank
also successfully debuted on the schuldschein loan market.
The Bank also welcomed a rising demand from merchants for e-commerce
card acceptance. Together with Bankart, the Bank introduced a new, modern
Digitalisation of product offering
online platform (i.e., Payment Gateway - PGW), which enables e-commerce
merchants modern and competitive support for online business of card
A fully digitised and user-friendly online application NLB factoring (‘Odkup
payments, while providing a friendlier user experience for card payments.
terjatev’) provides the Bank’s clients with a digitised receivables finance
However, market conditions and restrictive measures are increasingly
solution (including working capital financing option, financing domestic
encouraging retailers to expand their business online, thus enabling their
and cross-border receivables, import and export). This solution is well
customers to make easy, secure, and cashless purchases in the safe shelter
incorporated in the framework of easing potential liquidity problems faced by
of their home. The latter is also proved in YoY growth in the number and
clients.
volume of transactions, namely by 156% or 230%, respectively, and in a
larger average amount of the purchase (increased by 29% YoY).
The number of m-bank Klikpro users is constantly rising (by 10% YoY),
which indicates that clients are getting more used to digital banking. Constant
In order to meet the growing needs and requirements of its corporate clients
upgrades also improve clients’ experience, and Klikpro app being now
in the area of payments, the Bank embarked on Global Payments Innovation
available also in the Huawei App Gallery.
(GPI) service which enables higher transparency of costs, faster payment
execution, and easier tracking of international payment transactions. The
The Bank’s mobile wallet NLB Pay app enables clients to make contactless,
Bank is the only Slovenian bank that offers such a service for customers
simple, fast, and safe payments on the contactless POS (in Slovenia and
in the area of international payments. Despite the special situation due
abroad) with the NLB Business Mastercard and NLB Business Maestro cards,
to COVID-19, the volume of operations remained stable, as the Group
and also enables instalment payments.
processed 154 million transactions with a total value of EUR 304.5 billion.
In terms of fees from payments and cash operations, the Group gained more
After the first lock-down period, many companies had to adapt their
than EUR 50 million.
business practices to the changed behaviour, habits, and expectations of their
customers. Digital transformation is bringing new opportunities to address
customers’ needs and adapt sales channels accordingly.
49
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Customers
recognised us
as a reliable
and proven
manufacturer
Marko Vrhovac
Domaćinstvo Vrhovac, Republic of Srpska, BiH
‘Domaćinstvo Vrhovac’ (The Vrhovac household)
is located in the village of Mravica, near Prnjavor,
Republic of Srpska and is engaged in the production
of juices. The production started with pear juice,
considering that the household had an orchard with
over 3,000 trees. After excellent reactions to pears,
apple, quince, chokeberry, blackberry, raspberry, grape
and dogwood juices were soon added to the array of
products. The basic idea is to create a quality domestic
product using only top quality raw materials and
thus start a successful family business in a completely
natural environment.The #HelpFrame project
immediately attracted their attention. As a developing
business that does not yet have the possibility of
serious promotion through traditional and digital
channels, they managed to reach a large number of
potential customers. By participating in the project,
people recognised them as a reliable manufacturer,
which gave their story the necessary boost.
50
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 64%
53%
24%
o/w Result of minority shareholders
Strategic
Foreign Markets
With the acquisition of Komercijalna Banka, Beograd at the end of 2020, which added three
banks and investment fund company, the core part of the Group in foreign markets now
consists of nine banks and investment fund company. They are locally even stronger embedded
as important financial institutions and market leaders in various business segments. All Group
subsidiary banks have a stable market position and have earned a strong reputation. The
market shares by total assets of subsidiary banks exceed 10% in five out of six markets.
Contribution to NLB Group
Result b.t.
Net interest
income
Net
non-interest
income
Figure 40: Contribution to NLB Group (result b.t., net interest income, net non-interest income)
Strategic foreing markets
The profit before tax was EUR 178.8 million, 92% higher YoY. The
most important positive effect on the result had negative goodwill from
Komercijalna Banka, Beograd acquisition (EUR 137.9 million), while the
established impairments and provisions (EUR 59.1 million), to a large extent
related to COVID-19 outbreak, had a negative effect. The result before
impairments and provisions was 4% lower YoY.
Net interest income increased by EUR 1.7 million (1%) YoY due to higher
volumes (gross loans to customers 6% higher YoY, without inclusion of loans
from Komercijalna Banka group) and despite the falling trend of interest
margins.
Net non-interest income decreased by EUR 4.7 million or 9% YoY,
mostly due to modification losses caused by changes of contractual cash
flows for loans subject to COVID-19 moratoria (EUR 2.1 million in NLB
Banka, Skopje and EUR 1.1 million in NLB, Banka Beograd). Net fee
and commission income decreased slightly YoY (EUR 0.9 million), due to
COVID-19 negative impact on card operations and payment transactions.
Total costs decreased YoY (EUR 1.2 million or 1%).
Further information is available
in the document NLB Group
Strategic Foreign Markets -
further information, which
includes a detailed report on:
• NLB Banka, Skopje
• NLB Banka, Banja Luka
• NLB Banka, Sarajevo
• NLB Banka, Prishtina
• NLB Banka, Podgorica
• NLB Banka, Beograd
• Komercijalna Banka, Beograd
• Komercijalna Banka, Banja Luka
• Komercijalna Banka, Podgorica
• Kombank INvest, Beograd
Table 17: Results of the Strategic Foreign Markets segment
in EUR million consolidated
The market shares (by total assets)
Change YoY
of subsidiary banks exceed
1%
0%
6%
-9%
0%
-1%
-1%
-4%
-
-
92%
-63%
5%
6%
9%
10%
in five out of six markets.
Nine
subsidiary banks
and
One
investment fund company.
Profit before tax
178.8 million
EUR
92% higher YoY, mostly due to acquisition
of Komercijalna Banka, Beograd (EUR
137.9 million of negative goodwill).
Net interest income
Interest income
Interest expense
Net non-interest income
o/w Net fee and
commmission income
Total net operating income
Total costs
Result before impairments
and provisions
Impairments and provisions
o/w KB
Negative goodwill (KB)
Result before tax
2020
159.3
182.6
-23.3
49.8
54.1
209.1
-109.0
100.1
-59.1
-13.4
137.9
178.8
3.0
2019
157.5
182.5
-24.9
54.5
55.0
212.1
-107.8
104.2
-11.3
-
92.9
8.2
1.7
0.1
1.6
-4.7
-0.9
-3.0
-1.2
-4.2
-47.8
137.9
85.9
-5.2
31 Dec 2020
31 Dec 2020
w/o KB
31 Dec 2019
Change YoY
w/o KB
Net loans to customers
5,052.4
3,185.4
Gross loans to customers
5,234.8
3,357.4
Individuals
2,592.9
1,743.5
3,024.6
3,162.1
1,603.8
160.7
195.3
139.6
Interest rate on
retail loans
-
6.28%
6.71%
-0.43 p.p.
Corporate
2,443.7
1,524.7
1,470.3
54.4
4%
Interest rate on
corporate loans
-
4.15%
4.49%
-0.34 p.p.
State
198.1
89.2
88.0
1.3
1%
Interest rate on
state loans
-
3.53%
4.00%
-0.47 p.p.
Deposits from customers
7,552.2
4,108.8
3,856.7
252.1
7%
Interest rate
on deposits
Non-performing
loans (gross)
-
0.43%
0.53%
-0.10 p.p.
195.0
155.1
111.6
43.5
39%
Cost of risk (in bps)(i, ii)
2020
140
2019
17
CIR
52.1%
50.9%
Interest margin
3.33%
3.59%
Change YoY
123
1.3 p.p.
0.26 p.p.
(i) Cost of risk for 2019 is adjusted to new methodology.
(ii) Komercijalna Banka, Beograd is excluded from calculation.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 +66% YoY
+6% YoY
w/o KB
+96% YoY
+7% YoY
w/o KB
5,235
2,593
62%
2,642
70%
1,843.5
2,864
1,434
1,430
3,162
1,604
1,558
31 Dec 2018
31 Dec 2019
31 Dec 2020
7.09%
3,357
1,743
9%
4.88%
6.71%
4.46%
1,614
4%
31 Dec 2020
w/o KB
2018
2019
6.28%
4.11%
2020
w/o KB
7,552
101%
5,211
86%
2,341
1,843.5
3,438
2,343
1,095
3,857
2,598
1,259
31 Dec 2018
31 Dec 2019
31 Dec 2020
0.71%
0.58%
4,109
2,765
6%
0.41%
0.41%
7%
1,344
31 Dec 2020
w/o KB
2018
2019
0.47%
0.35%
2020
w/o KB
Individuals
Corporate & state
Individuals
Corporate & state
Figure 41: Gross loans volume and interest rates in Strategic Foreign Markets
Figure 42: Deposit volume and interest rates in Strategic Foreign Markets
Net impairments and provisions in the amount of which EUR 59.1 million
Banks in Strategic Foreign Markets have approved EUR 1,941.4 million
In order to help micro and small enterprises as an important pillar of the
were formed, mostly related to COVID-19 outbreak, while additional EUR
moratorium, more than half of them by Serbian banks as a result of
local economies and as most affected by the consequences of COVID-19
13.4 million impairments were established for expected credit losses on the
COVID-19 related measures taken at the state level. 93.1% of the
pandemic, in 2020 all Group banking members started the #HelpFrame
performing portfolio for the Komercijalna Banka group.
Gross loans to customers increased in all Group subsidiary banks in total by
moratoriums approved by banking members of the Group in SEE have
already expired by the 2020 YE.11 Moratorium maturity is normally 3-9
months of cumulative period. Following the EBA reactivation of guidelines on
project as a part of an ESG campaign.
Sustainability
EUR 2,072.7 million or 195.3 million (6%) YoY without inclusion of acquired
moratoria in December, new legislative moratorium measures were introduced
loans from Komercijalna Banka group; the largest YoY increases were
by Serbian Central Bank as well with 11 months of cumulative allowed
Active engagement in social responsibility activities in the Group further
recorded in NLB Banka, Beograd (EUR 63.0 million), NLB Banka, Skopje
period.
(EUR 52.1 million), NLB Banka, Prishtina (EUR 29.0 million), and NLB
Banka, Podgorica (EUR 27.3 million). Without inclusion of Komercijalna
Response to COVID-19 and digitalisation
Banka group the loans to individuals recorded a solid 9% increase YoY, mostly
strengthened the relationship with employees, clients, and the community.
All member banks12 made decisive steps on the path of sustainable banking,
which is a Group-wide initiative driven by commitments to EBRD and
MIGA and the UN Principles for responsible banking. In July 2020, the banks
due to double digit growth in housing loans (18%), while consumer loans grew
Digital innovation helped the banks adapt during the COVID-19 pandemic
appointed ESMS Officers with responsibility for the overall administration
by 5% YoY. A lower but still moderate increase of 4% YoY was recorded in
by accelerating efficiency improvements and achieving profitable growth
and oversight of the Environmental and Social Management System.
loans to corporate and state.
in regular business. Despite the COVID-19 outbreak, all the banks marked
strong growth in loans production volume, especially in the retail housing
Due to the inclusion of the Komercijalna Banka group in the segment, total
segment, where a double digit-growth was achieved. The Group banking
gross loans to customers of the segment increased by EUR 1,877.3 million
members improved their client-centric digital solutions, talent management,
(EUR 1,616.3 million from Komercijalna Banka, Beograd, EUR 155.4
and active engagement in the Group sustainability agenda and social
million from Komercijalna Banka, Banja Luka, and EUR 105.7 million from
responsibility initiatives.
Komercijalna Banka, Podgorica).
Deposits from customers increased by EUR 3,695.6 million, of which 3,443.5
and capital indicators were above minimum requirements. The introduction
million was due to the inclusion of the acquired banks. Without this inclusion,
of modern technologies enabled the banks to swiftly adapt to the new normal
deposits would increase by 7%, distributed equally between individuals and
environment and ensure undisturbed continuance of all banking activities.
corporate and state, 6% and 7%, respectively.
All the banks implemented protective measures for customers in branches,
Despite the turbulent environment, a strong liquidity position was maintained
Further information is available in the
NLB Group Sustainability Report 2020.
organised work from home where possible, and adapted the rules for safe
business operations. Focusing on clients’ health and achieving a positive
customer experience were a part of the focal point of the banks’ activities.
11. Further details are available in Table 34.
12. Banks acquired on 30 December 2020 are excluded.
52
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Financial Markets
in Slovenia
The segment is focused on the Group’s activities on international financial markets,
including treasury operations. In the challenging environment of low interest rates on
financial markets, the continuous focus was on prudent liquidity reserves management.
Wholesale funding activities contributed to the Group’s funding, and were mainly
Result before impairments and provisions
conducted with the aim of strengthening the capital position of the Group.
Impairments and provisions
Result before tax
Table 28: Performance of the Financial Markets in Slovenia segment
in EUR million consolidated
2020
2019
Change YoY
Net interest income
o/w ALM(i)
Net non-interest income
Total net operating income
Total costs
23.5
16.5
16.2
39.6
-7.6
32.0
-1.3
30.8
33.6
29.3
2.0
35.6
-7.5
28.1
-0.5
27.6
-10.1
-12.8
14.1
4.0
-0.1
3.9
-0.8
3.1
-30%
-44%
-
11%
-1%
14%
-167%
11%
91%
-5%
49.8%
liquid assets (% of total assets).
78%
government securities in the
Group’s banking book portfolio.
3.65 years
average maturity of the Group’s
banking book securities portfolio.
Contribution to NLB Group
Balances with Central banks
1,998.1
1,044.1
953.9
31 Dec 2020
31 Dec 2019
Change YoY
11%
8%
8%
Banking book securities
2,945.8
3,093.6
-147.8
Result b.t.
Net interest
income
Net
non-interest
income
Interest rate on banking book securities
0.77%
1.03%
-0.26 p.p.
Wholesale funding
143.5
161.6
-18.1
-11%
Interest rate on wholesale funding
0.54%
0.50%
0.04 p.p.
Subordinated liabilities
288.3
210.6
77.8
37%
Interest rate on subordinated liabilities
3.64%
4.03%
-0.39 p.p.
Figure 61: Contribution to NLB Group (result b.t., net interest income, net non-interest income)
Financial markets
(i) Net interest income from assets and liabilities with the use of FTP.
The segment includes income generated by the liquidity reserves, as well as
The Group’s ALM
the surplus from fund transfer pricing (FTP) to other business segments in
Slovenia. Financial Markets in Slovenia recorded a profit before tax of EUR
The purpose of the Group ALM process is to manage the Group’s balance
30.8 million, a 11% increase YoY.
sheet with respect to the interest rate, currency, and liquidity risk considering
the macroeconomic environment and financial markets development.
Net interest income was EUR 10.1 million (30%) lower YoY, mainly due to
Monitoring and management of the Group’s exposure to market risk is
the capitalisation of high yielding securities either as they were due or (and in
decentralised. Uniform guidelines and limits for each type of risk are set for
particular) as they were sold because of higher risk perceived towards some
individual Group members. The methodologies are in line with regulatory
exposures during the COVID-19 pandemic in H1 2020. Later, these funds
requirements on individual and consolidated levels, while reporting to regulator
were reinvested at lower yields in different asset classes to further diversify the
on the consolidated level is carried out using a standardised approach.
portfolio.
Pursuant to the relevant policies, the Group members must monitor and
manage exposure to market risks and report to the Bank accordingly. The
Following the H1 2020 sale of high yielding securities net non-interest income
exposure of an individual Group member is regularly monitored and reported
was higher, EUR 14.1 million YoY. The total effect on the income statement
to the Group Asset and Liability Committee (Group ALCO).
from the sold securities in H1 amounted to EUR 17.1 million.
Increase in balances with CBs (EUR 953.9 million YoY), while banking
Group contributed to further growth of fixed interest rate loans, mostly
book securities decreased by EUR 147.8 million due to lack of attractive
housing loans, and investments in high quality debt securities. In terms of
and profitable short-term investments at the end of the year (T-bills auction
funding, non-banking sector deposits continued to increase in the form of
cancellation by RoS).
sight deposits and savings accounts. The development of the COVID-19
From the interest rate risk perspective, the surplus liquidity position of the
53
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 pandemic contributed to a substantial increase in the propensity to save, and
consequently to an increase in an already strong deposit base. The Group
manages interest rate positions and stabilises its interest margin by actively
adjusting pricing policy and by charging maintenance fees, whereas for
managing interest rate risk exposure the Group keeps outstanding plain vanilla
derivatives in line with the Group’s conservative risk appetite. Additionally, the
exposure to interest rate risk has been managed via fund transfer pricing and
external pricing policy. 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.
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
44.6%
40.6%
45.8%
49.2%
Liquid assets
in total assets
n
o
i
l
l
i
m
R
U
E
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
5,454.6
5,172.3
53.4%
1.1%
12.7%
19.6%
13.2%
63.4%
0.9%
6.1%
26.8%
2.7%
6,487.6
57.7%
0.1%
4.4%
29.4%
8.4%
31 Dec 2017
31 Dec 2018
31 Dec 2019
49.8%
9,750.5
51.4%
0.7%
4.4%
37.5%
7,523.6
49.5%
0.0%
3.8%
38.9%
7.7%
6.0%
31 Dec 2020
w/o KB
31 Dec 2020
ECB eligible credit claims
Cash & CB reserves
Placements with banks
Trading book debt securities
Banking book debt securities
Encumbered assets
requirements of regulations governing liquidity.
Figure 62: Evolution of NLB Group liquid assets structure (in EUR million)
Based on due-diligence and the initial communication, acquisition of
Banking book debt securities constituted 51.4% of the Group’s liquid assets.
Komercijalna Banka, Beograd is not altering the current balance sheet
The purpose of the banking book securities is to provide liquidity, along with
concept of NLB Group.
Liquidity reserves management
stabilisation of the interest margin, and interest rate risk management. When
managing the portfolio, the Group uses conservative principles, particularly
with respect to the portfolio’s structure in terms of asset classes.
The Group’s liquidity management focuses on ensuring a sufficient level of
The portfolio is well diversified from the geographical and asset class
liquid assets to settle all due liabilities, minimising the cost of maintaining
perspective, while the prudent tenors of the investments also reflect the
liquidity, optimising the structure of liquidity reserves, ensuring an appropriate
conservative risk appetite of the Group. In 2020, the Group turned its
level of liquidity for different situations and stress scenarios, as well as
attention to the new and fast-developing market of ESG bonds. These bonds
anticipating emergencies and crisis conditions and implementing appropriate
currently have a small share in the whole portfolio (EUR 56.9 million) and is
contingency plans.
expected to grow in the future.
Liquidity reserves management in the Group is decentralised. Each Group
member is responsible for its own portfolio, while Financial Markets in
Slovenia manages the liquid assets of the Bank. The liquidity position of
Komercijalna Banka group is very strong and the management of liquidity
reserves will be embedded into the Group’s existing framework.
The Group’s liquid assets as at year-end were comprised of a cash equivalent
(EUR 4,089.9 million), a debt securities portfolio (EUR 5,077.6 million), and
credit claims eligible for CB-secured funding operations (EUR 583.0 million).
The liquid assets portfolio represents 49.8% of total assets corresponding
to EUR 9,750.5 million (2019: 45.8%). A small part of liquid assets (EUR
1,030.0 million) was encumbered for operational and regulatory purposes.
Liquidity reserves represent liquid assets which are not encumbered and can
provide funding of the future core growth.
54
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
3%
3%
3%
4%
4%
6%
7%
Austria
BiH
Germany
Netherlands
Belgium
France
N. Macedonia
Slovenia
Serbia
Other
Geographical structure
Asset class distribution
Corporate
0%
Agency
2%
GGB
3%
Covered bond
7%
Table 29: Maturity profile of NLB Group’s banking book securities as at 31 December 2020 (in EUR million)
16%
Senior Unsecured
8%
Domestic securities (the Group strategic markets)
26%
27%
Government sec.
78%
- Slovenia
- Other SEE
International securities
Total
2021
2022-2023
2024-2025
2026+
Total
579.2
252.6
326.6
268.3
847.5
923.6
57.3
866.3
651.9
647.9
227.6
420.3
558.3
602.5
298.1
304.4
777.2
1,575.5
1,206.2
1,379.7
2,753.2
835.6
1,917.6
2,255.7
5,008.8
0%
5%
10%
15%
20%
25%
30%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Figure 63: Banking book securities portfolio of NLB Group by asset class and geographical structure as at 31 December 2020
Distribution of asset classes in banking book securities portfolio shows
The maturity profile of the Group’s banking book securities decreased mostly
government securities (including government guaranteed bonds GGB) have
due to acquisition at 2020 YE. Excluding Komercijalna Banka group maturity
a share of 82% (excluding Komercijalna Banka group: 76%), while banking
profile substantially differs only in ‘other SEE’ item, where in 2021 it matures
senior unsecured and covered bonds have 8% and 7%, respectively (excluding
EUR 175 million, in 2022–2023 EUR 248 million, in 2024–2025 EUR 129
Komercijalna Banka group: 11% and 10%). From a geographical structure
million, and in 2026 and beyond EUR 92 million.
point of view, the nine highest exposures excluding Komercijalna Banka
group are towards Slovenia (22%), North Macedonia (9%), France (8%),
The average yield on the Group’s securities without Komercijalna Banka
Belgium (5%), the Netherlands (5%), Germany (5%), Austria (4%), BiH (3%)
group securities was 0.9% (1.2% at 2019 YE).
and Finland (3%). Other contributed 35%.
The average maturity of banking book securities was approximately 3.65
Wholesale funding
years (excluding Komercijalna Banka group: 2020: 3.98 years and 2019: 4.09
Wholesale funding activities in the Group are conducted with the aim of
years).
achieving diversification, improving structural liquidity and capital position,
and fulfilling regulatory requirements. The Bank raised EUR 120 million in
wholesale funding in the form of a subordinated Tier 2 bonds on international
capital markets to strengthen and optimise its capital position. The ECB’s
permission to include the instrument in the calculation of Tier 2 capital was
received in March.
Two Group banking subsidiaries raised funds in a total amount of EUR 10 million.
55
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Non-Core Members
Table 30: Results of the Non-Core Members segment
in EUR million consolidated
2020
2019
Change YoY
The Non-Core Members segment includes the operations of non-core Group members and the non-
core part of the Bank’s portfolio, which consists of non-performing loans to foreign clients and a
limited number of remaining Bank’s equity participations, which are to be terminated. 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.
The segment recorded a EUR 4.6 million loss before tax. Lower net non-
interest income also due to the positive effect from contractual penalty (EUR 1.3
million) in 2019.
Net interest income
Net non-interest income
Total net operating income
Total costs
Result before impairments and provisions
Impairments and provisions
Result before tax
Segment assets
Net loans to customers
Gross loans to customers
Investment property and property & equipment
received for repayment of loans
The wind-down of the
Non-Core segment
in 2020 included:
A decrease of the total assets of the segment YoY (EUR 38.3 million) in line
Other assets
with the divestment strategy of the non-core segment, hence a EUR 6.0 million
Non-performing loans (gross)
decrease in the net operating income.
-56%
-51%
-53%
11%
-148%
-
-47%
-23%
-33%
-31%
1.2
4.2
5.4
-12.9
-7.4
2.9
-4.6
2.7
8.7
11.5
-14.5
-3.0
-0.1
-3.1
-1.5
-4.5
-6.0
1.6
-4.4
3.0
-1.5
31 Dec 2020 31 Dec 2019
Change YoY
131.2
169.5
45.0
95.0
70.2
16.0
71.3
67.4
137.2
75.6
26.5
93.6
-38.3
-22.4
-42.2
-5.4
-7%
-10.5
-22.4
-40%
-24%
42.2
million
EUR
reduction of gross loans
to customers in 2020.
29.6
million
EUR
the total sales value of real-estate
transactions executed or supported
by the real-estate team in 2020.
• A reduction of the
Reduction of the Bank’s credit business with foreign clients
Cost of risk (in bps)(i)
CIR
2020
2019
Change YoY
-396
-231
236.2%
126.0%
-165
110.2 p.p
Bank’s loan exposure
with foreign clients
• Divestment of non-
core Group members
• Sale of the Bank’s
equity participations
• Active management
of real-estate assets
The decreasing of non-core loan exposure is ongoing. The Bank resolved
(i) Cost of risk for 2019 is adjusted to new methodology.
(whole or partly) several exposures in Croatia, Bulgaria, Slovakia, Serbia, and
Montenegro, thus contributing to NPL and other off-balance wind-down
Sale of NLB’s equity participations
processes with a positive effect on P&L.
Divestment of non-core Group members
million (2019: EUR 0.31 million).
At the 2020 YE, the overall asset volume of equity participations is at EUR 0.28
During 2015 – 2020, a liquidation process was initiated in all non-core leasing
Active management of real estate assets
and trade finance subsidiaries and some real estate subsidiaries; in 2020 for
NLB Leasing d.o.o., Sarajevo and BH-RE d.o.o., Sarajevo. The divestment
The divestment process of still remaining NPL exposures at the Bank or at
process has been running with thoughtful cost management and well-established
the non-core subsidiaries’ level is being facilitated through a specialised team
collection procedures leading to a successful divesture in 2020 of NLB Leasing
for repossessing, managing, and divesting collateral real estate. Real estate
Sarajevo – in liquidation, NLB Leasing Podgorica – in liquidation and NLB
expertise and services are offered to the Group members assisting them in
Vita d.d., Ljubljana (which was also subject to EC commitments).
implementation of the most efficient divestment manner of the remaining non-
New business has been suspended in all non-core Group members which are
in the process of being wound-down. The decrease of the cumulative non-
The main task is to ensure value-preserving strategies for the real estate
core subsidiaries’ portfolio remains ongoing through regular repayments and
management, respectively the collateral value of NPL claims by either
performing portfolio or the repossession of the collateral real-estates.
collection measures.
temporarily repossessing real-estate or ensuring a value-preserving divestment
process of the real-estate or a claim. From 2015 to 2020, real-estate transactions
with a total sales value of over EUR 168.7 million were executed or supported,
and directly or indirectly contributed to a EUR 500.1 million of NPL reduction,
of which EUR 29.6 million in 2020 alone.
56
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Finding way to
own a brand with
help of scholarship
Tina Turk
Skripsi, Slovenia
There are many young people who want to
actively contribute to the environment. If there
is any entrepreneurial spirit in them, interesting
entrepreneurial ideas are born. Tina Turk, a 21-year-
old economics student, designed the sustainable
Skripsi brand. Her basic idea is that by buying Skripsi,
customers not only get a nice wooden pen, but a
tree is planted in their name. Tina is so passionate
about her idea, that she even invested her scholarship
in its development. Just at the time of entering the
market, the young businesswoman suffered a major
blow - an epidemic was declared. In the new situation,
she was forced to reduce the necessary investment
in advertising, but she kept on going and became
even more active on social networks. The #HelpFrame
project helped her to further conquer the market.
57
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Risk Management
The stock of NPE volume moderately increased, mainly as a result of
COVID-19 impacts and acquisition of Komercijalna Banka group, while
further reduction resulted from active workout activities. In addition, the
coverage ratio remains high above the EU average, on slightly lower level due
to acquisition impacts, enabling further NPE reduction without significant
Proactive Risk
Management
The self-funded model, strong liquidity, and a solid capital position continued in 2020,
influence on the cost of risk in the years ahead.
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
In the COVID-19 environment the Group is perceived as safe heaven and
therefore faced growing excess liquidity, and impacts of the pandemic did
in 2020.
2.3%
processes within the Group, with the aim of proactively supporting its business operations.
not cause any material liquidity outflows. Significant attention was put into
NPE (EBA def.).
Risk Management in the Group is in charge of managing, assessing, and
market movements. Excess liquidity and market demand for fixed interest
monitoring risks within the Bank as the main entity in Slovenia, and the
rate products resulted in moderately increased interest rate risk exposure,
competence centre for nine banking subsidiaries. Following the acquisition of
which stayed within the risk appetite tolerance toward this risk. Moreover,
Komercijalna Banka, Beograd, integration process is underway, which is in
the Group’s capital and liquidity position remained strong in both the Group
the area of Risk Management primarily focused on the implementation of
and subsidiary bank levels, including the newly acquired Komercijalna Banka
uniform Group’s Standards.
group.
the structure and concentration of liquidity reserves by incorporating early
warning systems, while keeping in mind the potential adverse negative
80.6%
of the granted moratoria
expired by the 2020 YE.
Credit risk
Interest rate risk
Liquidity risk
Operational risk
Other risks
Risk Management principles
The Bank is, as a systemic bank, involved in the Single Supervisory
Mechanism, whereby the supervision is under the jurisdiction of the Joint
Supervisory Team of the ECB and the BoS. ECB regulations are followed
by the Group, where the Group subsidiaries operating outside Slovenia are
Based on the Group’s business strategy, credit risk is the dominant risk
compliant with the rules set by the local regulators. Across the Group, risks are
category, followed by interest rate risk in the banking book, liquidity, and
assessed, monitored, managed, or mitigated in a uniform manner, as defined
operational risk. Management of credit risk focuses on the taking of moderate
in the Group’s Risk management standards, also considering the specifics
risks. The Group has limited exposure to other aforementioned risks, while
of the markets in which individual Group members operate. Following the
liquidity risk tolerance is low. Market risk and other non-financial risks are less
acquisition of Komercijalna Banka group, the harmonisation process in the
important from materiality perspective.
area of Risk Management is underway.
16.6%
14.1%
257.5%
165.7%
62 bps(i)
4.5%
2.3%
-7.3%
The overall slow-down of the economy, caused by the COVID-19 pandemic
Risk Management and control is performed through a clear organisational
at the end of Q1 2020, had some negative impacts on the existing loan
structure with defined roles and responsibilities. The organisation and
portfolio quality and new loan generation. The Group’s credit portfolio
delineation of competencies is designed to prevent conflicts of interest,
quality remained solid with quite stable rating structure and portfolio
ensure a transparent and documented decision-making process, subject to an
diversification. The increased loan volume of the Group is primarily a
appropriate upward and downward flow of information. Business line Risk
result of the acquisition of the Komercijalna Banka group. The cost of
Management in NLB is, by encompassing several professional areas, in charge
risk increased due to the impact of negatively affected macroeconomic
of formulating and controlling the Group’s Risk Management policies, setting
environment, where its materiality and impacts on the risk profile of the
limits, overseeing the harmonisation, regular monitoring of risk exposures and
loan portfolio in the future will mostly depend on the length and severity of
limits based on centralised reporting at the Group level.
Table 31: NLB Group’s
Key Risk Appetite indicators
(KRIs) as at 31 December 2020
TCR
CET1 ratio
LCR
NSFR
Cost of Risk
NPL (EBA def.)
NPE (EBA def.)
Interest rate risk (EVE)
(i) Komercijalna Banka group is excluded from calculation.
disruption in corporate operations and average income of private individuals
(further details are available under the Risk Factors and Outlook).
The Group puts great emphasis on the risk culture and awareness across the
entire Group. The Group’s Risk Management framework is forward-looking
During the year 2020, the Group reviewed IFRS 9 provisioning on an
and tailored to its business model and corresponding risk profile. The main
ongoing basis by testing a set of relevant macroeconomic scenarios to
risk principles and limits are set forth by the Group’s Risk Appetite and Risk
adequately reflect the current circumstances and related future impacts.
58
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Strategy, designed in accordance with business strategy. Special focus is placed
The uniform stress-testing programme, which includes internally developed
on the inclusion of risk analysis into the decision-making process at strategic
models, stress scenarios, and sensitivity analysis, was further complemented.
and operating levels, diversification to avoid large concentration, optimal capital
Such a stress-testing framework is the subject of a regular internal validation
usage and allocation, appropriate risk-adjusted pricing, and overall compliance
cycle and related procedures where the Group established comprehensive
with internal rules and regulations.
validation framework. Namely, the Group supports a strong validation
governance process and controls over applied selected risk approaches and
Risk Management focuses on managing and mitigating risks in line with the
internal models.
Group’s Risk Appetite and Risk Strategy, representing the foundation of the
Group’s Risk Management framework. Within these frameworks, the Group
The business and operating environment, relevant for the Group operations
monitors a range of risk metrics in order to assure the Group’s risk profile is in
is changing, with trends such as changing customer behaviour, emerging new
line with its Risk Appetite. In addition, the Group is constantly enhancing its
technologies and competitors, and increasing new regulatory requirements. It
Risk Management system, where consistent incorporation of ICAAP, ILAAP,
should be noted that Risk Management is continuously adapting with the aim
Recovery plan, and other internal stress-testing capabilities into the Risk
of detecting and managing new potential emerging risks.
Management system is essential. Moreover, the Group puts great emphasis on
their integration into the overall Risk Management system in order to assure
Proactive Risk Management in 2020
proactive support for informed decision-making.
Figure 64: NLB Group’s Risk Management
P
A
A
L
I
&
P
A
A
C
I
s
t
u
p
n
i
Business strategy
Risk identification
Risk Appetite
(Limit system)
Capital and Financial
planning
ILAAP
ICAAP
• Economic and normative-
assessment of liquidity
• Stress tests
• Liquidity contingency
plan (LCP)
• Economic and normative
assessment of capital
• Stress tests
Results
Recovery plan
Assessment of liquidity and capital (significant deterioration)
Prudent level of capital position and MREL requirement
One of the key aims of Risk Management is to preserve a prudent level of the
3.50%
3.50%
3.25%
2.75%
2.75%
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 perspective as part of the established
ICAAP process. As at 31 December 2020, the Group had a very solid capital
position and TCR of 16.6%. The capital increased mostly due to the inclusion
of subordinated Tier 2 bonds (EUR 240 million), undistributed profit from
2019 (EUR 157.5 million), and the minority capital (EUR 99.0 million), also
for the purpose of acquisition. Despite the implementation of CRR ‘quick fix’
2017
2018
2019
2020
2021
and other capital relief measures, an increase of risk-weighted assets arising
Figure 65: NLB Group’s Pillar 2
from the acquired Komercijalna Banka group, resulted in a drop of the Group’s
Requirement evolution
TCR at the end of the year 2020. The CET1 ratio, representing the capital of
highest quality, stood at 14.1%. As at 31 December 2020, the Group meets all
fully loaded regulatory requirements. Moreover, enhanced overall corporate
governance led in the past two years to a lower Pillar 2 Requirement (P2R),
which decreased from 3.5% in 2018 to 2.75% applicable in 2020 and 2021,
while Pillar 2 Guidance remains at low level of 1%.
The MREL requirement for the Group is based on the Multiple Point of Entry
(MPE) approach. For the time being it is set as the percentage of TLOF at the
sub-consolidated level of the NLB Resolution Group (the Bank and non-core
part of the Group). The currently valid MREL decision issued by the BoS
defines the MREL requirement at the level of 15.56% of TLOF at the sub-
consolidated level of the NLB Resolution Group which needs to be met as of
31 December 2021 onward. In accordance with the revised methodology for
MREL requirements TLOF will no longer represent the basis for calculating the
requirement, instead TREA (based on risk-weighted assets and leverage ratio)
will be used. The new period for fulfilling the requirement is expected
59
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
to be from 1 January 2022 onwards (as binding intermediate target) with
transition period until 2024. The Group expects to receive a new MREL
Maintaining the adequate credit portfolio quality
decision in H1 2021, consequently the new MREL requirement will be
Maintaining the adequate credit portfolio quality is the most important goal,
implemented as part of Group’s risk appetite. Otherwise, the MREL
with the focus on cautious risk-taking and quality of new loans leading to a
requirement is regularly analysed and monitored by the Group.
diversified portfolio of customers. The Group is constantly developing a wide
Maintaining a solid level and structure of liquidity
450%
400%
350%
300%
250%
200%
150%
100%
31 D ec 2019
31 Jan 2020
29 Feb 2020
31 M ar 2020
30 A pr 2020
31 M ay 2020
30 Ju n 2020
31 Jul 2020
31 A u g 2020
30 Sep 2020
31 O ct 2020
30 N ov 2020
31 D ec 2020
LCR NLB Group
LCR NLB Group w/o KB
Figure 66: NLB Group’s LCR
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. From
the beginning of the COVID-19 pandemic, the Group fully respected EBA
guidelines on payment moratoria regarding forborne exposures, frequently
performing the assessment of borrowers and ensuring effective early warning
systems. Respectively monitoring systems were upgraded with the intention
to detect any significant increase in credit risk at an early stage. All relevant
information was available to management bodies with higher frequency than
before crisis to assure adequate and timely oversight over the critical elements
of credit Risk Management and executing mitigation measures if needed.
The Group’s lending strategy focuses on its core markets of retail, SME,
State(iii) 3,290
SME 2,687
Institutions 446
Maintaining a solid level and structure of liquidity represents the next very
and selected corporate business activities within the region and EU. On the
important risk target. The liquidity position of the Group remained very
Slovenian market, the focus is on providing appropriate solutions for retail,
solid, and the impacts of the pandemic did not cause any material liquidity
medium-sized companies, and small enterprise segments, whereas on the
outflows. The Group holds a very strong liquidity position at the Group and
corporate segment, the Bank established cooperation with selected corporate
individual subsidiary bank levels. Also, the liquidity position of Komercijalna
clients (through different types of lending or investment instruments).
Banka group is very comfortable. Due to the acquisition, LCR decreased to
257.5% (by 45 p.p. in comparison to Q3 2020), but remained well above the
risk appetite. Although the Group gained EUR 1.5 billion of high-quality liquid
Highest quality
assets (HQLA) with the acquisition of Komercijalna Banka, Beograd, only a
part of them of each banking member can be included in the consolidated
57 58 60 61
63 65
60
LCR calculation (only the amount of HQLA that covers net liquidity outflows
incurred in the same currency). In addition, HQLA also decreased on the Bank
%
n
I
level due to paid purchase price. Nevertheless, the level of the unencumbered
eligible liquid assets increased up to EUR 8,720.5 million, representing 44.6%
of total assets. Even if the event of the combined adverse stress scenario would
be realised, the Group has sufficient liquidity reserves in place in the form of
placements at the ECB, prime debt securities, and money market placements.
All banking members satisfy the minimum liquidity reserve criteria and would
survive at least three months in such stress scenario. The main funding base of
the Group at the Group and individual subsidiary bank levels predominately
entails customer deposits, namely in the retail segment, representing a very
stable and constantly growing base. By acquiring Komercijalna Banka, Beograd,
LTD decreased from 62.4% (Q3 2020) to 58.8% (YE 2020), remaining at very
comfortable level.
28 30 28
33
23 25
18
A
B
C
D
31 Dec 2015
31 Dec 2016
31 Dec 2017
31 Dec 2018
31 Dec 2019
31 Dec 2020 w/o KB
31 Dec 2020
6
5
5
4
3
3
4
7
6
5
3
2
2
2
Figure 67: NLB Group structure of the credit portfolio(i) (gross loans) by segment (in EUR million) and rating(ii)
(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 >90days 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.
Retail
consumer
2,300
EUR
13.7 billion
Retail housing
2,729
Corporates
2,235
Default
NPL
12
8
5
2
2
2
4
E
60
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Table 32: Overview of NLB Group loan portfolio by industry as at 31 December 2020
Retail sector after acquisition of KB Banks
Corporate credit portfolio (in EUR million)
Corporate sector by industry
NLB Group
w/o KB
NLB
Group
%
%
∆
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. Currently,
Accommodation and food service activities
112.6
2.9%
141.2
2.9%
Administrative and support service activities
108.5
2.8%
121.8
2.5%
28.6
13.3
the acquired Komercijalna Banka, Beograd is predominantly focused on retail
and large companies, however its future strategy will be more focused on retail
Stage 1
92%
Agriculture, forestry and fishing
164.1
4.2%
288.7
5.9%
124.6
and SME segments.
Retail
consumer
46%
EUR
5.0 billion
Retail
mortgages
54%
The current structure of credit portfolio (gross loans) consists of 36.7% retail
clients, 16.3% large corporate clients, 19.6% SMEs and micro companies, while
the remainder of the portfolio consists of other liquid assets. As at 31 December
2020, with the acquisition of Komercijalna Banka, Beograd, there were no
major changes in the corporate and retail credit portfolio structure. 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.
State
26%
Retail
38%
Stage 2
4%
Stage 3
3%
FVTPL
0%
Institutions
3%
Corporate
33%
Figure 68: NLB Group loan portfolio
(measured at amortised cost) by
stages as at 31 December 2020
Arts, entertainment and recreation
18.1
0.5%
21.0
0.4%
2.9
Construction industry
267.8
6.8%
373.8
7.6%
106.0
Retail sector w/o KB Banks
Education
13.5
0.3%
14.1
0.3%
Retail
consumer
46%
EUR
4.2 billion
Electricity, gas, steam and air conditioning
170.9
4.4%
258.1
5.2%
Finance
150.1
3.8%
167.7
3.4%
Human health and social work activities
38.9
1.0%
50.0
1.0%
Information and communication
164.4
4.2%
233.9
4.8%
0.6
87.2
17.6
11.1
69.5
Retail
mortgages
54%
Manufacturing
Mining and quarrying
873.8
22.3%
986.1
20.0%
112.3
32.4
0.8%
80.0
1.6%
Professional, scientific and techn. act.
148.8
3.8%
171.6
3.5%
Public admin., defence, compulsory social.
132.8
3.4%
219.4
4.5%
Real estate activities
182.4
4.7%
221.6
4.5%
Services
12.1
0.3%
13.9
0.3%
Transport and storage
555.2
14.2%
592.1
12.0%
Water supply
28.3
0.7%
41.1
0.8%
47.6
22.9
86.5
39.1
1.9
36.9
12.8
Wholesale and retail trade
744.5
19.0%
923.1
18.8%
178.6
Other
1.2
0.0%
1.8
0.0%
0.7
Total Corporate sector
3,920.3
100.0% 4,921.0
100.0% 1,000.7
61
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 The majority of the Group’s loan portfolio is classified as Stage 1 (92.4%),
of Stage 1 exposures increased. Impacts of the COVID-19 pandemic caused
the remaining portfolio as Stage 2 (4.1%), and Stage 3 and FVTPL (3.5%).
moderate credit quality deterioration, namely as an increase of Stage 2 and
Under IFRS 3 rules, all assets of the acquired Komercijalna Banka, Beograd
Stage 3 exposures. The highest increase in Stage 3 exposures arises from the
were initially recognised at fair value in the Group financial statements.
accommodation and food service activities, while an increase in Stage 2 largely
Respectively all loans were classified either in Stage 1 (performing portfolio)
refers to manufacturing. An increase in both stages also occurred in the segment
or in Stage 3 (non-performing portfolio). For Stage 3 loans special rules apply,
of private individuals. Additionally, part of increase of Stage 3 exposures also
since they are NPLs already at initial recognition and recognised at fair value
refers to the acquisition of Komercijalna Banka, Beograd and the changed
without any additional credit loss allowances. On this basis, the percentage
treatment of excluded interest.
Table 33: NLB Group loan portfolio (measured at amortised cost) by stages as at 31 December 2020
NLB Group after acquisition of KB banks
Stage1
Credit portfolio
Stage2
Stage3 & FVTPL
Stage1
Stage2
Stage3 & FVTPL
Provisions and FV changes for credit portfolio
(in EUR million)
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
o/w Corporate
o/w Retail
o/w State
12,650.8
4,135.7
4,779.2
92.4%
84.0%
95.0%
3,703.1
928.5
957.0
3,290.1
100.0%
1,658.0
o/w Institutions
445.8
100.0%
159.6
560.1
426.8
133.3
-
-
4.1%
8.7%
2.7%
-
-
89.0
59.5
29.6
-
-
475.7
358.6
117.1
-
-
3.5%
7.3%
2.3%
-
-
101.0
73.0
29.6
-1.7
-
75.7
49.0
25.2
1.3
0.2
0.6%
1.2%
0.5%
0.0%
0.1%
40.8
32.7
8.2
-
-
7.3%
7.7%
6.1%
-
-
271.9
210.8
61.2
-
--
57.2%
58.8%
52.2%
-
-
NLB Group w/o KB banks
Stage1
Credit portfolio
Stage2
Stage3 & FVTPL
Stage1
Stage2
Stage3 & FVTPL
Provisions and FV changes for credit portfolio
(in EUR million)
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 w/o KB
10,065.6
o/w Corporate
o/w Retail
o/w State
3,169.6
3,935.5
91.0%
80.9%
94.1%
1,117.9
-37.6
113.3
2,661.2
100.0%
1,029.0
o/w Institutions
299.4
100.0%
13.2
560.1
426.8
133.3
-
-
5.1%
10.9%
3.2%
-
-
89.0
59.5
29.6
-
-
435.3
324.0
111.4
-
-
3.9%
8.3%
2.7%
-
-
60.6
38.4
23.9
-1.7
-
65.3
41.0
23.0
1.1
0.2
0.6%
1.3%
0.6%
0.0%
0.1%
40.8
32.7
8.2
-
-
7.3%
7.7%
6.1%
-
-
271.9
210.7
61.2
-
-
62.5%
65.0%
54.9%
-
-
62
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Moratoriums and new financings as a response to COVID-19
Based on the measures taken by the governments in Slovenia and other
In December 2020, after the impact of the second COVID-19 wave, the
countries, the Group made moratoriums available to all eligible borrowers for
EBA decided to reactivate its guidelines on legislative and non-legislative
payment of obligations due to COVID-19, which were not treated as a trigger
moratoria. This reactivation ensured that loans, which had previously not
for a significant increase of the credit risk. Nevertheless, all clients requiring
benefitted from payment moratoria, could afterwards also benefit from them.
the moratorium are closely monitored as their financial situation and
The revised EBA guidelines will apply until 31 March 2021. In some markets
identification of credit deterioration will lead to downgrade and will impact
where Group members operate, the local government or regulator renewed or
the IFRS 9 staging.
prolonged payment moratoriums. However, the Group members shall follow
EBA guidelines on moratoria. In accordance with these guidelines, moratoria
The moratorium applies to a large group of obligors predefined on the basis
granted after period defined by EBA, should be classified on a case-by-case
of broad criteria, and envisages only changes to the schedule of payments,
basis, evaluating each client’s forbearance status.
either by postponing or suspending the payments of principal amounts,
interest or full instalments, for a predefined and limited period of time.
Moratoriums were granted for the period between 3 to 12 months, subject
to applicable government measures.
Table 34: NLB Group COVID-19 Related Transactions (Moratoriums and New Financings); in EUR thousands
NLB Group member
Number of clients
Exposure
Of which:
EBA Compliant
moratoria
Of which:
expired by
31 Dec 2020
% of Exposure
% of Exposure
(exc. expired
moratoriums)
Number of clients
Exposure
Of which:
expired by
31 Dec 2020
Of which:
subject to public
guarantee schemes
% of Exposure
Exposure
Of which:
expired by
31 Dec 2020
COVID-19 Moratorium
COVID-19 New Financing
Total COVID-19 Related Transactions
NLB, Ljubljana
Retail
o/w Housing
o/w Consumer
Non-financial corporations
o/w Secured loans
o/w Unsecured loans
Other
NLB Banka, Beograd
Retail
o/w Housing
o/w Consumer
Non-financial corporations
o/w Secured loans
o/w Unsecured loans
Other
NLB Leasing d.o.o. - v likvidaciji, Ljubljana
Retail
o/w Housing
o/w Consumer
Non-financial corporations
o/w Secured loans
o/w Unsecured loans
Other
3,915.0
3,553.0
1,279.0
2,625.0
360.0
200.0
202.0
2.0
39,227.0
38,633.0
489,950.9
390,262.6
152,108.6
123,330.9
106,749.4
79,519.8
43,811.1
69,654.8
37,094.5
24,613.3
14,595.9
10,017.5
366,536.3
283,429.6
127,495.2
305,803.8
224,577.6
60,732.5
58,852.0
83.7
83.7
86,796.2
40,699.0
0.0
251,797.6
251,797.6
251,797.6
159,486.4
159,486.4
159,486.4
825.0
28,645.6
28,645.6
28,645.6
38,159.0
130,840.8
130,840.8
130,840.8
592.0
132.0
508.0
2.0
159.0
94.0
0.0
94.0
65.0
65.0
1.0
0.0
92,294.6
41,427.5
50,867.2
16.6
3,615.2
1,084.4
0.0
1,084.4
2,530.9
2,529.8
1.1
0.0
92,294.6
41,427.5
50,867.2
16.6
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
92,294.6
41,427.5
50,867.2
16.6
3,331.9
952.2
0.0
952.2
2,379.7
2,378.6
1.1
0.0
7.2%
1.8%
1.2%
0.7%
5.4%
4.5%
0.9%
0.0%
41.7%
26.4%
4.7%
21.7%
15.3%
6.9%
8.4%
0.0%
14.6%
4.4%
0.0%
4.4%
10.2%
10.2%
0.0%
0.0%
5.0%
1.5%
1.0%
0.5%
3.5%
3.2%
0.3%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
1.1%
0.5%
0.0%
0.5%
0.6%
0.6%
0.0%
0.0%
96.0
20.0
0.0
20.0
76.0
25.0
52.0
0.0
248.0
29.0
0.0
29.0
219.0
219.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
20,766.1
396.0
0.0
396.0
20,370.1
14,067.0
6,303.2
0.0
56,935.7
1,958.7
0.0
1,958.7
54,977.0
54,977.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
12,722.7
471.9
0.0
471.9
12,250.8
12,250.8
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
12,766.9
50.2
0.0
50.2
12,716.8
12,716.8
0.0
0.0
56,935.7
1,958.7
0.0
1,958.7
54,977.0
54,977.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.3%
0.0%
0.0%
0.0%
0.3%
0.2%
0.1%
0.0%
7.3%
0.3%
0.0%
0.3%
7.1%
7.1%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
510,717.0
152,108.6
123,726.9
79,519.8
44,207.1
24,613.3
14,595.9
10,017.5
386,906.4
127,495.2
319,870.8
67,035.6
83.7
86,796.2
40,699.0
0.0
308,733.4
264,520.4
161,445.0
159,958.3
28,645.6
28,645.6
132,799.5
131,312.7
147,271.7
104,545.4
96,404.5
50,867.2
16.6
3,615.2
1,084.4
0.0
1,084.4
2,530.9
2,529.8
1.1
0.0
53,678.3
50,867.2
16.6
3,331.9
952.2
0.0
952.2
2,379.7
2,378.6
1.1
0.0
63
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 NLB Group member
Number of clients
Exposure
Of which:
EBA Compliant
moratoria
Of which:
expired by
31 Dec 2020
% of Exposure
% of Exposure
(exc. expired
moratoriums)
Number of clients
Exposure
Of which:
expired by
31 Dec 2020
Of which:
subject to public
guarantee schemes
% of Exposure
Exposure
Of which:
expired by
31 Dec 2020
COVID-19 Moratorium
COVID-19 New Financing
Total COVID-19 Related Transactions
NLB banka, Podgorica
Retail
o/w Housing
o/w Consumer
Non-financial corporations
o/w Secured loans
o/w Unsecured loans
Other
NLB Banka, Banja Luka
Retail
o/w Housing
o/w Consumer
Non-financial corporations
o/w Secured loans
o/w Unsecured loans
Other
NLB Banka, Skopje
Retail
o/w Housing
o/w Consumer
Non-financial corporations
o/w Secured loans
o/w Unsecured loans
Other
NLB Banka, Sarajevo
Retail
o/w Housing
o/w Consumer
Non-financial corporations
o/w Secured loans
o/w Unsecured loans
Other
NLB Banka, Prishtina
Retail
o/w Housing
o/w Consumer
Non-financial corporations
o/w Secured loans
o/w Unsecured loans
Other
7,601.0
7,373.0
1,758.0
6,200.0
226.0
136.0
130.0
2.0
155.0
126.0
33.0
99.0
28.0
23.0
6.0
1.0
76,912.0
76,328.0
2,126.0
75,291.0
583.0
177.0
443.0
1.0
1,431.0
1,363.0
73.0
1,322.0
67.0
33.0
39.0
1.0
5,883.0
4,646.0
2,024.0
3,884.0
1,232.0
1,218.0
26.0
5.0
165,046.9
165,046.9
165,046.9
118,981.7
118,981.7
118,981.7
69,147.7
49,833.9
42,853.2
36,508.3
6,344.9
3,212.1
20,946.1
2,200.7
1,221.3
979.4
11,730.5
11,682.4
48.0
7,015.0
69,147.7
49,833.9
42,853.2
36,508.3
6,344.9
3,212.1
8,673.6
359.4
217.0
142.4
1,299.2
1,254.6
44.6
7,015.0
69,147.7
49,833.9
42,853.2
36,508.3
6,344.9
3,212.1
17,443.6
1,939.8
1,075.2
864.7
8,488.8
8,440.7
48.0
7,015.0
347,350.6
347,350.6
292,042.4
282,459.2
282,459.2
236,966.0
83,408.3
83,408.3
65,578.9
199,050.9
199,050.9
171,387.0
64,884.7
50,472.3
14,412.4
6.6
35,157.2
12,564.3
1,728.3
10,836.0
20,770.3
16,027.8
4,742.5
1,822.6
64,884.7
50,472.3
14,412.4
6.6
35,152.3
12,564.3
1,728.3
10,836.0
20,765.4
16,027.8
4,737.6
1,822.6
55,069.8
42,872.5
12,197.3
6.6
26,799.2
11,852.3
1,681.5
10,170.8
13,124.3
10,105.7
3,018.5
1,822.6
249,283.2
249,283.2
190,121.7
49,594.5
37,530.7
12,063.8
49,594.5
37,530.7
12,063.8
48,881.0
36,897.2
11,983.9
199,623.9
199,623.9
141,175.9
199,536.1
199,536.1
141,088.4
87.8
64.7
87.8
64.7
87.6
64.7
35.1%
25.3%
14.7%
10.6%
9.1%
7.8%
1.4%
0.7%
3.6%
0.4%
0.2%
0.2%
2.0%
2.0%
0.0%
1.2%
27.6%
22.5%
6.6%
15.8%
5.2%
4.0%
1.2%
0.0%
6.5%
2.3%
0.3%
2.0%
3.8%
3.0%
0.9%
0.3%
32.3%
6.4%
4.9%
1.6%
25.9%
25.9%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.6%
0.0%
0.0%
0.0%
0.6%
0.6%
0.0%
0.0%
4.4%
3.6%
1.4%
2.2%
0.8%
0.6%
0.2%
0.0%
1.5%
0.1%
0.0%
0.1%
1.4%
1.1%
0.3%
0.0%
7.7%
0.1%
0.1%
0.0%
7.6%
7.6%
0.0%
0.0%
7.0
0.0
0.0
0.0
7.0
2.0
5.0
0.0
36.0
15.0
0.0
15.0
21.0
8.0
13.0
0.0
3.0
0.0
0.0
0.0
3.0
3.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
492.4
0.0
0.0
0.0
492.4
100.0
392.4
0.0
2,722.9
353.3
0.0
353.3
2,369.6
1,760.1
609.4
0.0
123.9
0.0
0.0
0.0
123.9
123.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
168.6
14.7
0.0
14.7
153.9
0.0
153.9
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.1%
0.0%
0.0%
0.0%
0.1%
0.0%
0.1%
0.0%
0.4%
0.1%
0.0%
0.1%
0.4%
0.3%
0.1%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
165,539.3
165,046.9
118,981.7
118,981.7
69,147.7
49,833.9
43,345.6
36,608.3
6,737.3
3,212.1
69,147.7
49,833.9
42,853.2
36,508.3
6,344.9
3,212.1
23,669.0
17,612.2
2,554.0
1,221.3
1,332.7
14,100.0
13,442.6
657.5
7,015.0
1,954.5
1,075.2
879.3
8,642.7
8,440.7
202.0
7,015.0
347,474.5
292,042.4
282,459.2
236,966.0
83,408.3
65,578.9
199,050.9
171,387.0
65,008.7
50,596.3
14,412.4
6.6
35,157.2
12,564.3
1,728.3
10,836.0
20,770.3
16,027.8
4,742.5
1,822.6
55,069.8
42,872.5
12,197.3
6.6
26,799.2
11,852.3
1,681.5
10,170.8
13,124.3
10,105.7
3,018.5
1,822.6
249,283.2
190,121.7
49,594.5
37,530.7
12,063.8
48,881.0
36,897.2
11,983.9
199,623.9
141,175.9
199,536.1
141,088.4
87.8
64.7
87.6
64.7
64
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 NLB Group member
Number of clients
Exposure
Of which:
EBA Compliant
moratoria
Of which:
expired by
31 Dec 2020
% of Exposure
% of Exposure
(exc. expired
moratoriums)
Number of clients
Exposure
Of which:
expired by
31 Dec 2020
Of which:
subject to public
guarantee schemes
% of Exposure
Exposure
Of which:
expired by
31 Dec 2020
COVID-19 Moratorium
COVID-19 New Financing
Total COVID-19 Related Transactions
Komercijalna Banka, Beograd
143,880.0
798,057.7
798,057.7
798,057.7
Retail
o/w Housing
o/w Consumer
Non-financial corporations
o/w Secured loans
o/w Unsecured loans
Other
Komercijalna Banka, Podgorica
Retail
o/w Housing
o/w Consumer
Non-financial corporations
o/w Secured loans
o/w Unsecured loans
Other
Komercijalna Banka, Banja Luka
Retail
o/w Housing
o/w Consumer
Non-financial corporations
o/w Secured loans
o/w Unsecured loans
Other
Total NLB Group
141,509.0
542,859.1
542,859.1
542,859.1
9,827.0
234,781.0
234,781.0
234,781.0
136,737.0
308,078.1
308,078.1
308,078.1
2,334.0
328.0
2,112.0
254,366.5
254,366.5
254,366.5
117,414.8
117,414.8
117,414.8
136,951.8
136,951.8
136,951.8
37.0
935.0
783.0
271.0
600.0
152.0
0.0
152.0
0.0
183.0
124.0
48.0
78.0
51.0
28.0
29.0
8.0
832.0
41,664.3
18,398.9
10,594.4
7,804.5
23,265.5
0.0
832.0
41,253.6
18,361.2
10,594.4
7,766.8
22,892.4
0.0
832.0
38,050.2
17,656.3
10,406.1
7,250.2
20,394.0
0.0
23,265.5
22,892.4
20,394.0
0.0
32,073.8
2,658.1
1,531.9
1,126.1
14,999.0
7,382.0
7,617.0
14,416.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
27,604.8
2,658.1
1,531.9
1,126.1
10,529.9
4,303.7
6,226.3
14,416.7
34.3%
23.3%
10.1%
13.2%
10.9%
5.0%
5.9%
0.0%
34.3%
15.1%
8.7%
6.4%
19.1%
0.0%
19.1%
0.0%
16.3%
1.4%
0.8%
0.6%
7.6%
3.8%
3.9%
7.3%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
3.0%
0.6%
0.2%
0.5%
2.4%
0.0%
2.4%
0.0%
2.3%
0.0%
0.0%
0.0%
2.3%
1.6%
0.7%
0.0%
3.5%
1,736.0
897.0
0.0
897.0
838.0
813.0
26.0
1.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
4.0
0.0
0.0
0.0
4.0
4.0
0.0
0.0
64,893.3
16,523.3
0.0
16,523.3
48,357.3
48,119.7
237.6
12.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
20,406.5
5,262.1
0.0
5,262.1
15,131.7
15,131.7
0.0
12.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
2,976.5
1,346.1
0.0
0.0
0.0
2,976.5
2,976.5
0.0
0.0
0.0
0.0
0.0
1,346.1
1,346.1
0.0
0.0
64,893.3
16,523.3
0.0
16,523.3
48,357.3
48,119.7
237.6
12.7
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
2,130.0
148,910.9
34,644.0
134,596.0
1.9%
0.5%
0.0%
0.5%
1.4%
1.4%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.8%
0.0%
0.0%
0.0%
0.8%
0.8%
0.0%
0.0%
0.8%
862,951.0
818,464.2
559,382.4
548,121.2
234,781.0
234,781.0
324,601.3
313,340.1
302,723.8
269,498.3
165,534.4
132,546.5
137,189.4
136,951.8
844.8
41,664.3
18,398.9
10,594.4
7,804.5
23,265.5
0.0
844.8
38,050.2
17,656.3
10,406.1
7,250.2
20,394.0
0.0
23,265.5
20,394.0
0.0
0.0
35,050.4
28,950.8
2,658.1
1,531.9
1,126.1
17,975.6
10,358.6
7,617.0
14,416.7
2,658.1
1,531.9
1,126.1
11,876.0
5,649.7
6,226.3
14,416.7
2,583,854.5
1,997,048.5
280,281.0
2,434,943.6
2,286,878.1
1,962,404.6
17.8%
On the Group level EUR 2,434.9 million moratorium have been approved
Serbian banks as a result of COVID-19-related measures taken at the state
so far, 44.9% to non-financial corporations and 53.9% to households. The
level. A total of 93.1% of the moratoriums approved by strategic banking
amount represents 17.8% of the total gross book value. Moratoria were
members of the Group in SEE have already expired by the 2020 YE.
granted for the period between 3 to 12 months. Moreover, 80.6% of the
granted moratoria expired by the 2020 YE, whereas by the end of Q3 2020
The Group is actively present on SEE markets by financing the existing and
already 51.8% of them expired. Since the expiration of moratorium, 93.5%
new creditworthy clients. Lending growth in the corporate segment remained
of exposure has performed without any material delays, while non-expired
relatively moderate, especially in the current specific circumstances. Besides
moratoriums were already appropriately reclassified in 2020 based on future
that, the COVID-19 situation contributed to a temporary slowdown in
expectations. From the non-expired moratoria, 55.2% will expire in the next
the growth of retail segment. Apart from moratoriums, the Group is also
three months.
providing additional liquidity by granting new loans to creditworthy clients to
help with the specific situation due to COVID-19 crisis. The volume of such
In Slovenia EUR 493.6 million moratorium have been approved with
loans was EUR 20.8 million in the Bank and EUR 128.1 million in other
outstanding amount of EUR 338.1 million at the 2020 YE which represents
less than 4.8% of the total portfolio. Banks in Strategic Foreign Markets have
approved EUR 1,941.4 million moratorium, more than half of them by
banking members of the Group. EUR 134.6 million of the new COVID-19
loans are subject to public guarantee schemes in Serbia and Slovenia.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 New NPLs formation and NPL management
The combination of a high-quality portfolio, COVID-19 legislative options
and uncertain macroeconomic conditions led to cumulative new NPLs
formation in the amount of EUR 148 million, which is 1.1% of the total
portfolio. These figures do not include the newly acquired Komercijalna
Banka, Beograd, however, their NPLs as of 2020 YE are included in the
Group’s NPLs stock. Additionally, the macroeconomic situation across the
region, affected by the economic slowdown in the current year, resulted in an
increased cost of risk. Its further development refers to a large extent to the
economic circumstances caused by COVID-19 pandemic.
Formation / gross loans (stock)
1.2%
1.4%
0.7%
0.7%
0.6%
128
31
32
64
123
15
77
31
60
37
21
2
64
36
16
12
56
35
20
1.1%
148
78
60
10
2015
2016
2017
2018
2019
2020
Corporate
SME
Retail/Other
Figure 69: NLB Group gross NPL formation (in EUR million)
Precisely set targets in the Group’s NPL Strategy 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 use of other active NPL management tools, such as
foreclosure of collateral, the sale of claims, and pledged assets. The non-
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
3,684
59.3%
2,798
69.7%
2,623
68.7%
72.2%
1,896
89.2%
76.1%
77.5%
81.8%
77.1%
28.2%
25.6% 25.1%
1,299
13.8%
19.3%
844
9.2%
622
6.9%
375
475
3.8%
3.5%
31 Dec
2012
31 Dec
2013
31 Dec
2014
31 Dec
2015
31 Dec
2016
31 Dec
2017
31 Dec
2018
31 Dec
2019
31 Dec
2020
100
90
80
70
60
50
40
30
20
10
0
Coverage ratio 1
NPL ratio
NPLs
Figure 70: NLB Group NPL, NPL ratio and Coverage ratio(i) (in EUR million)
(i) By internal definition.
Table 35: NPL, NPL ratio and Coverage ratio by NLB Group members (in EUR thousands)
NLB Group member
NLB, Ljubljana
NLB Banka, Skopje
NLB Banka, Podgorica
NLB Banka, Sarajevo
NLB Banka, Prishtina
NLB Banka, Banja Luka
NLB Banka, Beograd
Komercijalna Banka, Beograd
Komercijalna Banka, Banja Luka
Komercijalna Banka, Podgorica
Total NLB Group banks
Total NLB Group
NPL
31 Dec 2020
208,426.1
63,177.1
27,279.5
24,690.8
17,518.9
13,702.8
8,718.3
35,219.8
1,165.9
3,558.9
403,458.1
474,748.9
% NPL
31 Dec 2020
NPL CR 2
31 Dec 2020
3.0%
5.1%
5.8%
4.5%
2.3%
2.3%
1.4%
1.5%
0.6%
2.7%
2.9%
3.5%
57.9%
69.0%
50.9%
68.9%
81.2%
63.6%
59.8%
0.0%
0.0%
0.0%
55.4%
57.3%
performing credit portfolio stock stopped its multi-year declining trend as a
Due to extensive experience gained in the last few years in dealing with
consequence of COVID-19 outbreak. The non-performing credit portfolio
clients with financial difficulties, resulting primarily from legacy portfolios, the
stock in the Group increased at 2020 YE in comparison with 2019 YE to
Group has developed an extensive knowledge base both in the prevention of
EUR 474.7 million (2019 YE: EUR 374.7 million). The increase of NPLs
financial difficulties for clients, to restructure viable clients in case of need,
mainly occurred due to the deterioration of asset quality related to the
and to efficiently work out exposures with no realistic recovery prospects.
COVID-19 pandemic, changed treatment of accrued interest and acquisition
This extensive knowledge base is available throughout the Group, and risk
of Komercijalna Banka, Beograd, while different workout measures (namely
units as well as restructuring and workout teams are properly staffed and
repayments, collection and recovery from legacy portfolios) positively
have the capacity to deal, if needed, with considerably increased volumes
influenced on the stock of NPLs. The combined result of all the effects lead to
in a professional and efficient manner. Due to this fact, as well as due to
3.5% of NPLs, while the internationally more comparable NPE ratio, based
implemented early warning tools, and due to efficient analysis and reporting
on the EBA methodology, stood at 2.3%. The Group’s indicator gross NPL
mechanisms, which allows the Group to proactively identify and engage with
ratio, defined by the EBA, is equal to 4.5% and is below the regulatory defined
potentially distressed borrowers, the Group estimates that it is well prepared
threshold for establishment of NPL strategy framework.
to deal proactively with potentially distressed debtors also in the context of
66
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 COVID-19, while properly differentiating between viable and non-viable
The Group carries its main business activities in euros, and the subsidiary
Robust operational Risk Management
clients, in order to minimise the impact on the quality of its credit portfolio.
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
In the area of operational Risk Management, where the Group has
An important Group’s strength is the NPL coverage ratio 1 (coverage of
from transactional risk is low, and at less than 1.7% of capital. Regarding
established robust operational risk culture, the main qualitative activities refer
gross NPLs with impairments for all loans), which remains high at 81.8%.
structural FX positions on a consolidated level, assets and liabilities held in
to the reporting of loss events and identification, assessment, and management
Furthermore, the Group’s NPL coverage ratio 2 (coverage of gross NPLs
foreign operations are converted into euro currency at the closing FX rate
of operational risks. On this basis, constant improvement of control activities,
with impairments for NPL) stands at 57.3%, which is well above the EU
on the balance sheet date. FX differences of non-euro assets and liabilities
processes, and/or organisation are performed. Besides that, the Group also
average as published by the EBA (44.9% for Q4 2020). As such, it enables a
are recognised in the other comprehensive income, and therefore affect
focuses on proactive mitigation, prevention, and minimisation of potential
further reduction in NPLs without significantly influencing the cost of risk
shareholder’s equity and CET1 capital. By acquiring Komercijalna Banka,
damage. Special attention is dedicated to the stress-testing system, based on a
in the coming years. The decrease in coverage indicators in 4Q 2020 was
Beograd, the Group’s structural FX positions increased, resulting in an
scenario analysis referring to the potential high severity, low frequency events,
influenced by the special treatment of NPLs from the acquired entities. NPLs
increase of Group’s RWA for market risk.
of Komercijalna Banka group are initially recognised at fair value, without
and modeling data on loss events. Furthermore, key risk indicators, servicing
as an early warning system for the broader field of operational risks (such as
any additional credit loss allowances.
The Group’s exposure to interest rate risk is moderate and arises mainly from
HR, processes, systems, and external conditions) are regularly monitored,
banking book positions. In the last three years, the Group recorded the growth
analysed, and reported, with the aim to improve the existing internal controls
The Group strives to ensure the best possible collateral for long-term loans,
of fixed interest rate loans and the long-term banking book securities on the
and enabling reacting on time.
namely mortgages in most cases. Thus, the real-estate mortgage is the most
assets side, and the transformation of deposits from term to sight as a result of
frequent form of loan collateral for corporate and retail clients. In the
the low interest rate environment and excessive liquidity.
Following the indications of the outbreak of the COVID-19 pandemic in
corporate loans, it is followed by government and corporate guarantees.
Slovenia and SEE, the Group has taken necessary measures to protect its
In retail loans, the other most frequent types of loan collateral are loan
The Group’s interest rate positions were slightly affected by moratoriums
customers and employees by ensuring the relevant safety conditions and
insurances by insurance companies and guarantors.
during the year 2020, which were mostly short-term, from 3 to 6 months, and
making sure that the services offered by the Group are provided without any
consequently not very material. The Group places excess liquidity mainly
disruption. The Group continuously offered necessary services to clients,
The Group is following the ECB guidelines to banks on NPLs with regards to
into banking book securities with fixed IR, while in current negative interest
especially through digital channels (mobile banking, video calls, telebanking),
the evaluation of collateral. The establishment of market values for collateral
rate environment there is also higher demand for products with fixed IR.
which the Group continues to develop at an accelerated pace. A crisis
for NPLs is by means of individual evaluation when NPL status is established.
The interest rate exposure to interest rate risk remains modest, within the risk
management team was established in the Bank and other banking members
The value of collateral is then regularly monitored on a yearly level and
appetite limits. If market interest rates would increase, the net interest income
with full engagement of the Management Board members. Special attention
updated by either independent evaluation (over prescribed threshold) or with
of the Group would be positively affected, whereas if they decreased, negative
was paid to continuous provision of services to clients, their monitoring,
the use of statistical re-evaluation for smaller values of NPL. For statistical
effects would be lower due to zero floor clauses included in a number of loan
health protection measures, and the prevention of cyber fraud.
re-evaluation the indexes from the government agency or other relevant
contracts. When assessing EVE sensitivity, the Group members apply different
official data sources are used. The value of collateral is with statistical
scenarios. For most members, the worst case regulatory scenario is in the case
In addition, the Group was also diligently managing other, non-financial
approach always updated only downwards, never upwards. Only if the
of increase of IR by 200 bps. From the EVE perspective, the estimated capital
risks, referring to the Group’s business model or arising from other external
individual appraisal shows a higher value of collateral, the upwards re-
sensitivity of 200 bps equals -7.3% of the Group’s capital (including acquired
circumstances, within the established ICAAP process.
evaluation would be performed. If the data from statistics would show
Komercijalna Banka group).
significant decline in the real estate market, individual evaluations for such
types of real estate would be performed and values corrected accordingly.
-8.0%
-7.0%
-7.2%
-7.2%
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. With the 2020 YE acquisition,
the position of trading book increased due to position of Komercijalna Banka
-6.0%
-4.0%
-2.0%
0.0%
-5.5%
-6.1%
-4.8%
-3.7%
-7.3%
-6.1%
-6.3%
Incorporating ESG risks
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. Thus,
the management of ESG risks follows ECB and EBA guidelines and will be
comprehensively integrated into all relevant processes.
31 Dec
2018
31 Mar
2019
30 Jun
2019
30 Sep
2019
31 Dec
2019
31 Mar
2020
30 Jun
2020
30 Sep
2020
31 Dec
2020
31 Dec 2020
w/o KB
Further information on risk management is available in the Note 6
to the Audited Annual Financial Statements and Pillar 3 Disclosures.
group, mostly referring to the liquid debt securities of the Republic of Serbia.
Figure 71: NLB Group’s EVE evolution
Nevertheless, the Bank intends to further maintain a small trading portfolio,
mainly to monitor market signals in the global markets. Respectively, it does
not constitute a material risk to the Group’s operations, while its tolerance for
interest rate and credit spread risk in trading book is very low.
67
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 The right support
at the right time
Sergej Ivanov
PG MAGI, Serbia
A veterinarian and a great lover of autochthonous
breeds of domestic animals, Sergej Ivanov started
breeding Balkan donkeys on Stara Planina 15 years
ago. He wanted to preserve this breed whose number
has greatly decreased due to the extinction of villages
in this part of Serbia. On the farm, where the whole
family works, he produces donkey’s milk, which is
extremely healthy, especially for respiratory diseases,
and is most similar to mother’s milk. The #HelpFrame
project, realised in period when a large number
of people started to search for natural sources of
immunity due to the COVID-19 epidemic, brought
him an increase in visits to the website, increased
interest and sales of this healthy milk, and ultimately
enabled farm improvement by increasing his herd.
68
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 IT and Cyber Security
Information Technology
The Group continues to provide its clients with sustainable and efficient
services supported through highly reliable and secure technology platforms.
The Bank is very actively pursuing a technology transformation programme,
where two new large platforms were introduced in 2019. In 2020, a new IT
Strategy was introduced including a core banking strategy. The team started
12.8%
15.0%
delivering on outlined roadmaps. The Group is aiming to centralise and
unify governance, applications, and infrastructure. The Bank also introduced
effective online collaboration solution and enabled the majority of employees
to work from home without interruption to operations. Due to the general
cyber security risks increase, special focus was on raising overall level of cyber
security resilience.
IT infrastructure and reliability
55.2%
45.1%
16.1%
8.3%
7.2%
NLB Banka,
Beograd
NLB Banka,
Sarajevo
NLB Banka,
Podgorica
NLB Banka,
Prishtina
NLB Banka,
Banja Luka
NLB Banka,
Skopje
NLB
Figure 72: Digital penetration of Group’s banks (w/o Komercijalna Banka group)
948,645
digital users in the Group.
IT performance is monitored through a set of relevant indicators that are
Additionally, the ongoing projects were revised with the aim to ensure timely
linked to the Balanced Scorecard (BSC) system. The indicators show the high
delivery, while the relationships with key vendors were reviewed in order to
performance of IT operations and successful risk management in this area.
improve costs.
The availability of the information system in the Bank is at very high level
of 99.92% (2019: 99.93%), and the share of unplanned interruptions is very
Application architecture on the Group level was assessed in terms of solutions
low, 0.08% (2019: 0.02%). In 2020, the number of days without system/
GAPs/maturity, and as well as the Group’s synergy potential which then was
service interruptions were at 78.5% (2019: 83%). Harmonised Service Level
included in the Group IT strategy.
Agreements (SLA) are in place with users of the information system, which
the Bank managed to fulfil in a very high proportion. High IT operational
Group-wide capabilities were significantly extended (mainly in the Group
performance was also recorded in the Group members.
competence centre in Belgrade, Serbia) for the new digital banking platform,
Main IT initiatives
enterprise integration platform, and business process management platform
development within the region, and cyber security and infrastructure group.
Further developments are also planned in the future.
The main focus was the transformation of IT in terms of organisation,
processes, people, and technology. IT supported a more agile way of delivery,
The Bank achieved several new milestones in the implementation of a
to better partner with business and thus be more efficient and effective. It also
Group-wide data management platform which encompasses an enterprise
hired new experts in strategic positions.
data warehouse, advanced analytics, risk management analytics, profitability,
data governance, and consolidated Group regulatory reporting.
The approach of delivery was changed with an emphasis on insourcing and
keeping strategic knowledge and resources ‘in-house.’ Also, several initiatives
In the coming years, the Bank is expected to continue investing in newly
were started, from mainframe to distributed systems, from on-premise to the
adopted technologies to support the business strategy, and to achieve superior
cloud, from paid to open-source where possible, and moving resources from
client experience in terms of quality, innovation, reliability, and security.
back-end to front delivery.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 IT Strategy 2020-2024
Cyber security
99.92%
the availability in NLB.
At the end of the year, a refreshed IT Strategy was adopted which also
The Group is giving special focus to cyber security, and consequently
incorporates the Group dimension.
assuring confidentiality, integrity, and the availability of data, information,
and IT systems that support banking services and products for customers.
The Vision statement emphasises to build the best digital bank IT team in the
Cyber security in the Group is constantly tested and upgraded by security
SEE region.
assessments, independent reviews, and penetration testing. Cyber security is
regularly discussed at the Bank’s Information Security Steering Committee,
The Mission statement of the IT Strategy emphasises to enable the best client
Operational Risk Committee, and Management Board meetings. In 2020, the
and employee experiences through reliable, effective, secure, accessible, and
Security stream in the Bank was additionally enhanced with the Information
scalable IT solutions.
The Main principles are to:
Technology Asset Management, Document Classification and protection,
Web Application Firewalls, Multi Factor Authentication and Mobile Device
Management implementation. The Bank will further enhance usage of
security tools and roll them out to the Group in the future.
• increase customers satisfaction in all segments with new digital
omnichannel platform, digitizing customer journeys and interactions
All employees in the Group are also being continually educated about the
(CRM) and operational excellence;
importance of information/cyber security, as well as social engineering
• have an effective IT architecture, which will use cloud solutions and open
techniques. The Group banks are providing employees and customers with
source software where ever is possible;
security notifications, especially for the occurrence of threats in the (global)
• introduce a new way of agile development and DevOps transformation
environment with potential impact on the banks’ IT systems, services,
leading to shorter releases cycles, automated testing and less manual tasks;
products, and customers. The Bank is also testing the awareness of its
• ensure the necessary development capacity - hire right talents with the
employees with social engineering attack simulations.
digital skills and looking forward to execute change;
• introduce modern collaboration tools and digitize internal processes;
• leverage investment made in Data platform and treat data as an asset;
• assure IT quality, security, and availability of the
systems and applications;
• have a highly motivated, effective and satisfied IT team which
will work closely and cooperate with business side.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Human Resources
Due to the COVID-19 pandemic, business operations were organised in
a way that all employees, if their job description or other circumstances
‘Top Employer’
allowed it, could work from home (remotely). The Group ensured business
for the 6th consecutive year.
HR drives improvements and innovative practices to enable the best possible employee
engagement and strong business results. The Group sees investments in its employees as a key
change enabler. Acting as a strategic partner to the business, HR is focused on the needs of
continuity by performing key business functions and processes intact despite
the sudden change in the way banks perform their business. All health and
safety environment decisions were made on time and in accordance with the
organisational and cultural development. Due to the COVID-19 pandemic, activities connected
epidemiological circumstances.
to health and safe environment had the highest priority. During the periods of pandemic, on
average 43% employees of the Bank worked from home, and safety environment and equipment
Strive to Be ‘Top Employer’
were provided to employees working at their work place. Development activities were moved
mainly to the online environment. Certain programmes were focused at the new reality;
remote leadership, MS Teams, health and mental well-being, while others aimed to develop
knowledge and skills related to management and sales profiles, lean processes, social learning
activities, and implementation of practices to enhance employee efficiency. The Group believes
that investments in its employees are crucial for the successful introduction of changes.
Employee Headcount
The Group is continuing to strengthen its HR practises based on feedback
from reputable institutions and benchmarks with best-in-class HR practises.
The Bank was once again recognised as the ‘Top Employer’ by the Dutch Top
Employer Institute for already the 6th consecutive year. The Bank will continue
to ensure an even more stimulating work environment also in the future.
Continuing a longstanding tradition of investing in employees
Caring about our employees is the key value reflected in several activities and
The Group continued with optimisation of processes and right-sizing
opportunities intended for all the employees. The organisational culture is
its staffing level. In the last five years, the Group reduced the number of
changing by engaging in various fields, integrating the member companies,
employees by 13.5% to 5,807 however, due to the acquisition of Komercijalna
enabling staff rotation, and changing the work environment, promoting out-
Banka, Beograd and its subsidiaries in December, the number of staff at the
of-the-box thinking and personal development. As a result, by changing the
2020 YE rose to 8,792.
behaviour, the organisational culture is being changed.
Table 36: NLB Group headcount by countries as of 31 December 2020 and 2019
Country
Slovenia
Serbia(i)
BiH(i) (Republic of Srpska, Federation of BiH)
Montenegro(i)
North Macedonia
Kosovo
Germany
Switzerland
Croatia
31 December 2020
31 December 2019
2,691 (NLB: 2,591, other: 100)
2,750 (NLB: 2,659, other: 91)
3,198
1,086
467
877
463
1
2
7
494
934
312
903
474
1
3
7
A crucial part of this process is motivation and engagement of employees,
which is constantly being improved. In the H2 2020 engagement on the
Group level was measured. A total of 72.3% of employees participated in
the survey. An above average percentage of employees (43%) are engaged
(loyal and psychologically committed to the organisation).
Engaged
Not engaged
Actively
disengaged
15%
43%
42%
Total (the Group)
8,792
5,878
Figure 73: NLB Group Employee Engagement 2020
(i) Acquisition of Komercijalna Banka, Beograd and its subsidiaries in December 2020.
71
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Prepared to Tackle Future Challenges
Remuneration system as a motivation for
engaged and committed employees
The Group strives for high quality and compliance with the standards of a
modern learning organisation. Various training activities are aimed to raise
For an employee working in the companies within the Group, salary is
awareness and encourage employees to embrace changes and 2020 was full
composed of a fixed and a variable part. The fixed part of the salary is
of new challenges. Purpose of these activities was to train the employees to
determined according to the complexity of the work for which the employee
organise themselves in new COVID-19-driven circumstances, complete their
has concluded a contract of employment, while the variable amount
business objectives, and thus meet their personal expectations by showing
depends on the employee’s performance. Apart from quarterly or half-yearly
social responsibility in interactions with all the stakeholders.
compensation, the employees are awarded with annual rewards related to
Due to COVID-19, most of the trainings (from March on) were conducted
assessment is done by the head of the employee’s organisational unit using
online. The emphasis was on programmes focused on remote work (work
a top-down approach to evaluate the employee’s achievements in relation to
from home), distance leadership, physical and mental health, and others. The
goals set for a particular assessment period (quarter or half-year). The goals
aim was to improve employee’s knowledge about the digitalisation, to explore
are set according to the ‘SMART’ method, meaning that they have to be
and understand contemporary tech trends, as well as to adapt to new ways of
specific, measurable, achievable, relevant, and time-bound.
the business performance of the bank in which they work. Performance
working and learning in the digital world.
At the end of the year, additional efforts were put in the direction of online
measures to award employees who were exposed in this period and gave them
learning by laying out the groundwork to enable all employees to have access
an extra workload allowance as additional variable salary.
Given the extremely difficult environment in 2020, the Bank has taken some
to 7,000+ courses to cover their needs for development of knowledge and
skills.
Well-being & Health
For employees performing special work, a Remuneration Policy is
implemented on the Group level. The policy also contains provisions
regarding payment of the variable part and defines the circumstances for
subsequent adjustment to the risks that mandatory reduce the deferred
On average
The Group was committed to offering knowledge on good health, creating
variable part of the salary to zero (holdback) or circumstances that potentially
a work environment that enables quality interpersonal relationships, and
reduce the deferred part of the variable salary to zero (clawback).
43%
of NLB’s employees worked from
home in the periods of pandemic.
promoting activities that enhance the good health and satisfaction of
employees.
Due to the aggravated business situation in 2020, the Bank’s Management
Board decided that, in the period from 1 May 2020 to 31 December 2020, the
During the pandemic, emphasis was placed on developing healthy
salary of the Management Board members is reduced by 15% and the salary
habits which were communicated daily to all employees through internal
of employees with service contracts by 10%. The Supervisory Board members
communication portal NLB Net. Due to the changed work environment,
also reduced their remuneration by 15% for the period from 1 May till 31
8,792
employees adapted to new health and safety measures. The Bank provided
December 2020.
all the necessary protective equipment (masks, gloves, disinfectants) and made
employees in the Group family.
sure proper social distancing. Remote work and work from home were enabled
The BoS also adopted the Decision on Macroprudential Restrictions for
to the majority of the employees in the Group.
Banks’ profit distribution with the aim of making the resilience of the
financial system more robust, preventing any disturbances in the financial
system and lowering the systematic risks, and imposed a temporary restriction
for distribution of banks’ profits. A temporary prohibition of variable salary
payments or the establishment of a variable salary payment liability or
discretional pension benefits for the employees performing special work have
been laid down. The macroprudential measure imposed by the BoS Decision
will be in force one year (from April 2020 to April 2021). Considering those
measures, the Bank was unable to pay out to the employees performing special
work the deferred part of variable salary for 2016, neither could pay off the
variable part of the salary for 2019 or paid-out its non-deferred part.
Information on sustainability aspect
of HR area can be found in the
NLB Group Sustainability Report 2020.
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Annual Report 2020 Corporate Governance
The Bank’s governing bodies are:
The 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-2), 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, as well as the EBA Guidelines on remuneration practices.
General Meeting
of Shareholders
Supervisory
Board
Management
Board
Apart from the mentioned binding legal framework, the Bank also follows
In addition to good and stable business results as a systemic player in the
the Corporate Governance Code for Listed Companies (valid since 1 January
SEE markets, NLB also considers the environmental and social impacts of its
2017). Deviations from the recommendations of the mentioned code are
business, with the aim of ensuring sustainable development of the Bank and
published in the Corporate Governance Statement of NLB, prepared
the Group. In 2020, the Bank upgraded the Corporate Social Responsibility
according to Article 70 (paragraph 5) of the Companies Act (ZGD-1) and
(CSR) activities with more consistent adherence to the 2030 Agenda of the
is part of the Business Report in the NLB Group Annual Report. This
UN Sustainable Development, that is the most comprehensive development
statement is also published on www.nlb.si/corporate-governance.
call to action so far, as it defines 17 concrete goals that should be achieved
by 2030. CSR activities in the Bank will gradually be upgraded so that any
The corporate governance framework of the Bank is designed jointly by the
socially responsible activity will pursue at least one of the 17 UN Sustainable
Management Board and the Supervisory Board of the Bank with the Corporate
Development Goals and will consequently have a long-term impact on society
Governance Policy of NLB (November 2020), wherein they commit to and
and the environment.
publicly disclose to shareholders, clients, creditors, employees, and other
stakeholders as a whole, how they will supervise and manage the Bank, as
At the end of September, NLB was the first bank in Slovenia that joined
well as decide which corporate governance code the Bank should follow. The
more than 180 banks from all over the world that signed the UN Principles
mentioned policy was amended in November 2020 (published on www.nlb.si/
for Responsible Banking. Further information on sustainable development
corporate-governance), due to the termination of validity of the commitments
and sustainable banking is incorporated in the NLB Group 2020
by the EC as a result of receipt of the state aid in December 2013, changes to
Sustainability Report published on the banks web page (www.nlb.si).
the Articles of Association of NLB (Articles of Association), as well as changes
of the regulation governing corporate and social responsibility. The Corporate
The Bank’s corporate governance is based on a two-tier system in which
Governance Policy of NLB should be read together with the NLB Group
the Management Board manages the Bank, while its daily operations are
Corporate Governance Policy, in which the corporate governance principles and
supervised by the Supervisory Board.
mechanisms of the Group members (except for NLB) are defined and governed.
More information on the corporate social
responsibility and the implementation
of sustainability into the Group business
model (together with information on the
GRI standards) is available in the
NLB Group Sustainability Report 2020.
In 2020 NLB as the first bank in RoS implemented the decision passed by
the Constitutional Court of the RoS regarding participation of employees
in the bank’s managing bodies. Namely, on 13 June 2019, the Constitutional
Court established an inconsistency of the fourth section of the Banking Act
(ZBan-2), which excluded workers’ participation in the managing bodies of the
bank. Therefore, on 15 June 2020, the General Meeting adopted amendments
to the Articles of Association, which allow the Workers’ Council to appoint four
representatives to the Supervisory Board and grant the possibility to appoint a
worker director.
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Annual Report 2020 The General Meeting of Shareholders
The General Meeting of Shareholders (General Meeting) is the highest 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); decisions on all statutory issues with respect to
appointing and discharging members of the Supervisory Board (representatives of capital) and
appointment of an auditor; use of distributable profit; and granting of a discharge from liability
to the Management Board and Supervisory Board. Competences of the General Meeting are
stipulated in the Companies Act (ZGD-1), the Banking Act (ZBan-2), and the Articles of Association.
The General Meeting met on 15 June 2020 and took note of the NLB Group
Since the mandate of four members of the Supervisory Board expired in
Annual Report 2019 approved by the Supervisory Board, the Report of the
2020, the General Meeting elected members of the Supervisory Board.
Supervisory Board of NLB on the Results of the Examination of the NLB
The terms of office for László Urbán and Alexander Bayr were terminated,
Group Annual Report 2019, took note of the adopted Internal Audit’s Report
while Primož Karpe and David Eric Simon were re-elected for a new term
for 2019 and adopted the Information on the Income of Members of the
of office. Additionally, Verica Trstenjak was elected as a new member of
Management Board and Supervisory Board of NLB for the last year. The
the Supervisory Board (more information on election of members of the
shareholders also decided on the allocation of distributable profit for 2019.
Supervisory Board is in the following sub-chapter on the Supervisory Board).
The distributable profit for 2019 in the amount of EUR 228,039,879.73,
The General Meeting also adopted a decision that allows the Management
which consisted of net profit for 2019 in the amount of EUR 176,148,615.15
Board to convene the General Meeting by electronic means thereby allowing
and retained earnings from previous years in the amount of EUR
shareholders to participate without a physical presence in the meeting.
51,891,264.58 remained undistributed representing the profit carried
over, due to the restriction introduced by the BoS on the macroprudential
All adopted resolutions together with voting results are available to interested
restrictions on the distribution of banks’ profits, with the aim to lower the
parties at the Ljubljana Stock Exchange website SEOnet (https://seonet.ljse.si).
impact and consequences of the COVID-19 epidemaic. The purpose of the
measure is to preserve capital so that the banking system can more easily
withstand potential losses and continue to provide the economy and citizens
with credits.
In continuation, the General Meeting granted discharge to the members of
the management and supervisory bodies for the 2019 financial year.
In accordance with the Decision passed by the Constitutional Court of the
RoS in June 2019 the General Meeting adopted the proposed amendments
to the Articles of Association with regard to participation of workers in the
governing bodies of banks. The Amendments to the Articles of Association
allow the Works Council to appoint four representatives to the Supervisory
Board and grant the possibility to propose the appointment of a worker
director. As a result, the Articles of Association were amended also in the
article governing the number of members of the Management Board.
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Annual Report 2020 The Supervisory Board
The Supervisory Board of NLB (Supervisory Board) carries out its tasks in compliance with the
provisions of the above mentioned laws governing the operations of banks and companies, as
well as the Articles of Association. In accordance with the two-tier governance system and the
authorisations for supervising the Management Board, the Supervisory Board is, among other
tasks, responsible for: appointing and dismissing the president and members of the Management
Board and deciding on their remuneration, issuing approvals to the Management Board in
relation to the Bank’s business policy and financial plan, the strategy of the Bank and the Group,
organising the internal control system, giving consent to the Audit Plan of the Internal Audit, all
financial transactions (e.g. issuance of own securities, and equity stakes in companies and other
legal entities), and supervising the performance of the Internal Audit. The Supervisory Board
acts in accordance with the highest ethical standards, preventing any conflict of interest.
In 2020, the Bank implemented the Decision of the Constitutional Court with
respect to participation of workers in a bank’s managing bodies. In accordance
with the already mentioned changes to the Articles of Association, adopted on
the General Meeting held on 15 June 2020 the Supervisory Board now consists
of 12 members, out of which eight are representatives of the capital and four are
employee representatives elected and appointed by the Workers’ Council of NLB.
For four members of the Supervisory Board, the term of office expired in 2020.
At the General Meeting held on 15 June 2020, Primož Karpe and David Eric
Simon were re-elected for a new term of office, additionally, Verica Trstenjak was
elected as a new member of the Supervisory Board.
On 9 June 2020, Worker Council of NLB elected and appointed Petra Kakovič
Bizjak, Sergeja Kočar, and Bojana Šteblaj as members of the Supervisory Board –
representatives of employees. Their four-year term of office began on the day of
the registration of changes to the Articles of Association into the court register
(17 June 2020). On 1 September 2020, the Bank received a letter of resignation
from Petra Kakovič Bizjak. Her mandate was terminated on 10 September 2020.
On 20 November 2020, the Bank received information that the Workers’ Council
elected Janja Žabjek Dolinšek as member of the Supervisory Board – and
representative of the workers. Her term of office started on 20 November 2020.13
Further information about the work and composition of the Supervisory Board
is available in the chapter Corporate Governance Statement of NLB.
13. Further developments are available in
the chapter Events after 31 December 2020.
At 31 December 2020,
the Supervisory
Board included the
following members:
Representatives
of capital
Representatives
of employees
Primož Karpe, M.Sc.
Andreas Klingen
Sergeja Kočar, M.Sc.
Chairman
Deputy Chair
Member
Shrenik
Dhirajlal Davda
Member
David Eric Simon
Bojana Šteblaj, M.Sc.
Member
Member
Mark William
Lane Richards
Member
Peter
Groznik, Ph.D.
Member
Janja Žabjek
Dolinšek, M.Sc.
Member
Gregor Rok Kastelic
Member
Verica
Trstenjak, Ph.D.
Member
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Annual Report 2020 Primož Karpe, M.Sc.
David Eric Simon
Shrenik Dhirajlal Davda
Chairman
Member
Member
Term of office: 2016-2020,
Term of office: 2016-2020,
Term of office: 2019-2023
Gregor Rok Kastelic
Member
Term of office: 2019-2023
Verica Trstenjak, Ph.D.
Sergeja Kočar, M.Sc.
Member
Member
Term of office: 2020–2024
Term of office: 2020–2024
renewed term 2020-2024
renewed term 2020-2024
Link to CV
Link to CV
Membership in NLB
Membership in NLB
Supervisory Board committees:
Supervisory Board committees:
• Nomination Committee (Chairman)
• Audit Committee (Chairman)
• Audit Committee (Member)
• Risk Committee (Member)
• Operations and IT (Member)
Membership in management bodies
of related or unrelated companies:
of related or unrelated companies:
• Jihlavan a.s., President of
• Angler d.o.o. - Director
the Supervisory Board
Membership in management bodies
Andreas Klingen
Deputy Chair
Term of office: 2015-2019,
renewed term 2019-2023
Link to CV
Membership in NLB
Supervisory Board committees:
• Nomination Committee
(Deputy Chairman)
• Risk Committee (Chairman)
Membership in management bodies
of related or unrelated companies:
• None
• Czech Aerospace industries
sro, legal representative
• Central Europe Industry Partners a.s.,
sole Member of the Supervisory Board
Peter Groznik, Ph.D.
Member
Term of office: 2017-2021
Link to CV
Membership in NLB
Supervisory Board committees:
• Nomination Committee (Member)
• Remuneration Committee (Member)
• Risk Committee (Member)
Membership in management bodies
of related or unrelated companies:
• MSIN
• CETIS
Link to CV
Link to CV
Link to CV
Link to CV
Membership in NLB
Supervisory Board committees:
• Operations and IT Committee
(Deputy Chairman)
• Remuneration Committee (Member)
Membership in NLB
Membership in NLB
Membership in NLB
Supervisory Board committees:
Supervisory Board committees:
Supervisory Board committees:
• Remuneration Committee (Chairman)
• Nomination Committee (Member)
• Nomination Committee (Member)
• Audit Committee (Member)
• Remuneration Committee (Member)
Membership in management bodies
• Audit Committee (Member)
Membership in management bodies
of related or unrelated companies:
Membership in management bodies
of related or unrelated companies:
• None
of related or unrelated companies:
Membership in management bodies
• Triglav Group, Slovenia, Deputy
• None
of related or unrelated companies:
• Managing Director, Meghraj
Capital Ltd, Kenya (since 2020)
Mark William Lane Richards
Member
Term of office: 2019-2023
Link to CV
Membership in NLB
Supervisory Board committees:
• Operations and IT Committee (Chairman)
• Nomination Committee (Member)
• Risk Committee (Member)
Membership in management bodies
of related or unrelated companies:
• None
Chairman of the Supervisory
Board (2012-2017)
• SID Banka, Slovenia, Member of the
Supervisory Board (2009-2012)
Bojana Šteblaj, M.Sc.
Member
• Komercijalna Banka, Beograd, Serbia,
Term of office: 2020–2024
Member of the Supervisory Board (2006)
• NLB Montenegrobanka, Podgorica,
Montenegro, Member of the
Supervisory Board (2006)
• Komercijalna Banka, Skopje,
North Macedonia, Member of the
Supervisory Board (2005-2006)
• ABN Amro Bank N.B., Uzbekistan,
Member of the Supervisory
Board (2004-2006)
Janja Žabjek Dolinšek, M.Sc.
Member
Term of office: 2020–2024
Link to CV
Link to CV
Membership in NLB
Supervisory Board committees:
Membership in NLB
• Operations and IT (Member)
Supervisory Board committees:
• None
Membership in management bodies
of related or unrelated companies:
Membership in management bodies
• None
of related or unrelated companies:
• None
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Annual Report 2020
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:
Audit
Committee
Risk
Committee
Nomination
Committee
Remuneration
Committee
David Eric Simon
President
Andreas Klingen
President
Primož Karpe
President
Gregor Rok Kastelic
President
Operations and
Information
Technology (IT)
Committe
Mark William
Lane Richards
President
Shrenik
Dhirajlal Davda
Deputy president
Primož Karpe
Member
Peter Groznik
Deputy president
Andreas Klingen
Deputy president
Mark William
Lane Richards
Deputy president
Shrenik
Dhirajlal Davda
Deputy president
Mark William
Lane Richards
Member
Verica Trstenjak
Member
Shrenik
Dhirajlal Davda
Member
Andreas Klingen
Member
Gregor Rok Kastelic
Member
David Eric Simon
Member
Peter Groznik
Member
Peter Groznik
Member
Primož Karpe
Member
Gregor Rok Kastelic
Member
Sergeja Kočar
Member
Sergeja Kočar
Member
Bojana Šteblaj
Member
Further information about the work and composition of the Committees of the Supervisory Board is available in the chapter Corporate Governance Statement of NLB.
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Annual Report 2020 The Management Board
At the end of 2020 the composition of the Management Board was as follows:
The Management Board of NLB (Management Board) leads,
represents, and acts on behalf of the Bank, independently and
at its own discretion, as provided for by the law and Articles of
Association. In accordance with above mentioned recent changes
to the Articles of Association, the Management Board has three
to seven members (the President and up to six members, of
which one may be the worker director), which are appointed
and dismissed by the Supervisory Board. The President and
members of the Management Board are appointed for a five-
year term of office and may be reappointed or dismissed early
Blaž Brodnjak
CEO & CMO
Petr Brunclík
COO
Andreas Burkhardt
Archibald Kremser
CRO
CFO
in accordance with the law and Articles of Association.
Term of office: 2016-2021,
Term of office: 2020-2025
Term of office: 2016-2021,
Term of office: 2016-2021,
renewed term 2021-2026
renewed term 2021-2026
renewed term 2021-2026
At the beginning of 2020, the Management Board consisted of Blaž Brodnjak,
CEO & CMO; Archibald Kremser, CFO; Andreas Burkhardt, CRO; and
László Pelle, COO. László Pelle and the Supervisory Board agreed on the
termination of his office as of 31 January 2020. In order to assure continuation
of the function of COO, the Supervisory Board appointed Petr Brunclík as
member of the Management Board. Petr Brunclík assumed his function as
Link to CV
Link to CV
Link to CV
Link to CV
Other important functions
Other important functions
Other important functions
Other important functions
and achievements:
and achievements:
and achievements:
and achievements:
• More than 20 years of experience
• Almost 20 years of diverse banking,
• 19 years of experience in the
• More than 20 years of experience in the
at managerial positions on all levels
business, customer service,
area of banking, especially in
financial services industry in Austria,
of international banking groups.
process improvement, online,
the area of Central Europe.
CEE, and SEE focusing on finance
COO on 18 May 2020, upon receiving a consent by the ECB on 13 May 2020.
supervisory boards of 13 commercial
On 12 November 2020, the Supervisory Board reappointed Blaž Brodnjak as
CEO & CMO, Archibald Kremser as CFO, and Andreas Burkhardt as CRO of
the Bank for a period of five years from the end of their term on 6 July 2021.
banks in 6 countries, 3 insurance
Direct responsibility:
companies in 3 countries, leading asset
• IT Architecture
management company in Slovenia
• IT Delivery
and multinational production group.
• Data Management
Direct responsibility:
• Internal Audit
• Compliance and Integrity
• Global Risk and Credit Risk
– Corporate and Retail
• Was a chairman or member of the
and technology experience.
Further information about the work and composition of the Management
Board is available in the chapter Corporate Governance Statement of NLB.
Direct responsibility:
• NLB Group IT Security Governance
• Restructuring
• IT Shared Service Centre
• Workout and Legal Support
• Strategy and Business Development
• IT Infrastructure
• Legal and Secretariat
• Communications
• Procurement
• Payment Processing
• HR and Organisation Development
• Cash Processing
Membership in management or
• Group Steering
supervisory bodies of related
or unrelated companies:
Membership in management or
and asset management, strategy and
corporate development, as well as
performance improvement assignments.
Direct responsibility:
• Financial Accounting
• Controlling
• Financial Markets
• Group Real Estate Management
• Investment Banking and Custody
• Financial Markets Processing
• Chairman of the Board of Directors:
supervisory bodies of related
• Retail and Private Banking,
• Corporate Banking Processing
NLB Banka, Prishtina
or unrelated companies:
and Corporate Banking
• Retail Banking Processing
NLB Lease&Go (since 15 May 2020)
• Chairman of the Board of Directors:
Membership in management or
Membership in management or
supervisory bodies of related
supervisory bodies of related
or unrelated companies:
or unrelated companies:
• Chairman of the Supervisory Board:
• None
NLB Banka, Beograd
(until 11 December 2020)
NLB Banka, Podgorica
Komercijalna Banka, Beograd
(from 30 December 2020)
NLB Banka, Sarajevo
NLB Banka, Banja Luka
NLB Banka, Skopje
• Member of the Board of Directors:
Komercijalna Banka, Beograd
(from 30 December 2020)
• President of the Association of Banks
in Slovenia (from 1 November 2017)
• President of the Board of
Governors: AmCham Slovenia
(from 15 September 2020)
• Member of Executive Committee of
the Handball Federation of Slovenia
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Advisory bodies of the
Bank’s Management Board
The Management Board also
appointed working bodies that
operate at a lower level:
• Committee for New
and Existing Products
• Group Real Estate Asset
Management Sub Committee
• Committee for Business IT Architecture
• Data Management Committee
• Anti - Money Laundering Commission
The Watch List Committee
The Risk Committee
Chairman: CRO
Chairman: CRO
The Watch List Committee is an
The Risk Committee monitors and
advisory body which acknowledges
periodically reviews matters related to
the activities related to the clients on
risk and commercial risk and prepares
the Watch List. As a rule, committee
materials for the Management
meetings are convened quarterly. The
Board to obtain decisions. The
committee has seven members.
Committee has eleven members.
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
Chairman: CRO
NLB Operational Risk
Committee
Chairman: CRO
The Sales
Board
Chairman: CMO
The Committee determines credit ratings
The Committee is responsible for
The Sales Board adopts decisions on the
and makes decisions on the reclassification
monitoring, guiding, and supervising
management of the range of products and
of clients and approves commercial banking
operational risk management in the Bank,
services and the relations with the clients
investment transactions and limits that are
and for transferring this methodology
in the area of sales. As a rule, Committee
beyond the competencies of the Directors.
to the Group members. As a rule, the
meetings are convened once a week.
The Committee adopts decisions that are
Committee meets once every two months.
The Committee has eleven members.
outside of the powers of the directors, as
The Committee has fifteen members.
NLB Retail
Credit Committee
Chairman: The General Manager
of Credit Risk – Corporate and
Retail
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
Committee has five members.
well as 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
The Change the
Bank Committee
Chairman: CEO
week. The Committee has eight members.
The Committee is responsible for adopting
Assets and Liabilities
Committee of the NLB Group
Chairman: CFO
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, 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 and
this Committee has four members.
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 Committee has four members.
The Group Real Estate Asset
Management Committee
Chairman: CFO
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 Committee has three members.
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Compliance
and Integrity
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. In 2020
Compliance and Integrity employed 10 additional colleagues with the aim
to further enhance its capability.
Fraud prevention
and investigation
Physical /
technical security
AML / CTF
Business ethics
and corporate
integrity
Oversight,
monitoring, steering,
and managing the
Group compliance
function and
programme(i)
The Compliance
and Integrity in
the Bank addresses
the following
risk areas:
Identification,
assessment, and
management of
compliance, and
integrity risks at
the Bank and the
Group levels
(i) Established by standards for
compliance and integrity for the Group
and implementation of monitoring by
off-site data analysis and onsite visits.
Fit and proper
assessment procedures
(as part of assessing
reputation, financial
strength, time
availability, and
conflict of interests)
Conflict of
interests, gifts
and hospitality
management
Privacy data
protection and
information
security
Regulatory
compliance
Corruption
prevention
Group-wide ethics and integrity standards
Preventing Money Laundering and Terrorism Financing
Within the framework of the programme of ensuring business compliance,
The Bank complies with national regulations on Anti-Money Laundering and
the Group also deals with the ethics and integrity of the organisation. Such a
Counter-Terrorism Financing (AML/CTF), including the Guidelines of the
programme encourages employees and other stakeholders to conduct business
BoS. The RoS is a member of EU, and thus is subject to the standards of the
which is consistent with a strong positive organisational culture. The values
Financial Action Task Force (FATF) and the European legislation based on
of the Group, embedded in the Group Code of Conduct, provide guidance
them. For the Group, it is of paramount importance to effectively mitigate
and principles of expected behaviour regarding ethical conduct and require
the risk of money laundering and terrorism financing. This is why rules,
426
new laws, draft laws, regulations and
other information regarding regulatory
environment of the Bank reviewed.
10
appropriate conduct from all employees at any level of the organisation,
procedures, and technology in the area of AML/CTF are the subject of strict
additional new employees onboarded
including its contractors.
and unified policies/standards. The same approach is applied for sanctions
in Compliance and Integrity.
The regime on inside information (MAR)
and embargo screening. Group AML Team upgraded and introduced further
enhancements of Group AML governance in line with directions set by the
BoS. The headquarters exercises constant onsite and off-site monitoring of the
In line with the Financial Instruments Market Act (ZTFI-1), MAR, and other
implementation and execution of standards throughout the Group.
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
The Bank monitors AML/CTF indicators and whenever necessary
in a manner that enables it to comply with the obligations related to inside
transactions are reported to competent national authority, pursuant to AML/
information identification and disclosure in accordance with the rules and
CTF legislation. Furthermore, business relationships were terminated where
regulations applicable at any time. Also, the Bank has a system in place
criteria were met. The Bank has adopted additional measures to prevent the
implementing the market abuse prevention regime in accordance with
onboarding of clients with new types of AML/CTF indicators. Following
MAR to prevent insider trading, market manipulation, and illegal disclosure
the 2018 and 2020 increase in the AML/CTF team, the Bank dedicated
of inside information.
additional resources to the team.
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cases investigated.
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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 resilience of systems took place (pen-tests). Furthermore, in line with
the plan, several internal assessments/compliance checks were made on the
basis of ISO 27001:2013 and ISO 27002:2013 standard, including related
to external (service) providers (i.e., data processors and external software
providers). Special obligatory e-training for all employees in the area of
information security was prepared and was followed by testing of awareness
related to social engineering; all as part of prevention measures in this area.
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 not adopted in 2020 as expected. If necessary,
further alignments will be made when the national legislation is in place.
Prevention
An internal periodical survey on Ethics and Compliance was conducted
again in 2020 to understand the pulse and perception of these topics among
employees. Conclusions were made and decisions for enhancing adopted
based on response findings. In combination with assessment of compliance
risks (so-called ECRA – Enterprise Compliance Risk Assessment) the
management of the Bank and Compliance and Integrity in particular 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/CTF, Information Security, Physical
Security, and other relevant topics related to everyday work were prepared.
For 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.
Internal Audit
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.
50
planned and extraordinary
audits conducted in the Bank.
26
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. Internal Audit provided impartial assurance to the Management Board
and Supervisory Board on the management of risks in key areas, i.e., cyber
security, IT project assurance, retail and corporate moratoria process and
Internal Audit experts.
control activities, customer data and data quality management, IT organisation
and IT outsourcing, RWA calculation for credit and operational risk, credit risk
management (early warning system, individual provisioning, ratings and loan
collateral management), cash management in branches, and others.
The highest standards
Performed audits
were followed
Internal Audit and other
internal audit services
in the Group operate in
accordance with the:
• International
Standards for the
Professional Practice
of Internal Auditing
• Banking Act (ZBan-2) or
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 2020, Internal Audit of
NLB conducted 50 audit assignments (out of that four audits on a Group
level), four were postponed due to objective reasons. Furthermore, auditors
conducted 32 branch inspections, three joint audits with the local auditors and
two internal audit quality reviews, both in the Group. Auditors also conducted
two unplanned audits and were involved in several strategic projects as advisor.
The majority of the recommendations given in 2020 were implemented
within the agreed deadlines.
other relevant laws which
Implementation of uniform rules
regulate the operations
of a Group member
• Code of Ethics of
an Internal Auditor
• Code of Internal
Auditing Principles
Internal Audit increases efficiency. It focuses on monitoring the
implementation of audit recommendations, training and education, updating
the internal audit charter and manual, advising management, and ensuring
high quality and professional operations of the internal audit function within
the Group. Internal Audit also introduces uniform rules of operation of the
internal audit function and regularly monitors the compliance with these rules
within the Group.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 To know you
have someone
to rely on
Toni Gerasimovski
TERMONET, North Macedonia
TERMONET is a leading company in the sale of products
for a wide range of integrated systems and products
for solar power, plumbing, and heating systems.
TERMONET is not only aware of the complexity and
different demands of the market, they also provide
service that transfers technical expertise and know-how
with decades of experience. As for many, the past year
has been full of challenges and difficulties. Customer
interest has been significantly reduced, sales did not
even come close to the desired results, and they faced
difficulties in day-to-day operations. When they found
out about the NLB #HelpFrame project, they recognised
an opportunity to improve the situation, and thanks to
the project they received support at a time when it was
needed the most. Through the ads, they made contacts
with clients for future cooperation. Also, the project
confirmed their belief that we are stronger together,
and that true partners are recognised in a crisis.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Corporate Governance Statements
Statement of Management’s Responsibility
Authorisation to Perform Banking Services
In accordance with the provisions of Article 14 (1st paragraph) of the
It may perform the following additional financial services, pursuant to
Regulation on Books of Accounts and Annual Reports of Banks and Savings
Article 6 of the Banking Act (ZBan-2):
Banks (Official Gazette of the RS, No. 69/17, 73/19 and 164/20) adopted
by the Bank of Slovenia on the basis of the authorisation from Article 93 of
1. brokerage in the sale of insurance policies pursuant to the law governing
the Banking Act (Official Gazette of the RS, no. 25/15 with Amendments,
the insurance industry
hereinafter ‘ZBan-2’), NLB hereby lists all types of financial services which,
4. custodian services according to the law governing investment funds and
in accordance with the authorisation of the Bank of Slovenia, took place
management companies
during the period for which the business report was prepared. NLB has
5. credit brokerage for consumer and other loans
In accordance with the provisions of Article 134 of the Financial
The Management Board confirms that the business report includes a fair
an authorisation to perform banking services pursuant to Article 5 of the
Instruments Market Act, the Management Board hereby confirms the
view of developments and operating results of the Bank and the Group and
Banking Act (ZBan-2). Banking services are the acceptance of deposits and
Authorisation to perform banking services is published on the official web
statements made in the business report, which are in accordance with the
their financial standings, including a description of the key types of risks and
other repayable funds from the public and the granting of credits for its own
page of the BoS (https://www.bsi.si/en/financial-stability/institutions-
attached financial statements as at 31 December 2020, and represent the
the companies under consolidation are exposed as a whole.
account.
under-supervision/banks-in-slovenia/8/nova-ljubljanska-banka-dd-
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 2020.
Ljubljana, 23 March 2021
Management Board of NLB
Archibald Kremser
CFO
Andreas Burkhardt
CRO
Petr Brunclík
COO
Blaž Brodnjak
CEO & CMO
ljubljana).
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 Banking Act (ZBan-2), 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 sureties
7. trading for own account or for the account of clients:
•
•
•
•
•
in money-market instruments
in foreign legal tender, including currency exchange transactions
in standardized futures and options
in currency and interest-rate instruments
in transferable securities
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 Financial Instruments Market Act (ZTFI)
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Corporate Governance Statement of NLB
Recommendation no. 29.3: NLB does not have a programme of
acquisition of own shares (in 2020 NLB didn’t buy any own shares and
In the event of deficiencies, irregularities of breaches identified in the
process of implementation of internal controls the breaches are discussed at
Pursuant to Article 70, paragraph 5, of the Companies Act (ZGD-1)14 NLB
hereby gives the following Corporate Governance Statement as a part of the
Business Report of the NLB Group Annual Report 2020.
2. COMPLIANCE WITH THE CORPORATE GOVERNANCE
therefore didn’t need a programme of acquisition of own shares). Should
the Operational Risk Committee and appropriate actions are taken. In the
CODE FOR LISTED COMPANIES
NLB need to buy its own shares (e.g. for the purpose of paying variable
events of intentional breaches of the Bank’s rules as defined by the Group
remuneration in the form of own shares to its Identified Staff), it will draw
Code of Conduct, the events are handled according to the Integrity and
The Bank does not follow (or implements partially) the following
it up.
Compliance Policy of NLB and NLB Group.
1. STATEMENT OF COMPLIANCE WITH THE
CORPORATE GOVERNANCE CODE
recommendations:
Information contained in this point represents a ‘Statement of Compliance
Recommendation no. 10.1: In assessing candidate’s eligibility for the
position of Supervisory Board member, statutory criteria are applied.
Recommendation no. 29.9: NLB does not publish the rules of
procedure of its bodies (Management Board and Supervisory Board and
3.1.2. Internal Control Functions
The internal control functions are part of the system of the internal
the General Meeting) on its website. However, each year the Bank discloses
governance in the Bank. Internal control functions include:
with the Corporate Governance Code’ as defined in the Ljubljana Stock
However, candidates don’t have a certificate evidencing their specialised
the composition, competences, and work of its managing bodies in the
Exchange Rules, dated 27 April 2020 (Article 24).
professional competence for membership on a Supervisory Board, such as
‘Corporate Governance Statement of NLB’ and publishes it in the NLB
1.1. REFERENCES TO THE CODE ON CORPORATE GOVERNANCE
certificate. That said, all of the strict conditions have to be fulfilled according
The Internal Audit function is organised according to the Charter on the
Apart from binding legal framework (primarily but not exclusively
to banking legislature.
3. MAIN FEATURES OF INTERNAL CONTROL AND RISK MANAGEMENT
Internal Audit of NLB adopted by the Management Board on 13 November
the Certificate of the Slovenian Directors’ Association, or any other relevant
Group Annual Report as well on Bank’s website.
a) The Internal Audit Department
Companies Act (ZGD-1), Banking Act (ZBan-2), EBA Guidelines), the Bank
SYSTEMS IN RELATION TO FINANCIAL REPORTING
as a public company, also follows best corporate practice recommendations
of the Corporate Governance Code for Listed Companies, adopted by the
Recommendation no. 12.2: The Rules of Procedure of the Supervisory
Board of NLB do not include the list of all types of transactions for which
NLB is governed by the provisions of the Banking Act (ZBan-2) and the
2019).
2018 (and supplemented on 13 August 2019), to which the Supervisory
Board of NLB gave its approval (30 November 2018 and 6 September
Ljubljana Stock Exchange and Slovene Directors’ Association, adopted on
the Management Board needs prior approval of the Supervisory Board,
Regulation on Internal Governance Arrangements, the Management Body
27 October 2016 (came in force on 1 January 2017). The recommended
but refer to Article 24 of the Articles of Association. These rules also do
and the Internal Capital Adequacy Assessment Process for Banks and
The Charter of the Internal Audit of NLB is the umbrella document
best corporate governance practices contribute to a transparent and
not include the Supervisory Board evaluation, education, and training of
Savings Banks regulating, among other, the Bank’s obligation to set up,
about the understanding and role of the Internal Audit in the Bank, which
understandable corporate governance system, which promotes both
the members of the Supervisory Board. These provisions are part of other
maintain appropriate internal control, and risk management systems. As a
defines the purpose, powers, responsibilities, and tasks of the Internal Audit
domestic and foreign investor confidence, as well as the confidence of
internal documents or decisions of the managing bodies.
result of this, NLB has developed a steady and reliable internal governance
in line with the International Standards for the Professional Practice of
employees, other stakeholders (regulators, suppliers, etc.) and the general
public. This code is published on the Ljubljana Stock Exchange’s website
(http://www.ljse.si). A decision on which code the Bank will follow is made
Recommendation no. 12.3: The Rules of Procedure of the Supervisory
Board of NLB do not include the scope of topics and timeframe to be
system encompassing the following:
Internal Auditing. The mentioned Charter lays down the position of the
Internal Audit in the organisation, including the nature of the relationship
• A clear organisational structure with precisely defined, transparent, and
between the functional responsibility of the Head of the Internal Audit to
jointly by the Management Board and the Supervisory Board of the Bank
respected by the Management Board in its periodic reporting of the
consistent internal relations in the area of responsibility;
the supervisory body, grants authorisations to internal auditors for accessing
by adopting the Corporate Governance Policy of NLB (November 2020).
Supervisory Board. However, the scope of topics and time frames of
• Effective risk management processes for identifying; measuring or
records, employees, premises, and equipment relevant for performing their
periodic reporting to the Supervisory Board are included in annual Action
assessing; and managing and monitoring risks – including risk appetite,
tasks, and defines the area and activities of the Internal Audit.
Compliance with the aforementioned code is explained in the Corporate
Plan of the Supervisory Board and Articles of Association. Professional
risk strategy, ICAAP, ILAAP, recovery plan and the reporting of risks to
Governance Statement of NLB on ‘comply or explain basis,’ in which the
services of the Bank take care that timely information is provided to the
which the Group is exposed or could be exposed in its operations;
The Management Board has set up an independent internal audit function
Bank provides explanation on deviations or reasoning for non-compliance
Supervisory Board.
• Incorporating the main strategic risk guidelines into the annual business
which gives assurances and advice about risk management, internal controls
with certain recommendation. The statement refers to the Bank’s system
of corporate governance from the beginning to the end of financial year,
which also corresponds to the beginning and the end of the calendar year
Recommendation no. 15.3: NLB does not follow this recommendation
because the President of the Supervisory Board is at the same time President
• Suitable internal control mechanisms that include appropriate
of the Internal Audit is to consolidate and secure the value of the Bank
administrative and accounting procedures;
by issuing objective assurances based on risk assessment, with consultancy
plan review, budgeting process, and other relevant decision-making;
system, and management of the Bank. The mission and the principal task
(from 1 January until 31 December). Corporate Governance Statement of
of the Nominations Committee.
• The appropriate remuneration policies and practices that are in line
and deep understanding of the Bank’s operations. In addition to that, the
NLB is, according to Article 70 (paragraph 5) of the Companies Act (ZGD-
with prudent and effective risk management, and thus promote risk
Internal Audit carries out regular control of the quality of operation of the
1), included in the Business Report of the NLB Group Annual Report
(published on (https://www.nlb.si/financial-reports), and is also published
Recommendation no. 17.1: Members of the Supervisory Board don’t
receive attendance fees, but are entitled to payment for performing their
management.
on the Bank’s website under the chapter on Corporate Governance (https://
function.
3.1. Internal control mechanisms
other internal audit departments in the Group and takes care of constant
development of the internal auditing function.
www.nlb.si/corporate-governance).
Suitability of the internal control mechanisms are determined by the
Pursuant to the provisions of the law, the Bank has organised the internal
NLB strives to increase the level of its business transparency and informs
Recommendation no. 25.3: The Bank does not follow the
recommendation on rotation of audit companies (at least once every seven
independence, quality, and validity of:
audit as an independent organisational unit, primary responsible to the
Supervisory Board of NLB and secondary to the Management Board of
the shareholders and other expert community based on Guidelines on
years), however, the Bank complies with the Banking Law (ZBan-2) that
• The rules for and controls of the implementation of the Bank’s
NLB.
Disclosure for Listed Companies (Ljubljana Stock Exchange, valid from 23
allows a longer period. Still, the audit firm did replace the audit partner
organisational, business, and work procedures (internal controls), and
November 2020) on electronic communications system of the Ljubljana
responsible for the audit of NLB and the Group financial statements for
• The internal control functions and departments (internal control
The Supervisory Board of NLB must issue its approval of the appointment,
Stock Exchange (SEOnet), in line with Rules and Regulation of the
year 2020.
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.
Recommendation no. 27.4: NLB draws up its financial calendar which
is published on its website (https://www.nlb.si/financial-calendar) and
functions).
3.1.1. Internal Controls
Internal controls should be put in place at all levels of the Bank’s
remuneration, and dismissal of the Director of the Internal Audit, which
ensures their independence and thus the independence of the work of the
Internal Audit.
The Corporate Governance system of the Bank and all relevant information
provide information on the dividend payment date, which is announced in
and support functions, and at the level of each of the Bank’s financial
b) The Risk Management Function
on Bank’s management that exceeds the requirements of article 70 of the
the publication of the Agenda and Proposed Resolutions to be passed at the
services. In daily operations, the Bank follows the internal act System of
The Risk Management Function is organised according to the Charter
Companies Act (ZGD-1) are published in the Corporate Governance Policy
Annual General Meeting (both documents published on https://www.nlb.
Internal Controls, which sets the system of internal controls in NLB and
of the Risk Management Function of NLB adopted by the Management
of NLB (November 2020) and other documents that are communicated
to the stakeholders and other interested persons by being published on the
si/general-meetings). The dividend payment date is determined based on
KDD Operations Rules (Central Securities Clearing Corporation).
responsibilities for its establishment, continuous performance, and its
upgrading. On the organisational level, the Bank established middle-offices
Board on 6 November 2015, in agreement with the Supervisory Board
of NLB. The Charter on Functioning of the Risk Management Function
includes the date of the Annual General Meeting, even though it doesn’t
organisational structure, especially the levels of commercial, control,
NLB’s website (http://www.nlb.si/corporate-governance).
and back offices.
14. The Companies Act (ZGD- 1; Official Gazette of the RoS, No. 42/06 and consecutive changes).
of NLB is the framework document on understanding and role of the
risk management function; it defines the purpose, validity, and method
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CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 of operation, as well as the authorisations and responsibilities of the risk
• Anti-money laundering and counter-terrorist financing (separately for
• A reliable decision-making and operation support system
An explanation regarding significant direct and indirect
management function according to the requirements of the Banking Act
NLB and the Group)
• Accurate, complete, and timely accounting data, the resulting accounting,
ownership of the company’s securities in the sense of
(ZBan-2) and the Regulation on Internal Management Arrangements,
• Information security and data protection
Management Body, and Internal Capital Adequacy Assessment Process for
• Personal data protection
and other reports of the Bank and the Group
• Compliance with legal and other requirements
achieving a qualified stake as determined by the act regulating
acquisitions (Point 3 of the sixth paragraph of Article 70 of the
Banks and Savings Banks.
• Regulatory compliance management
• Prevention of fraud and internal investigations
4. INFORMATION ON POINT 4, PARAGRAPH 5, OF THE ARTICLE 70 OF THE
ZGD-1)
The risk management function represents an important part of overall
• Security
ZGD-1 regarding points 3, 4, 6, 8, and 9 of paragraph 6 in the same article
Significant direct and indirect ownership of the company’s securities in
management and governance system in the Group. This function in
• Development of compliance risk methodologies, and setting and
NLB is organised within the Risk stream, covered by the member of the
monitoring ethics and integrity standards
Management Board in charge of risk (CRO). The risk stream covers the
• Harmonisation of policies and practices within the Group (Competence
following organisational units:
line Compliance and Integrity)
• Global Risk
Compliance and Integrity is an organisational unit of the Bank, placed
• Corporate and Retail Credit Analysis Department
directly under the Bank’s Management Board in the organisational
• Evaluation and Control
• Restructuring
structure. The Bank adopted Integrity and Compliance Policy of the NLB
and the NLB Group (Version 1, December 2016), which regulates the
• Non-Performing Loan Management Department and Recovery
method and scope of the activities of the compliance function in the Bank.
Separate policies regulate different areas which are organised within the
Shareholder
RoS
Brandes Investment Partners, L.P.(i)
EBRD(i)
Schroders plc(i)
terms of achieving a qualifying holding as defined in the Takeovers Act (as
at 31 December 2020):
Number of shares
Percentage of shares
Nature of ownership
5,000,001
/
/
/
25.00
>5 and <10
>5 and <10
>5 and <10
shares
GDRs
GDRs
GDRs
The risk management function is performed by the Global Risk. In
Compliance and Integrity in NLB.
(i) In the form of GDRs.
accordance with the competences, authorisations, and responsibilities,
Global Risk is represented by its General Manager. The Global Risk is in
Supervision over compliance of operations is within the competence of
More information on the Bank’s Share Capital is available on the website:
and that this person is not, directly or indirectly, a holder of more than 25%
functional and organisational terms separate from other functions where
the Compliance and Integrity. This enables the Compliance and Integrity
https://www.nlb.si/shares.
of the Bank’s voting rights.
business decisions are adopted and where potential conflict of interest may
to operate independently from other Bank’s departments. The director of
arise with the risk management function. The head of the risk management
Compliance and Integrity does not perform any other function at the Bank
An explanation regarding the holders of securities that carry
The acquirer who exceeds the share of 25% of the Bank’s shares with
function has direct access to the Management Board of the NLB and at the
that could possibly lead to conflict of interests. To ensure his independence,
special control rights
voting rights, and does not require the issuance of approval for the transfer
same time unhindered and independent access to the Supervisory Board of
the director reports to the Management Board and to a specific member of
(Point 4 of the sixth paragraph of Article 70 of the ZGD-1)
of shares, or does not receive the approval of the Bank, may exercise the
NLB and the Risk Committee of the Supervisory Board of the NLB.
the Bank’s Management Board responsible for compliance area (including
voting right from 25% of the shares with the voting rights.
information security and AML/CTF functions), which additionally ensures
The Bank did not issue any securities carrying special controlling rights.
In members of the Group, the risk management function is organised
independence of operation of the Compliance and Integrity.
There are no restrictions other than those mentioned and those that are
according to the local legislation, taking into account the bases for set-up,
An explanation regarding restrictions related to voting rights,
regulatory.
organisation, and activities in the area of risk management in the members,
As information security, AML/CTF and Group AML functions are
in particular: (i) restrictions of voting rights to a certain stake
as defined in the document ‘Risk Management Standards in the NLB
organised within Compliance and Integrity, CISO, head of AML/CTF
or certain number of votes, (ii) deadlines for executing voting
An explanation of the (i) company’s rules on appointment or
Group.’ The described standards on risk management provide the members
area for NLB and head of the Group AML are ensured full independence
rights, and (iii) agreements in which, based on the company’s
replacement of members of the management of supervisory
of the Group the bases with which they have to align their organisation,
through equal reporting lines as the director of Compliance and Integrity,
cooperation, the financial rights arising from securities are
bodies, and (ii) changes to company’s Articles of Association
strategic risk-taking guidelines, internal policies, methodologies, and
and have direct access and separate reporting line to the Bank’s Supervisory
separated from the rights of ownership of such securities
(Point 8 of the sixth paragraph of Article 70 of the ZGD-1)
reporting system.
Board. Following NLB’s model, the compliance function has been
(Point 6 of the sixth paragraph of Article 70 of the ZGD-1)
established in the core members of the Group as well based on the Group
The appointment or replacement of members of
Risk management and control is performed through a clear organisational
standards for compliance and integrity area. Through specific binding
The shares of the Bank are freely transferable, subject to the provisions
the management or supervisory bodies
structure with defined roles and responsibilities. The organisation and
standards in the area of compliance and integrity, there is a harmonised
of the Articles of Association of the Bank which require the approval of
The Management Board of the Bank is comprised of three to seven
delineation of competencies is designed to prevent conflicts of interest,
system of standards and practices in the area of compliance and integrity in
the Supervisory Board, namely for the transfer of shares of the Bank by
members, one of whom is appointed President of the Management Board
and to ensure a transparent and documented decision-making process that
place in the entire NLB Group, in core and non-core members.
which the acquirer, together with the shares held by the holder before such
of the Bank, and one member may be a Worker Director. The number of
is subject to an appropriate upward and downward flow of information.
an acquisition and the shares held by third parties for the account of the
Management Board members is determined by a resolution of the Bank’s
Business line Risk Management in NLB, encompassing several professional
3.2. Financial reporting
acquirer, exceeds a 25% share of the Bank’s voting shares. Approval for the
Supervisory Board. The President and other members of the Management
areas, is in charge for formulating and controlling the Group’s risk
With the aim of ensuring appropriate financial reporting procedures, the
transfer of shares is issued by the Supervisory Board.
Board are appointed and recalled by the Supervisory Board of the Bank;
management policies, setting limits, overseeing the harmonisation, regular
Group pursues the adopted Policy on Accounting Controls. The accounting
the President of the Management Board may propose to the Chair of the
monitoring of risk exposures and limits based on centralised reporting at
controls are provided through the operation of the complete accounting
The Bank rejects the request for approval of transfer shares if the acquirer,
Supervisory Board of the Bank to appoint or recall an individual member or
the Group level. In contrast, the primary responsibility for managing the
function with the purpose of ensuring quality and reliable accounting
together with the shares held by the acquirer before the acquisition and the
the remaining members of the Management Board of the Bank. However,
assumed risks in the Group members within centralised set limits lies with
information, and thereby accurate and timely financial reporting. The
shares held by third parties for the account of the acquirer, exceed the 25%
it is the Workers’ Council of the Bank that may propose to the Supervisory
each Group member’s management board.
principal identified risks in this area are managed with an appropriate
share of the Bank with voting rights, increased by one share.
Board of the Bank to appoint or recall a Worker Director.
system of authorisations, a segregation of duties, compliance with
The Group puts great emphasis on the risk culture and awareness across the
accounting rules, documenting of all business events, a custody system,
Notwithstanding the provision mentioned in the first paragraph, approval
The President and members of the Management Board shall be appointed
entire Group. The Group’s Risk management framework is forward-looking
posting on the day of a business event, in-built control mechanisms in source
for the transfer of shares is not required if the acquirer of the shares has
for a period of five years and may be re-appointed for another term
and tailored to its business model and corresponding risk profile.
applications, and archiving pursuant to the laws and internal regulations.
acquired them for third parties. So, it is not entitled to exercise voting rights
of office. The President and members of the Management Board may
c) The Compliance, Information Security, and AML/CTF Functions
Furthermore, the policy precisely defines the primary accounting controls,
from these shares at its sole discretion, while at the same time committing to
be recalled prior to the expiry of their term of office in accordance
performed in the scope of analytical bookkeeping, and secondary
accounting controls, i.e., checking the efficiency of implementation of
the Bank that 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
with applicable laws and Articles of Association. Each member of the
Management Board of the Bank may prematurely resign her/his term of
Compliance and Integrity in the Group in its role as internal control
primary accounting controls. With an efficient mechanism of controls in the
if, together with the instructions for voting, it does not receive a written
office with a period of notice of three months. A written notice shall be
function performs control activities with respect to the main following areas:
area of accounting reporting, the Group ensures:
guarantee from that person that this person has shares for his own account
delivered to the Chair of the Supervisory Board of the Bank. The notice
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 term may be shorter than three months if requested by the resigning
treasury shares, while the total percentage of shares acquired on the basis
6. INFORMATION ABOUT THE COMPOSITION AND WORK OF THE
banks and companies, the Bank’s Articles of Association, and its Rules of
member of the Management Board of the Bank in his/her notice and is
of this authorisation, together with the treasury shares already in possession
MANAGEMENT AND SUPERVISORY BODY AND ITS COMMITTEES
Procedure of the Supervisory Board of NLB. The Supervisory Board may
subject to the approval of the Supervisory Board of the Bank.
of NLB, may not exceed 10% of NLB’s share capital (2,000,000 shares).
engage legal and other consultants and institutions required by itself or its
When disposing its treasury shares which NLB acquired on the basis of this
6.1. The Management Board
committees to perform their tasks.
A member of the Bank’s Management Board may only be a person who
authorisation, the pre-emptive right of the existing shareholders to acquire
Composition of the Management Board
fulfils the legally prescribed conditions for a management board member
shares is excluded in full in case treasury shares are disposed of for the
The Management Board is the decision-making and representation body of
Composition of the Supervisory Board
under the law on banking, and who obtained a licence from the BoS or the
purpose of paying the variable part of remuneration to the employees of
the Bank. It manages the Bank, makes business decisions autonomously and
As the term of office of four members of the Supervisory Board of NLB
ECB – if executing the competences and tasks from Item (e) of paragraph 1
NLB in the form of NLB’s shares.
independently, adopts the development strategy, ensures sound and effective
expired in 2020, the General Meeting of Shareholders on 15 June 2020
of Article 4 of Regulation (EU) no. 1024/2013 for the performance of the
risk management, acts with the highest professional integrity, protects
adopted the decision to elect new members. Primož Karpe and David
function of a bank’s management board member under the law regulating
5. INFORMATION ON THE WORK AND KEY POWERS OF THE
business secrets, and is held accountable for the legality of the Bank’s
Eric Simon were re-elected for a new term of office, while the term of
banking. The Bank assesses every candidate following the Bank’s Policy
SHAREHOLDERS’ MEETING AND OF ITS KEY POWERS, AND A DESCRIPTION
operations within the limits set by the relevant regulations.
office of László Urbán and Alexander Bayr expired. Additionally, Verica
governing a Fit & Proper assessment prior to the appointment.
OF SHAREHOLDERS’ RIGHTS AND THE METHOD OF THEIR EXERCISING
Trstenjak was elected as a member of the Supervisory Board. All three
At the beginning of 2020, the Management Board of the Bank consisted of
members were appointed for a four-year term, which began on the day of
The Supervisory Board of the Bank consists of a total of 12 members,
Competences of the Bank’s General Meeting are stipulated in the
Blaž Brodnjak, CEO; Archibald Kremser, CFO; Andreas Burkhardt, CRO;
their appointment and shall last until the conclusion of the Annual General
of which eight members represent the interests of shareholders and four
Companies (ZGD-1), Banking Act (ZBan-2) and the Articles of Association.
and László Pelle, COO. László Pelle and the Supervisory Board agreed
Meeting of NLB that decides on the allocation of distributable profit for
members represent the interests of employees. Members representing the
The General Meeting is a body of the Bank through which shareholders
on the termination of his office as at 31 January 2020. In order to assure
the fourth financial year after their election, counting the year in which they
interests of shareholders shall be elected and recalled by the Bank’s General
exercise their rights, which include among others: decisions on corporate
continuation of the function of COO, the Supervisory Board appointed
were appointed as the first one.
Meeting from persons proposed by shareholders or the Supervisory Board
changes (amendments of the Articles of Association, increase or decrease of
Petr Brunclík as member of the Management Board, who joined NLB on
of the Bank and members representing the interests of employees shall be
share capital) and legal restructuring (mergers, acquisitions), adopt decisions
2 February 2020 in a function of Executive Assistant to the Management
At the same General Meeting, the shareholders also adopted amendments to
elected and recalled by the Workers’ Council of the Bank. Members of the
on all statutory issues with respect to appointing and discharging members
Board. He assumed his function as COO on 18 May 2020, upon receiving
the Articles of Association, which based on Constitutional Court’s decision
Supervisory Board representing the interests of shareholders are elected by
of the Supervisory Board (representatives of shareholders) and appointment
a consent by the ECB on 13 May 2020. On 12 November 2020, the
adopted in June 2019, enabled workers’ participation in the management
an ordinary majority of votes cast by shareholders.
of an auditor, distribution decisions (appropriation of distributable
Supervisory Board reappointed Blaž Brodnjak as the CEO, Archibald
bodies. With the mentioned decision, the Constitutional Court annulled
The members of the Supervisory Board of the Bank are elected for the
Supervisory Board.
period lasting from the day of their election until the end of the Bank’s
Following the already mentioned decision of the Constitutional Court of the
Workers in Management with respect to employee representatives in a
stipulated that the provisions of the Law Governing the Participation of
annual general meeting of shareholders, which decides on the use of
The General Meeting is convened by the Management Board. The General
RoS in June 2019, the Bank was required to enable workers participation
bank’s managing bodies would not apply to banks. In accordance with
accumulated profit for the fourth business year since they have been elected,
Meeting may be convened by the Supervisory Board in cases where the
in its governing bodies. For that purpose, an amendment to its Articles of
changes made to the Articles of Association, the Supervisory Board consists
unless otherwise stipulated at the time of appointment of individual
Management Board fails to convene the General Meeting or where when
Association was adopted at General Meeting of Shareholder on 15 June
of 12 members, out of which eight are representatives of the capital and
members.
a convocation is necessary to ensure unhindered operations of the Bank.
2020 that enables a right of the Bank’s employees to one member of the
four are employee representatives (elected and appointed by the Workers’
profit), and granting of a discharge from liability to the Management and
Kremser as the CFO, and Andreas Burkhardt as CRO of NLB.
the fourth paragraph of Article 33 of the Banking Act (ZBan-2), which
The Supervisory Board may amend the agenda of the General Meeting
Management Board (the Worker Director).
Council of NLB).
The general meeting of the Bank may dismiss an individual or all members
convened in line with the Articles of Association.
of the Supervisory Board (representatives of shareholders) even before the
Work of the Management Board
In June 2020, the Workers’ Council of NLB elected and appointed Petra
expiration of their term of office. A resolution on a dismissal shall be valid if
As a rule, the General Meeting of the Bank shall be convened at the
After the successfully completed privatisation process of NLB and the
Kakovič Bizjak, Sergeja Kočar, and Bojana Šteblaj as members of the
adopted with at least a three-quarter majority of all votes cast.
registered office of the Bank, yet it may also be convened at another
fulfilment of the highly limiting commitments to the EC by the end of
Supervisory Board of NLB – representatives of employees. Their four-year
The Supervisory Board of the Bank shall at its first meeting after an
resolutions by simple majority of the votes cast, unless the applicable laws
for future growth so that the Bank intensified activities on digitalisation
Articles of Association into the court register (17 June 2020).
appointment elect from among its members a Chair and at least one Deputy
or the Bank’s Articles of Association stipulate a larger majority or other
and modernisation of processes and services of the entire NLB Group,
Chair of the Supervisory Board of the Bank. A member representing the
conditions.
interests of employees cannot be elected Chair or Deputy Chair of the
increasing the range of customer services and the improvement of efficiency.
On 26 June 2020, members of the Supervisory Board of NLB elected
From February 2020, the Management Board took all necessary actions
Primož Karpe as Chairman of the Supervisory Board for the second
Supervisory Board of the Bank. All the supervisory board members shall be
The shareholders have the right to participate at the general meeting of the
in order to lower the impact and consequences of COVID-19 pandemic.
consecutive time, while Andreas Klingen was re-elected as Deputy. At that
independent professionals as defined by the Articles of Association.
Bank, the voting right, pre-emptive right to subscribe for new shares in case
Through the year, the Management Board worked on activities that resulted
point, the Supervisory Board of NLB consisted of 11 members, of which
venue specified by the convenor. The Shareholders’ Meeting shall adopt
2019, the Management Board in 2020 began creating new opportunities
terms of office began on the day of the registration of the changes to the
of share capital increase, the right to profit participation (dividends) and the
in purchase of Komercijalna banka a.d. Beograd (Komercijalna Banka,
eight were representatives of shareholders (in addition to Primož Karpe and
Amendments to Articles of Association:
right to a share in surplus in the event of liquidation or bankruptcy of the
Beograd) in December 2020.
Detailed information on the composition and amount of remuneration of
and Verica Trstenjak) and three were representatives of employees (Petra
Andreas Klingen, members were also Gregor Rok Kastelic, Mark William
Lane Richards, Shrenik Dhirajlal Davda, Peter Groznik, David Eric Simon,
A qualified majority of at least 75% of the votes cast by shareholders at the
Bank and the right to be informed.
general meeting of the Bank’s shareholders is required for the adoption of
any amendments of the Articles of Association.
Based on Article 296 of the Companies Act (ZGD-1), NLB informs
the Management Board is contained in Appendices C.1 and C.3 of this
Kakovič Bizjak, Sergeja Kočar, and Bojana Šteblaj). Due to the changed
shareholders on their rights as shareholders in an Information on the
statement.
membership, the Supervisory Board also appointed members to its five
An explanation regarding the authorisation of the members
Rights of Shareholders that is published among documents for convocation
committees.
of the management, particularly authorisations to issue or
of each General Meeting (i.e., on expansion of the agenda, proposals by
6.2. The Supervisory Board
purchase own shares
shareholders, voting proposals by shareholders, and the shareholders right to
In accordance with the two-tier governance system, the Bank’s Supervisory
Given the fact that the changed Articles of Association allowed up to
(Point 9 of the sixth paragraph of Article 70 of the ZGD-1)
be informed).
Board issues approvals to the Management Board related to the Banks’
four employee representatives to the Supervisory Board of the NLB, the
business policy and financial plan, approves the strategy of the Bank and the
Workers’ Council published a call for the election and appointment of one
The General Meeting of Shareholders of NLB on 10 June 2019 authorised
With recent changes in the Articles of Association at the General Meeting,
Group, the internal control system organisation, gives consent to the Annual
more member – an employee representative. While this process was still
the Management Board for redeeming treasury shares in the period of
an amendment was adopted that enables the shareholders to attend the
Plan of the Internal Audit, as well as financial transactions defined in the
ongoing, on 1 September 2020, the Bank received a letter of resignation
36 months from the adoption of the resolution at the General Meeting.
Pursuant to the provisions of the Banking Act (ZBan-2), NLB is required
to pay out the variable remuneration of certain employees (in part) in
NLB’s shares. The authorisation is valid for acquiring up to 36,542 NLB
General Meeting without physical presence.
Articles of Association. The Supervisory Board acts in accordance with the
highest ethical standards of management, considering the prevention of
from Petra Kakovič Bizjak, member of the Supervisory Board – the
employee representative. Her mandate was terminated by agreement with
conflicts of interest. The Supervisory Board performs its tasks in accordance
the Supervisory Board on 10 September 2020. The procedure for one
with the provisions of the applicable legislation governing the operations of
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 member of the Supervisory Board – the worker representative was still
• Final Monitoring Trustee Report for the Reporting Period July –
The Audit Committee’s tasks are defined by law, the Bank’s Articles of
• NLB Group Risk Strategy, Amendment to Risk Appetite, NLB Group
ongoing at the end of December 2020.
December 2019;
Association, Rules of Procedure of the Audit Committee of the Supervisory
Risk Appetite, Internal Liquidity Adequacy Process (ILAAP), The
• Amendments to the Corporate Governance Policy of the NLB; Changes
Board of NLB, resolutions of the Supervisory Board, and other regulations
Internal Capital Adequacy Assessment Process (ICAAP) in NLB Group,
On 20 November 2020, the Bank received information that the Workers’
in Rules and Procedures of the Risk Committee; Changes in Rules and
from which the Committee especially monitors and prepares proposals of
NLB Group Non-performing Exposure and Foreclosed Assets Strategy for
Council elected Janja Žabjek Dolinšek as member of the Supervisory
Procedures of Operations and IT Committee;
resolutions for the Supervisory Board for the area:
2020 -2024, NLB Group Recovery Plan 2020;
Board – the worker representative. Her term of office started on 20
• IT Strategy; CBS Strategy; Data Centre Strategy update; NLB Group
• COVID-19 – Initial Credit Risk impact analysis and quarterly
November 2020 and will run until the conclusion of the Annual General
Data Management Project; HR status in IT, Information on activities
• Accounting and financial reporting
information update;
Meeting of NLB that decides on the allocation of distributable profit for the
for information security assurance in NLB, Plan for KB, Subsidiaries IT
• Internal control and risk management
fourth financial year after her election, counting the year in which she was
landscape;
• Internal audit
• Quarterly Information on status of information security in NLB;
• Report on Top 50 groups of clients by exposure in the NLB Group;
appointed as the first one. Procedure for election of another member of the
• Decisions on concluding legal transactions with MIGA, Washington,
• Compliance of operations
• Report on Top 20 largest restructuring cases;
Supervisory Board – the worker representative was still ongoing at the end
establishment of new companies (NLB Cultural Heritage Management
• External audit
of December 2020.
Institute), large exposures, sale of receivables, write-offs of claims,
• Proposal for the issuance of prior consent of the Supervisory Board of
NLB, in accordance with the first paragraph of article 164 of Banking Act
divestment of NLB (Vita d.d., company BH-RE d.o.o., Sarajevo), major
There were seven regular sessions and three correspondence sessions of the
(ZBan-2), for a legal transaction based on which the Bank’s total exposure
Work of the Supervisory Board
legal proceedings involving NLB and NLB Group members, approval of
Audit Committee in 2020. Following is a summary of key topics considered
to individual client or a group of related clients would reach or exceed
In 2020, the Supervisory Board met at seven regular and 12 correspondence
transactions with persons in special relations with the Bank, etc.
by the Audit Committee:
sessions and took note of or adopted the following major decisions:
10% of the Bank’s eligible capital (or if it increases by each subsequent
5% of the Bank’s eligible capital), consents to early repayments and final
Composition and the amount of remuneration of the Supervisory Board
• Confirmation of NLB Group 2019 Annual Report, Overall Opinion
write-offs;
• Annual NLB Group Report for 2019; Report of the Supervisory Board
members is described in the Appendices C.2 and C.4 of this statement.
of Internal Audit for 2019, Corporate Governance Statement of NLB,
• Report on the material court proceedings for NLB and NLB Group
of NLB on the Results of Examining the Annual NLB Group Report
Statement on Management of Risk of the NLB, NLB Group Annual
members;
for 2019; Corporate Governance Statement of NLB; Risk Management
6.3. The Supervisory Board Committees
CSR Report for 2019;
• Proposed changes in Rules and Procedures of Risk Committee of the
Statement of NLB; Annual Report of Internal Audit for 2019;
All five Committees for the Supervisory Board function as consulting bodies
• Annual Report on the Work of Compliance and Integrity, Annual
Supervisory Board of NLB.
• Corporate Social Responsibility Report for 2019 with a Statement on
of the Supervisory Board of NLB and discuss the material and proposals of
Assessment on Risks in the Area of Compliance and Integrity;
non-financial operations of the NLB Group for 2019;
Management Board of NLB for the Supervisory Board meetings related to a
• Regular interim reports on the operations of the NLB Group, quarterly
Responsibilities of the committee are defined in Rules of Procedure of the
• Proposal to convene the regular General Meeting of NLB for 15 June
particular area. The Supervisory Board has the following committees.
Internal Audit Reports, Compliance and Integrity Reports, Reports on
Risk Committee of the Supervisory Board of NLB.
2020;
• NLB Group Budget 2021 and financial projections 2022-25; Interim
Reports on the NLB Group Operations;
• Acquisition of the Komercijalna Banka, Beograd;
• The Audit Committee
• The Risk Committee
• The Nomination Committee
Information security assurance in NLB;
• Re-plan of Internal Audit Plan 2020, Internal Audit Plan (2021), Work
6.3.3. The Nomination Committee of the Supervisory Board of NLB
Plan of the Compliance and Integrity for 2021, Regular reports on
The Nomination Committee drafts proposed resolutions for the Supervisory
overdue material recommendations of the Internal Audit, Reports on the
Board concerning the appointment and dismissal of the Management
• COVID-19 – Initial Credit Risk Impact Analysis; NLB Group wide
• The Remuneration Committee
documents received from BoS and ECB and on the implementation of
Board members; recommends candidates for Supervisory Board members;
COVID-19 implications with regulatory and governmental measures;
• The Operations and IT Committee
the requirements of the BoS and ECB;
recommends to the Supervisory Board the dismissal of members of the
• NLB Group Risk Appetite; NLB Group Risk Strategy; Regular risk
• Amendments to the Internal Auditing Manual, Rules on the relations of
Management Board and the Supervisory Board (representatives of capital);
reports for NLB and NLB Group; Regular Risk and Capital Management
Committees are composed of at least three members of the Supervisory
NLB and the Audit Committee with the audit firm, Audit Committee
prepares the content of executive employment contracts for the President
- Pillar III disclosures, NLB Group Recovery plan 2020; Report on the
Board. The Works Council can nominate one Supervisory Board
Self-Evaluation for 2019.
Top 50 groups of clients by exposure in the NLB Group, Restructuring
member – representative of workers into each committee. The Chair of
and members of the Management Board; evaluates the performance of the
Management Board and the Supervisory Board; and assesses the knowledge,
TOP 20; Management of largest restructuring cases; Overview of the
the Committee may only be appointed from among the members of the
Responsibilities of the committee are defined in Rules of Procedure of the
skills, and experience of individual members of the Management Board and
recommendations issued to external providers; Information on status
Supervisory Board. The term of office of Chair, the Deputy Chair, and
Audit Committee of the Supervisory Board of NLB.
Supervisory Board and the bodies as a whole.
of information security in NLB; Rules on the Relations of NLB and
members of the Committee should not exceed their term of office as
the Audit Committee with the Audit Firm; ILAAP – Internal liquidity
Supervisory Board members.
6.3.2. The Risk Committee of the Supervisory Board of NLB
From 1 January 2020, the composition of the committee was as follows:
adequacy process;
The Risk Committee monitors and drafts resolutions for the Supervisory
Primož Karpe (Chairman), Andreas Klingen (Deputy Chairman),
• Internal Audit Plan (2021 & long - term plan), Re-plan of Internal Audit
Composition of the aforementioned Committees in 2020 is described in
Board in all risk areas relevant to the Bank’s operations. It is consulted on
Alexander Bayr, Peter Groznik, and Mark William Lane Richards
Plan 2020, Overall Opinion of Internal Audit for 2019, Action Plan for
detail in the Appendix C.2 of this statement.
the current and future risk appetite and the risk management strategy, and
(members). From 26 June 2020, the composition of the committee was as
the Compliance and Integrity for 2021, Annual Assessment on Risks in
helps carry out control over senior management concerning implementation
follows: Primož Karpe (Chairman), Andreas Klingen (Deputy Chairman),
the Area of Compliance and Integrity for NLB and NLB Group; Regular
6.3.1. The Audit Committee of the Supervisory Board of NLB
of the risk management strategy.
Verica Trstenjak, Peter Groznik, and Sergeja Kočar (members).
periodic reports on Internal Audit; Compliance and Security and on
The Audit Committee monitors and prepares draft resolutions for the
Information Security Assurance in NLB;
Supervisory Board on accounting reporting, internal control and risk
From 1 January 2020, the composition of the committee was as follows:
There were eight regular sessions and one correspondence session of the
• Reports on the Documents received from the BoS and the ECB; Reports
management, internal audit, compliance, and external audit, and as well
Andreas Klingen (Chairman), László Urbán (Deputy Chairman), Peter
Nomination Committee in 2020. Following is a summary of key topics
on the implementation of the requirements of the BS and ECB and on
monitors the implementation of regulatory measures.
Groznik, Mark William Lane Richards and David Eric Simon (members).
considered by the Nomination Committee:
the implementation of the requirements;
From 26 June 2020, the composition of the committee was as follows:
• Achievements of the goals of the Management Board in 2019 and
From 1 January 2020, the composition of the committee was as follows:
Andreas Klingen (Chairman), Peter Groznik (Deputy Chairman), Mark
• Assessment of suitability of the candidates for members of the
Defined goals of the Management Board for 2020, Management Board
David Eric Simon (Chairman), Alexander Bayr (Deputy Chairman), Primož
William Lane Richards, Gregor Rok Kastelic and David Eric Simon
Supervisory Board of NLB
Evaluation – Method 360; Fit & Proper list of candidates for members
Karpe, Shrenik Dhirajlal Davda, and Gregor Rok Kastelic (members).
(members).
• NLBs MB evaluation – Method 360
of the Supervisory Board; Fit & Proper Assessment of candidate for
From 26 June 2020, the composition of the committee was as follows: David
• Proposal for the reappointment of the president and two members of the
the member of the Supervisory Board – Workers Representative; Self-
Eric Simon (Chairman), Shrenik Dhirajlal Davda (Deputy Chairman),
There were five regular sessions of the Risk Committee in 2020. Following is
Management Board of NLB.
assessment of the employees performing special work; Training Plan for
Primož Karpe, Gregor Rok Kastelic, Verica Trstenjak (resigned from Audit
a summary of key topics considered by the Risk Committee:
2020;
• NLB Workers’ Council Status Report on workers’ cooperation in
managing proposed measures;
Committee function on 18 December 2020) and Petra Kakovič Bizjak (until
20 September 2020) – as members.
• Risk report for 2019, a Statement of Management of Risk of the NLB;
• Regular quarterly risk reports of NLB and the NLB Group;
• Risk and Capital Management - Pillar III quarterly disclosures;
Responsibilities of the committee are defined in Rules of Procedure of the
Nomination Committee of the Supervisory Board of NLB.
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Annual Report 2020 6.3.4. The Remuneration Committee of the Supervisory Board of NLB
6.3.5. The Operations and IT Committee of the Supervisory Board of NLB
7. DESCRIPTION POLICY ON THE PROVISION OF DIVERSITY OF
there were no female representatives in the composition of the Supervisory
The Remuneration Committee carries out expert and independent
The Committee monitors and prepares draft resolutions for the
THE MANAGEMENT BODY AND SENIOR MANAGEMENT
Board in the first half of 2020. Even though selection process for four new
assessments of the remuneration policies and practices, and formulates
Supervisory Board, whereby the main tasks are the following: it monitors
members of the Supervisory Board was open to candidates of both genders,
initiatives for measures related to improving the management of the Bank’s
the implementation of the IT Strategy, Information Security Strategy,
Second version of Policy on the Provision of Diversity of the Management
at the regular General Meeting of Shareholders on 15 June 2020, only one
risks, capital, and liquidity; prepares proposals for remuneration-related
as well as Operations Strategy; it monitors key operations and IT KPI’s
Body and Senior Management was adopted by the General Meeting
female representative was elected as member of the Supervisory Board
decisions of the Supervisory Board; and supervises the remuneration of
and service quality indicators; monitors key operations and IT projects
of Shareholders on 10 June 2019. With the mentioned Policy, NLB sets
of NLB. However, with recent changes regarding workers participation
senior management performing the risk management and compliance
and initiatives; monitors operating risks in the area of Operations, IT and
the framework in the area of diversity of an adequate representation of
in managing bodies of banks, three female worker’s representatives were
functions.
Security; monitors the recommendations for ensuring and increasing the
both genders, with regard to education, range of knowledge, skills and
elected to the position by the Workers Council on 17 June 2020. Since
From 1 January 2020, the composition of the committee was as follows:
on potential violations, events and incidents in the area of IT security; and
on the Provision of Diversity of the Members of the Supervisory Board was
female representative on 20 November 2020 (and after the business year
Alexander Bayer (Chairman), László Urbán (Deputy Chairman), Shrenik
monitors the Target Operating Model implementation in the areas of IT,
extended on the members of the Management Board, while the goals of the
2020, on 22 January 2021, yet another female representative was selected).
Dhirajlal Davda, and Gregor Rok Kastelic (members). From 26 June 2020,
the Security Operating System, Competence Centre and Operations.
Policy shall also be reasonably applied to the provision of diversity of the
Currently, out of 12 members of the Supervisory Board, five representatives
the composition of the committee was as follows: Gregor Rok Kastelic
senior management.
are females.
level of information/cyber security issued by CISO, addresses the report
experience, age, gender, and international experience. The Provisions Policy
one worker’s representative resigned, the Workers Council elected another
(Chairman), Mark William Lane Richards (Deputy Chairman), Shrenik
From 1 January 2020, the composition of the committee was as follows:
Dhirajlal Davda, Sergeja Kočar and Peter Groznik (members).
Mark William Lane Richards (Chairman), Shrenik Dhirajlal Davda
The Bank implements the principles of this policy through other policies
At the beginning of 2020, the Management Board of the Bank consisted of
(Deputy Chairman), Primož Karpe, Andreas Klingen, and László Urbán
and procedures, namely the Policy on the selection of suitable candidates
four male representatives. Even though one member resigned from his post,
There were five sessions of the Remuneration Committee in 2020. Following
(members). From 26 June 2020, the composition of the committee was as
for members of the Supervisory Board and the Policy on the selection
and the selection process was open to both genders, he was replaced with
is a summary of key topics considered by the Remuneration Committee:
follows: Mark William Lane Richards (Chairman), Shrenik Dhirajlal Davda
of suitable candidates for members of the Management Board, as well
another male representative in May 2020. In 2021, the selection process for
(Deputy Chairman), Primož Karpe, Andreas Klingen, and Bojana Šteblaj
as procedures of the Nomination Committee of the Supervisory Board.
a worker’s representative in the Management Bord is planned, according to
• Realisation of goals of Management Board of NLB for 2019 and
(members).
Key criteria for selection of candidates were supplemented by criteria
the agreement between the Management Board and the Workers Council
information on proposed goals for 2020
that include experience, reputation, management of potential conflict of
that will be open to candidates of both genders.
• Self-assessment of the employees performing special work
There were five sessions of the Operations and IT Committee 2020. The
interests, independence, time availability, and conditions for achieving
• Information on salary raise of the members of the Management Board in
Operations and IT Committee took note of:
collective suitability of the Supervisory Board.
NLB Group and senior management in NLB
The diversity policy is reviewed by the Nomination Committee of the
Supervisory Board, while the Management Board reviews the diversity
• Proposal regarding salaries and benefits of the members of the
• IT Strategy, CBS Strategy
In practice, diversity is ensured through the procedures for nominating and
policy of the senior management.
Management Board
• ECB Action plan, ECB recommendations
appointing members to the management and supervisory bodies. While
• Assessment of performance and proposed variable part of remuneration
• NLB Group Data Management Project
other criteria of diversity were met, as far as gender criteria is concerned,
Ljubljana, 8 April 2021
for directors of Internal Audit, Compliance and Integrity and Global
• Regular HR status in IT
Risk.
• Quarterly Information on activities for information security
Supervisory Board of NLB
Responsibilities of the committee are defined by Rules of Procedure of the
• IT Security Dashboard, OPS Dashboard, Business Dashboard
Remuneration Committee of the Supervisory Board of NLB.
• Subsidiaries IT landscape
assurance in NLB
• Proposed changes in Rules of Procedures of Operations and
IT Committee.
Primož Karpe
Chairman
Responsibilities of the committee are defined by Rules of Procedure of the
Operations and IT Committee of the Supervisory Board of NLB.
Management Board of NLB
Archibald Kremser
CFO
Andreas Burkhardt
CRO
Petr Brunclík
COO
Blaž Brodnjak
CEO & CMO
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Table 37: Composition of Management in financial year 2020 (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
Blaž Brodnjak
Andreas Burkhardt
Archibald Kremser
Petr Brunclík
László Pelle
President
Member
Member
Member
Member
CEO
CRO
CFO
COO
COO
6 July 2016
5 July 2021(i)
Slovene
18 September 2013
31 July 2013
18 May 2020
5 July 2021(i)
5 July 2021(i)
17 May 2025
German
Austrian
Czech
26 October 2016
31 January 2020
Hungarian
1974
1971
1971
1979
1966
MBA
Banking/Finance
MBA
MBA
MSc
MSc
Banking/Finance
Banking/Finance
Information technologies
and applied informatics
Banking Operations
and IT Management
Membership in supervisory bodies in
companies not related to the company
Banks' Association of Slovenia
AMCham Slovenia
Handball Federation of Slovenia
(i) On 12 November 2020, the Supervisory Board extended the mandate by a period of five years until 2026.
Table 38: Composition of Supervisory Board and Committees in financial year 2020 (C.2)
Position held
(president, deputy
president, 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
Name and Surname
Primož Karpe
President
10 February 2016
Andreas Klingen
Deputy President
22 June 2015
2024
2023
Alexander Bayr
Member
4 August 2016
15 June 2020
David Eric Simon
Member
4 August 2016
2024
László Urbán
Member
10 February 2016
15 June 2020
Peter Groznik
Member
8 September 2017
Mark William
Lane Richards
Member
10 June 2019
Shrenik Dhirajlal Davda
Member
10 June 2019
Gregor Rok Kastelic
Member
10 June 2019
Verica Trstenjak
Member
15 June 2020
2021
2023
2023
2023
2024
Petra Kakovič Bizjak
Member
17 June 2020
10 September 2020
Sergeja Kočar
Bojana Šteblaj
Member
17 June 2020
Member
17 June 2020
Janja Žabjek Dolinšek
Member
20 November 2020
2024
2024
2024
Representative of
the company's
capital structure
Representative of
the company's
capital structure
Representative of
the company's
capital structure
Representative of
the company's
capital structure
Representative of
the company's
capital structure
Representative of
the company's
capital structure
Representative of
the company's
capital structure
Representative of
the company's
capital structure
Representative of
the company's
capital structure
Representative of
the company's
capital structure
Representative of the
company’s employees
Representative of the
company’s employees
Representative of the
company’s employees
Representative of the
company’s employees
7/7
6/7
4/4
7/7
3/4
7/7
7/7
7/7
7/7
3/3
2/2
3/3
3/3
0/0
male
Slovene
1970
MSc
Banking/Finance
male
German
1964
University Degree
Banking/Finance
male
Austrian
1960
University Degree
Banking/Finance
male
British
1948
Higher National
Diploma in
Business Studies
Banking/Finance
male
Hungarian
1959
PhD
Banking/Finance
male
Slovene
1971
PhD
Finance, industry,
investment banking
male
British
1966
MSc
Banking/Finance
male
British
1960
MSc
Finance
male
Slovene
1968
MSc
Banking/Finance
female
Slovene
1962
PhD
female
Slovene
1985
University Degree
Law
IT
female
Slovene
female
Slovene
female
Slovene
1968
1962
1957
MSc
MSc
MSc
Management
Management
IT
YES
YES
YES
YES
YES
YES
YES
YES
YES
YES
YES
YES
YES
YES
Kyrgyz Investment and Credit Bank
CISC, Credit Bank of Moscow
PJSC, Nepi Rockcastle plc
WKBG Bank, Vienna
Jihlavan a.s., Central Europe
Industry Partners a.s.
Ukreximbank, Ukraine
MSIN d.o.o., Ljubljana,
CETIS d.d., Ljubljana
CIB Bank Egypt, Sheffield Haworth
Ltd, Vencap International
Ukrgasbank, Kyiv, Ukraine,
Meghraj Capital Ltd, Kenya
EU Agency for Fundamental
Rights, Vienna
YES
NO
NO
NO
NO
NO
NO
NO
NO
NO
NO
NO
NO
NO
89
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Name and Surname
Membership in committees
(audit, nominal, income
committee, etc.)
First appointment
to the position
Conclusion of the
position/term of office
President/Member
Attendance at sessions of
SB's Committees in regard
to the total number of
SB's session (applicable
on his/her mandate)
15 June 2020
Member/Deputy President
15 June 2020
2023
2023
2024
2024
2024
2024
2023
15 June 2020
2021
26 June 2020
2024
2024
2024
President
Member
Member/President
Deputy President
Member
Member
President
Deputy President
Member
Member
Member
Member
Member
President
2024
Member
2023
Member/Deputy President
2023
Member
Member
Member
President
László Urbán
Remuneration Committee
Alexander Bayr
Remuneration Committee
Shrenik Dhirajlal Davda
Remuneration Committee
Gregor Rok Kastelic
Remuneration Committee
Mark William Lane Richards
Remuneration Committee
Peter Groznik
Sergeja Kočar
Primož Karpe
Remuneration Committee
Remuneration Committee
Nomination Committee
6 October 2017
1 March 2019
28 June 2019
28 June 2019
26 June 2020
26 June 2020
26 June 2020
15 April 2016
Andreas Klingen
Nomination Committee
19 February 2016
Alexander Bayr
Peter Groznik
Nomination Committee
Nomination Committee
Mark William Lane Richards
Nomination Committee
Verica Trstenjak
Nomination Committee
Sergeja Kočar
Nomination Committee
David Eric Simon
Audit Committee
Alexander Bayr
Primož Karpe
Audit Committee
Audit Committee
Shrenik Dhirajlal Davda
Audit Committee
Gregor Rok Kastelic
Audit Committee
6 October 2017
6 October 2017
28 June 2019
26 June 2020
26 June 2020
7 April 2016
15 April 2016
28 June 2019
28 June 2019
26 August 2016
15 June 2020
Deputy President
Petra Kakovič Bizjak
Audit Committee
26 June 2020
10 September 2020
Verica Trstenjak
Audit Committee
26 June 2020
18 December 2020
Andreas Klingen
Risk Committee
19 February 2016
2023
László Urbán
Peter Groznik
Risk Committee
Risk Committee
David Eric Simon
Risk Committee
Mark William Lane Richards
Risk Committee
Gregor Rok Kastelic
Risk Committee
Mark William Lane Richards
Operational and IT Committee
Shrenik Dhirajlal Davda
Operational and IT Committee
László Urbán
Operational and IT Committee
Andreas Klingen
Operational and IT Committee
Primož Karpe
Bojana Šteblaj
Operational and IT Committee
Operational and IT Committee
26 August 2016
15 June 2020
Deputy President
06 October 2017
7 April 2016
28 June 2019
26 June 2020
28 June 2019
28 June 2019
28 June 2019
28 June 2019
15 April 2016
26 June 2020
2021
Member/Deputy President
2024
2023
2023
2023
2023
15 June 2020
2023
2024
2024
Member
Member
Member
President
Deputy President
Member
Member
Member
Member
3/3
3/3
6/6
6/6
3/3
3/3
3/3
8/8
7/8
4/4
8/8
4/4
4/4
4/4
7/7
3/3
7/7
7/7
7/7
1/2
3/4
4/5
3/3
5/5
5/5
5/5
2/2
5/5
5/5
3/3
4/5
5/5
2/2
Table 39: Composition and amount of remuneration of the Management Board members in the financial year 2020 (C.3)
Variable income - gross
Position
held
(president/
member)
Fixed
income
-gross (1)
on the
basis
of quantity
criteria
on the
basis
of quality
criteria
Total (2)
Deferred
income (3)
Severance
pay (4)
Bonuses (5)
‘Draw-
back’ (6)
Total gross
(1+2+3+
4+5-6)
Total net(i)
President
384,734.20
Member
366,483.83
Member
352,795.83
0.00
2,250.22
0.00
386,984.42
166,906.55
0.00
24,331.19
0.00
390,815.02
169,095.43
0.00
17,861.15
0.00
370,656.98
161,243.90
Name and
Surname
Blaž
Brodnjak
Archibald
Kremser
Andreas
Burkhardt
László Pelle
Member
57,623.68
Petr Brunclík
Member
170,516.86
258,750.00
4,343.14
0.00
61,966.82
178,294.80
0.00
20,647.48
0.00
191,164.34
82,200.15
(i) This chart does not include other benefits and cost refunds
Table 40: Composition and amount of remuneration of members of the Supervisory Board
and committee members in the financial year 2020 (in EUR) (C.4)
Position held
(president, deputy
president, member,
external member
of a Committee)
Payment for the
performance of
services - gross
per year (1)
Attendance fees for
SB and committees
- gross per year (2)
Name and Surname
Total gross (1+2)
Total net(i)
Travel expenses
Primož Karpe
President
Andreas Klingen
Deputy President
László Urbán
Alexander Bayr
David Eric Simon
Peter Groznik
Mark William
Lane Richards
Member
Member
Member
Member
Member
Shrenik Dhirajlal Davda Member
Gregor Rok Kastelic
Member
Verica Trstenjak
Sergeja Kočar
Bojana Šteblaj
Member
Member
Member
Janja Žabjek Dolinšek
Member
Petra Kakovič Bizjak
Member
89,583.34
84,000.00
31,875.00
36,000.00
75,000.00
66,000.00
75,000.00
66,000.00
70,625.00
33,933.34
5,661.92
5,255.08
169.48
7,302.20
89,583.34
84,000.00
31,875.00
36,000.00
75,000.00
66,000.00
69,427.09
84,000.00
20,997.65
27,900.00
49,406.24
48,001.76
75,000.00
49,406.24
66,000.00
70,625.00
33,933.34
5,661.92
5,255.08
169.48
7,302.20
43,477.52
46,524.21
22,353.60
4,117.91
3,822.01
123.26
5,310.88
8,234.86
2,690.20
1,455.56
2,799.18
6,455.10
429.26
3,617.40
3,917.12
4,239.12
0.00
152.70
457.20
0.00
177.51
(i) After the prepayment of income taxes which is not taken into account in potential subsequent balancing payments of personal income taxes.
External member in committees (audit, nominal, income committee, etc.) - The Banking Act (ZBan-2) that came into effect on 13 May 2015 contains provision
stipulating that, irrespective of provision of Companies Act (ZGD-1) only members of the Supervisory Board can be appointed to Supervisory committees.
Attendance at
sessions of SB's
Committees in regard
to the total number
of SB's session (for
example 5/7)
Name and Surname
none
Gender
Qualification
Year of birth
Professional profile
Membership in
supervisory bodies
in companies
not related to
the company
90
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Statement of Management of Risk
Managing risks and capital efficiently at all levels is crucial for the Group
• Limited exposure to FX risk
sustained long-term profitable operations. Management of credit risk,
• Sustainable tolerance to net losses from operational risk
NLB’s Management Board and Supervisory Board provide herewith a concise
environmental, social and governance (ESG) risks into its business strategies,
representing the Group’s most important risk, focuses on the taking of moderate
statement of the Risk Management according to Article 17 of the Regulation
risk management framework and internal governance arrangements. Thus,
risks – diversified credit portfolio, adequate credit portfolio quality, sustainable
Values of the most important risk appetite indicators of the Group, also
on Internal Governance Arrangements, the Management body and the
the management of ESG risks follows ECB and EBA guidelines and will
cost of risk and ensuring an optimal return considering the risks assumed. The
including the also acquired Komercijalna Banka group as at the end of year
Internal Capital Adequacy Assessment Process for Banks and Savings banks
comprehensively integrated into all relevant processes.
liquidity risk tolerance is low. The Group must maintain an appropriate level
2020, reflecting interconnection between strategic business orientations, risk
(Official Gazette of the RoS, no. 73/15, 49/16, 68/17, 33/18 and 81/18) and
of liquidity at all times to meet its short-term liabilities, even if a specific stress
strategy, and targeted risk appetite profile, were the following:
Regulation (EU) 575/2013 (date of publication 21 December 2015), article
The Group plans a prudent risk profile, optimal capital usage, and profitable
scenario is realised. Further, with the aim of minimising this risk, the Group
435 (Risk management objectives and policies), points (e) and (f), and related
operations in the long run, considering the risks assumed. The Business
pursues an appropriate structure of sources of financing. The Group limited
• Total capital ratio (TCR) 16.6%
amendments to the Capital Requirements Regulation and Second Capital
strategy, the Risk appetite, the Risk strategy, and the key internal risk policies of
exposure to credit spread risk, arising from the valuation risk of debt securities
• Tier 1 capital ratio 14.2%
Requirements Regulation (Regulation (EU) 2020/873), as well as the EBA
the Group that are approved by the Management Board and the Supervisory
portfolio servicing as liquidity reserves, to the moderate level. The Group’s
• Common Equity Tier 1 ratio (CET1) 14.1%
Guidelines on Disclosure requirements (EBA GL/2016/11).
Board of NLB, specify the strategic objectives and guidelines concerning risk
basic orientation in the management of interest rate risk is to limit unexpected
assumption, the approaches, and methodologies of monitoring, measuring,
negative effects on revenues and capital that would arise from changed market
Risk Management in the Group, representing an important element of the
mitigating, and managing all types of risk at different relevant levels. Moreover,
interest rates and, therefore, a moderate tolerance for this risk is stated. When
Group’s overall corporate governance, is implemented in accordance with the
the main strategic risk guidelines are consistently integrated into regular
assuming operational risk, the Group pursues the orientation that such risk must
set strategic guidelines, established internal policies, and procedures which take
business strategy review, the budgeting process, and other strategic decisions,
not significantly impact its operations. Risk appetite for operational risks is low
• Leverage ratio 7.8%
• Cost of risk 62 bps15
• The share of non-performing exposure (NPE %) by EBA 2.3%
• Non-performing loans coverage ratio (NPL CR) 57.3%16
• Loan-to-deposit ratio (LTD) 58.8%
into account the European banking regulations, the regulations adopted by the
whereby informed decision-making is assured. The Group is regularly
to moderate, with a focus on mitigation actions for important risks and key risk
• LCR 257.5%
BoS, the current EBA guidelines, and the relevant good banking practices. EU
monitoring its target risk appetite profile and internal capital allocation,
indicators servicing as an early warning system. The conclusion of transactions
regulations are followed by the Group, where the Group subsidiaries operating
representing the key component of proactive management. Risk limits usage
in derivative financial instruments at NLB is primarily limited to servicing
outside Slovenia are also compliant with the rules set by the local regulators.
and potential deviations from limits or target values are regularly reported to
customers and hedging Bank’s own positions. In the area of currency risk, the
• NSFR 165.7%
• EVE sensitivity17 (of 200 bps) -7.3% of capital
• Transactional FX risk 1.2% of capital
The Group gives high importance to the risk culture and awareness of all
the respective committees and/or the Management Board of the Bank, the
Group thus pursues the goals of low to moderate exposure. The tolerance for all
• Net losses from operational risk 8.0% of capital requirement
relevant risks within the entire Group. Maintaining risk awareness is engrained
Risk Committee of the Supervisory Board, and the Supervisory Board of the
other risk types, including non-financial risks, is low with a focus on minimising
for operational risk
in the business strategy of the Group. The business and operating environment
Bank.
relevant for the Group’s operations, is changing with trends such as changing
their possible impacts on the Group’s operations. ESG risks do not represent a
new risk category, but rather an aggravating factor for the types of risks already
Consequently, the Group (including Komercijalna Banka group) concluded
customer behaviour, emerging new technologies and competitors, sustainable
Additionally, the Group established a comprehensive stress testing framework
managed through the established risk management framework.
the year 2020 as self-funded, with strong liquidity and solid capital position,
financing, and increasing new regulatory requirements. Respectively, Risk
and other early warning systems in different risk areas, with the intention to
demonstrating the Group’s financial resilience. The acquired KB Group has
Management is continuously adapting with aim to detect and manage new
contribute to setting and pursuing the Group’s business strategy, to support
The main NLB Group Risk Appetite Statement objectives are following:
similar business model to the existing NLB Group, respectively its impact on
potential emerging risks.
decision-making on an ongoing basis, to strengthen the existing internal
controls, and to enable a timely response when necessary. The stress- testing
The overall slow-down of the economy, caused by the COVID-19 epidemic,
framework includes all material types of risk and different relevant stress
• Preservation of regulatory capital adequacy
• Preservation of internal capital adequacy
had some negative impacts on the loan portfolio quality and new loan
scenarios or sensitivity analysis, according to the vulnerability of the Group’s
• Fulfilment of MREL requirement
the Group’s risk profile was moderate. Beside the acquisition there were no
other transactions of sufficiently material nature to impact on NLB Group’s risk
profile or distribution of the risks on the Group level.
generation. From the beginning of the COVID-19 pandemic the Group
business model. Stress testing has an important role when assessing the Group’s
• Maintenance of low leverage
The Condensed Statement of the management of risk is also published on the
complies with EBA guidelines on payment moratoria regarding forborne
resilience to stressed circumstances, namely from profitability, capital adequacy,
• Improvement in the quality of the credit portfolio, sufficient NPL coverage,
NLB intranet with the aim of strict adherence of the Banks’ employees at daily
exposures, namely by frequently performing the assessment of borrowers
and liquidity with a forward-looking perspective. As such, it is embedded into
sustainable credit risk volatility, sustainable cost of risk across the economic
operations of the Bank, as regards the definition and importance of a consistent
and ensuring effective early warning systems. All relevant information was
Group’s Risk Management system, namely Risk appetite, ICAAP, ILAAP, and
cycle, sustainable industry concentration, sustainable exposure to project
tendency of the adopted risks, and ways to take into account when adopting its
available to management bodies with higher frequency than before crises to
the Recovery plan, as an important component of sound Risk Management.
financing
assure adequate and timely oversight over the critical elements of credit risk
Besides internal stress testing, the Group as a systemically important bank also
• Maintenance of a solid liquidity position, maintaining stable customers’
management and executing mitigation measures if needed. In contrast, the
participates in the regulatory stress test exercises carried out by the ECB.
deposits as the main funding base
daily business decisions.
Ljubljana, 8 April 2021
Group faced growing excess liquidity, and the impacts of the pandemic did not
cause any material liquidity outflows.
The Group is the largest Slovenian banking and financial group with important
presence in the SEE region. As of 30th December 2020, the acquisition of
• Limited exposure to credit spread risk
• Limited exposure to interest rate risk
• Diversification of risk in exposures to banks and sovereigns
The Group uses the ‘three lines of defence framework’ as an important
Komercijalna Banka, Beograd was completed. The harmonisation in the area
element of its internal governance, whereby the Risk Management function
of the Group’s risk management framework and uniform data flow, based on
Supervisory Board of NLB
15. Komercijalna Banka group is excluded from calculation.
16. At initial recognition NPLs of Komercijalna Banka group were recognised at fair
value, without any additional credit loss allowances (in accordance with IFRS 3).
17. An estimated value on consolidated level as per 31 December 2020.
acts as a second line of defence. The Group’s enhanced overall corporate
Group’s Risk management standards, is ongoing.
governance reflects in the lowering of the SREP requirement in the past
years. A robust and comprehensive Risk Management framework is defined
The Group has a well-diversified business model. In accordance with its
and organised with regard to the Group’s business and risk profile, based on
strategic orientations, the Group intends to be a sustainably profitable,
a forward-looking perspective to meet internally set strategic objectives and
predominantly working with clients on its core markets, providing innovative,
all external requirements. A proactive Risk Management and control system
but simple customer-oriented solutions. Efficient managing of risks and capital
Primož Karpe
Chairman
is primarily based on Risk appetite and Risk strategy, which are consistent
is crucial for the Group to sustain long-term profitable operations. Based on
with the Group’s Business strategy, and focused on early risk identification and
the Group’s business strategy credit risk is the dominant risk category, followed
Management Board of NLB
efficient Risk Management. Set governance and different Risk Management
by credit spread risk on banking book portfolio, interest rate risk in the banking
tools enable adequate oversight of the Group’s risk profile, proactively support
book, operational risk, liquidity risk, market risk, and other non-financial
its business operations and its management by incorporating escalation
risks. Regular risk identification and their assessment is performed within the
procedures, and use different mitigation measures when necessary. In this
respect, the Group is constantly enhancing and complementing the existing
ICAAP process with an aim to assure their overall control and effective Risk
Management on an ongoing basis.
methods and processes in all Risk Management segments. Additionally, the
Group is engaged in contributing to sustainable finance by incorporating
Archibald Kremser
CFO
Andreas Burkhardt
CRO
Petr Brunclík
COO
Blaž Brodnjak
CEO & CMO
91
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Statement of Non-financial Information
The Bank has changed the way it reports Environmental, Social, and
Governance (ESG) matters, in order to better respond to its stakeholders
needs. In line with Article 70.c of the Companies Act (ZGD-1), the Bank
reports on non-financial information separately from the NLB Group
Annual Report 2020. The Bank’s disclosures of non-financial information
are prepared in a form of the NLB Group Sustainability Report 2020,
which accompanies the annual report and provides the first efforts in
the direction of a data-driven summary of the Bank’s sustainability
performance. The NLB Group Sustainability Report 2020 is published on
the Bank’s website.
Further information on sustainability is available
in the NLB Group Sustainability Report 2020.
Disclosure on Shares and
Shareholders of NLB
1. Information pursuant to the Companies Act
(ZGD-1), Article 70, paragraph 6
There are no restrictions other than those mentioned and those that are
regulatory.
1.1. Structure of the Bank’s share capital
1.3. Qualifying holdings
The Bank has issued only ordinary registered no-par value shares, the
holders of which have a voting right and the right to participate at the
General Meeting of the Bank’s shareholders, the pre-emptive right to
This information is included in the chapter ‘Corporate Governance
Statement of NLB.’
subscribe for new shares in case of a share capital increase, the right to profit
1.4. Securities carrying special controlling rights
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
This information is included in the chapter ‘Corporate Governance
Statement of NLB.’
shares belong to a single class and are issued in book-entry form.
Information regarding the shareholder structure of NLB (as at 31 December
2020) is available under the title ‘Shareholder Structure of NLB’ in the
chapter ‘Key Highlights.’
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
The Remuneration policy for employees performing special work defines the
1.2. All restrictions relating to the transfer of shares
payments with financial instruments according to the applicable banking law
and the restrictions on voting rights
(ZBan-2), however, due to the regulatory restrictions imposed by BoS, there
The shares of the Bank are freely transferable, subject to the provisions
was no payout in 2020.
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
1.6. Explanation regarding restrictions related to voting rights
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
This information is included in the chapter ‘Corporate Governance
Statement of NLB.’
acquirer, exceeds the share of 25% of the Bank’s voting shares. Approval for
the transfer of shares is issued by the Supervisory Board.
1.7. All agreements among shareholders which are known
to the company and could result in restrictions relating
The Bank rejects the request for approval of transfer shares if the acquirer,
to the transfer of securities or voting rights
together with the shares held by the acquirer before the acquisition and the
The Bank is not aware of such agreements.
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.
1.8. The company’s rules on the appointment or
replacement of management and supervisory board
Notwithstanding the provision mentioned in the first paragraph, approval
members and changes of the articles of association
for the transfer of shares is not required if the acquirer of the shares has
acquired them on the account of third parties, so that it is not entitled to
This information is included in the chapter ‘Corporate Governance
Statement of NLB.’
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
1.9. Authorisations given to management, particularly
basis of the instructions of an individual third party for whose account it has
authorisations to issue or purchase own shares
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 on
This information is included in the chapter ‘Corporate Governance
Statement of NLB.’
his own account and that this person is not, directly or indirectly, a holder of
more than 25% of the Bank’s voting rights.
1.10. All major agreements to which the company is a party and
which take effect, are changed or cancelled following a change
The acquirer who exceeds the share of 25% of the Bank’s shares with
in control over the company resulting from a bid, as laid down by
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
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
voting right from 25% of the shares with the voting rights.
would take effect, be changed, or cancelled following a change in control
over the Bank resulting from a bid.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 1.11. All agreements between the Bank and its management
the Management Board of NLB is entitled to compensation for early
or supervision bodies or its employees which envisage
termination of his term of office. The member of the Management Board
compensation if, due to a bid as laid down by the Act governing
shall not be entitled to compensation for early termination of the term of
M&A, these persons resign, are dismissed without a well-
office if he is employed in the Bank or in the Group after the termination
founded reason, or their employment is terminated
of the term of office. In the event of resignation, the member of the
In line with the employment contracts of the members of the Management
Management Board shall not be entitled to any compensation for early
Board, in case the Supervisory Board recalls a member of the Management
discontinuation of the term of office, unless otherwise decided by the
Board ‘for other business and economic reasons,’ such a member of
Supervisory Board.
2. Number of shares held by members of the Supervisory Board and Management Board
Table 41: Number of shares held by members of Supervisory Board and Management Board (as at 31 December 2020)
Shares held as at 31 December 2020
Name of member of Supervisory Board
Primož Karpe
Andreas Klingen
David Eric Simon(i)
Peter Groznik(ii)
Gregor Rok Kastelic
Shrenik Dhirajlal Davda
Mark William Lane Richards
Verica Trstenjak
Sergeja Kočar
Bojana Šteblaj
Janja Žabjek Dolinšek
Name of member of Management Board
Blaž Brodnjak
Archibald Kremser
Andreas Burkhardt
Petr Brunclík
Number
936
1,198
582
1,210
—
—
—
—
—
—
—
1,400
691
451
278
%
0.005%
0.006%
0.003%
0.006%
—
—
—
—
—
—
—
0.007%
0.003%
0.002%
0.001%
(i) David Eric Simon holds 2,910 GDRs, which is equal to 582 shares (as 1 share represents 5 GDRs).
(ii) Peter Groznik holds Bank’s shares indirectly through a company wholly owned by Peter Groznik.
Application of Double Tax Treaties
Events after the end
of the 2020 financial year
In January 2021, the Workers’ Council of NLB elected Tadeja Žbontar
Rems as member of the Supervisory Board of the Bank - representative of
workers. Her term of office shall run from 22 January 2021 and will last until
the conclusion of the Annual General Meeting of NLB that decides on the
allocation of distributable profit for the fourth financial year after her election,
counting the year in which she was appointed as the first one.
In January 2021, international independent the Top Employers Institute
awarded the Bank with the prestigious certificate the ‘Top Employer’ for the
6th consecutive year.
From April 1, 2021, the Bank charges a monthly fee of 0.04% for average
monthly balances of customers assets above EUR 250,000 – the sum of
balances on NLB Personal Accounts and Packages, NLB Savings Accounts,
NLB Gradual Savings and NLB Term Deposits will be taken into account (at
savings accounts, gradual savings and term deposits only opened after 27 July
2020 will be considered).
On 10 March 2021 NLB has announced a Takeover Bid in the Republic of
Serbia in accordance with applicable Serbian legislation for the acquisition
of: (i) all remaining regular shares of Komercijalna Banka, Beograd; ISIN
RSKOBBE16946 at the point of publishing not in NLB’s ownership
(2,820,270 regular shares or 16.77% of this class of shares) at RSD 3,315.47
per one share; and (ii) all priority shares of Komercijalna Banka, Beograd;
ISIN RSKOBBE19692 (373,510 priority shares or 100% of this class of
3. Stock option agreements
the application of a lower tax rate specified in the double tax treaty between
(‘Bidding Period’) for 30 days, beginning from 11 March 2021.
If the payee is not an intermediary, Slovenian tax authorities may approve
shares) at 934.72 RSD per one share. Takeover Bid is open for acceptance
The Bank has no stock option agreements in relation with listed shares.
provides certain information on the payee and a confirmation that the
the RoS and the country of residence of the payee if the Slovenian payer
payee is a resident for taxation purposes in such a country, issued by the tax
4. Dividend taxation
Withholding tax
authorities of such a country.
Refund of Withholding Tax
A Slovenian payer is required to deduct and withhold the amount of
If the Slovenian tax was deducted and withheld at a higher tax rate than
Slovenian corporate or personal income tax from dividend payments made
it would be paid if a Slovenian payer would make the dividend payment
to the certain categories of payees:
• Individuals: 27.5%18
• Intermediaries: 27.5%
• Legal entities (other than Intermediaries): 15%
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.
Legal persons
There are some exemptions if dividends are paid
Dividends with respect to the shares received by a legal person who is a
to intermediaries and legal entities
Slovenian resident are exempt from Slovenian corporate income tax (davek
For the purposes of Slovenian tax legislation, the GDR depositary will
od dohodkov pravnih oseb).
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 27.5 per cent. A holder, an owner of a GDR or
Individuals
The amount of tax withheld from a dividend payment received by an
a beneficial owner will be entitled, if and to the extent applicable, to claim a
individual constitutes the final amount of Slovenian Personal Income Tax
refund of the withholding tax.
(dohodnina) with respect to such a dividend payment.
18. The tax rate for individuals and intermediaries in amount of 27.5% applies from 1 January 2020 onwards.
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Annual Report 2020 Bosnia and Herzegovina
76
20
submitted
clients
selected
clients
1 new client, as focus was on existing ones
Different industries - majority
operates in production, sales,
education and tourism
Serbia
#HelpFrame
project
Due to its inherently
sustainable nature,
#HelpFrame project has
become the first NLB Group‘s
ESG project that brings
business value to our clients
and also to whole NLB Group.
The results of #HelpFrame
project exceeded expectations
– for the NLB Group and for
our clients. So, this is not the
end, rather the beginning of
new era. The next phase will
benefit from the experience
and accomplishments
achieved along the way
and will start in spring 2021.
Slovenia
submitted
clients
171
83
selected
clients
43 new clients
37 different industries
Highest share from services,
tourism and agriculture
Montenegro
80
20
submitted
clients
selected
clients
2 new clients
15 different business activities
submitted
clients
115
30
selected
clients
17 new clients
15 different industries
Highest share from food production,
transport and services
Kosovo
37
20
submitted
clients
selected
clients
5 new clients
14 different business activities
Mostly services, agriculture and trade
North Macedonia
223
101
6 new clients
submitted
clients
selected
clients
Different industries - majority from
retail, catering and restaurant services
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Annual Report 2020 Financial Report
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Contents
Independent auditor’s report
Report on compliance with the ESEF Regulation
Statement of management’s responsibility
Income statement for the annual period ended 31 December
Statement of comprehensive income for the annual period ended 31 December
Statement of financial position as at 31 December
Statement of changes in equity for the annual period ended 31 December
Statement of cash flows for the annual period ended 31 December
Notes to the financial statements
1. General information
2. Summary of significant accounting policies
2.1. Statement of compliance
2.2. Basis for presenting the financial statements
2.3. Comparative amounts
2.4. Consolidation
2.5. Business combinations, goodwill and bargain purchases
2.6. Investments in subsidiaries, associates and joint ventures
2.7. A combination of entities or businesses under common control
2.8. Foreign currency translation
2.9. Interest income and expenses
2.10. Fee and commission income
2.11. Dividend income
2.12. Financial instruments
2.13. Allowances for financial assets
2.14. Forborne loans
2.15. Repossessed assets
2.16. Offsetting
2.17. Sale and repurchase agreements
2.18. Property and equipment
2.19. Intangible assets
2.20. Investment properties
2.21. Non-current assets and disposal groups classified as held for sale
2.22. Accounting for leases
2.23. Cash and cash equivalents
2.24. Borrowings, deposits, and issued debt securities with characteristics of debt
2.25. Other issued financial instruments with characteristics of equity
2.26. Provisions
2.27. Contingent liabilities and commitments
2.28. Taxes
2.29. Fiduciary activities
2.30. Employee benefits
2.31. Share capital
2.32. Segment reporting
2.33. Critical accounting estimates and judgments in applying accounting policies
2.34. Implementation of the new and revised International Financial Reporting Standards
3. Changes in subsidiary holdings
4. Notes to the income statement
4.1. Interest income and expenses
4.2. Dividend income
4.3. Fee and commission income and expenses
4.4. Gains less losses from financial assets and liabilities not measured at fair value through profit or loss
4.5. Gains less losses from financial assets and liabilities held for trading
4.6. Gains less losses from non-trading financial assets mandatorily at fair value through profit or loss
97
100
101
101
102
102
103
104
105
105
105
105
105
105
106
106
106
106
106
107
107
107
107
108
110
110
110
110
110
110
110
110
111
111
111
111
111
111
111
112
112
112
112
112
113
114
115
115
115
115
4.7. Foreign exchange translation gains less losses
4.8. Other net operating income
4.9. Administrative expenses
4.10. Cash contributions to resolution funds and deposit guarantee schemes
4.11. Depreciation and amortisation
4.12. Gains less losses from modification of financial assets
4.13. Provisions
4.14. Impairment charge
4.15. Gains less losses from non-current assets held for sale
4.16. Income tax
4.17. Earnings per share
5. Notes to the statement of financial position
5.1. Cash, cash balances at central banks, and other demand deposits at banks
5.2. Financial instruments held for trading
5.3. Non-trading financial instruments measured at fair value through profit or loss
5.4. Financial assets measured at fair value through other comprehensive income
5.5. Derivatives for hedging purposes
5.6. Financial assets measured at amortised cost
5.7. Non-current assets held for sale
5.8. Property and equipment
5.9. Investment property
5.10. Intangible assets
5.11. Leases
5.12. Investments in subsidiaries, associates and joint ventures
5.13. Other assets
5.14. Movements in allowance for the impairment of financial assets
5.15. Financial liabilities, measured at amortised cost
5.16. Provisions
5.17. Deferred income tax
5.18. Income tax relating to components of other comprehensive income
5.19. Other liabilities
5.20. Share capital
5.21. Accumulated other comprehensive income and reserves
5.22. Capital adequacy ratios
5.23. Off-balance sheet liabilities
5.24. Funds managed on behalf of third parties
6. Risk management
6.1. Credit risk management
6.2. Market risk
6.2.1. Currency risk (FX)
6.2.2. Managing market risks in the trading book
6.2.3. Interest rate risk
6.3. Liquidity risk
6.4. Management of non-financial risks
6.5. Fair value hierarchy of financial and non-financial assets and liabilities
6.6. Offsetting financial assets and financial liabilities
7. Analysis by segment for NLB Group
8. Related-party transactions
9. Events after the reporting date
116
116
116
116
117
117
118
118
118
118
118
119
119
119
120
120
120
120
121
122
123
124
124
126
126
127
128
132
132
135
136
138
140
140
140
140
141
142
142
143
144
154
154
156
156
158
164
165
170
170
172
176
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Annual Report 2020 Independent auditor’s report
97
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Annual Report 2020 98
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 99
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Report on compliance with the ESEF Regulation
100
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Statement of management’s responsibility
Income statement for the annual period ended 31 December
The Management Board hereby confirms its responsibility for preparing
The Management Board also confirms that the appropriate accounting
the consolidated financial statements of NLB Group and the financial
policies were consistently applied, and that the accounting estimates were
statements of NLB for the year ending on 31 December 2020, and for the
prepared according to the principles of prudence and good management.
accompanying accounting policies and notes to the financial statements.
The Management Board further confirms that the financial statements of
NLB Group and NLB, together with the accompanying notes, have been
The Management Board is responsible for the preparation and fair
prepared on a going-concern basis for NLB Group and NLB, and in line
presentation of these financial statements in accordance with the
with valid legislation and the International Financial Reporting Standards as
International Financial Reporting Standards as adopted by the European
adopted by the European Union.
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
The Management Board is also responsible for appropriate accounting
NLB Group and NLB as at 31 December 2020, and their financial results
practices, the adoption of appropriate measures for safeguarding assets, and
and cash flows for the year then ended.
the prevention and identification of fraud and other irregularities or illegal
acts.
Management Board of NLB
Archibald Kremser
CFO
Andreas Burkhardt
CRO
Petr Brunclík
COO
Blaž Brodnjak
CEO & CMO
Interest income, using the effective interest method
Interest income, not using the effective interest method
Interest and similar income
Interest and similar expense
Net interest income
Dividend income
Fee and commission income
Fee and commission expense
Net fee and commission income
Gains less losses from financial assets and liabilities not
measured as at fair value through profit or loss
Gains less losses from financial assets and liabilities held for trading
Gains less losses from non-trading financial assets
mandatorily at fair value through profit or loss
Fair value adjustments in hedge accounting
Foreign exchange translation gains less losses
Net gains or losses on derecognition of investments
in subsidiaries, associates and joint ventures
Gains less losses on derecognition of non-financial assets
Other net operating income
Administrative expenses
Cash contributions to resolution funds and deposit guarantee schemes
Depreciation and amortisation
Gains less losses from modification of financial assets
Provisions for credit losses
Provisions for other liabilities and charges
Impairment of financial assets
Impairment of non-financial assets
Negative goodwill
Share of profit from investments in associates and joint
ventures (accounted for using the equity method)
Gains less losses from non-current assets held for sale
Profit before income tax
Income tax
Profit for the year
Attributable to owners of the parent
Attributable to non-controlling interests
Notes
4.1.
4.1.
4.2.
4.3.
4.3.
4.4.
4.5.
4.6.
5.5.a)
4.7.
4.8.
4.9.
4.10.
4.11.
4.12.
4.13.
4.13.
4.14.
4.14.
5.12.b)
5.12.d)
4.15.
4.16.
NLB Group
NLB
in EUR thousands
2020
347,639
7,549
355,188
(55,615)
299,573
111
232,432
(62,152)
170,280
17,689
9,794
6,598
720
739
(471)
1,300
7,549
2019
357,412
7,406
364,818
(46,331)
318,487
208
234,979
(64,640)
170,339
4,643
10,465
18,765
(555)
706
(111)
3,355
7,851
2020
167,616
7,488
175,104
(36,217)
138,887
6,259
136,691
(32,234)
104,457
16,970
4,741
6,815
720
(1,108)
-
12
2019
175,598
7,310
182,908
(24,782)
158,126
71,231
137,898
(33,943)
103,955
4,512
3,335
16,289
(555)
396
(1)
432
5,794
4,544
(262,226)
(274,014)
(162,613)
(173,098)
(16,674)
(31,715)
(3,577)
(482)
(8,077)
(61,799)
(996)
137,858
874
10,853
277,921
(5,165)
272,756
269,707
3,049
(16,223)
(30,964)
(182)
(312)
(11,135)
13,630
(3,177)
-
4,197
(576)
215,397
(13,579)
201,818
193,576
8,242
(7,103)
(17,848)
-
599
(7,645)
(9,633)
(685)
-
-
35,234
113,853
99
113,952
(7,034)
(18,046)
-
368
(5,586)
16,661
2,795
-
-
(578)
177,746
(1,597)
176,149
113,952
176,149
-
5.7
-
8.8
Earnings per share/diluted earnings per share (in EUR per share)
4.17.
13.5
9.7
The notes are an integral part of these financial statements.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Statement of comprehensive income
for the annual period ended 31 December
Statement of financial position as at 31 December
in EUR thousands
Notes
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
NLB Group
NLB
in EUR thousands
NLB Group
NLB
Notes
2020
2019
2020
Net profit for the year after tax
Other comprehensive income after tax
Items that will not be reclassified to income statement
Actuarial gains/(losses) on defined benefit pensions plans
Fair value changes of equity instruments measured at
fair value through other comprehensive income
Share of other comprehensive income/(losses) of
entities accounted for using the equity method
5.4.c)
Income tax relating to components of other comprehensive income
5.18.
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
Valuation gains/(losses) taken to equity
5.4.c)
272,756
(2,147)
878
3,809
(41)
(534)
(703)
(703)
6,555
7,733
Transferred to income statement
4.4., 4.14.
(1,178)
Share of other comprehensive income/(losses) of
entities accounted for using the equity method
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.
(11,026)
(1,085)
270,609
266,907
3,702
201,818
19,040
(1,777)
284
1,233
(146)
1,299
1,299
13,129
16,526
(3,397)
8,440
(3,422)
220,858
212,266
8,592
113,952
3,817
700
202
-
(171)
-
-
3,810
7,522
(3,712)
-
(724)
117,769
117,769
-
2019
176,149
4,446
(1,523)
213
-
104
-
-
6,977
11,202
(4,225)
-
(1,325)
180,595
180,595
-
Cash, cash balances at central banks, and
other demand deposits at banks
Financial assets held for trading
Non-trading financial assets mandatorily
at fair value through profit or loss
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at amortised cost
- debt securities
- loans and advances to banks
- loans and advances to customers
- other financial assets
Derivatives - hedge accounting
Fair value changes of the hedged items in
portfolio hedge of interest rate risk
Investments in subsidiaries
Investments in associates and joint ventures
Tangible assets
Property and equipment
Investment property
Intangible assets
Current income tax assets
Deferred income tax assets
Other assets
Non-current assets held for sale
Total assets
Financial liabilities held for trading
Financial liabilities measured at fair value through profit or loss
Financial liabilities measured at amortised cost
- deposits from banks and central banks
- borrowings from banks and central banks
- due to customers
- borrowings from other customers
- subordinated liabilities
- other financial liabilities
Derivatives - hedge accounting
Provisions
Current income tax liabilities
Deferred income tax liabilities
Other liabilities
Total liabilities
Equity and reserves attributable to owners of the parent
Share capital
Share premium
Accumulated other comprehensive income
Profit reserves
Retained earnings
Non-controlling interests
Total equity
Total liabilities and equity
The notes are an integral part of these financial statements.
5.1.
5.2.a)
5.3.a)
5.4.
5.6.a)
5.6.b)
5.6.c)
5.6.d)
5.5.b)
5.5.c)
5.12.a)
5.12.c)
5.8.a)
5.9.
5.10.
5.17.
5.13.
5.7.a)
5.2.b)
5.3.b)
5.15.a)
5.15.b)
5.15.a)
5.15.b)
5.15.c)
5.15.d)
5.5.b)
5.16.
5.17.
5.19.
5.20.
5.21.a)
5.21.b)
5.21.a)
3,961,812
2,101,346
2,261,533
1,292,211
84,855
42,393
24,038
25,359
18,831
35,106
24,085
23,287
3,514,290
2,141,428
1,716,351
1,656,657
1,503,087
197,005
9,619,860
113,138
-
13,844
-
7,988
1,653,848
93,403
7,589,724
97,415
788
8,991
-
7,499
249,117
195,605
54,842
61,668
4,369
31,789
97,140
8,658
52,316
39,542
6,284
29,500
63,811
43,191
1,277,880
158,320
4,564,178
54,503
-
13,844
749,060
1,662
91,675
8,300
28,105
1,923
29,214
11,664
4,454
1,485,166
144,352
4,568,599
67,279
788
8,991
351,883
1,366
89,904
9,303
25,980
5,463
29,569
11,142
5,532
19,565,855
14,174,088
11,026,603
9,801,557
15,485
-
72,633
158,225
17,903
7,998
42,840
170,385
16,397,167
11,612,317
91,560
288,321
207,300
61,161
125,059
1,002
4,475
20,427
64,458
210,569
158,484
49,507
88,414
2,271
2,833
15,212
17,442,815
12,443,191
200,000
871,378
21,127
13,522
846,762
1,952,789
170,251
2,123,040
19,565,855
200,000
871,378
26,493
13,522
574,489
1,685,882
45,015
1,730,897
14,174,088
15,500
-
41,635
143,464
8,850,755
13
288,321
101,273
61,161
63,790
-
-
9,697
9,575,609
200,000
871,378
24,102
13,522
341,992
17,892
7,746
89,820
161,564
7,760,737
2,537
210,569
98,342
49,507
60,384
-
-
9,234
8,468,332
200,000
871,378
20,285
13,522
228,040
1,450,994
1,333,225
-
1,450,994
11,026,603
-
1,333,225
9,801,557
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 The Management Board has authorised for issue the financial statements
and the accompanying notes.
Archibald Kremser
CFO
Andreas Burkhardt
CRO
Petr Brunclík
COO
Blaž Brodnjak
CEO & CMO
Ljubljana, 23 March 2021
Statement of changes in equity
for the annual period ended 31 December
Accumulated other
comprehensive income
Fair value
reserve of
financial
assets
measured
at FVOCI
Foreign
currency
translation
reserve
Share
capital
Share
premium
Other
Profit
reserves
Retained
earnings
Equity
attributable
to owners of
the parent
Equity
attributable
to non-
controlling
interests
Total
equity
in EUR thousands
5.20.
5.21.a)
5.21.b)
5.21.b)
5.21.b)
5.21.a)
NLB Group
Notes
Balance as at 1 January 2020
200,000
871,378
47,880
(17,055)
(4,332)
13,522
574,489
1,685,882
45,015
1,730,897
- Net profit for the year
- Other comprehensive income
Total comprehensive income after tax
Acquisition of subsidiaries
Transfer of fair values reserve
-
-
-
-
-
-
-
-
-
-
-
(2,833)
(2,833)
-
(2,551)
-
(669)
(669)
-
-
-
702
702
-
(15)
-
-
-
-
-
269,707
269,707
3,049
272,756
-
(2,800)
653
(2,147)
269,707
266,907
3,702
270,609
-
2,566
-
-
121,534
121,534
-
-
Balance as at 31 December 2020
200,000
871,378
42,496
(17,724)
(3,645)
13,522
846,762
1,952,789
170,251
2,123,040
Accumulated other
comprehensive income
Fair value
reserve of
financial
assets
measured
at FVOCI
Foreign
currency
translation
reserve
Share
capital
Share
premium
Other
Profit
reserves
Retained
earnings
Equity
attributable
to owners of
the parent
Equity
attributable
to non-
controlling
interests
Total
equity
in EUR thousands
5.20.
5.21.a)
5.21.b)
5.21.b)
5.21.b)
5.21.a)
NLB Group
Notes
Balance as at 1 January 2019
200,000
871,378
28,702
(18,275)
(2,604)
13,522
523,493
1,616,216
41,228
1,657,444
- Net profit for the year
- Other comprehensive income
Total comprehensive income after tax
Dividends paid
Transfer of actuarial gains
-
-
-
-
-
-
-
-
-
-
-
-
-
19,178
1,220
(1,708)
19,178
1,220
(1,708)
-
-
-
-
-
(20)
-
-
-
-
-
193,576
193,576
8,242
201,818
-
18,690
350
19,040
193,576
212,266
8,592
220,858
(142,600)
(142,600)
(4,805)
(147,405)
20
-
-
-
Balance as at 31 December 2019
200,000
871,378
47,880
(17,055)
(4,332)
13,522
574,489
1,685,882
45,015
1,730,897
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Annual Report 2020
Accumulated other
comprehensive income
in EUR thousands
Statement of cash flows for the annual period ended 31 December
NLB
Notes
Share
capital
Share
premium
Fair value
reserve of
financial assets
measured
at FVOCI
5.20.
5.21.a)
5.21.b)
Balance as at 1 January 2020
200,000
871,378
24,444
- Net profit for the year
- Other comprehensive income
Total comprehensive income after tax
-
-
-
-
-
-
-
3,250
3,250
Other
5.21.b)
(4,159)
-
567
567
Profit
reserves
Retained
earnings
Total
equity
5.21.a)
5.20.
13,522
228,040
1,333,225
-
-
-
113,952
113,952
-
3,817
113,952
117,769
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received
Interest paid
Dividends received
Fee and commission receipts
Fee and commission payments
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
Balance as at 31 December 2020
200,000
871,378
27,694
(3,592)
13,522
341,992
1,450,994
Payments to employees and suppliers
in EUR thousands
Other receipts
Other payments
Income tax (paid)/received
Accumulated other
comprehensive income
NLB
Notes
Share
capital
Share
premium
Fair value
reserve of
financial assets
measured
at FVOCI
5.20.
5.21.a)
5.21.b)
Balance as at 1 January 2019
200,000
871,378
18,620
- Net profit for the year
- Other comprehensive income
Total comprehensive income after tax
Dividends paid
-
-
-
-
-
-
-
-
-
5,824
5,824
-
Other
5.21.b)
(2,781)
-
(1,378)
(1,378)
-
Profit
reserves
Retained
earnings
Total
equity
5.21.a)
5.20.
13,522
194,491
1,295,230
-
-
-
-
176,149
176,149
-
4,446
176,149
180,595
(142,600)
(142,600)
Cash flows from operating activities before
changes in operating assets and liabilities
(Increases)/decreases in operating assets
Net (increase)/decrease in trading assets
Net (increase)/decrease in non-trading financial assets
mandatorily at fair value through profit or loss
Net (increase)/decrease in financial assets measured at
fair value through other comprehensive income
Net (increase)/decrease in loans and receivables measured at amortised cost
Net (increase)/decrease in other assets
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
Balance as at 31 December 2019
200,000
871,378
24,444
(4,159)
13,522
228,040
1,333,225
CASH FLOWS FROM INVESTING ACTIVITIES
The notes are an integral part of these financial statements.
Receipts from investing activities
Proceeds from sale of property, equipment, and investment property
Proceeds from sale of subsidiaries
Proceeds from non-current assets held for sale
Proceeds from disposals of debt securities measured at amortised cost
Payments from investing activities
Purchase of property, equipment, and investment property
Purchase of intangible assets
Purchase of subsidiaries, net of cash acquired and increase in subsidiaries' equity
5.12.b)
Increase in associates and joint ventures' equity
Purchase of debt securities measured at amortised cost
Net cash flows from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from financing activities
Issue of subordinated debt
Payments from financing activities
Dividends paid
Repayments of subordinated debt
Net cash flows from financing activities
Effects of exchange rate changes on cash and cash equivalents
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.
5.15.c)
5.15.c)
NLB Group
Notes
2020
2019
372,903
(52,921)
787
232,607
(65,728)
17,993
10,919
(260,301)
13,642
(20,629)
(6,645)
242,627
407,372
(44,062)
2,985
232,860
(68,000)
4,644
10,776
(265,572)
18,378
(23,126)
(34,225)
242,030
NLB
2020
207,188
(31,881)
6,261
133,743
(32,972)
17,274
5,634
in EUR thousands
2019
228,618
(21,335)
71,229
134,530
(34,041)
4,513
4,072
(164,600)
(170,530)
8,627
(9,490)
3,779
143,563
7,859
(11,375)
(23,283)
190,257
(366,831)
(575,987)
(105,859)
(229,476)
1,838
(12,667)
44,214
29,084
1,838
(12,564)
44,214
25,948
(150,006)
(250,506)
(77,098)
(126,152)
(207,260)
1,264
1,338,820
1,338,633
187
1,214,616
478,251
5,341
-
39,078
433,832
108,232
(27,626)
(15,020)
452,770
(326)
(411,170)
12,391
1,067,045
1,067,440
(395)
733,088
251,424
6,556
8
269
244,591
(500,106)
(19,257)
(13,311)
-
-
(301,566)
586,483
(467,538)
(248,682)
119,222
119,222
(45,000)
-
(45,000)
74,222
(2,176)
1,875,321
2,263,267
4,136,412
208,321
208,321
(162,246)
(147,244)
(15,002)
46,075
3,693
530,481
1,729,093
2,263,267
(18,357)
(173,964)
322
1,044,033
1,044,297
(264)
478
679,366
679,366
-
1,081,737
640,147
402,729
2,258
-
39,078
361,393
(602,939)
(15,089)
(10,663)
(397,729)
(326)
(179,132)
(200,210)
119,222
119,222
(45,000)
-
(45,000)
74,222
(2,080)
955,749
1,308,122
2,261,791
224,834
3,684
3,437
269
217,444
(448,106)
(10,787)
(9,125)
(1,744)
-
(426,450)
(223,272)
208,321
208,321
(142,600)
(142,600)
-
65,721
1,189
482,596
824,337
1,308,122
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Statement of cash flows for the annual period ended 31 December
Notes to the financial statements
NLB Group
NLB
in EUR thousands
1. General information
2.2. Basis for presenting the financial statements
The financial statements have been prepared on a going-concern basis,
Notes
2020
2019
2020
2019
Nova Ljubljanska banka d.d. Ljubljana (hereinafter: ‘NLB’) is a Slovenian
under the historical cost convention as modified by the revaluation of
Cash and cash equivalents comprise:
Cash, cash balances at central banks, and other demand deposits at banks
5.1.
3,962,686
2,101,871
2,261,791
1,292,345
Loans and advances to banks with original maturity up to three months
Debt securities measured at amortised cost with
original maturity up to three months
Debt securities measured at fair value through other comprehensive
income with original maturity up to three months
146,223
-
85,369
10,007
27,503
66,020
-
-
-
5,770
10,007
-
Total
4,136,412
2,263,267
2,261,791
1,308,122
joint-stock entity providing universal banking services. NLB Group consists
financial assets measured at fair value through other comprehensive income,
of NLB and its subsidiaries located in nine countries, mainly in Slovenia
financial assets and financial liabilities at fair value through profit or loss,
and the SEE market. Information on NLB Group’s structure is disclosed in
including all derivative contracts, hedged items in fair value hedge accounting
note 5.12. Information on other related party relationships of NLB Group is
relationships, non-current assets held for sale and investment property.
provided in note 8.
The preparation of financial statements in accordance with the IFRS
NLB is incorporated and domiciled in Slovenia. The address of its
requires the use of estimates and assumptions that affect the reported
registered office is Trg Republike 2, Ljubljana. NLB’s shares are listed on
amounts of assets and liabilities, the disclosure of contingent assets and
the Ljubljana Stock Exchange, and the global depositary receipts (‘GDR’),
liabilities on the date of the financial statements, and the reported amounts
representing ordinary shares of NLB, are listed on the London Stock
of revenue and expenses during the reporting period. Although these
Exchange. Five GDRs represent one share of NLB.
estimates are based on management’s best knowledge of current events
As at 31 December 2020 and as at 31 December 2019, the largest
Accounting estimates and underlying assumptions are reviewed on an
shareholder of NLB with significant influence is the Republic of Slovenia,
ongoing basis. Revisions of accounting estimates are recognised in the
and activities, actual results may ultimately differ from those estimates.
owning 25.00% plus one share.
period in which the estimate is revised. Critical accounting estimates and
judgements in applying accounting policies are disclosed in note 2.33.
All amounts in the financial statements and in the notes to the financial
statements are expressed in thousands of euros unless otherwise stated.
This document contains both, the separate financial statements of NLB and
2. Summary of significant accounting policies
the consolidated financial statements of NLB Group. Presented accounting
policies apply to both sets of financial statements, with exception of
policies described in notes 2.4. and 2.5. which apply only to consolidated
The principal accounting policies adopted for the preparation of the
financial statements and policies described in note 2.6., where differences
separate and consolidated financial statements are set out below. The
in accounting treatment for investments in subsidiaries, associated and
policies have been consistently applied to all the years presented, except
joint ventures between separate and consolidated financial statements are
for changes in accounting policies resulting from the application of new
described. Data relating to separate financial statements is marked ‘NLB’,
standards or changes to standards.
while data relating to consolidated financial statements is marked ‘NLB
2.1. Statement of compliance
Group.’
The principal accounting policies applied in the preparation of the separate
2.3. Comparative amounts
and consolidated financial statements were prepared in accordance with
Except when a standard or an interpretation permits or requires otherwise,
the International Financial Accounting Standards (hereinafter: ‘the
all amounts are reported or disclosed in comparative amounts. Where IAS
IFRS’) as adopted by the European Union (hereinafter: ‘EU’). Additional
8 applies, comparative figures have been adjusted to conform to the changes
requirements under the national legislation are included where appropriate.
in presentation in the current year.
The separate and consolidated financial statements are comprised of the
Compared to the presentation of the financial statements for the year ended
income statement and statement of comprehensive income, the statement of
31 December 2019, the schemes for presentation of the Income Statement
financial position, the statement of changes in equity, the statement of cash
changed due to changed schemes prescribed by the Bank of Slovenia.
flows, significant accounting policies, and the notes.
Comparative amounts have been adjusted to reflect these changes in the
presentation.
Cash contributions to resolution funds and deposit guarantee schemes
-
(16.223)
(16.223)
-
(7.034)
Other operating income
Other operating expenses
Other net operating income
Administrative expenses
16.270
(28.214)
-
-
(16.270)
8.508
28.214
(12.347)
-
-
-
7.851
7.851
-
4.544
(270.442)
(274.014)
(3.572)
(171.749)
(173.098)
105
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
31 Dec 2019
Net gains or losses on derecognition of investments
in subsidiaries, associates and joint ventures
Gains less losses from non-current assets held for sale
NLB Group
NLB
in EUR thousands
Old
presentation
Current
presentation
Change
Old
presentation
Current
presentation
Change
-
(687)
(111)
(576)
(111)
111
-
(579)
(1)
(578)
(1)
1
(7.034)
(8.508)
12.347
4.544
(1.349)
Annual Report 2020 The effects from derecognition of investments in subsidiaries, associates and
relevant share acquired of the carrying value of net assets of the subsidiary
held immediately before the acquisition date over the net amounts of the
2.7. A combination of entities or businesses under common control
joint ventures (outside the scope of IFRS 5 measurement requirements) are
is deducted from the equity. Gains or losses on sales to non-controlling
identifiable assets acquired, as well as the liabilities assumed. Any negative
A merger of entities within NLB Group is a business combination involving
included in the income statement as a separate item; before changing the
interests are recorded in the equity. For sales to non-controlling interests, the
amount, a gain on a bargain purchase (or ‘negative goodwill’), is recognised
entities under common control. For such mergers, members of NLB Group
schemes, the effects were disclosed under the item titled ‘Net gains or losses
differences between any proceeds received and the relevant share of non-
in profit or loss after management reassesses whether it has identified all the
apply merger accounting principles, and use the carrying amounts of
from non-current assets held for sale.’
controlling interests are also recorded in the equity. All effects are presented
assets acquired and all the liabilities and contingent liabilities assumed and
merged entities as reported in the consolidated financial statements. No
in the item ‘Equity Attributable to Non-controlling Interest.’
reviews the appropriateness of their measurement.
goodwill is recognised on mergers of NLB Group entities.
Costs associated with cash contributions to resolution funds and deposit
guarantee schemes are included in the income statement as a separate item;
2.5. Business combinations, goodwill and bargain purchases
Goodwill is tested annually for impairment. For the purpose of impairment
Mergers of entities within NLB Group do not affect the consolidated
before changing the schemes, those costs were included under the item
NLB Group accounts for business combinations using the acquisition
testing, goodwill arising from a business combination is, from the acquisition
financial statements.
‘Other operating expenses.’
method when the acquired set of activities and assets meets the definition of
date, allocated to the Group’s cash-generating units (CGUs) or groups of
a business and control is transferred to the Group. In determining whether
CGUs that are expected to benefit from the synergies of the combination.
2.8. Foreign currency translation
Expenses related to taxes, compulsory public levies, membership fees and
a particular set of activities and assets is a business, the Group assesses
Where goodwill has been allocated to a cash-generating unit (CGU) and
Functional and presentation currency
similar fees are recognised under the item ‘Administrative expenses’; before
whether the set of assets and activities acquired includes, at a minimum, an
part of the operation within that unit is disposed of, the goodwill associated
Items included in the financial statements of each of NLB Group’s entities
changing those expenses were disclosed under the item ‘Other operating
input and substantive process and whether the acquired set has the ability
with the disposed operation is included in the carrying amount of the
are measured using the currency of the primary economic environment
expenses.’
to produce outputs. The acquired process is considered substantive if it is
operation when determining the gain or loss on disposal. Goodwill disposed
in which the entity operates (i.e., the functional currency). The financial
critical to the ability to continue producing outputs; and the inputs acquired
in these circumstances is measured based on the relative values of the
statements are presented in euros, which is NLB Group’s presentation
‘Other operating income’ and ‘Other operating expenses’ are included
include an organised workforce with the necessary skills, knowledge, or
disposed operation and the portion of the cash-generating unit retained.
currency.
under the item ‘Other net operating income’; before changing the schemes,
experience to perform that process or it significantly contributes to the
those items were reported on a separate line item in the income statement.
ability to continue producing outputs and is considered unique or scarce or
The goodwill of associates and joint ventures is included in the carrying
Transactions and balances
2.4. Consolidation
continue producing outputs.
In the consolidated financial statements (NLB Group), subsidiaries which
cannot be replaced without significant cost, effort, or delay in the ability to
value of investments.
In a business combination achieved in stages, NLB Group remeasures its
exchange gains and losses resulting from the settlement of such transactions,
Foreign currency transactions are translated into the functional currency
at the exchange rates prevailing at the dates of the transactions. Foreign
are directly or indirectly controlled by NLB have been fully consolidated.
The consideration transferred is measured at the fair value of the assets
previously held equity interest in the acquiree at its acquisition-date fair
and from the translation of monetary assets and liabilities denominated in
Subsidiaries are consolidated from the date on which effective control is
transferred, equity interest issued, liabilities incurred or assumed, including
value and recognises the resulting gain or loss, if any, in profit or loss.
foreign currencies, are recognised in the income statement, except when
transferred to NLB Group.
the fair value of assets or liabilities from contingent consideration
deferred in other comprehensive income as qualifying cash flow hedges.
arrangements and fair value of any pre-existing equity interest in subsidiary.
2.6. Investments in subsidiaries, associates and joint ventures
NLB controls an entity when all three elements of control are met:
However, this excludes amounts related to the settlement of pre-existing
In the separate financial statements (NLB), investments in subsidiaries,
Translation differences resulting from changes in the amortised cost of
• it has power over the entity;
such as advisory, legal, valuation, and similar professional services are also
Dividends from subsidiaries, joint ventures, or associates are recognised in
assets and measured at fair value through other comprehensive income are
• it is exposed or has rights to variable returns from its involvement with the
recognised in profit or loss. Transaction costs incurred for issuing equity
the income statement when NLB’s right to receive the dividend has been
recognised in the income statement.
relationships which are recognised in profit or loss. Acquisition-related costs
associates and joint ventures are accounted for with the cost method.
monetary items denominated in foreign currency and classified as financial
entity; and
instruments are deducted from the equity, and all other transaction costs
established.
• it has the ability to use its power over the entity to affect the amount of
associated with the acquisition are expensed.
Translation differences on non-monetary items, such as equity instruments
the entity’s returns.
In the consolidated financial statements, investments in associates are
at fair value through profit or loss, are reported as part of the fair value gain
NLB reassesses whether it controls an entity if facts and circumstances
are, with limited exceptions, measured initially at their fair values at the
undertakings in which NLB Group holds between 20% and 50% of the
items, such as equity instruments classified as financial assets, measured
indicate there are changes to one or more of the three elements of control.
acquisition date.
voting rights, and over which NLB Group exercises significant influence, but
at fair value through other comprehensive income, are included together
If the loss of control of a subsidiary occurs, the subsidiary is no longer
does not have control.
consolidated from the date that the control ceases.
A contingent consideration classified as equity is not remeasured and
with valuation reserves in the valuation (losses)/gains taken to other
comprehensive income and accumulated in the equity.
Identifiable assets acquired and liabilities assumed in a business combination
accounted for using the equity method of accounting. These are generally
or loss in the income statement. Translation differences on non-monetary
Where necessary, the accounting policies of subsidiaries have been amended
consideration classified as an asset or liability that is a financial instrument
joint control, as established by contractual agreement. In the consolidated
Gains and losses resulting from foreign currency purchases and sales for
to ensure consistency with the policies adopted by NLB. The financial
and within the scope of IFRS 9 Financial Instruments, is measured at fair
financial statements, investments in joint ventures are accounted for using
trading purposes are included in the income statement as gains less losses
statements of consolidated subsidiaries are prepared as at the parent entity’s
value at each reporting date and changes in fair value are recognised in the
the equity method of accounting.
from financial assets and liabilities held for trading.
reporting date. Non-controlling interests are disclosed in the consolidated
statement of profit or loss in accordance with IFRS 9. Other contingent
statement of changes in equity. Non-controlling interest is that part of the
consideration that is not within the scope of IFRS 9 is measured at fair value
NLB Group’s share of its associates’ and joint ventures’ post-acquisition
NLB Group entities
its subsequent settlement is accounted for within equity. A contingent
Joint ventures are those entities over whose activities NLB Group has
net results, and of the equity of a subsidiary, attributable to interests which
at each reporting date and changes in fair value are recognised in profit or
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
presentation currency as follows:
The financial statements of all NLB Group entities that have a functional
currency different from the presentation currency are translated into the
NLB does not own, either directly or indirectly. NLB Group measures non-
loss.
controlling interest on a transaction-by-transaction basis, either at fair value,
or by the non-controlling interest’s proportionate share of net assets of the
For each business combination, NLB Group elects whether to measure
the carrying amount of the investment. When NLB Group’s share of losses
acquiree.
the non-controlling interests in the acquiree at fair value or at the present
in an associate and joint venture equals or exceeds its interest in the associate
• assets and liabilities for each statement of financial position presented are
ownership instruments’ proportionate share in the recognised amounts
and joint venture, including any other unsecured receivables, NLB Group
translated at the closing rate on the reporting date;
Inter-company transactions, balances, and unrealised gains on transactions
of the acquiree’s identifiable net assets at the date of acquisition. All
does not recognise further losses unless it has incurred obligations or made
• income and expenses for each income statement are translated at average
between NLB Group entities are eliminated. Unrealised losses are also
other components of non-controlling interests are measured at their
payments on behalf of the associate and joint venture. NLB Group resumes
exchange rates; and
eliminated unless the transaction provides evidence of impairment of the
acquisition-date fair values, unless another measurement basis is required by
recognising its share of those profits only after its share of the profits equals
• components of equity are translated at the historical rate.
asset transferred.
IFRSs.
the share of losses not recognised (note 5.12.c).
NLB Group treats transactions with non-controlling interests as transactions
Goodwill is measured as the excess of the aggregate of the consideration
NLB Group’s subsidiaries, associates and joint ventures are presented in
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
with equity owners of NLB Group. For purchases of subsidiaries from non-
transferred measured at fair value, the amount of any non-controlling
note 5.12.
at the closing rate.
controlling interests, the difference between any consideration paid and the
interest in the acquiree, and the fair value of an interest in the acquiree
106
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 In the consolidated financial statements, exchange differences arising from
provided at a point in time. When service is provided over time,
losses, and impairment are recognised separately in the income statement.
and losses are recognised in the line item ‘Gains less losses from financial
the translation of the net investment in foreign operations are recognised in
consideration is invoiced and due in line with contractual provisions.
Other net gains and losses are recognised in other comprehensive income,
assets and liabilities not classified at fair value through profit or loss.’ Gains
other comprehensive income. When control over a foreign operation is lost,
until the instrument is derecognised. At derecognition of the debt financial
and losses on disposals of financial liabilities designated as measured at fair
the previously recognised exchange differences on translations to a different
The Group has generally concluded that it is the principal in its revenue
instrument, the cumulative gains and losses previously recognised in other
value through profit or loss are also presented separately from those held for
presentation currency are reclassified from other comprehensive income to
arrangements because it typically controls the services before transferring
comprehensive income are reclassified to the income statement under line
trading.
profit and loss for the year. On the partial disposal of a subsidiary without
them to the customer.
item ‘Gains less losses from financial assets and liabilities not classified at fair
loss of control, the related portion of accumulated currency translation
value through profit or loss.’
Assessment of NLB Group’s business model
differences is reclassified as a non-controlling interest within the equity.
Fees and commissions that are integral to the effective interest rate of
NLB Group has determined its business model separately for each reporting
financial assets and liabilities are presented within interest income or
Equity instruments that are not held for trading may be irrevocably
unit within NLB Group, and is based on observable factors for different
2.9. Interest income and expenses
expenses.
Interest income and expenses for all financial instruments measured at
designated as FVOCI, with no subsequent reclassification of gains or losses
portfolios that best reflect how the Group manages groups of financial assets
to the income statement. Dividends are recognised as income in profit or loss
to achieve its business objective, such as:
amortised cost, and financial assets measured at fair value through other
2.11. Dividend income
unless the dividend clearly represents a recovery of part of the cost of the
comprehensive income are recognised in the income statement for all
Dividends are recognised in the income statement within the line ‘Dividend
investment, in which case, such gains are recorded in other comprehensive
• how the performance of the business model and the financial assets held
interest-bearing instruments on an accrual basis using the effective interest
income’ when NLB Group’s right to receive payment has been established
income. Other net gains and losses are recognised in other comprehensive
within that business model are evaluated and reported to key management
rate method. Interest income on all trading assets and financial assets
and an inflow of economic benefits is probable. In the consolidated financial
income and are never reclassified to profit or loss. In NLB Group, the most
personnel;
mandatorily required to be measured at fair value through profit or loss
statement, dividends received from associates and joint ventures reduce the
material equity instrument irrevocably designated as FVOCI is investment
• the risks that affect the performance of the business model and, in
is recognised using the contractual interest rate. The effective interest
carrying value of the investment.
in National Resolution Fund (note 5.4.a). NLB Group decided to use this
particular, the way those risks are managed;
rate method is used to calculate the amortised cost of a financial asset or
presentation alternative due to the fact that the fund was founded based on
• how the managers of the business are compensated (e.g., whether the
financial liability, and to allocate the interest income or interest expense
2.12. Financial instruments
the law and that its investment strategy is highly regulated, so to assure the
compensation is based on the fair value of the assets or on collection of
over the relevant period. The effective interest rate is the rate that exactly
a) Classification and measurement
safety, low risk and high liquidity of the fund.
contractual cash flows); and
discounts estimated future cash payments or receipts over the expected life
Financial instruments are initially measured at fair value plus or minus, in
• the expected frequency, value, and timing of sales.
of the financial instrument, or a shorter period (when appropriate) to the
the case of a financial instrument not measured at fair value through profit
All other financial assets are mandatorily measured at FVTPL, including
gross carrying amount of the financial asset or to the amortised cost of a
or loss, transaction costs that are directly attributable to the acquisition or
financial assets within other business models such as financial assets
The business model assessment is based on reasonably expected scenarios
financial liability. Interest income includes coupons earned on fixed-yield
issue of the financial instrument. Subsequent measurement depends on the
managed at fair value or held for trading and financial assets with
without taking worst-case and stress case scenarios into account. In general,
investments and trading securities, and accrued discounts and premiums on
classification of the instrument.
contractual cash flows that are not solely payments of principal and interest
the business model assessment of the Group can be summarised as follows:
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,
Financial assets
on the principal amount outstanding. Net gains and losses, including any
interest or dividend income, are recognised in profit or loss.
• Loans and deposits given are included in a business model ‘held to collect’
but excludes future credit risk losses.
All debt financial assets need to be assessed based on a combination of
since the primary purpose of NLB Group for the loan portfolio is to
Interest income is calculated by applying the effective interest rate to the
contractual cash flow characteristics. Measurement categories of financial
profit or loss if doing so eliminates or significantly reduces a measurement or
• Debt securities are divided into three business models:
gross carrying amount of financial assets other than credit-impaired assets.
assets are as follows:
recognition inconsistency that would otherwise arise from measuring assets
- the first group of debt securities presents ‘held for trading’ category;
the Group’s business model for managing the assets and the instruments’
IFRS 9 includes an option to designate financial assets at fair value through
collect the contractual cash flows;
When a financial asset becomes credit-impaired and is, therefore, regarded
• Financial assets, measured at amortised costs (AC);
as Stage 3, interest income is calculated by applying the effective interest
• Financial assets at fair value through other comprehensive income
Financial liabilities
‘held to collect and sale’ with the aim of collecting the contractual
cash flows and sale of financial assets, and forms part of the Group’s
rate to the net amortised cost of the financial asset. If the financial assets
(FVOCI);
Financial liabilities are subsequently measured at the amortised cost or at
liquidity reserves;
cures and is no longer credit-impaired, interest income is again calculated
• Financial assets held for trading (FVTPL); and
fair value through profit or loss, when they are held for trading, derivative
- the third part of debt securities is held within the business model for
on a gross basis.
• Non-trading financial assets, mandatorily at fair value through profit or
instruments, or the fair value designation is applied.
holding them in order to collect contractual cash flows.
or liabilities or recognising the gains or losses on them on different bases.
- debt securities in the second group are held under a business model
loss (FVTPL).
In case of purchased or originated credit-impaired financial assets, credit-
Upon initial recognition, financial liability may be irrevocably designated as
With regard to debt securities within the ‘held to collect’ business model,
adjusted effective interest rate is applied to the amortised cost of the
Financial assets are measured at AC if they are held within a business
measured at fair value through profit or loss if that eliminates or significantly
the sales which are related to the increase of the issuers’ credit risk,
financial asset from initial recognition. The credit-adjusted effective interest
model for the purpose of collecting contractual cash flows (‘held to collect’),
reduces a measurement or recognition inconsistency that would otherwise
concentrations risk, sales made close to the final maturity, or sales in order
rate is the interest rate that, at initial recognition, discounts the estimated
and if cash flows are solely payments of principal and interest on the
arise from measuring assets or liabilities or recognising the gains or losses on
to meet liquidity needs in a stress case scenario are permitted. Other sales,
future cash flows (including credit losses) to the amortised cost of the
principal amount outstanding. After initial recognition, they are measured
them on different bases, or if the liabilities are part of a group of financial
which are not due to an increase in credit risk may still be consistent with
purchased or originated credit-impaired financial asset.
at the amortised cost using the effective interest method and are subject to
instruments which are managed and their performance evaluated on a
a held to collect business model if such sales are incidental to the overall
impairment. Interest income calculated using the effective interest method,
fair value basis in accordance with a documented risk management or
business model, and:
2.10. Fee and commission income
foreign exchange gains and losses, and impairment are recognised in profit
investment strategy.
Fees and commissions mainly consist of fees received from credit cards
or loss. Each of them is presented as separate line item in the income
• are insignificant in value both individually and in aggregate, even when
and ATMs, customer transaction accounts, payment services, investment
statement. Any gain or loss on derecognition is recognised in profit or loss in
Changes in the fair value of financial liabilities designated as measured at
such sales are frequent;
funds, and commissions from guarantees. Fee and commission income
line item ‘Gains less losses from financial assets and liabilities not classified at
fair value through profit or loss are recognised in profit or loss, with the
• are infrequent even when they are significant in value.
are recognised at an amount that reflects the consideration to which the
fair value through profit or loss.’
exception of movement in the fair value due to changes of NLB Group’s
Group expects to be entitled in exchange for providing the services. The
own credit risk. Such changes are presented in other comprehensive income
A review of instruments’ contractual cash flow characteristics
performance obligations, as well as the timing of their satisfaction, are
Debt financial instruments are measured at FVOCI if they are held within
with no subsequent reclassification to the income statement.
(the SPPI test – solely payment of principal and interest
identified, and determined, at the inception of the contract. The Group’s
a business model for the purpose of both collecting contractual cash flows
on the principal amount outstanding)
revenue contracts do not include multiple performance obligations.
and selling (‘held to collect and sell’), and if cash flows are solely payments
Other financial liabilities are subsequently measured at amortised cost
The second step in the classification of the financial assets in portfolios
When the Group provides a service to its customers, consideration is
of principal and interest on the principal amount outstanding. FVOCI
results in the debt instruments being recognised at fair value in the statement
using the effective interest method. Interest expense and foreign exchange
gains and losses are recognised in profit or loss. Any gain or loss on
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.
invoiced and generally due immediately upon satisfaction of a service
of financial position and at AC in the income statement. Interest income
derecognition of financial liability is recognised in profit or loss. In the event
The principal amount reflects the fair value at initial recognition less any
calculated using the effective interest method, foreign exchange gains and
of derecognition of a financial liability measured at amortised cost, gains
subsequent changes, e.g. due to repayment. The interest must represent
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 only the consideration for the time value of money, credit risk, other basic
instrument or is based on a valuation technique whose variables only include
nature of the item being hedged. NLB Group designates certain derivatives
recognised in the income statement. When a forecasted transaction is no
lending risks, and a profit margin consistent with basic lending features. If
data from observable markets, the difference between the transaction price
as either:
the cash flows introduce more than de minimis exposure to risk or volatility
and fair value is recognised immediately in the income statement (‘day one
longer expected to occur, the cumulative gain or loss that was reported
in other comprehensive income is immediately transferred to the income
that is not consistent with basic lending features, the financial asset is
gains or losses’).
• hedges of the fair value of recognised assets or liabilities or firm
statement.
mandatorily measured at FVTPL.
commitments (fair value hedge);
In cases where the data used for valuation are not fully observable in
• hedges of highly probable future cash flows attributable to a recognised
Hedge of a net investment in a foreign operation
NLB Group reviews the portfolio within ‘held to collect’ and ‘held to
financial markets, day one gains or losses are not recognised immediately in
asset or liability, or a highly probable forecasted transaction (cash flow
Hedges of net investments in foreign operations are in consolidated financial
collect and sale’ for standardised products on a level of a product and
the income statement. The timing of recognition of deferred day one gains
hedge); or
statements accounted for similarly to cash flow hedges. Any gain or loss
for non-standardised products on a single exposure level. The Group has
or losses is determined individually. It is either amortised over the life of the
• hedges of a net investment in a foreign operation (net investment hedge).
on the hedging instrument relating to the effective portion of the hedge
established a procedure for SPPI identification as part of regular investment
transaction, deferred until the instrument’s fair value can be determined
is recognised directly in equity. The gain or loss relating to the ineffective
process with defined responsibilities for primary and secondary controls.
using market observable inputs, or realised through settlement.
Hedge accounting is used for derivatives designated in this way provided
portion is recognised immediately in the consolidated income statement in
Special emphasis is put on new and non-standardised characteristics of loan
agreements.
d) Derecognition
certain criteria are met. NLB Group and NLB elected, as a policy
‘Gains Less Losses on Financial Assets and Liabilities Held for Trading.’
choice permitted under IFRS 9, to continue to apply hedge accounting
Gains and losses accumulated in other comprehensive income are included
A financial asset is derecognised when the contractual rights to the
requirements in accordance with IAS 39. However, disclosures that
in the consolidated income statement when the foreign operation is disposed
Accounting policy for modified financial assets
cash flows from the financial asset expire, or when the financial asset is
are required by the IFRS 9 related amendments to IFRS 7 ‘Financial
of as part of the gain or loss on the disposal.
When contractual cash flows of a financial asset are modified, NLB Group
transferred, and the transfer qualifies for derecognition. A financial liability
Instruments: Disclosures’ are implemented.
assesses if the terms and conditions have been modified to the extent that,
is derecognised only when it is extinguished, i.e., when the obligation
2.13. Allowances for financial assets
substantially, it becomes a new financial asset. The following factors are,
specified in the contract is discharged, cancelled, or expires.
At the inception of the transaction, NLB Group documents the relationship
a) Expected credit losses for collective allowances
amongst others, considered when making such assessment:
e) Write-offs
between hedged items and hedging instruments, as well as its risk
IFRS 9 applies an expected loss model that provides an unbiased and
management objective, valuation methodology and strategy for undertaking
probability-weighted estimate of credit losses by evaluating a range of
• reason for modification of cash flows (commercial or client’s financial
NLB Group writes off financial assets in their entirety or a portion thereof
various hedge transactions. NLB Group also documents its assessment, both
possible outcomes that incorporates forecasts of future economic conditions.
difficulties);
• change in currency of the loan;
• introduction of an equity feature;
when it has exhausted all practical recovery efforts and has no reasonable
at the hedge inception and on an ongoing basis, of whether the derivatives
The expected loss model requires NLB Group to recognise not only credit
expectations of recovery. Criteria indicating that there is no reasonable
used in hedging transactions are highly effective in offsetting changes in fair
losses that have already occurred, but also losses that are expected to occur
expectation of recovery include default period, quality of collateral, and
values or cash flows of hedged items. The actual results of a hedge must
in the future. An allowance for expected credit losses (ECL) is required for
• replacement of initially agreed debtor with a new debtor that is not
different stages of enforcement procedures. NLB Group may write off
always fall within a range of 80–125%.
all loans and other debt financial assets not held at FVTPL, together with
related party to initial debtor; and
financial assets that are still subject to enforcement activities, but this does
loan commitments and financial guarantee contracts.
• if the modification is such that it changes the result of the SPPI test.
not affect its rights in the enforcement procedures. NLB Group still seeks
Fair value hedge
to recover all amounts it is legally entitled to in full. A write-off reduces
Changes in the fair value of derivatives that are designated and qualify as
In the general model, the allowance is based on the expected credit losses
If the modification results in derecognition of a financial asset, the new
the gross carrying amount of a financial asset and allowance for the
fair value hedges are recognised in the income statement together with any
associated with the probability of default in the next 12 months unless
financial asset is initially recognised at fair value, with the difference
impairment. Any subsequent recoveries are credited to credit loss expense.
changes in the fair value of the hedged asset or liability that are attributable
there has been a significant increase in credit risk since initial recognition,
recognised as a derecognition gain or loss, to the extent that an impairment
Write-offs and recoveries are disclosed in note 5.14.a).
to the hedged risk. Effective changes in the fair value of hedging instruments
in which case, the allowance is based on the probability of default over the
loss has not already been recorded. If the modification does not result in
and related hedged items are reflected in ‘Fair value adjustments in Hedge
life of the financial asset (LECL). When determining whether the risk of
cash flows that are substantially different, the modification does not result
f) Fair value measurement principles
Accounting’ in the income statement. Any ineffectiveness from derivatives is
default increased significantly since initial recognition, the Group considers
in derecognition. In such cases NLB Group recalculates the gross carrying
The fair value of financial instruments traded on active markets is based on
recorded in ‘Gains Less Losses on Financial Assets and Liabilities Held for
reasonable and supportable information that is relevant and available
amount of the financial asset and recognises modification gain or loss in
the price that would be received to sell the assets or transfer liability (exit
Trading.’
the income statement. The gross carrying amount is recalculated as the
price) being measured at the reporting date, excluding transaction costs. If
without undue cost or effort. This includes both quantitative and qualitative
information and analysis, based on the Group’s historical data, experience,
present value of the renegotiated or modified contractual cash flows that are
there is no active market, the fair value of the instruments is estimated using
If a hedge no longer meets the hedge accounting criteria, the adjustment
expert credit assessment, and incorporation of forward-looking information.
discounted at the financial asset’s original effective interest rate (or credit-
discounted cash flow techniques or pricing models.
to the carrying amount of the hedged item for which the effective interest
In 2020, due to the COVID-19 pandemic, the Group broadened the
adjusted effective interest rate for purchased or originated credit impaired
rate method is used is amortised to profit or loss over the remaining period
number of indicators to strengthen the likelihood of detection of significant
financial assets).
b) Reclassification
If discounted cash flow techniques are used, estimated future cash flows are
to maturity. The adjustment to the carrying amount of a hedged equity
increase of credit risk for clients with COVID-19 moratoria.
based on management’s best estimates; and the discount rate is a market-
security is included in the income statement upon disposal of the equity
based rate at the reporting date for an instrument with similar terms and
security.
Classification into stages
Financial assets can be reclassified when and only when NLB Group’s
conditions. If pricing models are used, inputs are based on market-based
business model for managing those assets changes. The reclassification takes
measurements at the reporting date.
Cash flow hedge
place from the start of the reporting period following the change. Such
changes are expected to be very infrequent, and none occurred during the
g) Derivative financial instruments and hedge accounting
The effective portion of changes in the fair value of derivatives that
are designated and qualify as cash flow hedges is recognised in other
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,
presented periods. Financial liabilities shall not be reclassified.
Derivative financial instruments – including forward and futures contracts,
comprehensive income. The gain or loss relating to the ineffective portion is
and Stage 3, based on the applied ECL allowance methodology as described
swaps, and options – are initially recognised in the statement of financial
immediately recognised in the income statement.
below:
c) Day one gains or losses
position at fair value. Derivative financial instruments are subsequently
The best evidence of fair value at initial recognition is the transaction
re-measured at their fair value. Fair values are obtained from quoted market
Amounts accumulated in equity are recycled as a reclassification from other
• Stage 1 – performing portfolio: no significant increase of credit risk
price (i.e., the fair value of the consideration given or received), unless
prices, discounted cash flow models, or pricing models, as appropriate. All
comprehensive income to the income statement in the periods when the
since initial recognition, NLB Group recognises an allowance based on
the fair value of that instrument is evidenced by a comparison with other
derivatives are carried at their fair value within assets when the derivative
hedged item affects profit or loss.
12-month period;
observable current market transactions in the same instrument (i.e., without
position is favourable to NLB Group, and as well within liabilities when the
• Stage 2 – underperforming portfolio: significant increase in credit risk
modification or repackaging), or based on a valuation technique whose
derivative position is unfavourable to NLB Group.
When a hedging instrument expires or is sold, or when a hedge no longer
(SICR) since initial recognition, NLB Group recognises an allowance for
variables only include data from observable markets.
The method of recognising the resulting fair value gain or loss depends on
meets hedge accounting criteria, any cumulative gain or loss existing in
other comprehensive income and previously accumulated in equity at
lifetime period; and
• Stage 3 – impaired portfolio: NLB Group recognises lifetime allowances
If the transaction price on a non-active market is different than the fair
whether the derivative is designated as a hedging instrument and, if so, the
that time remains in other comprehensive income and in equity, and is
for these defaulted financial assets.
value from other observable current market transactions in the same
recognised in profit or loss only when the forecasted transaction is ultimately
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 The Bank has aligned its definition of credit impaired assets under IFRS 9
For financial instruments in Stage 3, the same treatment is applied as for
Management Board. Scenarios and statistical models are the same for all
In the situation of the COVID-19 pandemic, NLB Group kept up with
to the new European Banking Authority (EBA) definition of non-performing
those considered to be credit impaired. Exposures below the materiality
NLB Group members, local specifics for subsidiaries are captured by the
the latest institutional projections that kept changing throughout 2020.
loans (NPLs) as at 31 December 2020. The Bank uses a unified definition of
threshold obtain collective allowances using a PD of 100%. Financial
process of scenarios results calibration.
past due and default exposures; defaulted clients are rated D, DF, or E based
instruments will be transferred out of Stage 3 if they no longer meet the
Due to the extraordinary state of the COVID-19-ridden global economy,
the early official forecasts were discarded in favour of the ECB June 2020
on the internal rating system and contains the clients with material delays
criteria of being credit-impaired after a probation period. Special treatment
The IFRS 9 scenario framework is based on institutional forecasts
projections which were deemed more realistic. In spite of the ever-changing
over 90 days, as well as the clients that were assessed as unlikely to pay. All
applies for purchased or originated credit-impaired financial instruments
(IMAD, EC, IMF, ECB), from which three forward-looking scenarios of
COVID-19 situation, IFRS 9 projections remain in line with NLB Group’s
the facilities of the retail clients obtain a unified credit rating.
(POCI), where only the cumulative changes in the lifetime expected losses
macroeconomic development are created (i.e. baseline, optimistic, and
economic outlook. We use the ECB baseline, mild, and severe scenarios for
since initial recognition are recognised as a loss allowance.
severe scenarios). The probability-weighted expected scenario is used
Slovenia for the initial period ranging from 2020 to 2022. For the two-year
A significant increase in credit risk is assumed:
as a base for IFRS 9 expected credit losses calculations. Currently, NLB
period from 2023 to 2024 we resort to established methodology and use
The calculation of collective allowances is performed by multiplying the
Group applies GDP growth rates for probability of default (PD) estimates
IMF projections. The latter represents the baseline scenario. We use our
• when a credit rating significantly deteriorates at the reporting date
EAD (exposure at default) at the end of each month with an appropriate
and House prices growth for loss given default (LGD) forward-looking
internally developed deviations from the baseline to obtain the severe and
in comparison to the credit rating at initial recognition (which is
PD and LGD (loss-given default). The obtained result for each month is
projections.
accompanied with the increase of Probability of default (PD) indicator);
discounted to the present time using the original effective interest rate of the
• when a financial asset has material delays over 30 days (days past due are
facility. For Stage 1 exposures, the ECL only takes a 12-month period into
also included in the credit rating assessment);
account, while for Stage 2 or 3 all potential losses until the maturity date are
Macroeconomic scenarios for Risk parameters explanatory variables:
optimistic scenarios. Real estate price growth is estimated on the basis of an
internal econometric model, using GDP forecasts as an explanatory variable.
• if NLB Group grants the forbearance to the borrower;
included.
• if the facility is placed on the watch list or intensive care list;
• if a retail client obtained COVID-19 moratoria and is placed on the EWS
The EAD represents the anticipated outstanding amount owed by the
list.
obligor, which is determined as the sum of on-balance exposure and
expected future drawings of the off-balance exposure. The drawings are
Based on the EBA Guidelines for COVID-19 legislative and non-
assessed by applying the CCF (credit conversion factor) based on the Bank’s
legislative moratoria, the Bank did not consider COVID-19 moratoria
historic experience with similar types of facilities.
PD
as a forbearance measure if granted before 30 September 2020 or if
granted after that date, but the cumulative moratoria period did not exceed
The PD is the estimation of likelihood of default over a given time horizon.
9 months. Nevertheless, any moratoria granted due to the COVID-19
The estimation is performed separately for each unique product group or
situation not aligned with the legislative or non-legislative standards, was
segment of clients. Through the cycle, the PD is supplemented with the
checked for forbearance status on a case-by-case basis. Additionally, the
forward-looking aspect using multiple possible scenarios.
clients who were granted COVID-19 moratoria or new financing on the
basis of the COVID-19 circumstances, were analysed as part of the regular
The LGD parameter reflects the expected loss the facility will incur in case
credit process using a wide variety of financial and non-financial indicators
of the event of default. The LGD value is assessed based on the Bank’s
and were downgraded or placed on the watch list if an increase in credit risk
historic data on repayments from different types of collateral, as well as
was identified.
other types of repayments such as regular/partial repayments, repayments
Risk parameter
Scenario Scenario weight*
Baseline
Optimistic
Adverse
Weighted average
60%
20%
20%
-
GDP percentage growth 5Y projection
2020
-6.50
-3.90
-10.00
-6.68
2021
4.90
6.70
0.40
5.31
2022
3.60
4.60
4.00
3.88
House prices growth 5Y projection
2023
2.80
2.88
2.33
2.67
2023
7.36
2024
2.50
2.58
1.76
2.37
2024
6.96
Risk parameter
LGD**
Scenario Scenario weight*
Weighted average
-
2020
-5.20
2021
10.90
2022
8.99
The methodology of credit rating for banks and sovereign classification
cycle, the LGD is supplemented with the forward-looking aspect to reflect
** Weighted average GDP scenario was used in internal econometric model for House prices growth forecasting.
from legal proceedings, the sale of receivables, and others. Through the
* Scenario weights change to 60% - 35% - 5% in year 2021 and return to the original weight partitioning in the following years.
depends on the existence or non-existence of a rating from international
the expected changes in the macroeconomic parameters.
credit rating agencies Fitch, Moody’s, or S&P. Ratings are set on a basis of the
Recalculation of all parameters is performed annually or more frequently if
b) Individual assessment of allowances for impaired financial assets
average international credit rating. If there are no international credit ratings,
Risk parameter calculations are based on the data from each subsidiary,
the macro environment changes more than it was incorporated in previous
NLB Group assesses impairments of financial assets separately for all
the classification is based on the internal methodology of NLB Group.
while the calculations and modelling are performed centrally. In the case
forecasts. In such a case all the parameters are recalculated according to
individually significant assets classified in Stage 3. The materiality threshold
where the data samples are not sufficiently large, hurdle rates are applied
new forecasts. In 2020, due to the changing macroeconomic predictions, a
is set at EUR 0.5 million exposure for legal entities and EUR 0.1 million for
The classification into stages is based on the facility level, nevertheless
based on the regulatory or other benchmarks.
second calculation was performed as at 30 September 2020.
private persons on the level of NLB, while the Group members apply lower
occurring delays on one facility may trigger the Stage deterioration of
other facilities of the same client. When the SICR criteria no longer exist,
Expected Life
The largest impact on expected credit losses in 2020 is due to the
collective allowances.
thresholds applicable to their portfolio size. All other financial assets obtain
the facility may be transferred to a more favourable stage subject to the
When measuring ECL, the Bank must consider the maximum contractual
deterioration of the macroeconomic environment due to the COVID-19
prescribed holding period.
period over which the Bank is exposed to credit risk. For certain revolving
crisis. This change in macroeconomic scenarios has an impact on the new
The amount of the loss is measured as the difference between the asset’s
credit facilities that do not have a fixed maturity, the expected life is
values of risk parameters which incorporate the estimated influence of the
carrying amount and the present value of estimated future cash flows,
The ECL for Stage 1 financial assets is calculated based on 12-month PDs
estimated based on the period over which the Bank is exposed to credit risk
COVID-19 outbreak.
or shorter period PDs, if the remaining maturity of the financial asset is
and where the credit losses would not be mitigated by management actions.
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
shorter than 1 year. The 12-month PD already includes the macroeconomic
Due to the COVID-19 crisis NLB Group has introduced a COVID-19
from operations is considered along with the sale of collateral that is not
impact effect. Allowances in Stage 1 are designed to reflect expected credit
Forward-looking information
mark-up on LGD (up to 10%). COVID-19 mark-up can be applied by
crucial for future business. In the case of the ‘gone concern’ principle, the
losses that had been incurred in the performing portfolio but have not been
The Group incorporates forward-looking information in both the
a NLB Group member as a measure of conservativeness or due to the
repayments are based on expected cash flows from the sale of collateral.
identified.
assessment of significant increase in credit risk and the measurement of
particularities of the local market. The COVID-19 mark-up applied in 2020
The expected payment from the collateral is calculated from the appraised
The ECL for Stage 2 financial assets is calculated based on lifetime PDs
Methodology, and discounted. Off-balance sheet liabilities are also assessed
(LPD) because their credit risk has increased significantly since their initial
The macroeconomic scenarios used by NLB Group for IFRS 9 are based on
Effects of changed risk parameters on the amount of expected credit losses
individually and, where necessary, related allowances are recognised as
ECL.
has no major impact on the increase of expected credit losses.
market value of the collateral, the haircut used as defined in the Haircut
recognition. This calculation is also based on a forward-looking assessment
that takes into account a number of economic scenarios in order to
existing Group’s stress-testing framework. Scenarios under the Stress-testing
framework are regularly presented, challenged, and discussed by the Capital
recognise the probability of losses associated with the predicted macro-
Management Group (CMG), the Liquidity Management Group (LMG),
economic forecasts.
respective Committees (ALCO, RICO, and OpRisk Committee), and the
are disclosed in notes 5.14. and 5.16.b).
liabilities.
The carrying amount of financial assets measured at an amortised cost is
reduced through an allowance account and the loss is recognised in the
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 income statement item ‘Impairment of financial assets.’ If the amount of
by taking possession of other assets (i.e., property, plant and equipment,
2.17. Sale and repurchase agreements
2.19. Intangible assets
allowances for ECL decreases subsequently due to an event occurring after
securities, and other financial assets), including investments in the equity
Securities sold under sale and repurchase agreements (repos) are retained
Intangible assets include software licenses, goodwill (note 2.5.), and
the impairment was recognised (e.g. repayment in the collection process
of debtors obtained via debt-to-equity swaps, it recognises the acquired
in the financial statements, and the counterparty liability is included in
identifiable intangible assets acquired in a business combination. Intangible
exceeds the assessed expected payment from collateral), the reversal of the
assets in the statement of financial position at fair value, recognising the
financial liabilities measured at an amortised cost. Securities sold subject to
assets except goodwill, have a finite useful life and are in the statement
loss is recognised as a reduction in the allowance account, and the gain is
difference between the fair value of the asset and the carrying amount of
sale and repurchase agreements are reclassified in the financial statements
of financial position stated at cost, less accumulated amortisation and
recognised in the same income statement item. For off-balance exposures,
the eliminated claim in profit or loss.
as pledged assets when the transferee has the right by contract or custom
impairment losses. Amortisation is calculated on a straight-line basis at rates
the amount of ECL is recognised in the statement of financial position in
to sell or re-pledge the collateral. Securities purchased under agreements to
designed to write-down the cost of an intangible asset over its estimated
the ‘Provisions’ item and in the income statement in the item ‘Provisions for
Forborne exposures may be identified in both the performing and non-
resell (reverse repos) are recorded as loans to other banks or customers, as
useful life. The core banking system is amortised over a period of 10 years,
credit losses.’
performing parts of the portfolio. Where the forborne loan is classified
appropriate.
in the non-performing part of the portfolio, it can be reclassified to
and other software over a period of three to five years. Amortisation does
not begin until the assets are available for use.
The ECLs for debt instruments measured at fair value through other
the performing part if exposure is no longer considered as impaired or
In financial statements, the difference between the sale and repurchase price
comprehensive income do not reduce the carrying amount of these financial
defaulted, if determined amounts were repaid, if one year has passed from
is treated as interest and accrued over the life of the repo agreements using
The identifiable intangible assets acquired in a business combination and
assets in the statement of financial position, which remains at fair value.
the latest of the events defined (introduction of forbearance, classification
the effective interest rate method.
Instead, an amount equal to the allowance that would arise if the assets were
in the non-performing part, repayment of the last overdue amount, end
measured at an amortised cost is recognised in other comprehensive income
of the grace period) and after the introduction of forbearance there have
2.18. Property and equipment
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
as an accumulated impairment amount, with a corresponding charge to
been no overdue amounts or doubts concerning the repayment of the
All items of property and equipment are initially recognised at cost. They
business combination are measured in accordance with IAS 38 Intangible
profit or loss. The accumulated loss recognised in other comprehensive
entire exposure, under the terms and conditions after the forbearance. The
are subsequently measured at cost less accumulated depreciation and any
Assets. Additionally identified intangible assets acquired in a business
income is recycled to the profit or loss upon derecognition of the assets,
absence of doubt is confirmed by analysis of the financial situation of the
accumulated impairment loss.
combination in December 2020 (note 5.12.b) relate to core deposits and
or when the amount of allowances for ECL decreases due to an event
debtor.
occurring after the impairment was recognised.
Each year, NLB Group assesses whether there are indications that property
trade name. Their useful life is assessed to be 5 years.
The forborne status is withdrawn when:
and equipment may be impaired. If any such indication exists, the
2.20. Investment properties
2.14. Forborne loans
recoverable amounts are estimated. The recoverable amount is the higher
Investment properties include buildings held to earn rentals, or to increase
A forborne loan (or restructured financial asset) arises as a result of a
• at least a 2-year probation period has passed since the latest of:
of the fair value less costs to sell and value in use. If the recoverable amount
the value of a long-term investment, rather than to be used by NLB Group.
debtor’s inability to repay a debt under the originally agreed terms, either
- the moment of extending the restructuring measures or
exceeds the carrying value, the assets are not impaired. If the carrying
Investment properties are stated at fair value determined by a certified
by modifying the terms of the original contract (via an annex) or by signing
- the forborne exposure was deemed performing;
amount exceeds the recoverable amount, the difference is recognised as a
appraiser. Fair value is based on current market prices. Any gain or loss
a new contract under which the contracting parties agree the partial or
• regular payments of the principal or interest were made, in a substantial
loss in the income statement.
arising from a change in the fair value is recognised in the income statement.
total repayment of the original debt. Loans with deferral of payment
total amount, during at least half the probation period;
approved in line with the national legislation on intervention measures
• no exposure, in the probation period, is more than 30 days in default of
Items of a largely independent property and equipment which do not
2.21. Non-current assets and disposal groups classified as held for sale
in response to SARS-CoV-2 (COVID-19) pandemic until 30 September
more than EUR 100.
generate cash flows are included in the cash-generating unit and later tested
Non-current assets and disposal groups are classified as held for sale if their
2020 are not forborne loans. Loans with deferrals of payment, under
COVID-19 measures approved after 30 September 2020 are subject of
2.15. Repossessed assets
for possible impairment.
carrying amount will be recovered through a sale transaction rather than
through continuing use. This condition is deemed to be met only when
assignment of forbearance status, except in cases, where detailed review and
In certain circumstances, assets are repossessed following the foreclosure
Depreciation is calculated on a straight-line basis over the assets’ estimated
the sale is highly probable, and the asset is available for immediate sale in
analysis sufficiently justify that the client is not in financial difficulties. If to
on loans that are in default. Repossessed assets are initially recognised in
useful lives. The following annual depreciation rates were applied:
its present condition. Management must be committed to the sale, which
receivables due from the client the status of restructuring is introduced, the
the financial statements at their fair value and classified in the appropriate
debtor must be classified in the rating group C or lower.
category according to their purpose and are sold as soon as is practical in
order to reduce exposure (note 6.1.l). After initial recognition, repossessed
NLB Group and NLB
The definitions of forborne loans closely follow definitions that were
assets are measured and accounted for in accordance with the policies
Buildings
developed by the European Banking Authority (EBA). These definitions
applicable to the relevant asset categories. Repossessed assets mainly
aim to achieve comprehensive coverage of exposures to which forbearance
represent items of real estate that NLB Group classifies within investment
measures have been extended.
properties measured in accordance with an IAS 40 Investment property
(note 2.20.), and other assets measured in accordance with IAS 2
The accounting treatment of forborne loans depends on the type of
Inventories.
restructuring. When NLB Group embarks on a forborne loan via the
Leasehold improvements
Computers
Furniture and equipment
Motor vehicles
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.
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.
in %
2 - 5
5 - 25
14.3 - 50
10 - 33.3
12.5 - 25
modified terms of repayment proceeding from extending the deadline
Real estate obtained from the foreclosure of loans and receivables within
During subsequent measurement, certain assets and liabilities of a disposal
for the repayment of the principal and/or interest, and/or a forbearance
other assets are initially recognised at fair value less costs to sell (realisable
Depreciation does not begin until the assets are available for use.
group that are outside the scope of IFRS 5 measurement requirements
of the repayment of the principal, and/or interest or a reduction in the
value), wherein only the direct costs of sales can be considered. At
are measured in accordance with the applicable standards (e.g., deferred
interest rate, and/or other expenses, it adjusts the carrying amount of the
subsequent measurement, the realisable value is verified at least annually.
The assets’ residual values and useful lives are reviewed and adjusted if
tax assets, assets arising from employee benefits, financial instruments,
forborne loan on the basis of the discounted value of the estimated future
Valuations of the fair value of real estate are performed by certified real
appropriate on each reporting date. Gains and losses on the disposal of
investment property measured at fair value, and contractual rights under
cash flows under the modified terms, and recognises the resulting effect in
estate appraisers. The real estate is impaired when the carrying value
items of property and equipment are determined as the difference between
insurance contracts). Tangible and intangible assets are not depreciated. The
profit or loss. In the event of the reduction of a claim against the debtor
exceeds the realisable value. The effect of impairment is presented as the
the sale proceeds and their carrying amount and are recognised in the
effects of sale and valuation are included in the income statement as a gain
via the reduction in the amount of the claims as a result of a contractually
impairment of other assets and the reversal of impairment as income from
income statement.
or loss from non-current assets held for sale.
agreed debt waiver and ownership restructuring or debt to equity swap,
the reversal of the impairment of other assets.
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
2.16. Offsetting
Maintenance and repairs are charged to the income statement during the
Liabilities directly associated with disposal groups are reclassified and
financial period in which they are incurred. Subsequent costs that increase
presented separately in the statement of financial position.
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
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
future economic benefits are recognised in the carrying amount of an asset,
and the replaced part, if any, is derecognised.
debtor’s modified position, the economic expectations, and the collateral of
offset the recognised amounts, and there is an intention to settle on a net
the forborne loan. When NLB Group is embarking on the forborne loan
basis, or to realise the asset and settle the liability simultaneously.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 2.22. Accounting for leases
NLB Group classifies a lease as a finance lease when the risks and rewards
The carrying value of an issued financial instrument with characteristics of
Other contingent liabilities and commitments
A lease is a contract, or part of a contract, which creates enforceable rights
incidental to ownership of a leased asset lie with the lessee. When assets
equity is presented in the statement of changes in equity in the item ‘Other
Other contingent liabilities and commitments represent undrawn loan
and obligations and conveys the right to control the use of an identified asset
are leased under a finance lease, the present value of the lease payments
Equity Instruments.’
commitments to extend credit, uncovered letters of credit, and other
for a period of time in exchange for consideration. Thus, IFRS 16 requires
is recognised as a receivable. Income from finance lease transactions is
commitments.
determination whether a contract is, or contains, a lease.
amortised over the lifetime of the lease using the effective interest rate
2.26. Provisions
NLB Group as a lessee
net investment in the lease, including the unguaranteed residual value.
constructive obligation as a result of past events, and it is probable that an
loan commitments where the loan agreed to be provided is on market terms,
NLB Group recognises a liability to make lease payments and an asset
outflow of resources embodying economic benefits will be required to settle
are not recorded in the statement of financial position.
representing the right to use the underlying asset (i.e., the right-of-use
Sale-and-leaseback transactions
the obligation, and a reliable estimate of the amount of the obligation can
asset) during the lease term for all leases, except for short-term leases and
NLB Group also enters into sale-and-leaseback transactions (in which NLB
be made. They are recognised in the amount that is the best estimate of
Contingent liabilities recognised in a business combination
leases of low-value. Short-term leases are defined as those which at the
Group is primarily a lessor) under which the leased assets are purchased
the expenditure required to settle the present obligation at the end of the
A contingent liability recognised in a business combination is initially
commencement date have a lease term of 12 months or less without the
from, and then leased back to the lessee. These contracts are classified as
reporting period. When the effect of the time value of money is material,
measured at its fair value. After initial recognition, it is measured at the
method. Finance lease receivables are recognised at an amount equal to the
Provisions are recognised when NLB Group has a present legal or
The nominal contractual value of guarantees, letters of credit, and undrawn
option to purchase the underlying asset. Leases of underlying assets with
finance leases or operating leases, depending on the contractual terms of the
NLB Group determines the level of provision by discounting the expected
higher of:
a value, when new, lower or equal to EUR 5 thousand are defined as low
leaseback agreement.
cash flows at a pre-tax rate reflecting the current rates specific to the liability.
value leases, and are thus recognised as an expense on a straight-line basis
over the lease term.
Right-of-use assets
Leases recognised in a business combination
2.27. Contingent liabilities and commitments
In all leases acquired in a business combination, the acquiree is the lessee.
Financial and non-financial guarantees
• 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
For such leases, NLB Group applies the IFRS 16 initial measurement
Financial guarantees are contracts that require the issuer to make specific
amount of income recognised in accordance with the principles of IFRS
At the commencement date, NLB Group measures the right-of-use asset
provisions (with exceptions for leases with remaining term of 12 months
payments to reimburse the holder for a loss it incurs because a specific
15 Revenue from Contracts with Customers. This requirement does not
at cost, reduced by any accumulated depreciation and impairment losses,
or less and low value leases) and recognises the acquired lease liability as if
debtor fails to make payments when due, in accordance with the terms of
apply to contracts accounted for in accordance with IFRS 9.
and adjusted for any remeasurement of lease liabilities. The cost of right-
the lease contract was a new lease at the acquisition date. The right-of-use
debt instruments. Such financial guarantees are given to banks, financial
of-use assets consists of the amount of lease liabilities recognised, initial
asset is measured at an amount equal to the recognised liability. There are
institutions, and other bodies on behalf of the customer to secure loans,
2.28. Taxes
direct costs incurred, an estimate of costs to be incurred by the lessee in
no favourable or unfavourable terms of the leases relative to market terms,
overdrafts, and other banking facilities.
Income tax expense comprises current and deferred income tax.
dismantling, and removing the underlying asset to the condition required
which would require the adjustment of the right-of-use assets.
by the terms and conditions of the lease and lease payments made at or
The issued guarantees covering non-financial obligations of the clients
Current corporate income tax in NLB Group is calculated on taxable
before the commencement date less any lease incentives received. After the
2.23. Cash and cash equivalents
represent the obligation of the Bank (guarantor) to pay if the client fails
profits at the applicable tax rate in the respective jurisdiction. The corporate
commencement date, NLB Group measures the right-of-use asset using
For the purpose of the statement of cash flows, cash and cash equivalents
to perform certain works in accordance with the terms of the commercial
income tax rate for 2020 in Slovenia was 19% (2019: 19%).
a cost model and recognises depreciation of the right-of-use assets, on a
comprise cash and balances with central banks and other demand deposits
contract.
straight-line basis over the lease term, and (separately) interest on the lease
at banks, debt securities held for trading, loans to banks, and debt securities
Current and deferred taxes are recognised in profit or loss, except to
liabilities. In the statement of financial position, right-of-use assets are
not held for trading with an original maturity of up to three months. Cash
Financial and non-financial guarantees are initially recognised at fair value,
the extent that they relate to a business combination or taxes related to
presented in item ‘Property and equipment’.
and cash equivalents are disclosed under the cash flow statement.
which is normally evidenced by the fees received. The fees are amortised to
effects recognised directly in equity (deferred tax related to the fair value
the income statement over the contract term using the straight-line method.
re-measurement of financial assets measured at fair value through other
Lease liabilities
2.24. Borrowings, deposits, and issued debt securities with characteristics
NLB Group’s liabilities under guarantees are subsequently measured at the
comprehensive income, cash flow hedges, and actuarial gains and losses
At the commencement date, NLB Group measures the lease liability at
of debt
greater of:
on defined benefit pension plans is charged or credited directly to other
the present value of the lease payments that are not paid at that date. The
Loans and deposits received and issued debt securities are initially
comprehensive income).
lease payments consist of fixed payments, variable lease payments that
recognised at fair value. Borrowings are subsequently measured at the
• the initial measurement, less amortisation calculated to recognise fee
depend on an index or a rate, amounts expected to be paid under residual
amortised cost. The difference between the value at initial recognition and
income over the period of guarantee; or
Deferred income tax is calculated using the balance sheet liability method
value guarantees, the exercise price of a purchase option if there exists
the final value is recognised in the income statement as an interest expense,
• an ECL provision as set out in note 2.13.
a reasonable certainty for it to be exercised, and payments of penalties
applying the effective interest rate.
for terminating the lease, if the lease term reflects exercising the option
Documentary letters of credit
for temporary differences arising between the tax bases of assets and
liabilities, and their carrying amounts for financial reporting purposes.
to terminate. Subsequently (after the commencement date), NLB Group
Repurchased own debt is disclosed as a reduction in liabilities in the
Documentary (and standby) letters of credit constitute a written and
Deferred tax assets are recognised if it is probable that future taxable profit
measures the lease liability by:
statement of financial position. The difference between the book value and
irrevocable commitment of the issuing (opening) bank on behalf of the
will be available in the foreseeable future against which the temporary
the price at which own debt was repurchased is disclosed in the income
issuer (importer) to pay the beneficiary (exporter) the value set out in the
differences can be utilised.
• increasing the carrying amount to reflect interest on the lease liability;
statement.
• reducing the carrying amount to reflect the lease payments made;
documents by a defined deadline:
Deferred tax assets and liabilities are measured at tax rates enacted or
• remeasuring the carrying amount to reflect any reassessment or lease
2.25. Other issued financial instruments with characteristics of equity
• if the letter of credit is payable on sight; and
substantively enacted at the end of the reporting period that are expected
modifications.
Upon initial recognition, other issued financial instruments are classified
• if the letter of credit is payable for deferred payment, the bank will pay
to apply to the period when the asset is realised, or the liability is settled. At
in part or in full as equity instruments if the contractual characteristics
according to the contractual agreement when and if the beneficiary
each reporting date, NLB Group reviews the carrying amount of deferred
In the statement of financial position, lease liabilities are presented in item
of the instruments are such that NLB Group must classify them as equity
(exporter) presents the bank with documents that are in line with the
tax assets and assesses future taxable profits against which temporary taxable
‘Other financial liabilities’.
NLB Group as a lessor
instruments in accordance with IAS 32 Financial Instruments: Presentation.
conditions and deadlines set out in the letter of credit.
differences can be utilised.
An issued financial instrument is only considered an equity instrument if
that instrument does not represent a contractual obligation for payment.
A commitment may also take the form of a letter of credit confirmation,
Deferred tax assets for temporary differences arising from impairments of
Payments under operating leases are recognised as income on a straight-line
which is usually done at the request or authorisation of the issuing
investments in subsidiaries, associates and joint ventures are recognised only
basis over the period of the lease. Assets leased under operating leases are
Issued financial instruments with characteristics of equity are recognised
(opening) bank and constitutes a firm commitment by the confirming bank,
to the extent that it is probable that:
presented in the statement of financial position as investment property or as
property and equipment.
in equity in the statement of financial position. Transaction costs incurred
for issuing such instruments are deducted from equity reserves. The
in addition to that of the issuing bank, which independently assumes a
commitment to the beneficiary under certain conditions.
corresponding interest is recognised directly in profit reserves.
• the temporary differences will be reversed in the foreseeable future; and
• taxable profit will be available.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Slovenian law does not set deadlines by which uncovered tax losses must be
the defined benefit liability are recognised in the item ‘Interest and similar
2.33. Critical accounting estimates and judgments in applying accounting
flow model, valuation based on comparable entities, and other frequently
utilised.
expenses.’ These interest expenses represent the change during the period
policies
used valuation models. These valuation models pretty much reflect
in the defined benefit liability that arises from the passage of time. For post-
NLB Group’s financial statements are influenced by accounting policies,
current market conditions at the measurement date, which may not be
In the case of business combination deferred tax balances are recognised if
employment benefits, actuarial gains and losses from the effect of changes
assumptions, estimates, and management’s judgment. NLB Group makes
representative of market conditions either before or after the measurement
related to temporary differences and carry-forwards of an acquiree that exist
in actuarial assumptions and experience adjustments (differences between
estimates and assumptions that affect the reported amounts of assets and
date. Management reviewed all applied models as at the reporting date to
at the acquisition date or if they arise as a result of the acquisition. Income
the realised and expected payments) are recognised in other comprehensive
liabilities within the next financial year. All estimates and assumptions
ensure they appropriately reflect current market conditions, including the
taxes are measured in accordance with IAS 12 Income Taxes.
income under the item ‘Actuarial Gains/(Losses) on Defined Benefit
required in conformity with the IFRS are best estimates undertaken in
relative liquidity of the market and the applied credit spread. Changes in
A tax on financial services, which means a tax on fees paid for prescribed
gains and losses that relate to other employment benefits are recognised in
evaluated on a continuing basis, and are based on past experience and other
financial instruments held for trading, and financial assets measured at fair
financial services rendered (financial services, exempt from value added
the income statement as defined benefit costs. In the statement of financial
factors, including expectations with regard to future events.
value through other comprehensive income.
Pensions Plans,’ and will not be recycled to the income statement. Actuarial
accordance with the applicable standard. Estimates and judgments are
assumptions regarding these factors could affect the reported fair values of
tax (with the exception of securities transactions) and the services of
position, liabilities for short-term employee benefits are included in item
insurance brokers and agents), is paid in Slovenia. The tax rate is 8.5%
‘Other financial liabilities’, while liabilities for post-employment benefits
a) Allowances for expected credit losses on loans and advances
In year 2020, the volatility of prices on various markets has increased as
(2019: 8.5%) and the tax is paid monthly. Given that the tax on financial
and other employment benefits (jubilee long-service benefits) are included in
NLB Group monitors and checks the quality of the loan portfolio at the
a result of the spread of COVID-19. Therefore, NLB Group decided to
services is classified as a sales tax, it reduces accrued revenues in the financial
item ‘Provisions’.
individual and portfolio levels to continuously estimate the necessary
sell some securities with increased credit spreads as part of its strategy to
statements.
2.29. Fiduciary activities
In the case of a business combination employee benefits are recognised
individually significant financial assets attributed to Stage 3. Such an
at fair value through other comprehensive income (EUR 250,297 thousand
and measured in accordance with IAS 19 Employee Benefits, i.e. not at fair
assignment is based on information regarding the fulfilment of contractual
at NLB Group and EUR 222,586 thousand at NLB), while EUR 120,131
allowances for ECL. NLB Group creates individual allowances for
manage the credit risk. Most of these securities were classified as measured
NLB Group provides asset management services to its clients. Assets held in
value.
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
2.31. Share capital
and expenses relating to fiduciary activities are generally recognised in the
Dividends on ordinary shares
obligations or other financial difficulties of the debtor, and other important
thousand of sold securities were measured at amortised cost. The total
facts. Individual assessments are based on the expected discounted cash
realised gains due to sales of securities amount to EUR 17,815 thousand at
flows from operations and/or the assessed expected payment from collateral.
NLB Group and EUR 17,096 thousand at NLB (note 4.4).
income statement when the service has been provided (see also note 2.10.).
Dividends on ordinary shares are recognised in equity in the period in which
Allowances are assessed collectively for financial assets assigned to Stage 1
Due to increased frequency and values of sales of securities measured at
Fee and commission income charged for this type of service is broken down
they are approved by NLB’s shareholders.
or 2, or for financial assets in Stage 3 with exposure below the materiality
amortised cost, NLB Group reassessed whether there has been a change in
by items in note 4.3.b). Further details on transactions managed on behalf
of third parties are disclosed in note 5.24.
Treasury shares
threshold. The ECL in this group of assets are estimated based on expected
its business model for managing financial assets. Sales were made due to an
value of risk parameters combining the historic movements with the future
increase in the assets’ credit risk, and are therefore consistent with a held
If NLB or another member of NLB Group purchases NLB’s shares,
macroeconomic predictions. The models used to estimate future risk
to collect business model because the credit quality of financial assets is
Based on the requirements of Slovenian legislation, NLB Group has, in
the consideration paid is deducted from the total shareholders’ equity as
parameters are validated and back-tested on a regular basis to make loss
relevant to NLB Group’s ability to collect contractual cash flows. Credit risk
note 5.24., additionally disclosed the assets and liabilities on accounts used
treasury shares. If such shares are subsequently sold, any consideration
estimations as realistic as possible.
management activities that are aimed at minimising potential credit losses
to manage financial assets from fiduciary activities, i.e. information related
received is included in equity. If NLB’s shares are purchased by NLB itself
due to credit deterioration are integral to such a model.
to the receipt, processing, and execution of orders and related custody
or other NLB Group entities, NLB creates reserves for treasury shares in
NLB Group performs regular stress-testing as part of the ICAAP process
activities.
2.30. Employee benefits
Employee benefits include:
equity.
Share issue costs
normative approach, where the 3-year budget is tested for adverse
Furthermore, the sales were made as a response to COVID-19 situation and
circumstances. The selected stress scenario predicts adverse economic
the increased volume of sales is not expected to persist. It is expected, that
circumstances as a result of the COVID-19 pandemic.
future sales volumes will be lower in frequency and value. So, no change in
Costs directly attributable to the issue of new shares are recognised in equity
our business model has been made.
as a reduction in the share premium account.
In terms of credit risk, the scenario has an unfavourable impact on default
• short-term employee benefits (such as salaries, social security
rates (transfer of assets from performing to default) and loss rates (expected
The fair values of derivative financial instruments are determined on the
contributions, compensations, and non-monetary benefits);
2.32. Segment reporting
losses after occurrence of default). Furthermore, a transfer of assets within
basis of market data (mark-to-market), in accordance with NLB Group’s
• retirement indemnity bonuses (post-employment benefits); and
Operating segments are reported in a manner consistent with internal
the performing sub-portfolio to rating classes with worse default probabilities
methodology for the valuation of financial instruments. The market
• jubilee long-service benefits (other employment benefits).
reporting to the Management Board, which is the executive body that makes
is envisaged. Based on the existing exposures (static balance sheet
exchange rates, interest rates, yield, and volatility curves used in valuations
Short-term employee benefits are recognised in the period to which they
of a specific segment.
existing default exposures and new default flows, as well as on the remaining
4 p.m., and later used for the calculation of the fair values (market value,
relate and included in the income statement line ‘Administrative expenses.’
performing portfolio.
Among others they include the payment of contributions for pension and
Transactions between organisational units (OU) are managed under normal
NPV) of financial instruments. NLB Group applies market yield curves
for valuation, and fair values are additionally adjusted for credit risk of the
decisions regarding the allocation of resources and assesses the performance
assumption), additional allowances for expected credit losses are assessed on
are based on the market snapshot principle. Market data are saved daily at
disability insurance, which according to local legislation (for employer)
operating conditions. Interest income among individual OU in the parent
The results of the stress scenario for NLB Group shows an increase of credit
counterparty.
amount to 8.85% of the gross salaries.
bank (NLB) is allocated using a fund transfer pricing method and shown
risk impairments in the first year of stress by EUR 97.7 million, of which
within the net interest income of each OU. Net non-interest income is
EUR 20.4 million applies to the newly acquired Komercijalna banka group
The fair value hierarchy of financial instruments is disclosed in note 6.5.
According to legislation, employees retire after 35-40 years of service when,
allocated to the OU that actually provides the service that generates income.
(a comparable scenario in 2019: EUR 68.1 million), and an increase in the
if they fulfil certain conditions, they are entitled to a lump-sum severance
Direct costs are attributed to the segment that is directly related to the
coverage of the credit portfolio by impairments by 0.71 percentage points
c) Impairment of investments in subsidiaries, associates and joint ventures
payment. Employees are also entitled to a long-service bonus for every 10
provided service and indirect costs (costs which service centres provide for
(2019: 0.70 percentage points).
years of service in NLB.
profit centres) are attributed to the segment for which the service is provided,
whereas overhead costs are allocated according to general keys. External
b) Fair value of financial instruments
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
These obligations are measured at the present value of future cash
net income is the net income of NLB Group from the consolidated income
The fair values of financial investments traded on the active market are
themselves are sensitive to the assumptions used. The review of impairment
outflows considering future salary increases and other conditions, and then
statement. Income tax is not allocated between segments (note 7.a).
based on current bid prices (financial assets) or offer prices (financial
represents management’s best estimate of the facts and assumptions such as:
apportioned to past and future employee service based on the benefit plan’s
terms and conditions.
In accordance with IFRS 8, NLB Group has the following reportable
segments: Retail Banking in Slovenia, Corporate and Investment Banking
The fair values of financial instruments that are not traded on the active
• Future cash flows from individual investments present the estimated cash
flow for periods for which adopted plans are available. For core members,
liabilities).
Service costs are included in the income statement in the item
in Slovenia, Strategic Foreign Markets, Financial Markets in Slovenia, Non-
market are determined by using valuation models. These include a
estimated cash flows are based on a five-year business plan. For non-
‘Administrative expenses’ as defined benefit costs, while interest expenses on
core members, and Other Activities.
comparison with recent transaction prices, the use of a discounted cash
core members, estimated cash flows are based on a period in line with
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 the strategy of divestment. The business plans of individual entities are
of financial and economic variables, including the risk-free rate and risk
e) Taxes
• Interest Rate Benchmark Reform Amendments to IFRS 9, IAS 39 and
based on an assessment of future economic conditions that will impact an
premium. The value of variables used is subject to fluctuations outside
NLB Group operates in countries governed by different laws. The deferred
IFRS 7 (the Phase 1 amendments) issued in September 2019 are effective
individual member’s business and the quality of the credit portfolio;
management’s control. The pre-tax discount rate is between 9.66 and
tax assets recognised as at 31 December 2020 are based on profit forecasts
from 1 January 2020 or later. NLB Group has early adopted the Phase
• The growth rate in cash flows for the period following the adopted
15.88% (31 December 2019: between 9.66 and 15.18%).
and take the expected manner of recovery of the assets into account.
1 amendments for annual periods beginning on 1 January 2019. The
business plan is between 2.9 and 4.4%;
Changes in assumptions regarding the likely manner of recovering assets
amendments modify some specific hedge accounting requirements to
• The target capital adequacy ratio of an individual bank is between 14 and
For strategic NLB Group members in 2020 and 2019, there were no
or changes in profit forecasts can lead to the recognition of currently
provide relief from potential effects of the uncertainty caused by the
17%;
indications of impairment for equity investments.
unrecognised deferred tax assets or derecognition of previously created
IBOR reform. Meaning, that the IBOR reform should not generally cause
• The discount rate derived from the capital asset pricing model that is used
deferred tax assets. If NLB profit projections used for estimation of
hedge accounting to terminate. As indicated in the accounting policies,
to discount future cash flows is based on the cost of equity allocated to an
In 2020, NLB impaired equity investments in non-core members in the
the amount of deferred tax assets which are expected to be reversed in
NLB Group elected, as a policy choice permitted under IFRS 9 Financial
individual investment. The discount rate reflects the impact of a range
amount of EUR 582 thousand.
foreseeable future (i.e., within 5 years) would change by 10%, the estimated
Instruments, to continue to apply hedge accounting in accordance with
d) Employee benefits
Liabilities for certain employee benefits are calculated by an independent
actuary. The main assumptions included in the actuarial calculation are as
follows:
Actuarial assumptions
Discount factor
Wage growth based on inflation, promotions, and
wage growth based on past years of service
Other assumptions
NLB Group
2020
2019
NLB
2020
0.3% - 4.0%
0.2% - 3.2%
0.3%
2019
0.2%
1.0% - 4.0%
1.8% - 3.7%
2.6% - 3.0%
3.0% - 3.3%
Number of employees eligible for benefits
7,996
5,010
2,572
2,608
Sensitivity analysis of significant actuarial assumptions for post-employment benefit
NLB Group
NLB
31 Dec 2020
Discount rate
Future salary increases
Discount rate
Future salary increases
Impact on employee benefits provisions -
post-employment benefits (in %)
The minimum discount rate is considered to be 0%.
+0.5 b.p.
-0.5 b.p.
+0.5 b.p.
-0.5 b.p.
+0.5 b.p.
-0.5 b.p.
+0.5 b.p.
-0.5 b.p.
(4.9)
3.8
5.3
(4.8)
(5.2)
3.4
5.6
(5.3)
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
Actuarial gains and losses due to changed financial assumptions
Actuarial gains and losses due to changes
in demographic assumptions
Actuarial gains and losses due to experience
Total actuarial gains and losses for the year
The weighted average duration of liabilities in years
NLB Group
2020
606
134
138
878
NLB Group
2020
2019
(1,425)
(86)
(266)
(1,777)
2019
Post-employment benefit
10.5 - 18.7
10.7 - 19.1
NLB
2020
473
200
27
700
NLB
2020
11.1
in EUR thousands
2019
(1,160)
(129)
(234)
(1,523)
2019
11.5
amount of deferred tax assets would change by approximately EUR 6
IAS 39 Financial Instruments: Recognition and Measurement. IAS 39
million (notes 4.16. and 5.17.).
requires that for cash flow hedges, a forecast transaction must be highly
probable. IAS 39 also requires that a hedging relationship only qualifies
2.34. Implementation of the new and revised International Financial
for hedge accounting if the hedging relationship is highly effective in
Reporting Standards
achieving offsetting changes in fair value or cash flows attributable to the
During the current year, NLB Group adopted all new and revised standards
hedged risk. The assessment of hedge effectiveness is made prospectively
and interpretations issued by the International Accounting Standards
and retrospectively. As a result of interest rate benchmark reform, there
Board (hereinafter: ‘the IASB’) and the International Financial Reporting
may be uncertainties about the timing and or amount of benchmark-
Interpretations Committee (hereinafter: ‘the IFRIC’), and that are endorsed
based cash flows of the hedged item or the hedging instrument during
by the EU that are effective for annual accounting periods beginning on 1
the period before the replacement of an existing interest rate benchmark
January 2020.
with an alternative nearly risk-free interest rate. This may lead to
uncertainty whether a forecast transaction is highly probable and whether
Accounting standards and amendments to existing standards
prospectively the hedging relationship is expected to be highly effective.
effective for annual periods beginning on 1 January 2020 that
Additional information about interest rate benchmark reform is provided
were endorsed by the EU and adopted by NLB Group
in note 5.5.d).
• IAS 1 and IAS 8 (amendments) – ‘Definition of Material’ are effective
for annual periods beginning on or after 1 January 2020 (with earlier
• IFRS 16 (amendment) – ‘Leases COVID-19-Related Rent Concessions’
application permitted) and relate to a revised definition of ‘material,’
is effective for annual periods beginning on or after 1 June 2020. The
namely: “Information is material if omitting, misstating, or obscuring
amendment provides lessees with an exemption from assessing whether
it could reasonably be expected to influence decisions that the primary
rent concessions that occur as a direct consequence of the COVID-19
users of general purpose financial statements make on the basis of those
pandemic and meet specified conditions, are lease modifications. Lessees
financial statements, which provide financial information about a specific
that apply the exemption are required to account for COVID-19-related
reporting entity.” Three new aspects of the new definition are particularly
rent concessions as if they were not lease modifications. An entity
emphasised and defined – “obscuring,” “could reasonably be expected
applying the exemption must disclose this fact, whether the exemption
to influence,” and “primary users.” The new definition of material
has been applied to all qualifying rent concessions or, if not, information
and the accompanying explanatory paragraphs are contained in IAS
about the nature of the contracts to which it has been applied, as well
1 Presentation of Financial Statements. The definition of material in IAS
as the amount recognised in profit or loss arising from the COVID-19
8 Accounting Policies, Changes in Accounting Estimates and Errors has
related rent concessions. There is no impact on NLB Group’s consolidated
been replaced with a reference to IAS 1, thus the Amendments ensure
financial statements.
that the definition of ‘material’ is consistent across all IFRS Standards.
There is no impact on NLB Group’s consolidated financial statements.
Accounting standards and amendments to existing standards that
were endorsed by the EU, but not adopted early by NLB Group
• ‘Amendments to References to the Conceptual Framework in IFRS
New and revised accounting standards and interpretations endorsed by the
Standards’ are effective for annual periods beginning on or after 1
EU that are not mandatory for annual accounting periods beginning on 1
January 2020. Amendments were issued to support transition to the
January 2020, were not adopted early by NLB Group. These standards and
revised Conceptual Framework for companies that develop accounting
amendments are not expected to have a material impact on the consolidated
policies using the Conceptual Framework when no IFRS Standard
financial statements of NLB Group in the future reporting periods and on
applies to a particular transaction. There is no impact on NLB Group’s
foreseeable future transactions. NLB Group plans to adopt the accounting
consolidated financial statements.
standards and amendments listed below for reporting periods commencing
• IFRS 3 (amendment) – ‘Business Combinations’ is effective for annual
on or after the effective date.
periods beginning on or after 1 January 2020. It aims to resolve entities’
• IFRS 4 (amendment) – ‘Insurance Contracts’ – deferral of IFRS 9’
difficulties which arise when determining whether they have acquired a
is effective for annual periods beginning on or after 1 January 2021.
business or a group of assets. Among others, the Amendment clarifies and
Currently IFRS 4 requires insurance entities to apply IFRS 9 Financial
narrows the definitions of a business and of outputs, provides additional
guidance, and illustrative examples. There is no impact on NLB Group’s
Instruments from 1 January 2021, and amendments allow them to
defer the application of IFRS 9 until the annual period beginning on
consolidated financial statements.
or after 1 January 2023. The amendment will not impact NLB Group’s
consolidated financial statements.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Accounting standards and amendments to existing standards,
• Annual Improvements (amendments) 2018-2020 are effective for annual
3. Changes in subsidiary holdings
but not endorsed by the EU
periods beginning on or after 1 January 2022. The amendments to IFRS
• IFRS 17 (new standard) – ‘Insurance Contracts’ is effective for annual
9 clarify which fees and costs should be included in the “10 per cent”
periods beginning on or after 1 January 2023. The new standard provides
test for derecognition of a financial liability. The amendment to IFRS 16
a comprehensive principle-based framework for the measurement and
Leases removes from the example the illustration of the reimbursement
Changes in 2020
Capital changes:
Changes in 2019
Capital changes:
presentation of all insurance contracts. The new standard will replace
of leasehold improvements by the lessor in order to resolve any potential
• In December 2020, NLB acquired an 83.23% ordinary shareholding
• In January 2019, decrease of share capital in the amount of EUR 3,324
IFRS 4 Insurance Contracts and requires insurance contracts to be
confusion regarding the treatment of lease incentives. The amendments
in Komercijalna banka a.d. Beograd, which represents 81.42% of total
thousand was registered in NLB Leasing d.o.o. Sarajevo. Since March
measured using current fulfilment cash flows, and for revenue to be
to IFRS 1 First-time Adoption of International Financial Reporting
shareholding in the bank.
2019 the company has been formally in liquidation.
recognised – as the service is provided over the coverage period. NLB
Standards permits a subsidiary that becomes a first-time adopter of
• In December 2020, NLB acquired 1 ordinary share of Komercijalna
• An increase in share capital in the form of a cash contribution in the
Group does not expect an impact on its consolidated financial statements.
IFRS Standards later than its parent to measure cumulative translation
banka a.d. Banja Luka which represents a 0.002% share of their capital.
amount of EUR 1,740 thousand in REAM d.o.o., Podgorica to ensure
• IAS 1 (amendment and deferral of effective date) – ‘Presentation of
of the parent, based on the parent’s date of transition to IFRS Standards.
Ljubljana and thereby increased its ownership from 39.44% to 40.08%.
Financial Statements: Classification of Liabilities as Current or Non-
The amendments to IAS 41 Agriculture remove the requirement to
• An increase in share capital in the form of a debt to equity conversion in
Other changes:
current’ is effective for annual periods beginning on or after 1 January
exclude cash flows for taxation when measuring fair value under IAS 41.
the amount of EUR 1,800 thousand in NLB Leasing Podgorica d.o.o. – u
differences at amounts included in the consolidated financial statements
• In December 2020, NLB acquired additional shares of Bankart d.o.o.,
regular business operations.
2023. The amendments clarify that liabilities are classified as either
This amendment is intended to align with the requirement in the standard
likvidaciji.
current or non-current, depending on the rights that exist at the end of
to discount cash flows on a post-tax basis. NLB Group does not expect an
• In January 2019, REAM d.o.o., Beograd merged with SR-RE d.o.o.,
Beograd. In April 2019, SR-RE d.o.o., Beograd was renamed ‘REAM
the reporting period. Classification is unaffected by the expectations of
impact on its consolidated financial statements.
Other changes:
d.o.o., Beograd.’
the entity or events after the reporting date. The amendment also clarifies
• From 1 January 2019 NLB Srbija d.o.o., Beograd and NLB Crna Gora
what IAS 1 means when it refers to the ‘settlement’ of a liability. NLB
• IFRS 9 (amendment), IAS 39 (amendment), IFRS 7 (amendment), IFRS
• In April 2020, NLB established the nonfinancial cultural heritage institute
d.o.o., Podgorica were transferred from core to non-core members.
Group does not expect an impact on its consolidated financial statements.
4 (amendment) and IFRS 16 (amendment) – ‘Interest Rate Benchmark
named ‘NLB Zavod za upravljanje kulturne dediščine, Ljubljana.’
• In June 2019, Prospera plus d.o.o., Ljubljana – v likvidaciji and NLB
Reform – Phase 2’ are effective for annual periods beginning on or
• In May 2020, NLB established financial company named ‘NLB
Interfinanz Praha s.r.o., Prague – vo likvidaci were liquidated. In
• IFRS 3 (amendment) – ‘Business Combinations – Reference to the
after 1 January 2021 with earlier application permitted. Unlike Phase
Lease&Go, leasing, d.o.o., Ljubljana.’
accordance with a court order, companies were removed from the court
Conceptual Framework’ is effective for annual periods beginning on or
1, which focused on issues of the impact of the reform on financial
• In May 2020, all the suspensive conditions under the joint NLB and
register.
after 1 January 2022. The amendments update a reference in IFRS 3 to
reporting in the period before the replacement of the existing interest
KBC Insurance NV sale agreement signed in December 2019 where met,
• In June 2019, NLB sold its subsidiary CBS Invest d.o.o., Sarajevo.
the Conceptual Framework for Financial Reporting without changing
rate benchmark with a risk-free interest rate, Phase 2 focused on issues
therefore the sale of NLB’s 50% stake in the share capital of NLB Vita
• In December 2019 NLB and KBC Insurance NV, in a joint process,
the accounting requirements for business combinations. Further, the
that affect financial reporting when an existing interest rate benchmark
d.d., Ljubljana was completed (note 4.14.).
agreed to sell their respective stakes in the life insurance company NLB
amendments add an exception to the recognition principle for liabilities
is replaced with a risk-free rate. The Phase 2 amendments include a
• In December 2020, BH-RE d.o.o., Sarajevo – beginning of the
Vita d.d., Ljubljana. As the sale is expected to qualify for recognition as
and contingent liabilities within the scope of IAS 37 Provisions,
practical expedient to require contractual changes, or changes to cash
liquidation procedure entered in the court register.
a completed sale within one year from the end of the reporting period,
Contingent Liabilities and Contingent Assets or IFRIC 21 Levies. The
flows that are directly required by the reform, to be treated as changes
• In December 2020, NLB sold its subsidiaries NLB Leasing d.o.o.,
investment in joint venture NLB Vita d.d., Ljubljana was transferred from
amendments also clarify existing guidance for contingent assets.
to a floating interest rate equivalent to a movement in a market rate of
Sarajevo - u likvidaciji and NLB Leasing Podgorica d.o.o., Podgorica - u
the line ‘Investments in associates and joint ventures’ into line ‘Non-
interest. The practical expedient is also required for entities applying
likvidaciji.
current assets held for sale.’
• IAS 16 (amendment) – ‘Property, Plant and Equipment: Proceeds
IFRS 4 Insurance Contracts that are using the exemption from IFRS 9
before Intended Use’ is effective for annual periods beginning on or
Financial Instruments (and therefore, apply IAS 39 Financial Instruments:
after 1 January 2022. The amendment prohibits the deduction from
Recognition and Measurement) and for IFRS 16 Leases, to lease
the cost of an item of property, plant and equipment of any proceeds
modifications required by the IBOR reform. The amendments permit
from the sale of produced items while the assets is being prepared for
changes required by the IBOR reform to be made to hedge designations
its intended use. The proceeds from selling such items, and the cost of
and hedge documentation under both IFRS 9 and IAS 39 without
producing those items, are recognised in profit or loss. It also clarifies
the hedging relationship being discontinued. Under IFRS 7 Financial
that an entity is ‘testing whether the asset is functioning properly’ when
instrument: Disclosures amendments an entity will be required to disclose
it assesses the technical and physical performance of the asset. The
information about new risks arising from the reform and how it manages
financial performance of the asset is not relevant to this assessment.
the transition to alternative benchmark rates. The Phase 2 amendments
The amendment further requires separate disclosure of the amounts
apply only to changes required by the interest rate benchmark reform to
of proceeds and costs relating to items produced that are not an output
financial instruments and hedging relationships. NLB Group does not
of the entity’s ordinary activities. It is also necessary to disclose the line
expect material impact on its consolidated financial statements.
item in the statement of comprehensive income where the proceeds are
included. NLB Group does not expect an impact on its consolidated
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. NLB
Group does not expect an impact on its consolidated financial statements.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 4.2. Dividend income
NLB Group
NLB
Financial assets measured at fair value through other comprehensive income
2020
2019
2020
2019
- related to investments held at the end of reporting period
in EUR thousands
4. Notes to the income statement
4.1. Interest income and expenses
Analysis by type of assets and liabilities
Interest and similar income
Interest income, using the effective interest method
Loans and advances to customers at amortised cost
Securities measured at amortised cost
Financial assets measured at fair value through other comprehensive income
Loans and advances to banks measured at amortised cost
Deposits with banks and central banks
Interest income, not using the effective interest method
Financial assets held for trading
Non-trading financial assets mandatorily at fair value through profit or loss
Derivatives - hedge accounting
Other
Total
Interest and similar expenses
Interest expenses, using the effective interest method
Due to customers
Borrowings from banks and central banks
Borrowings from other customers
Subordinated liabilities
Deposits from banks and central banks
Lease liabilities (note 5.11.a)
Derivatives - hedge accounting
Negative interest
Financial liabilities held for trading
Interest expenses on defined employee benefits (note 2.30., 5.16.c)
Other
Total
347,639
312,695
16,165
18,180
386
213
7,549
5,408
1,800
-
341
357,412
311,541
23,215
20,606
1,235
815
7,406
6,097
1,300
9
-
167,616
140,203
12,736
10,704
3,887
86
7,488
5,408
1,739
-
341
175,598
141,345
19,119
11,656
3,065
413
7,310
6,097
1,204
9
-
355,188
364,818
175,104
182,908
41,208
20,541
880
941
10,040
78
294
32,072
23,111
1,285
940
2,716
216
316
9,439
8,434
4,789
100
79
8,969
3,488
5,100
184
6
21,883
3,835
774
-
10,040
27
39
14,334
9,439
7,168
4,789
30
76
10,612
4,317
1,110
-
2,271
298
38
14,170
8,969
2,578
5,100
96
5
55,615
46,331
36,217
24,782
Interest expenses, not using the effective interest method
14,407
14,259
Net interest income
299,573
318,487
138,887
158,126
The item ‘Negative interest’ includes the interest from deposits with banks
due to the purchase with a premium in the amount of EUR 845 thousand
and central banks in the amount of EUR 7,178 thousand for NLB Group
for NLB Group and NLB (2019: EUR 518 thousand).
(2019: EUR 2,970 thousand), and EUR 5,912 thousand for NLB (2019:
EUR 2,060 thousand). It also includes interest from deposits with financial
Other interest income in the amount of EUR 341 thousand relates to
organisations in the amount of EUR 411 thousand for NLB Group and
refund of corporate income tax from Italian Tax Authority (note 4.16.).
NLB (2019: EUR 0) and also interest from securities with a negative yield
Investments in subsidiaries
Investments in associates and joint ventures
Non-trading financial assets mandatorily at fair value through profit or loss
Total
4.3. Fee and commission income and expenses
a) Fee and commission income and expenses relating to activities of NLB Group and NLB
Fee and commission income
Fee and commission income relating to financial instruments
not at fair value through profit or loss
Credit cards and ATMs
Customer transaction accounts
Other fee and commission income
Payments
Investment funds
Guarantees
Agency of insurance products
Other services
Total
Fee and commission expenses
Fee and commission expenses relating to financial instruments
not at fair value through profit or loss
Credit cards and ATMs
Other fee and commission expenses
Payments
Insurance for holders of personal accounts and gold cards
Investment banking
Guarantees
Other services
Total
NLB Group
NLB
in EUR thousands
2020
83
83
-
-
28
111
2019
111
111
-
-
97
208
2020
2019
-
-
5,561
670
28
6,259
-
-
68,353
2,781
97
71,231
NLB Group
NLB
in EUR thousands
2020
2019
2020
2019
63,940
66,311
50,325
19,286
11,781
6,338
4,639
69,423
60,686
54,697
17,621
11,282
6,384
5,619
35,634
49,566
39,369
45,606
21,109
23,477
5,931
7,282
5,241
3,434
5,506
7,192
4,832
4,141
222,620
225,712
128,197
130,123
46,473
49,685
25,581
28,261
6,134
1,034
2,272
778
2,528
6,605
955
1,989
114
2,529
909
760
524
712
817
875
771
487
30
753
59,219
61,877
29,303
31,177
Net fee and commission income related to banking activities
163,401
163,835
98,894
98,946
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 b) Fee and commission income and expenses relating to fiduciary activities
4.5. Gains less losses from financial assets and liabilities held for trading
NLB Group
NLB
in EUR thousands
NLB Group
NLB
in EUR thousands
2020
2019
2020
2019
2020
2019
2020
2019
Fee and commission income related to fiduciary activities
Receipt, processing, and execution of orders
Management of financial instruments portfolio
Initial or subsequent underwriting and/or placing of financial
instruments without a firm commitment basis
Custody and similar services
Management of clients' account of non-materialised securities
Advice to companies on capital structure, business strategy, and related matters
and advice, and services relating to mergers and acquisitions of companies
Total
Fee and commission expenses related to fiduciary activities
Fee and commission related to Central Securities Clearing
Corporation and similar organisations
Fee and commission related to stock exchange and similar organisations
Total
Net fee income related to fiduciary activities
Total fee and commission income
Total fee and commission expenses
1,583
1,237
327
4,842
1,797
26
9,812
2,876
57
2,933
6,879
1,281
1,513
256
4,877
1,162
178
9,267
2,711
52
2,763
6,504
1,435
-
327
4,909
1,797
26
8,494
2,874
57
2,931
5,563
1,227
-
256
4,953
1,162
177
7,775
2,714
52
2,766
5,009
232,432
62,152
234,979
64,640
136,691
32,234
137,898
33,943
Total a) and b)
170,280
170,339
104,457
103,955
4.4. Gains less losses from financial assets and liabilities not measured at fair value through profit or loss
Foreign exchange trading
- gains
- losses
Debt instruments
- gains
- losses
Derivatives
- currency
- interest rate
- securities
Total
31,628
(21,139)
24,102
(12,574)
23,022
(18,623)
16,058
(11,338)
797
(392)
(170)
(909)
(21)
9,794
1,455
(1,459)
363
(1,900)
478
10,465
797
(392)
867
(909)
(21)
4,741
1,455
(1,459)
41
(1,900)
478
3,335
Interest income is included in the income statement line ‘Interest and similar
income’ and interest expense in line ‘Interest and similar expense’ (note
4.1.).
4.6. Gains less losses from non-trading financial assets mandatorily at fair value through profit or loss
NLB Group
2020
2019
2020
5,244
(178)
4,528
(1)
4,525
(178)
in EUR thousands
NLB
2019
4,397
(1)
12,749
116
12,749
116
Equity securities
- gains
- losses
Debt securities
- gains
- losses
Loans and advances to customers
- gains
Total
(126)
17,689
-
4,643
(126)
16,970
-
4,512
income’ (note 4.1.).
Interest income is included in the income statement line ‘Interest and similar
4.7. Foreign exchange translation gains less losses
Financial assets and liabilities not measured as at fair value through profit or loss
Disposal of a subsidiary
Financial assets measured at fair value through profit or loss
Other
Total
NLB Group
NLB
in EUR thousands
2020
2019
2020
2019
4,003
(2,656)
14
(49)
5,286
6,598
9,277
(945)
6
(66)
10,493
18,765
3,043
(1,587)
-
-
5,359
6,815
8,061
(945)
-
-
9,173
16,289
NLB Group
NLB
in EUR thousands
2020
836
-
(131)
34
739
2019
662
19
39
(14)
706
2020
(1,011)
-
(131)
34
(1,108)
2019
372
-
39
(15)
396
Debt instruments measured at fair value through other comprehensive income
- gains
- losses
Debt instruments measured at amortised cost
- gains
Financial liabilities measured at amortised cost
- losses
Total
During 2020, NLB Group and NLB sold securities measured at amortised
cost in the amount of EUR 120,131 thousand due to increased credit risk
caused by COVID-19 (note 2.33.b).
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 4.8. Other net operating income
Other operating income
Income from non-banking services
- cash transportation
- operating leases of movable property
- IT services
- other
Rental income from investment property
Revaluation of investment property to fair value (note 5.9.)
Sale of investment property
Other operating income
Total
Other operating expenses
Expenses related to issued service guarantees
Revaluation of investment property to fair value (note 5.9.)
Other operating expenses
Total
Other net operating income
Other operating expenses mainly include expenses associated with
donations, damages, and licences.
6,390
2,994
1,003
438
1,955
2,572
1,006
234
2,728
12,930
1,328
136
3,917
5,381
7,549
6,605
3,170
985
455
1,995
4,124
849
361
4,331
16,270
2,477
541
5,401
8,419
7,851
5,595
2,994
470
891
1,240
471
884
164
1,508
8,622
1,328
87
1,413
2,828
5,794
5,694
3,170
455
863
1,206
697
11
220
1,886
8,508
2,477
86
1,401
3,964
4,544
NLB Group
NLB
in EUR thousands
4.9. Administrative expenses
NLB Group
NLB
in EUR thousands
2020
2019
2020
2019
2020
2019
2020
2019
Employee costs
Gross salaries, compensations, and other short-term benefits
145,878
151,634
Defined contribution scheme
Social security contributions
Defined benefit expenses (note 5.16.c)
Post-employment benefits
Other employee benefits
Total
Other general and administrative expenses
Material
Services
Intellectual services
Costs of supervision
Costs of other services
Tax expenses
Membership fees and similar
Business travel
Marketing
Buildings and equipment
Electricity
Rents and leases
Maintainance costs
Costs of security
Insurance for tangible assets
Other costs related to buildings and equipment
Technology
Maintainance of software and hardware
Licences
Data assets and subscription costs
Other technology costs
Communications
Postal services
Telecommunication and internet
Other communication costs
Other general and administrative costs
Total
10,297
8,236
545
423
122
10,484
8,317
741
447
294
90,063
6,689
5,546
304
239
65
95,934
6,826
5,591
218
54
164
164,956
171,176
102,602
108,569
4,529
28,136
10,176
3,926
14,034
2,688
852
399
8,131
20,996
4,045
1,916
6,500
3,599
930
4,006
21,979
10,184
7,961
1,998
1,836
8,259
4,027
2,152
2,080
1,301
4,562
31,082
13,516
3,494
14,072
2,757
815
1,205
9,625
20,818
4,113
1,899
6,975
3,669
631
3,531
2,117
18,484
6,194
2,257
10,033
1,002
337
136
5,086
11,952
2,277
390
4,714
1,791
167
2,613
1,834
21,402
9,502
1,931
9,969
1,027
322
512
5,985
12,189
2,230
528
5,049
1,619
240
2,523
20,466
14,655
13,765
9,526
7,061
2,096
1,783
9,305
5,215
2,002
2,088
2,203
7,164
5,054
1,383
1,054
5,509
3,581
724
1,204
733
6,740
4,514
1,503
1,008
6,002
4,001
751
1,250
1,491
97,270
102,838
60,011
64,529
Total administrative expenses
262,226
274,014
162,613
173,098
Number of employees
8,792
5,878
2,591
2,659
117
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Costs of other services include costs for cash transport, archiving services,
In the presented years, NLB Group and NLB paid the following expenses
personal insurance costs, and legal costs and fees.
related to the services of the statutory auditor:
NLB Group
External audit services
Audit of annual report
Other audit services
Other non-audit services
Total
NLB Group
NLB
in EUR thousands
2020
2019
2020
2019
542
55
42
639
570
10
-
580
211
55
42
308
211
10
-
221
Additionally, to the services included in the table above, the statutory
thousand). These expenses are included in the calculation of the effective
auditor performed also some services related to the issue of subordinated
interest rate of the issued subordinated instruments.
instruments in 2020 in the amount of EUR 75 thousand (2019: EUR 330
4.10. Cash contributions to resolution funds and deposit guarantee schemes
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
4.13. Provisions
Guarantees and commitments (note 5.16.b)
Restructuring provisions (note 5.16.d)
Provisions for legal risks (note 5.16.e)
Other provisions (note 5.16.f)
Total
NLB Group
NLB
4.14. Impairment charge
in EUR thousands
Cash contributions to deposit guarantee schemes
Cash contributions to resolution funds
Total
4.11. Depreciation and amortisation
Amortisation of intangible assets (note 5.10.)
Depreciation of property and equipment:
- own property and equipment (note 5.8.b)
- right-of-use assets (note 5.11.a)
Total
4.12. Gains less losses from modification of financial assets
2020
15,022
1,652
16,674
NLB Group
2020
10,112
17,062
4,541
31,715
2019
14,173
2,050
16,223
2019
9,994
16,393
4,577
30,964
2020
5,451
1,652
7,103
NLB
2020
6,908
10,092
848
17,848
2019
7,348
9,922
776
18,046
2019
4,984
2,050
7,034
Impairment of financial assets
Cash balances at central banks, and other demand deposits at banks
Loans and advances to individuals measured at amortised cost (note 5.14.a)
Loans and advances to legal entities measured at amortised cost (note 5.14.a)
in EUR thousands
Debt securities measured at fair value through other comprehensive income (note 5.14.b)
Debt securities measured at amortised cost (note 5.14.b)
Other financial assets measured at amortised cost (note 5.14.a)
Impairment of investments in subsidiaries, associates and joint ventures
Investments in subsidiaries
Investments in associates and joint ventures
Total
Impairment of other assets
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
2020
2019
Financial assets modified during the period
Amortised cost before modification
416,341
27,798
Net modification gains/(losses)
(3,094)
(357)
8,756
(126)
452,895
(3,577)
734
(24)
1,821
(49)
3,861
(109)
Total
6,416
(182)
Other assets
Total
Total impairment
in EUR thousands
Property and equipment (note 5.8.)
31 Dec 2020
in EUR thousands
31 Dec 2019
1,690
-
NLB Group
NLB
in EUR thousands
2020
482
3,500
4,696
(119)
8,559
2019
312
5,478
5,696
(39)
11,447
2020
(599)
3,500
4,230
(85)
7,046
2019
(368)
5,500
191
(105)
5,218
NLB Group
NLB
in EUR thousands
2020
2019
2020
2019
344
29,007
26,019
3,888
547
1,994
63
8,010
(23,856)
1,130
237
786
124
13,219
(4,597)
635
224
28
46
3,772
(21,606)
171
293
663
-
-
-
204
792
996
-
-
-
171
3,006
3,177
552
30
582
-
103
103
(2,843)
1
(2,842)
-
47
47
62,795
(10,453)
10,318
(19,456)
Total
61,799
(13,630)
9,633
(16,661)
Impairment of financial assets includes EUR 13,447 thousand of 12-month
In 2020, NLB impaired equity investments in non-core subsidiaries and an
expected credit losses for Stage 1 financial assets, acquired through a
associate in total amount of EUR 582 thousand (2019: EUR 591 thousand).
business combination (note 5.12.b). Of that EUR 10,434 thousand relates
In 2020 NLB did not release any impairments of equity investments (2019:
to financial assets measured at amortised cost, EUR 2,932 thousand to
financial assets measured at fair value through other comprehensive income,
EUR 3,433 thousand, mainly due to decrease of share capital in non-core
subsidiary and consequential repayment of funds to NLB).
and EUR 81 thousand to cash balances at central banks and other demand
deposits at banks.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Impairments of investments in subsidiaries and associates are included in
the segment ‘Non-core members.’
4.15. Gains less losses from non-current assets held for sale
Gains less losses on derecognition of subsidiaries, associates and joint ventures
Gains less losses from property and equipment
Total
Each member of NLB Group (disclosed in note 5.12.) is taxable as required
a reversal is expected within five years. The deferred tax assets with respect
by local tax legislation. Income tax rates within NLB Group range from
to which simultaneously deferred tax liabilities are recognised are excluded
9–32%.
from this calculation (e.g., deferred tax assets for temporary non-deductible
expenses for impairment of debt securities measured at fair value through
in EUR thousands
A tax rate of 19% was applied in Slovenia in 2020 (2019: 19%).
other comprehensive income and deferred tax assets related to fair value
NLB Group
NLB
2020
11,006
(153)
10,853
2019
-
(576)
(576)
2020
35,454
(220)
35,234
2019
-
(578)
(578)
hedge accounting).
In 2020 NLB received EUR 3,569 thousand corporate income tax refund
and EUR 341 thousand interest from the Italian Tax Authority. The refund
Other NLB Group members did not recognise deferred tax assets for tax
is related to the closing of Trieste Branch (officially closed in 2017) and is
losses as there is uncertainty about whether the tax losses can be utilised,
the consequence of tax non-deductible impairments of financial assets,
because it is not probable that future taxable profits will be available against
recognised by the Trieste Branch in the year 2013. The refund procedure
which the deferred tax assets can be utilised.
started in 2016 and was successfully concluded in 2020.
Non-taxable income of NLB Group mostly relates to the gain from a
general rule, a tax inspection, which could result in additional tax liability,
The tax authorities may audit operations of NLB Group entities. As a
In May 2020, all the suspensive conditions under the joint NLB and
was completed. Effect of sale is included in the segment ‘Retail banking in
bargain purchase (negative goodwill) of Komercijalna banka Beograd.
default interest, and fines for tax, may be initiated at any time within 4 to 6
KBC Insurance NV sale agreement signed in December 2019 where met,
Slovenia.’
therefore, the sale of NLB’s 50% stake in the share capital of NLB Vita
4.16. Income tax
Current income tax
Income related to previous period
Deferred income tax (note 5.17.)
Total
Income tax differs from the amount of tax determined by applying the
Slovenian statutory tax rate as follows:
Profit before tax
Tax calculated at prescribed rate of 19%
Income not assessable for tax purposes
Expenses not deductible for tax purposes
Effect of unrecognised deferred tax assets on impairments of subsidiaries and associates
Tax reliefs
Effect of unrecognised deferred tax assets on tax losses
Effects of different tax rates in other countries
Changes in recognition and measurement of deferred taxes
Withholding tax suffered in other countries for which no tax credit was available in Slovenia
Adjustment to tax in respect of prior periods
Other
Total
Non-taxable income of NLB relates mostly to income from sale of NLB
years from the date of tax statement or from the year in which tax should
Vita, which is according to Slovenian tax legislation 50% non-taxable and to
have been assessed. NLB is not aware of any circumstances that could give
dividends. NLB excluded from its taxable base EUR 16,841 thousand from
rise to a potential material tax liability in this respect.
NLB Vita sale and EUR 5,947 thousand dividend income in 2020 (2019:
in EUR thousands
EUR 67,605 thousand).
In 2018, the Financial Administration of the Republic of Slovenia (FURS)
granted NLB special tax status for a period of three years. The purpose of
NLB Group
NLB
2020
11,972
(3,569)
(3,238)
5,165
2019
21,620
-
(8,041)
13,579
2020
4,010
(3,569)
(540)
(99)
2019
10,153
-
(8,556)
1,597
The effect of unrecognised deferred tax assets on impairments of
the status is to establish cooperation between FURS and the taxpayers, with
subsidiaries and associates represents mainly a decrease of the tax base
the aim of encouraging voluntary compliance and reduce administrative
of NLB due to utilisation of previously tax non-deductible expenses for
burdens on financial supervision. FURS cooperates with NLB and responds
impairments of subsidiaries that were divested during the presented years.
quickly to resolve NLB’s tax compliance issues, which reduces NLB’s tax
risks and uncertain tax positions.
NLB recognised deferred tax assets accrued on the basis of temporary
differences in an amount that, given future profit estimates, is expected to
The effective tax rate of NLB Group relating to operations in 2020,
be reversed in the foreseeable future (i.e., within five years). Due to some
calculated as a ratio of the tax expense and profit before tax is 1.9% (2019:
uncertainties regarding external factors (regulatory environment, market
6.3%). NLB Group profit before tax includes non-taxable gain from a
situation, etc.), a lower range of expected outcomes was considered for the
bargain purchase (negative goodwill) of EUR 137,858 thousand. Without
purposes of deferred tax assets calculation.
this one-off event, the effective tax rate of NLB Group would be 3.7 %. The
effective tax rate for NLB is -0.1% (2019: 0.9%).
in EUR thousands
foreseeable future, was not changed in 2020 and stays the same as in 2019,
4.17. Earnings per share
The estimated amount of deferred tax assets, expected to be reversed in
NLB Group
NLB
2020
2019
2020
277,921
52,805
(26,300)
3,838
(9,016)
(1,902)
(4,351)
(6,273)
-
114
(3,457)
(293)
5,165
215,397
113,853
40,925
(3,102)
3,829
(2,112)
(2,929)
(8,531)
(9,110)
(8,393)
2,870
113
19
13,579
21,632
(4,359)
1,662
(8,652)
(1,649)
(4,985)
-
-
114
(3,569)
(293)
(99)
2019
177,746
33,772
(13,632)
627
(2,650)
(1,864)
(9,155)
-
(8,393)
2,870
3
19
1,597
when NLB increased recognised deferred tax assets by EUR 6,739 thousand
Earnings per share are calculated by dividing the net profit by the weighted
(included in Changes in recognition and measurement of deferred taxes).
average number of ordinary shares in issue, less treasury shares.
NLB did not recognise deferred tax assets arising from tax losses. NLB
Diluted earnings per share are the same as basic earnings per share for NLB
recognised deferred tax assets on all temporary differences, except for
Group and NLB, since subordinated loans and issued debt securities have no
impairments of non-strategic capital investments where deferred tax assets
future conversion options, and consequently there are no dilutive potential
are recognised in the amount that, taking into account other recognised
ordinary shares.
deferred tax assets reaches the total amount of deferred tax assets, for which
Net profit attributable to the owners of the parent (in EUR thousands)
Weighted average number of ordinary shares (in thousands)
Basic earnings per share (in EUR per share)
Diluted earnings per share (in EUR per share)
NLB Group
NLB
2020
2019
2020
269,707
20,000
13.5
13.5
193,576
20,000
9.7
9.7
113,952
20,000
5.7
5.7
2019
176,149
20,000
8.8
8.8
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CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 5. Notes to the statement of financial position
b) Financial liabilities held for trading
5.1. Cash, cash balances at central banks, and other demand deposits at banks
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
Derivatives, excluding hedging instruments
Balances and obligatory reserves with central banks
3,149,775
1,569,753
1,998,297
1,044,255
Cash
Demand deposits at banks
Allowance for impairment
Total
507,970
304,941
339,897
192,221
192,405
71,089
164,725
83,365
3,962,686
2,101,871
2,261,791
1,292,345
(874)
(525)
(258)
(134)
3,961,812
2,101,346
2,261,533
1,292,211
Swap contracts
- currency swaps
- interest rate swaps
Options
- interest rate options
Forward contracts
- currency forward
Total
Slovenian banks are required to maintain a compulsory reserve with the
accordance with local legislation. NLB and other banks in NLB Group fulfil
The notional amounts of derivative financial instruments are disclosed in
Bank of Slovenia relative to the volume and structure of their customer
their compulsory reserve deposit requirements.
note 5.23.b).
deposits. Other banks in NLB Group maintain a compulsory reserve in
5.2. Financial instruments held for trading
a) Financial assets held for trading
Derivatives, excluding hedging instruments
Swap contracts
- currency swaps
- interest rate swaps
Options
- interest rate options
- securities options
Forward contracts
- currency forward
Total derivatives
Securities
Bonds
- Republic of Slovenia
- other EU members
- Republic of Serbia
- other non-EU members
Total securities
Total
- quoted securities
of these debt instruments
The notional amounts of derivative financial instruments are disclosed in
note 5.23.b).
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
13,597
400
13,197
786
-
786
1,666
1,666
16,049
68,806
-
-
66,356
2,450
68,806
18,169
2,056
16,113
810
3
807
734
734
19,713
4,325
1,041
40
-
3,244
4,325
13,932
735
13,197
786
-
786
1,663
1,663
16,381
2,450
-
-
-
2,450
2,450
18,216
2,103
16,113
810
3
807
734
734
19,760
4,325
1,041
40
-
3,244
4,325
84,855
24,038
18,831
24,085
68,806
68,806
4,325
4,325
2,450
2,450
4,325
4,325
5.3. Non-trading financial instruments measured at fair value through profit or loss
a) Financial assets mandatorily at fair value through profit or loss
Assets
Shares
Investment funds
Bonds
Loans and advances to companies
Total
- quoted securities
of these equity instruments
of these debt instruments
- unquoted securities
of these equity instruments
b) Financial liabilities measured at fair value through profit or loss
Liabilities
Loans and advances to companies
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
13,932
777
13,155
-
-
1,553
1,553
15,485
17,238
1,983
15,255
3
3
662
662
17,903
13,947
792
13,155
-
-
1,553
1,553
15,500
17,238
1,983
15,255
3
3
651
651
17,892
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
4,171
10,989
2,157
25,076
42,393
2,157
-
2,157
15,160
15,160
3,167
5,475
1,756
14,961
25,359
2,207
451
1,756
8,191
8,191
4,171
2,716
-
-
30,935
35,106
-
-
-
4,171
4,171
-
-
20,571
23,287
-
-
-
2,716
2,716
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
-
7,998
-
7,746
120
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 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
b) Movements of financial assets measured at fair value through other comprehensive income
in EUR thousands
NLB Group
NLB
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
Balance as at 1 January
2,141,428
1,898,079
1,656,657
1,528,314
2020
2019
2020
2019
1,598,760
1,509,559
Effects of translation of foreign operations to presentation currency
Bonds
- governments
- Republic of Slovenia
- other EU members
- Republic of Serbia
- other non-EU members
- banks
- other issuers
Shares
National Resolution Fund
Treasury bills
- Republic of Slovenia
- other EU members
- Republic of Serbia
- other non-EU members
Commercial bills
Total
Allowance for impairment
- quoted securities
of these equity instruments
of these debt instruments
- unquoted securities
of these equity instruments
of these debt instruments
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).
3,260,940
2,527,240
417,238
384,474
1,258,775
466,753
716,459
17,241
22,925
44,874
135,102
57,531
24,015
8,483
45,073
50,449
1,913,623
1,330,137
434,168
557,783
84,118
254,068
561,596
21,890
4,936
44,687
112,162
93,184
14,982
-
3,996
66,020
879,856
334,819
370,484
-
174,553
701,663
17,241
273
44,874
72,444
45,007
7,011
-
20,426
-
930,561
362,694
528,359
9,801
29,707
561,596
17,402
259
44,687
102,152
87,170
14,982
-
-
-
3,514,290
2,141,428
1,716,351
1,656,657
(9,482)
3,307,103
703
(5,597)
1,952,920
3,288
(3,141)
1,671,204
-
(2,512)
1,611,711
-
Acquisition of subsidiaries (note 5.12.b)
Additions
Disposals and maturity
Net interest income
Exchange differences on monetary assets
Changes in fair values
Balance as at 31 December
(312)
1,284,895
1,856,445
977
-
1,958,648
(1,793,394)
(1,767,198)
17,370
(10,895)
18,753
20,142
1,135
29,645
-
-
1,045,700
(999,844)
9,894
(11,007)
14,951
-
-
802,625
(711,020)
11,192
1,268
24,278
3,514,290
2,141,428
1,716,351
1,656,657
As at 31 December 2020, NLB Group and NLB do not have any equity
of the bankruptcy proceedings were not met. At the time of conversion,
instruments measured at fair value through other comprehensive income
NLB Group transferred EUR 1,002 thousand from accumulated other
obtained by taking possession of collateral in the statement of financial
comprehensive income into retained earnings.
position (NLB Group 31 December 2019: EUR 3,289 thousand) (note 6.1.l).
Equity investment obtained by taking possession of collateral in amount
selling equity securities measured at fair value through other comprehensive
In 2020 and 2019, NLB Group and NLB did not realise any gain or loss by
of EUR 3,289 thousand was during year 2020 converted back to the
income.
item ‘Financial assets measured at amortised cost’ because the conditions
c) Accumulated other comprehensive income related to financial assets measured at fair value through other comprehensive income
NLB Group
NLB
in EUR thousands
3,306,400
1,949,632
1,671,204
1,611,711
Balance as at 1 January
207,187
67,096
140,091
188,508
46,335
142,173
45,147
45,147
-
44,946
44,946
-
Effects of translation of foreign operations to presentation currency
Net gains/(losses) from changes in fair value
Gains/losses transferred to net profit on disposal (note 4.4.)
Impairment (note 4.14.)
Transfer of gains/losses to retained earnings
Deferred income tax (note 5.17.)
Share of other comprehensive income of associates and joint ventures
Balance as at 31 December
- debt securities
- equity securities
2020
48,316
48
11,526
(5,066)
3,888
(1,002)
(1,486)
(12,574)
43,650
39,924
3,726
2019
28,861
29
16,782
(4,527)
1,130
-
(1,859)
7,900
48,316
43,933
4,383
2020
24,444
-
7,724
(4,347)
635
-
(762)
-
27,694
27,242
452
2019
18,620
-
11,415
(4,396)
171
-
(1,366)
-
24,444
24,156
288
121
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 5.5. Derivatives for hedging purposes
instrument and those of the hedged item match (i.e. the principal terms
c) Accumulated fair value adjustments arising from the
of financial position as a hedged item, except for macro fair value hedges. In
NLB Group entities measure exposure to interest rate risk using repricing
match), while the dollar-offset method is used to regularly measure hedge
corresponding continuing hedge relationships
such relationships, hedged items are presented in the item ‘Financial assets
gap analysis and by calculating the sensitivity of the statement of financial
effectiveness retrospectively. Prospective testing of hedge effectiveness is
The table below presents accumulated fair value adjustments arising from
measured at amortised cost,’ while the accumulated fair value adjustment
position and off-balance-sheet items in terms of the economic value
carried out regularly for macro hedges where the characteristics of both
the corresponding continuing hedge relationships, irrespective of whether
is presented in a separate item ‘Fair value changes of the hedged items in
of equity. The portfolio duration is used as a measure of risk in the
items in the hedge relationship do not fully match by comparing the change
there has been a change in the hedge designation during the year. The
portfolio hedge of interest rate risk.’
management of securities in the banking book.
in the fair value of both items to the shift in the yield curve.
accumulated fair value adjustment is presented in the same line of statement
NLB Group entities use various derivatives such as interest rate swaps
Hedge accounting rules were not applied in economic hedges using CIRS.
(IRS) and currency interest rate swaps (CIRS) to close open positions in an
Thus, the effects of valuation are disclosed in the income statement in the
individual maturity bucket. Micro and macro fair value hedges are used for
item ‘Gains less losses from financial assets and liabilities held for trading.’
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 used, i.e. the
Sources of hedge ineffectiveness may arise, but are not limited to the
swapping of a variable interest rate on a hedged item for a fixed interest
discount rates used for valuation of derivatives at fair value, and notional
rate. All cash flow hedges were made on liability items, while fair value
and timing differences, as well differences in the amortising plan between
NLB Group and NLB
Micro fair value hedges
hedges were used on both liability and asset items.
hedged items and hedging instrument. Hedge effectiveness is assessed
Fixed rate corporate loans measured at AC
Hedge accounting rules (fair value and cash flow hedging) were applied
in the hedging of interest rate risk using interest rate swaps. These hedge
attributable to a hedged risk with changes in the fair value of the hedging
instrument.
relationships are created in such a way that the characteristics of the hedge
monthly, by comparing changes in the fair value of the hedged item that are
a) Fair value adjustment in hedge accounting recognised in profit or loss
Fixed rate bonds measured at AC
Fixed rate bonds measured at FVOCI
Macro fair value hedges
Fixed rate retail loans
2020
2019
in EUR thousands
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
498,397
2,667
117,839
377,891
154,050
154,050
43,571
165
14,182
29,224
13,844
13,844
479,098
3,582
117,811
357,705
149,198
149,198
35,668
293
13,378
21,997
8,991
8,991
NLB Group and NLB
Fair value hedge
Net effects from hedging instruments
- interest rate swap for micro hedge
- interest rate swap for macro hedge
Net effects from hedged items
- loans measured at amortised cost - micro hedge
- bonds measured at amortised cost - micro hedge
- bonds measured at fair value through OCI - micro hedge
- loans measured at amortised cost- macro hedge
2020
720
(12,348)
(7,537)
(4,811)
13,068
(128)
1,116
7,227
4,853
in EUR thousands
2019
(555)
(19,482)
(12,968)
(6,514)
18,927
(153)
(257)
12,864
6,473
d) IBOR reform
The Article 28(2) of Regulation (EU) 2016/1011 requires EU supervised
NLB Group closely monitors the development of Benchmark Interest
entity users of a benchmark to nominate in their contingency plans suitable
Rate Reform and is actively preparing for the changes imposed by the
benchmark alternative(s). The inclusion of robust and suitable fallback
regulation. In 2018, NLB formed a special working group which deals with
mechanisms in contractual documentation is also expected. NLB identified
the preparation for the discontinuation of some important reference interest
potential €STR-based fallbacks for EURIBOR, in line with the current
rates and reports on this to NLB Group ALCO.
market consensus on those fallbacks and intends to proceed with the
activities for inclusion on EURIBOR fallbacks into all new EURIBOR-
NLB Group no longer offers new products that would be tied to reference
based contracts.
rates in termination. The exception are products related to EURIBOR,
which is not scheduled for discontinuation. Therefore, NLB Group’s
In the next step, the Bank is expected to include fallback provisions also
attention in this phase is focused on the modification of new contractual
in legacy contracts with clear focus on LIBOR exposures first. The exact
relationships with customers in which EURIBOR occurs and the
timing depends on regulatory development as the amendment of the interest
amendment of existing contractual relationships with customers in which
rate benchmark reform is still in the legislative process.
other benchmarks in termination appear. As regulations in the field of
interest rate reform are still changing and as good banking practice has not
NLB Group planned activities for implementation of fallback provisions in
In both of the presented years all fair value hedges were effective, with
net investment in a foreign operation. NLB Group applied a hedge of a
yet been fully established, NLB Group is preparing proactively and adapting
legacy IBOR contracts with clients are as follows:
actual results of the hedge within a range of 80–125%, therefore, no
net investment in a foreign operation in years 2011 and 2012, and at that
to changing circumstances.
discontinuation of the hedge accounting was required.
time it recognised a EUR 754 thousand gain on the hedging instrument in
• review of outstanding IBOR referencing loans,
other comprehensive income (note 5.21.b). This gain will be included in the
Next to the timeline and industry building blocks, NLB Group’s key focus
• identification of alternative reference rate to be used for loan portfolio,
As at 31 December 2020 and 2019, NLB Group and NLB had no
consolidated income statement when the foreign operation is disposed of as
areas remain:
relationships designated for cash flow hedge accounting or for hedge of a
a part of the gain or loss on the disposal.
b) Notional amounts of interest rate swaps
NLB Group and NLB
Fair value hedge
31 Dec 2020
31 Dec 2019
Notional amount
Fair value
in EUR thousands
Asset
Liability
573,753
561,500
-
788
61,161
49,507
• Developing new products strategy,
• Managing legacy portfolio,
• Executing operational infrastructure changes,
• Mitigating customer and conduct risk, and
• Performing contract identification and change.
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.
• analysis of how the alternative reference rate will be calculated and how
to calculate any economic difference between IBORs and the selected
alternative reference rates,
• consideration of IT system accommodation with alternative reference
rates,
• documentation of the transition of the loans.
122
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 The table below indicates the nominal amount and weighted average
instruments provide a close approximation to the extent of the risk exposure
b) Loans and advances to banks
maturity of derivatives in hedging relationships that will be affected by the
NLB Group manages through hedging relationships.
IBOR reform, analysed on an interest rate basis. The derivative hedging
NLB Group
NLB
in EUR thousands
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
Interest rate swaps
EURIBOR (3 months)
EURIBOR (6 months)
USD LIBOR (6 months)
2020
2019
Nominal amount
(in EUR thousands)
Weighted average
maturity (years)
Nominal amount
(in EUR thousands)
Weighted average
maturity (years)
186,471
374,254
13,028
5.18
7.83
1.99
186,472
375,028
-
6.23
8.95
-
Loans
Time deposits
Reverse sale and repurchase agreements
Purchased receivables
Allowance for impairment (note 5.14.a)
Total
As it can be seen from the table, the majority of long term derivatives in
at 31 December 2020, derivatives with remaining maturity of five or more
c) Loans and advances to customers
hedging relationships are exposed to EURIBOR, therefore, the uncertainty
years amount to EUR 310,730 thousand (31 December 2019: EUR 441,189
arising from interest rate benchmark reform derives mainly from derivatives
thousand).
with longer maturities, when a change of EURIBOR could be expected. As
5.6. Financial assets measured at amortised cost
Analysis by type
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
1,503,087
1,653,848
1,277,880
1,485,166
197,005
93,403
158,320
144,352
9,619,860
7,589,724
4,564,178
4,568,599
113,138
97,415
54,503
67,279
11,433,090
9,434,390
6,054,881
6,265,396
Loans
Overdrafts
Finance lease receivables (note 5.11.b)
Credit card business
Called guarantees
Allowance for impairment (note 5.14.a)
Total
Analysis of loans and advances to customers by sector
Debt securities
Loans and advances to banks
Loans and advances to customers
Other financial assets
Total
The credit quality analysis for financial assets and contingent liabilities is
disclosed in note 6.1.j).
a) Debt securities
Government
Companies
Banks
Financial organisation
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
1,173,718
1,285,540
86,946
220,988
25,120
81,350
264,323
25,775
953,881
79,732
220,988
25,120
1,115,335
81,350
264,323
25,775
1,506,772
1,656,988
1,279,721
1,486,783
Government
Financial organisations
Companies
Individuals
Total
9,809
128,074
59,263
-
197,146
(141)
197,005
2,213
91,076
-
209
93,498
(95)
93,403
95,070
63,405
-
-
158,475
(155)
158,320
81,633
62,651
-
209
144,493
(141)
144,352
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
9,490,734
7,408,374
4,501,991
4,446,843
322,622
49,517
125,725
3,542
9,992,140
(372,280)
9,619,860
328,947
49,017
122,730
3,100
7,912,168
(322,444)
7,589,724
152,487
179,381
-
52,156
916
4,707,550
(143,372)
4,564,178
-
60,688
452
4,687,364
(118,765)
4,568,599
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
368,400
158,871
4,159,496
4,933,093
9,619,860
271,389
100,054
3,280,246
3,938,035
7,589,724
170,742
177,198
1,838,468
2,377,770
4,564,178
182,582
131,442
1,901,950
2,352,625
4,568,599
Allowance for impairment (note 5.14.b)
(3,685)
(3,140)
(1,841)
(1,617)
Total
1,503,087
1,653,848
1,277,880
1,485,166
123
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 d) Other financial assets
Analysis by type of other financial assets
5.7. Non-current assets held for sale
a) Analysis by type of non-current assets held for sale
Receivables in the course of collection and other temporary accounts
Credit card receivables
Debtors
Fees and commissions
Receivables to brokerage firms and others for the
sale of securities and custody services
Accrued income
Dividends
Prepayments
Other financial assets
Allowance for impairment (note 5.14.a)
Total
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
32,484
20,260
6,316
6,563
611
1,327
-
447
50,683
118,691
(5,553)
113,138
28,697
18,497
6,360
5,315
612
515
46
38
42,241
102,321
(4,906)
97,415
15,906
11,383
1,307
2,871
610
1,296
-
-
22,460
55,833
(1,330)
54,503
25,825
12,194
1,525
3,524
610
529
46
-
24,867
69,120
(1,841)
67,279
Property and equipment
Investment in joint venture
Total non-current assets held for sale
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
8,658
-
8,658
4,308
38,883
43,191
4,454
-
4,454
2,123
3,409
5,532
Item ‘Property and equipment’ includes business premises and assets
2020, all the suspensive conditions under the joint NLB and KBC Insurance
received as collateral that are in the process of being sold.
NV sale agreement signed in December 2019 where met, therefore the sale
In 2019 NLB Group and NLB classified joint venture NLB Vita as non-
investment in NLB Vita as at 31 December 2019 and effect of sale in year
current assets held for sale, due to its expected sale in 2020 (note 3.). In May
2020 are included in the segment ‘Retail banking in Slovenia.’
of NLB’s 50% stake in the share capital of NLB Vita was completed. The
b) Analysis of movements of non-current assets held for sale
in EUR thousands
Receivables in the course of collection are temporary balances which will be
Other financial assets include receivables to pension funds for prior pension
Effects of translation of foreign operations to presentation currency
transferred to the appropriate item in the days following their occurrence.
payments, receivables from insurance companies, claims in enforcement
procedures, claims for sold securities and trust services, claims from refunds,
paid duties, and legal costs.
Acquisition of subsidiaries (note 5.12.b)
Additions
Transfer from/(to) property and equipment (note 5.8.)
Balance as at 1 January
Analysis of other financial assets by sector
Banks
Government
Financial organisations
Companies
Individuals
Total
NLB Group
NLB
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
Transfer from investments in associates and joint ventures
Transfer from/(to) investment property (note 5.9.)
in EUR thousands
Transfer from/(to) other assets
35,431
41,576
14,488
3,912
17,731
113,138
21,749
25,500
10,810
3,857
35,499
97,415
8,069
22,537
7,257
580
16,060
54,503
14,994
24,905
6,920
1,506
18,954
67,279
Disposals
Valuation
Balance as at 31 December
5.8. Property and equipment
a) Analysis by type
e) Movement of called non-financial guarantees
in EUR thousands
Own property and equipment
Balance as at 1 January
Effects of translation of foreign operations to presentation currency
Called guarantees
Paid guarantees
Write-offs
Balance as at 31 December
NLB Group
NLB
2020
1,859
(2)
2,376
(1,932)
(463)
1,838
2019
683
2
1,828
(397)
(257)
1,859
2020
365
-
2,261
(1,723)
(463)
440
2019
548
-
278
(204)
(257)
365
Right-of-use assets (note 5.11.)
Total
NLB Group
2020
43,191
(3)
1,969
89
2,779
-
-
(17)
(39,089)
(261)
8,658
2019
4,349
21
-
-
1,328
85
38,883
(550)
(320)
(605)
43,191
NLB
2020
5,532
-
-
-
2,626
-
-
-
(3,484)
(220)
4,454
2019
1,720
-
-
-
1,249
-
3,409
-
(248)
(598)
5,532
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
223,598
25,519
249,117
179,060
16,545
195,605
88,495
3,180
91,675
87,120
2,784
89,904
124
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 b) Movement of own property and equipment
in EUR thousands
NLB Group
NLB
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
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 2019
312,458
64,026
99,521
6,804
482,809
198,180
41,813
55,414
5,208
300,615
Balance as at 1 January 2020
313,168
70,744
95,673
6,186
485,771
198,313
44,635
51,628
5,441
300,017
Effects of translation of foreign
operations to presentation currency
Acquisition of subsidiaries
(note 5.12.b)
Additions
Disposals
Impairment (note 4.14.)
Transfer to/from investment
property (note 5.9.)
Transfer to/from non-current
assets held for sale (note 5.7.)
(101)
(20)
(40)
40,173
1,773
3,249
-
-
(161)
45,195
-
-
-
-
-
-
-
-
-
-
5,888
10,254
6,945
1,255
24,342
5,299
5,378
3,356
104
14,137
(5,843)
(961)
(6,955)
(3,132)
(16,891)
(13)
(433)
(5,629)
(2,031)
(8,106)
(43)
(756)
(6,717)
-
-
-
-
-
-
-
-
-
-
(43)
(756)
-
-
(6,717)
(6,556)
(95)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(6,556)
-
Disposal of subsidiary (note 3.)
-
(61)
(34)
Balance as at 31 December 2020
345,769
81,729
98,838
4,309
530,645
197,043
49,580
49,355
3,514
299,492
Depreciation and impairment
Balance as at 1 January 2020
173,763
48,808
79,515
4,625
306,711
135,328
29,440
43,762
4,367
212,897
Effects of translation of foreign
operations to presentation currency
(25)
(17)
(40)
-
(82)
Disposals
(2,427)
(948)
(6,651)
(2,349)
(12,375)
-
-
-
-
-
-
(431)
(5,600)
(2,031)
(8,062)
Depreciation (note 4.11.)
6,271
6,040
4,103
648
17,062
3,945
3,896
1,782
469
10,092
Impairment (note 4.14.)
Transfer to/from investment
property (note 5.9.)
Transfer to/from non-current
assets held for sale (note 5.7.)
161
(401)
(3,938)
-
-
-
-
-
-
Disposal of subsidiary (note 3.)
-
(61)
(30)
-
-
-
-
161
(401)
-
-
(3,938)
(3,930)
(91)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,930)
-
Balance as at 31 December 2020
173,404
53,822
76,897
2,924
307,047
135,343
32,905
39,944
2,805
210,997
Net carrying value
Balance as at 31 December 2020
172,365
27,907
21,941
1,385
223,598
61,700
16,675
9,411
709
88,495
Effects of translation of foreign
operations to presentation currency
Additions
Disposals
Transfer to/from investment
property (note 5.9.)
Transfer to/from non-current
assets held for sale (note 5.7.)
222
56
122
-
400
-
-
-
-
-
4,561
11,453
4,732
363
21,109
2,952
6,251
1,851
363
11,417
(700)
(4,751)
(8,361)
(981)
(14,793)
(473)
(2,900)
-
-
-
-
-
-
-
(473)
(2,900)
(2,819)
(381)
-
-
-
(3,429)
(5,637)
(130)
(9,196)
-
-
-
-
-
-
-
-
-
-
(2,819)
-
Disposal of subsidiary (note 3.)
-
(40)
(341)
Balance as at 31 December 2019
313,168
70,744
95,673
6,186
485,771
198,313
44,635
51,628
5,441
300,017
Depreciation and impairment
Balance as at 1 January 2019
168,665
47,427
84,843
4,470
305,405
132,296
29,646
47,818
3,921
213,681
Effects of translation of foreign
operations to presentation currency
80
44
108
-
232
Disposals
(241)
(4,738)
(7,604)
(604)
(13,187)
-
(1)
-
-
(3,422)
(5,631)
Depreciation (note 4.11.)
7,010
6,115
2,509
759
16,393
4,603
3,216
1,575
Impairment (note 4.14.)
Transfer to/from investment
property (note 5.9.)
Transfer to/from non-current
assets held for sale (note 5.7.)
171
(350)
(1,572)
-
-
-
-
-
-
Disposal of subsidiary (note 3.)
-
(40)
(341)
-
-
-
-
171
(350)
-
-
(1,572)
(1,570)
(381)
-
-
-
-
-
-
-
-
-
-
(82)
528
-
-
-
-
-
(9,136)
9,922
-
-
(1,570)
-
Balance as at 31 December 2019
173,763
48,808
79,515
4,625
306,711
135,328
29,440
43,762
4,367
212,897
Net carrying value
Balance as at 31 December 2019
139,405
21,936
16,158
1,561
179,060
62,985
15,195
7,866
1,074
87,120
Balance as at 1 January 2019
143,793
16,599
14,678
2,334
177,404
65,884
12,167
7,596
1,287
86,934
Balance as at 1 January 2020
139,405
21,936
16,158
1,561
179,060
62,985
15,195
7,866
1,074
87,120
of collateral and included in property and equipment by NLB Group
thousand) (note 6.1.l).
amounted to EUR 13,268 thousand (31 December 2019: EUR 1,440
As at 31 December 2020, the value of assets received by taking possession
thousand), and in NLB to EUR 7 thousand (31 December 2019: EUR 7
125
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 5.9. Investment property
in EUR thousands
5.10. Intangible assets
Balance as at 1 January
Effects of translation of foreign operations to presentation currency
Acquisition of subsidiaries (note 5.12.b)
Additions
Disposals
Transfer from/(to) property and equipment (note 5.8.)
Transfer from/(to) non-current assets held for sale (note 5.7.)
Transfer from/(to) other assets
Net valuation to fair value (note 4.8.)
Balance as at 31 December
NLB Group
2020
52,316
(24)
19,643
717
(2,493)
355
17
(16,559)
870
54,842
2019
58,644
84
-
1,024
(8,417)
123
550
-
308
52,316
NLB
2020
9,303
-
-
-
(2,031)
-
-
231
797
8,300
2019
12,026
-
-
923
(3,571)
-
-
-
(75)
9,303
The value of assets received by taking possession of collateral and included
(31 December 2019: EUR 32,465 thousand), and in NLB amounted to EUR
in investment property by NLB Group amounted to EUR 36,130 thousand
4,079 thousand (31 December 2019: EUR 3,464 thousand) (note 6.1.l).
Operating expenses arising from investment properties:
Leased to others
Not leased to others
Total
NLB Group
NLB
in EUR thousands
2020
1,157
242
1,399
2019
1,135
235
1,370
2020
383
194
577
2019
456
175
631
NLB Group
in EUR thousands
NLB
Software licenses
Other intangible
assets
Goodwill
Total
Software licenses
Cost
Balance as at 1 January 2020
Effects of translation of foreign operations to presentation currency
Acquisition of subsidiaries (note 5.12.b)
Additions
Write-offs
Disposal of subsidiary (note 3.)
228,692
(34)
4,921
14,150
(844)
(198)
-
-
13,200
-
-
-
32,336
261,028
192,581
-
-
-
-
-
(34)
18,121
14,150
(844)
(198)
-
-
9,033
-
-
Balance as at 31 December 2020
246,687
13,200
32,336
292,223
201,614
Amortisation and impairment
Balance as at 1 January 2020
Effects of translation of foreign operations to presentation currency
Amortisation (note 4.11.)
Write-offs
Disposal of subsidiary (note 3.)
Balance as at 31 December 2020
Net carrying value
192,679
(22)
10,112
(826)
(195)
201,748
-
-
-
-
-
-
28,807
221,486
166,601
-
-
-
-
(22)
10,112
(826)
(195)
-
6,908
-
-
28,807
230,555
173,509
Balance as at 31 December 2020
44,939
13,200
Balance as at 1 January 2020
36,013
-
3,529
3,529
61,668
28,105
39,542
25,980
Other intangible assets in the amount of EUR 13,200 thousand represent
additionally identified intangible assets in a business combination, namely
core deposits and trade name (note 5.12.b). Useful life is assessed to be 5
years.
126
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 NLB Group
in EUR thousands
NLB
The income statement shows the following amounts relating to leases:
Software licenses
Goodwill
Total
Software licenses
Cost
Balance as at 1 January 2019
Effects of translation of foreign operations to presentation currency
Additions
Write-offs
Disposal of subsidiary
Balance as at 31 December 2019
Amortisation and impairment
Balance as at 1 January 2019
Effects of translation of foreign operations to presentation currency
Amortisation (note 4.11.)
Write-offs
Disposal of subsidiary
214,343
32,336
246,679
182,708
109
14,534
(69)
(225)
-
-
-
-
109
14,534
(69)
(225)
-
9,937
(64)
-
228,692
32,336
261,028
192,581
182,904
28,807
211,711
159,317
75
9,994
(69)
(225)
-
-
-
-
75
9,994
(69)
(225)
-
7,348
(64)
-
Balance as at 31 December 2019
192,679
28,807
221,486
166,601
Depreciation of right-of-use assets (note 4.11.)
Land and buildings
Vehicles
Furniture and equipment
Total
Interest expenses on lease liabilities (note 4.1.)
Expenses relating to short-term leases (included in administrative expenses)
Expenses relating to leases of low-value assets that are not shown above
as short-term leases (included in administrative expenses)
Income from sub-leasing right-of-use assets (included in other operating income)
NLB Group
NLB
in EUR thousands
2020
2019
2020
2019
3,299
571
671
4,541
3,446
522
609
4,577
441
391
16
848
425
349
2
776
NLB Group
NLB
in EUR thousands
2020
(294)
(719)
(771)
92
2019
(316)
(506)
(787)
114
2020
(39)
(266)
(151)
-
2019
(38)
(375)
(151)
-
Net carrying value
Balance as at 31 December 2019
Balance as at 1 January 2019
5.11. Leases
a) NLB Group as a lessee
Right-of-use assets
Land and buildings
Vehicles
Furniture and equipment
Total
Lease liabilities
36,013
31,439
3,529
3,529
39,542
25,980
34,968
23,391
The total cash outflow for leases in 2020 in NLB Group was EUR 4,865
For calculation of the net present value of the future lease payments, NLB
thousand (2019: EUR 4,914 thousand) and in NLB EUR 897 thousand
Group applies the internal transfer price for retail deposits as a discount rate.
(2019: EUR 752 thousand).
NLB Group and NLB do not have expenses relating to variable payments
NLB Group
NLB
have lease terms between 5 to 20 years, while some contracts are made
A maturity analysis of lease liabilities is disclosed in note 6.3.f).
in EUR thousands
used in its business. Rental contracts for offices and branches generally
NLB Group leases various offices, branches, vehicles, and other equipment
and gains or losses arising from sale and leaseback transactions.
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
for indefinite periods. Contracts for indefinite periods are included in
measurement of the liability in accordance with planning projections.
b) NLB Group as a lessor
22,758
959
1,802
25,519
26,359
13,481
1,256
1,808
16,545
16,713
2,240
912
28
3,180
3,212
1,691
1,049
44
2,784
2,784
Normally, a lease term between 3 and 5 years is assumed, with the
Finance and operating leases of motor vehicles and operating leases of
exemption of business premises on strategic locations where management
business premises and POS terminals represent the majority of agreements
assesses a different (longer) lease term. Vehicles and other equipment
in which NLB Group acts as a lessor.
generally have lease terms between 1 to 5 years. There are several lease
contracts that include extension and termination options. These options
Most of the lease agreements entered into by NLB Group as lessor contracts
are negotiated by management to align with the Group’s business needs.
are finance lease agreements (operating leases account for less than 10% of
Lease payments to be made under reasonably certain extension options are
all lease agreements). Most of the finance lease agreements are concluded
included in measurement of the liability.
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
Lease terms are negotiated on an individual basis and contain a range of
lessee’s property. The financial leasing receivables are secured by the object
In the statement of financial position, right-of-use assets are included in the
Additions to the right-of-use assets during 2020 in NLB Group amounted
different terms and conditions. The lease agreements do not impose any
of financing. NLB Group does not have finance lease contracts with variable
item ‘Property and equipment’ and lease liabilities are included in the item
to EUR 4,736 thousand (2019: EUR 3,650 thousand) and in NLB EUR
covenants other than the security interests in the leased assets that are
payments.
‘Other financial liabilities.’
1.808 thousand (2019: EUR 1,114 thousand). Due to the acquisition of
held by the lessor. Leased assets may not be used as security for borrowing
subsidiaries in 2020, the right-of-use assets in NLB Group increased by EUR
purposes.
9,576 thousand.
The investment properties are leased to lessee under operating leases with
rentals payable monthly. There are no variable lease payments that depend
NLB Group also has certain leases of other equipment with lease term of
on an index or rate. The investment properties generally have lease terms
12 months or less, and equipment with low value. For these leases, NLB
between 2 to 10 years. Some contracts are made for indefinite period.
Group applies the short-term lease and lease of low-value assets recognition
exemptions. Lease payments on short-term leases and leases of low-value
As at 31 December 2020, the allowance for unrecoverable finance lease
assets are recognised as an expense on a straight-line basis over the lease
term.
receivables included in the allowance for loan impairment amounted to
EUR 884 thousand (as at 31 December 2019 EUR 4,505 thousand).
127
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Nature of
Business
Country of
Incorporation
Equity as at
31 Dec 2020
Profit/(loss)
for 2020
NLB’s
shareholding
%
NLB’s voting
rights %
NLB Group’s
shareholding
%
NLB Group’s
voting
rights%
in EUR thousands
Finance leases
The following table sets out a maturity analysis of lease receivables, showing
Data of subsidiaries as included in the consolidated financial statements of
Loans and advances to customers in NLB Group include finance lease
the undiscounted lease payments to be received after the reporting date.
NLB Group as at 31 December 2020:
receivables.
NLB Group
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Total undiscounted lease receivable
Unearned finance income
Net investment in the lease
During 2020, NLB Group recognised interest income on lease receivables in
Operating lease
in EUR thousands
2019
25,351
13,119
7,317
3,632
1,758
1,860
53,037
(4,020)
49,017
2020
23,287
11,506
7,734
5,159
3,243
2,719
53,648
(4,131)
49,517
Core members
NLB Banka a.d., Skopje
Banking
North Macedonia
229,777
19,222
NLB Banka a.d., Podgorica
Banking
Montenegro
68,556
1,387
NLB Banka a.d., Banja Luka
Banking
Bosnia and Herzegovina
99,872
10,122
NLB Banka sh.a., Prishtina
Banking
Kosovo
98,335
13,334
NLB Banka d.d., Sarajevo
Banking
Bosnia and Herzegovina
NLB Banka a.d., Belgrade
Banking
Serbia
89,808
74,205
5,895
2,598
Komercijalna banka a.d. Belgrade
Banking
Serbia
609,943
(9,050)
Komercijalna banka a.d. Banja Luka
Banking
Bosnia and Herzegovina
31,045
(1,309)
Komercijalna banka a.d. Podgorica
Banking
Montenegro
20,689
(1,224)
KomBank Invest a.d. Belgrade
Finance
Serbia
1,342
-
the amount of EUR 1,957 thousand (2019: EUR 3,776 thousand).
A maturity analysis of lease payments, showing the undiscounted lease
NLB Skladi d.o.o., Ljubljana
Finance
Slovenia
10,487
5,490
payments to be received after the reporting date:
NLB Lease&Go, leasing d.o.o., Ljubljana
Finance
Slovenia
1,938
(1,062)
NLB Group
NLB
in EUR thousands
NLB Zavod za upravljanje kulturne
dediščine, Ljubljana
Cultural
heritage
management
Slovenia
378
368
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Total
2020
3,082
1,863
1,497
1,411
1,308
1,759
2019
1,855
1,447
1,200
484
445
697
2020
2019
Non-core members
399
364
341
333
331
243
405
392
315
293
285
326
NLB Leasing d.o.o. - v likvidaciji, Ljubljana
Finance
Slovenia
Optima Leasing d.o.o., Zagreb - "u likvidaciji" Finance
Croatia
NLB Leasing d.o.o., Belgrade - u likvidaciji
Finance
Serbia
Tara Hotel d.o.o., Budva
Real estate
Montenegro
PRO-REM d.o.o., Ljubljana - v likvidaciji
Real estate
Slovenia
OL Nekretnine d.o.o., Zagreb - u likvidaciji
Real estate
Croatia
10,920
6,128
2,011
2,016
BH-RE d.o.o., Sarajevo - u likvidaciji
Real estate
Bosnia and Herzegovina
NLB Group realised rental income arising from: investment properties in
the amount of EUR 471 thousand (2019: EUR 697 thousand); and movable
the amount of EUR 2,572 thousand (2019: EUR 4,124 thousand); and
property in the amount of EUR 470 thousand (2019: EUR 455 thousand)
movable property in the amount of EUR 1,003 thousand (2019: EUR 985
(note 4.8.).
thousand). NLB realised rental income arising from: investment properties in
REAM d.o.o., Podgorica
Real estate
Montenegro
REAM d.o.o., Belgrade
Real estate
Serbia
SPV 2 d.o.o., Belgrade
Real estate
Serbia
S-REAM d.o.o, Ljubljana
Real estate
Slovenia
REAM d.o.o., Zagreb
Real estate
Croatia
17,568
1,346
5,940
17,025
20,870
1,409
7
1,652
1,762
820
1,349
2,108
720
(996)
19
(204)
353
(127)
(14)
(166)
(145)
8
(236)
92
5.12. Investments in subsidiaries, associates and joint ventures
a) Analysis by type of investment in subsidiaries
NLB
Banks
Other financial organisations
Enterprises
Total
31 Dec 2020
31 Dec 2019
in EUR thousands
671,880
21,819
55,361
749,060
277,160
18,819
55,904
351,883
NLB Srbija d.o.o., Belgrade
Real estate
Serbia
32,046
1,149
NLB Crna Gora d.o.o., Podgorica
Real estate
Montenegro
NLB InterFinanz AG, Zürich in Liquidation
Finance
Switzerland
NLB InterFinanz d.o.o., Belgrade
Finance
Serbia
755
10,783
3
139
986
(3)
LHB AG, Frankfurt
Finance
Germany
1,732
(432)
86.97
99.83
99.85
81.21
97.34
86.97
99.83
99.85
81.21
97.35
86.97
99.83
99.85
81.21
97.34
86.97
99.83
99.85
81.21
97.35
99.997
99.997
99.997
99.997
81.42
0.002
83.23
0.002
-
-
100
100
100
100
-
100
-
-
100
100
100
100
-
100
12.71
12.71
100
100
-
-
100
100
100
100
-
100
100
100
-
100
-
-
100
100
100
100
-
100
100
100
-
100
81.42
83.23
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
128
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Data of subsidiaries as included in the consolidated financial statements of
NLB Group as at 31 December 2019:
Data of subsidiaries with significant non-controlling interests, before
intercompany eliminations
Nature of
Business
Country of
Incorporation
Equity as at
31 Dec 2019
Profit/(loss)
for 2019
NLB’s
shareholding
%
NLB’s voting
rights%
NLB Group’s
shareholding
%
NLB Group’s
voting
rights%
in EUR thousands
86.97
99.83
99.85
81.21
97.34
86.97
99.83
99.85
81.21
97.35
86.97
99.83
99.85
81.21
97.34
86.97
99.83
99.85
81.21
97.35
Non-controlling interest in equity in %
Non-controlling interest's voting rights in %
Income statement and statement of comprehensive income
Revenues
Profit/(loss) for the year
Attributable to non-controlling interest
99.997
99.997
99.997
99.997
Other comprehensive income
100
100
100
100
Total comprehensive income
Attributable to non-controlling interest
Paid dividends to non-controlling interest
Statement of financial position
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity
Attributable to non-controlling interest
Core members
NLB Banka a.d., Skopje
Banking
North Macedonia
209,664
32,877
NLB Banka a.d., Podgorica
Banking
Montenegro
67,532
7,565
NLB Banka a.d., Banja Luka
Banking
Bosnia and Herzegovina
88,745
17,101
NLB Banka sh.a., Prishtina
Banking
Kosovo
84,927
19,545
NLB Banka d.d., Sarajevo
Banking
Bosnia and Herzegovina
NLB Banka a.d., Belgrade
Banking
Serbia
NLB Skladi d.o.o., Ljubljana
Finance
Slovenia
Non-core members
NLB Leasing d.o.o. - v likvidaciji, Ljubljana
Finance
Slovenia
Optima Leasing d.o.o., Zagreb - "u likvidaciji" Finance
Croatia
81,499
72,954
10,509
16,786
2,373
9,047
4,142
5,512
1,332
(502)
NLB Leasing Podgorica d.o.o.,
Podgorica - "u likvidaciji"
Finance
Montenegro
(1,558)
(1,662)
NLB Leasing d.o.o., Belgrade - u likvidaciji
Finance
Serbia
NLB Leasing d.o.o., Sarajevo
Finance
Bosnia and Herzegovina
Tara Hotel d.o.o., Budva
Real estate
Montenegro
PRO-REM d.o.o., Ljubljana - v likvidaciji
Real estate
Slovenia
5,930
632
17,618
20,518
430
(365)
480
141
OL Nekretnine d.o.o., Zagreb - u likvidaciji
Real estate
Croatia
1,556
(161)
BH-RE d.o.o., Sarajevo
Real estate
Bosnia and Herzegovina
REAM d.o.o., Podgorica
Real estate
Montenegro
REAM d.o.o., Belgrade
Real estate
Serbia
SPV 2 d.o.o., Belgrade
Real estate
Serbia
S-REAM d.o.o, Ljubljana
Real estate
Slovenia
REAM d.o.o., Zagreb
Real estate
Croatia
NLB Srbija d.o.o., Belgrade
Real estate
Serbia
NLB Crna Gora d.o.o., Podgorica
Real estate
Montenegro
18
1,818
1,912
814
1,585
2,045
30,933
615
(13)
(89)
(267)
(57)
(168)
458
557
165
NLB InterFinanz AG, Zürich in Liquidation
Finance
Switzerland
9,817
2,302
NLB InterFinanz d.o.o., Belgrade
Finance
Serbia
LHB AG, Frankfurt
Finance
Germany
(21)
2,164
(1)
(275)
Changes in ownership interest in subsidiaries of NLB Group in 2020 and
2019 are presented in note 3.
100
-
100
100
100
100
-
100
100
100
12.71
12.71
100
100
-
-
100
100
100
100
-
100
100
100
-
100
-
-
100
100
100
100
-
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
NLB Banka, Skopje
NLB Banka, Prishtina
in EUR thousands
2020
13.03
13.03
81,673
19,222
2,505
898
20,120
2,622
-
2019
13.03
13.03
84,105
32,877
4,284
1,092
33,969
4,426
3,139
690,387
895,265
668,866
793,433
1,176,539
1,049,358
179,336
229,777
29,940
203,277
209,664
27,319
2020
18.79
18.79
47,699
13,334
2,505
74
13,408
2,519
-
443,289
435,775
689,776
90,953
98,335
18,477
2019
18.79
18.79
45,066
19,545
3,673
1,025
20,570
3,865
1,396
379,090
421,995
597,505
118,653
84,927
15,958
Beside NLB Banka, Skopje and NLB Banka, Prishtina also Komercijalna
EUR 1,864 thousand are included in NLB Group’s income statement
banka is a subsidiary with significant non-controlling interest, with non-
for 2020. Loss attributable to non-controlling interest amounts to EUR
controlling interest in equity of 18.58% and non-controlling interest
2,149 thousand and gain attributable to non-controling interest recognised
in voting rights of 16.77%. Since the acquisition was concluded on 30
in other comprehensive income amounts to EUR 463 thousand. Equity
December 2020, only 12-month expected credit losses in the amount of
attributable to non-controlling interest as at 31 December 2020 amounts to
EUR 13,447 thousand and attributable deferred taxes in the amount of
EUR 119,848 thousand.
b) Acquisition of Komercijalna banka a.d. Beograd
On 30 December 2020 NLB acquired an 83.23% ordinary shareholding
in Komercijalna banka a.d. Beograd, which represents 81.42% of total
shareholding in Komercijalna banka a.d. Beograd. The acquired bank has
three subsidiaries:
Subsidiaries
Komercijalna banka a.d. Podgorica, Montenegro
Komercijalna banka a.d. Banja Luka, Bosnia and Herzegovina
Investment Management Company KomBank Invest a.d. Belgrade, Serbia
Komercijalna banka
Beograd’s ownership
NLB’s direct ownership
100%
99.998%
100%
-
0.002%
-
Serbia has long been a strategically important market for NLB Group in the
market by population) it was, until the execution of this transaction, sub-
context of the strategy to be the leading international bank headquartered
in and focused on the SEE region. Whilst in all countries of Group’s
scale.
operations NLB has a top three market position, in Serbia (the largest
As a result of the transaction, NLB became the third largest banking group
in Serbia with the acquisition of Komercijalna banka increasing NLB’s
129
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 market share from approximately 2% by total assets to over 12% as at 30
At acquisition date cash in acquired entities amounted to EUR 847,488
NLB Group recognises non-controlling interests in Komercijalna banka
‘Negative goodwill.’ The main reasons for negative goodwill are current
September 2020. The business operations of NLB Group in Serbia will be
thousand, therefore net inflow of cash amounted to EUR 452,770 thousand
Beograd at the non-controlling interest’s proportionate share of the acquired
market conditions, when banks are generally valued below their net book
(besides the Slovenian market) the largest and most important one, adding
(included in statement of cash flows within payments from investing
entity’s net identifiable assets.
values.
more than 800,000 active retail customers and the largest distribution
activities).
network in the country of 203 branches to NLB’s existing operations.
Acquisition of Komercijalna banka Beograd resulted in a gain from a
As a result of the acquisition, NLB Group’s off-balance sheet liabilities
Purchase consideration amounted to EUR 394,718 thousand and was
follows:
fully paid in cash. There are no contingent consideration arrangements.
thousand, which is recognised in income statement under line item
The assets and liabilities recognised as a result of the acquisition are as
bargain purchase (negative goodwill) in the amount of EUR 137,858
increased by EUR 377,361 thousand:
in EUR thousands
19,431
15,437
3,994
88,123
34,467
53,656
266,832
1,440
1,535
377,361
In 2020, acquisition-related costs amounted to EUR 1,643 thousand and are
NLB obtained all the necessary information for measuring fair values,
included within administrative expenses (2019: EUR 3,305 thousand).
therefore no amounts were measured and recognised on a provisional basis.
in EUR thousands
Short-term guarantees
- financial
- non-financial
Long-term guarantees
- financial
- non-financial
Commitments to extend credit
Letters of credit
Other
Total
Cash, cash balances at central banks and other demand deposits at banks
Financial assets held for trading
Non-trading financial assets mandatorily at fair value through profit or loss
Financial assets measured at fair value through other comprehensive income (note 5.4.b)
Financial assets measured at amortised cost
- debt securities
- loans and advances to banks
- loans and advances to customers
- other financial assets
Tangible assets
Property and equipment (notes 5.8.b and 5.11.a)
Investment property (note 5.9.)
Intangible assets (note 5.10.)
Current income tax assets
Deferred income tax assets
Other assets
Non-current assets held for sale (note 5.7.b)
Total assets
Financial liabilities measured at amortised cost
- deposits from banks and central banks
- borrowings from banks and central banks
- due to customers
- borrowings from other customers
- other financial liabilities
Provisions (note 5.16.)
Current income tax liabilities
Deferred income tax liabilities
Other liabilities
Total liabilities
Net identifiable assets acquired (100%)
Less: non-controlling interests
Net assets acquired (NLB Group share)
Consideration given
Bargain purchase (negative goodwill)
836,408
66,356
5,628
1,284,895
7,214
46,981
1,877,349
23,250
54,771
19,643
18,121
153
1,125
17,604
1,969
4,261,467
35,895
8,788
3,443,478
29,295
49,072
34,537
4
2,112
4,176
3,607,357
654,110
(121,534)
532,576
394,718
137,858
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 The valuation techniques used for measuring the fair value of material
assets and liabilities acquired were as follows:
Assets acquired
Valuation technique
Performing loans
Non-performing loans
Debt securities
Real estate
Core deposits
Trade name
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 Komercijalna banka’s local financial statements, by reducing future cash flows accordingly. Also prepayment risk
was estimated for two retail products namely cash loans and housing loans which have the longest maturity.
As a discount rate, average weighted interest rate for new transactions in the market for the same products, currency and
clients (sector) were used. The source was Serbian central bank (NBS) statistical database, which provided a history of interest
rates data by various products, currencies, maturities, type of interest rates and size of customer for new 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 20%.
Only exceptionally, also cash flows from regular business were considered, also discounted with the required yield of 20%.
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).
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.
Acquired core deposit accounts typically provide a low-cost source of funds to the buyer. To replace these established, low-cost deposit accounts
in a timely manner, the buyer’s alternative would be to utilize higher-cost funds at current market rates. Core deposits value is measured by
the present value of the difference, or spread, between the core deposit’s ongoing cost and the cost of a market alternative replacement.
The trade name was valued by applying the relief-from-royalty method under the income approach. This method is based
upon the application of an appropriate royalty rate on the respective revenues to estimate the Fair Value for the trade name.
This method assumes that, by virtue of having ownership of the trade name rather than licensing one for use.
Liabilities acquired
Valuation technique
Deposits
Discounted cash flow approach: Aggregated future cash flows were discounted by applying market interest rates
for term deposits. Future cash flows were grouped into 11 groups according to the type of client and currency. As
a discount rate, average weighted interest rate for new transactions in the market in 2020 was applied.
c) Analysis by type of investment in associates and joint ventures
NLB Group
NLB
in EUR thousands
Carrying amount of the NLB Group's interest
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
Other financial organisations
Enterprises
Total
7,988
-
7,988
7,499
-
7,499
1,382
280
1,662
1,056
310
1,366
In 2020, NLB sold its 50% stake in the share capital of NLB Vita (note
4.15.), which was in 2019 reclassified to non-current assets held for sale.
NLB Group’s associates
2020
2019
Nature of
Business
Country of
Incorporation
Shareholding % Voting rights % Shareholding % Voting rights %
Bankart d.o.o., Ljubljana
ARG - Nepremičnine d.o.o., Horjul
Card processing
Real estate
Slovenia
Slovenia
40.08
75.00
40.08
75.00
39.44
75.00
39.44
75.00
By contractual agreement between the shareholders, NLB does not
The carrying amount of interests in associates included in the consolidated
control ARG-Nepremičnine, Horjul, but does have a significant influence.
financial statements of NLB Group:
Therefore, the entity is accounted as an associate.
Carrying amount of the NLB Group's interest
NLB Group's share of:
- Profit for the year
- Other comprehensive income
- Total comprehensive income
2020
7,988
874
(41)
833
in EUR thousands
2019
7,499
1,036
(81)
955
The fair value of acquired loans and advances to customers is EUR
Since the transaction was closed on 30 December 2020, only 12-month
the amount of EUR 21 thousand (31 December 2019: EUR 5 thousand), as
2019: EUR 2,295 thousand).
1,877,349 thousand, of which EUR 1,836,970 thousand relates to
expected credit losses for Stage 1 financial assets in the amount of EUR
it still has the cumulative unrecognised share of losses of an associate that
performing portfolio and EUR 40,379 thousand to non-performing
13,447 thousand and attributable deferred taxes in the amount of EUR
portfolio. The latter was recognised as purchased or originated credit
1,864 thousand are included in NLB Group income statement. If the
NLB Group’s joint ventures
In 2020, NLB Group did not recognise a share of profit of an associate in
as at 31 December 2020 amounted to EUR 2,274 thousand (31 December
impaired financial assets (POCI). The gross contractual amount for
acquisition has occurred on 1 January 2020, management estimates that
performing loans and advances to customers is EUR 1,827,721 thousand
consolidated revenue (excluding negative goodwill) would have been
and for this exposure 12-month expected credit losses in the amount of
between EUR 750 and 760 million and consolidated profit for the year
EUR 10,349 thousand were recognised through the income statement.
would have been between EUR 260 and 265 million. The exact result
The gross contractual amount for non-performing loans and advances to
is difficult to assess due to some changed circumstances during the year,
NLB Vita d.d., Ljubljana
customers is EUR 149,654 thousand, and it is expected that approximately
especially the COVID-19 pandemic.
EUR 75 million of the contractual cash flows will not be collected.
Prvi Faktor Group, Ljubljana
2020
2019
Nature of Business
Country of
Incorporation
Voting rights%
Voting rights%
Insurance
Finance
Slovenia
Slovenia
-
50
50
50
In 2020, NLB Group did not recognise a share of loss of a joint venture in
Cumulative unrecognised share of losses of a joint venture as at 31
the amount of EUR 243 thousand (31 December 2019: unrecognised loss
EUR 199 thousand).
December 2020 amounted to EUR 14,946 thousand (31 December 2019:
EUR 14,704 thousand).
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
d) Movements of investments in associates and joint ventures
in EUR thousands
a) Movements in allowance for the impairment of loans and receivables measured at amortised cost
5.14. Movements in allowance for the impairment of financial assets
2020
7,499
326
1,036
(162)
(41)
(670)
-
7,988
2019
37,147
-
5,051
(854)
7,819
(2,781)
(38,883)
7,499
NLB Group
12-month expected credit losses
Loans and advances to individuals
Loans and advances to legal entities
Other financial assets
Lifetime ECL not credit-impaired
Effects of
translation
of foreign
operations
to
presentation
currency
Balance
as at 1
Jan 2020
Increases/
Transfers
(Decreases) Write-offs
Changes in
models/risk
parameters
Foreign
exchange
and other
movements
Disposal of
subsidiary
Balance
as at 31
Dec 2020
Repayments
of
written-off
receivables
in EUR thousands
21,613
35,210
177
(22)
(10)
(1)
(3)
(2)
1
12,806
(9,062)
5,004
7,865
63
80
(11,149)
(8,675)
(17)
7,250
4,955
(143)
(1)
(6)
(22)
(3)
(4)
(4)
(290)
1,582
(21)
5,925
9,334
166
-
(18)
-
28
(2)
-
NLB Group
NLB
Other financial assets
27
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
Lifetime ECL credit-impaired
in EUR thousands
Loans and advances to legal entities
27,076
Loans and advances to individuals
6,103
Assets, received as collateral (note 6.1.l)
76,017
51,322
Loans and advances to individuals
47,737
(22)
(1,610)
29,353
(20,159)
1,689
4,317
9,157
7,858
2,949
1,159
6,005
2,513
2,021
1,950
4,926
5,976
180
467
115
5,292
4,935
378
435
102
97,140
63,811
11,664
11,142
NLB Group
Balance as at 1 January
Increase in capital share
Share of results before tax
Share of tax
Net gains/(losses) recognised in other comprehensive income
Dividends received
Transfer to non-current assets held for sale (note 5.7.b)
Balance as at 31 December
5.13. Other assets
Deferred expenses
Inventories
Claim for taxes and other dues
Prepayments
Total
Assets, received as collateral on NLB Group in the amount of EUR 75,151
thousand (31 December 2019: EUR 50,467 thousand), and on NLB in the
amount of EUR 4,926 thousand (31 December 2019: EUR 5,292 thousand)
consisting of real estate (note 6.1.l).
-
25,044
(11)
49,616
-
-
-
-
-
276
8,151
32,682
30
61,305
-
-
-
-
-
-
5,858
9,565
499
-
-
Loans and advances to legal entities
184,800
Other financial assets
4,702
Of which: Purchased credit-
impaired financial assets
Loans and advances to legal entities
1,887
Other financial assets
3
67
(9)
-
-
3,624
11,750
(31,254)
(46)
2,395
(2,258)
-
-
(568)
1
-
-
98
16
-
-
27,584
(1,046)
195,623
485
(38)
5,247
-
-
-
-
1,319
4
Column Increases/(Decreases) includes also 12-month expected credit losses
EUR 8,198 thousand for Loans and advances to legal entities and in the
recognised at acquisition of Komercijalna banka in the amount of EUR
amount of EUR 54 thousand for Other financial assets (notes 4.14. and
2,150 thousand for Loans and advances to individuals, in the amount of
5.12.b.).
Effects of
translation
of foreign
operations
to
presentation
currency
Balance
as at 1
Jan 2019
Increases/
Transfers
(Decreases) Write-offs
Changes in
models/risk
parameters
Foreign
exchange
and other
movements
Disposal of
subsidiary
Balance
as at 31
Dec 2019
Repayments
of
written-off
receivables
in EUR thousands
NLB Group
12-month expected credit losses
Loans and advances to individuals
Loans and advances to legal entities
Other financial assets
Lifetime ECL not credit-impaired
17,162
24,416
182
11,754
(7,474)
-
120
9,598
4,184
(197)
(2,825)
20
11
(31)
(7)
50
18
2
1
22
(1)
Loans and advances to individuals
8,263
Loans and advances to legal entities
27,274
Other financial assets
58
Lifetime ECL credit-impaired
(8,321)
3,980
(1,317)
(1,369)
(63)
24
(3)
(38)
(2)
Loans and advances to individuals
59,054
189
(3,433)
13,661
(21,117)
Loans and advances to legal entities
317,524
1,000
(8,281)
(12,839)
(112,266)
Other financial assets
7,956
(3)
43
795
(2,073)
Of which: Purchased credit-
impaired financial assets
Loans and advances to legal entities
2,184
Other financial assets
1
-
-
-
-
(298)
2
-
-
2,182
2,510
11
(638)
(18)
8
-
-
1
16
-
1
(6)
-
21
(320)
-
-
-
-
-
-
-
-
21,613
35,210
177
6,103
27,076
27
-
-
-
-
-
-
47,737
3,821
184,800
13,499
(4)
(2,020)
4,702
56
1
-
-
-
1,887
3
-
-
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Balance as at
1 Jan 2020
Transfers
Increases/
(Decreases)
Write-offs
in EUR thousands
Changes in
models/risk
parameters
Foreign
exchange
and other
movements
Balance as at
31 Dec 2020
Repayments
of written-off
receivables
7,195
13,670
55
1,396
9,792
9
15,576
71,277
1,777
1,856
3
6,107
3,254
68
(4,953)
(3,261)
(1)
(1,154)
7
(67)
-
-
(6,509)
(3,356)
(22)
3,422
(2,516)
(7)
14,318
(2,677)
411
(537)
1
(1)
(6)
(2)
(3)
(4)
-
(6,227)
(7,159)
(864)
-
-
2,181
3,285
(25)
2,491
4,925
1
(365)
(119)
(2)
-
-
-
(28)
(1)
(2)
-
-
707
22,264
-
-
-
8,973
16,819
73
2,351
8,936
2
22,855
83,593
1,255
1,319
4
-
-
-
-
-
-
2,319
4,139
328
-
-
Balance as at
1 Jan 2019
Transfers
Increases/
(Decreases)
Write-offs
in EUR thousands
Changes in
models/risk
parameters
Foreign
exchange
and other
movements
Balance as at
31 Dec 2019
Repayments
of written-off
receivables
NLB
12-month expected credit losses
Loans and advances to individuals
Loans and advances to legal entities
Other financial assets
Lifetime ECL not credit-impaired
Loans and advances to individuals
Loans and advances to legal entities
Other financial assets
Lifetime ECL credit-impaired
Loans and advances to individuals
Loans and advances to legal entities
Other financial assets
Of which: Purchased credit-
impaired financial assets
Loans and advances to legal entities
Other financial assets
NLB
12-month expected credit losses
Loans and advances to individuals
Loans and advances to legal entities
Other financial assets
Lifetime ECL not credit-impaired
6,355
10,511
27
3,991
2,036
15
(2,377)
728
25
Loans and advances to individuals
1,255
(2,875)
1,854
Loans and advances to legal entities
11,405
6,433
(8,882)
Other financial assets
6
(2)
4
Lifetime ECL credit-impaired
Loans and advances to individuals
Loans and advances to legal entities
Other financial assets
Of which: Purchased credit-
impaired financial assets
Loans and advances to legal entities
Other financial assets
18,347
154,763
1,855
2,145
1
(1,116)
(8,469)
(13)
5,833
(6,962)
(7,892)
(66,998)
659
(722)
-
-
(290)
2
-
-
-
(5)
(4)
(3)
(34)
-
(775)
380
(8)
1,164
870
1
(545)
(139)
(2)
-
-
1
20
-
1
-
-
19
12
-
1
-
7,195
13,670
55
1,396
9,792
9
15,576
71,277
1,777
1,856
3
-
-
-
-
-
-
1,382
6,671
16
-
-
b) Movements in allowance for the impairment of debt securities
in EUR thousands
NLB Group
Balance as at
1 Jan 2020
12-month expected credit losses
Debt securities measured at amortised cost
Debt securities measured at fair value
through other comprehensive income
Lifetime ECL not credit-impaired
Debt securities measured at fair value
through other comprehensive income
Lifetime ECL credit-impaired
Debt securities measured at fair value
through other comprehensive income
3,140
4,757
42
798
Effects of
translation
of foreign
operations to
presentation
currency
(2)
2
-
-
Transfers
Increases/
(Decreases)
Changes in
models/risk
parameters
Foreign
exchange
and other
movements
Balance as at
31 Dec 2020
-
-
-
-
343
4,156
(6)
-
204
(253)
(9)
-
-
(6)
1
-
3,685
8,656
28
798
Column Increases/(Decreases) includes also 12-month expected credit losses
of EUR 2,932 thousand for Debt securities measured at fair value through
recognised at acquisition of Komercijalna banka in the amount of EUR 32
other comprehensive income (notes 4.14. and 5.12.b.).
thousand for Debt securities measured at amortised cost and in the amount
NLB Group
Balance as at
1 Jan 2019
Effects of
translation
of foreign
operations to
presentation
currency
Transfers
Increases/
(Decreases)
Changes in
models/risk
parameters
Foreign
exchange
and other
movements
Balance as at
31 Dec 2019
in EUR thousands
12-month expected credit losses
Debt securities measured at amortised cost
Debt securities measured at fair value
through other comprehensive income
Lifetime ECL not credit-impaired
Debt securities measured at fair value
through other comprehensive income
Lifetime ECL credit-impaired
Debt securities measured at fair value
through other comprehensive income
2,898
3,597
75
798
4
(4)
-
-
-
19
292
1,332
(19)
(24)
-
-
(55)
(188)
10
-
1
1
-
-
3,140
4,757
42
798
The contractual amount outstanding on financial assets that were written
which EUR 4,162 thousand in NLB Group (31 December 2019: EUR
off during the year ending 31 December 2020 and that are still subject to
42,811 thousand) and EUR 2,537 thousand in NLB (31 December 2019:
enforcement activity for NLB Group amounted to EUR 42,738 thousand
EUR 41,747 thousand) represents interest receivables that have not been
(31 December 2019: EUR 142,593 thousand), and for NLB amounted
to EUR 9,773 thousand (31 December 2019: EUR 92,882 thousand), of
recognised in the income statement prior to the write-off.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 NLB
12-month expected credit losses
Debt securities measured at amortised cost
Debt securities measured at fair value through other comprehensive income
Lifetime ECL credit-impaired
Debt securities measured at fair value through other comprehensive income
NLB
12-month expected credit losses
Debt securities measured at amortised cost
Debt securities measured at fair value through other comprehensive income
Lifetime ECL credit-impaired
Debt securities measured at fair value through other comprehensive income
Balance as at
1 Jan 2020
Increases/
(Decreases)
in EUR thousands
Changes in
models/risk
parameters
Foreign
exchange
and other
movements
Balance as at
31 Dec 2020
1,617
1,714
798
16
626
-
208
9
-
-
(6)
-
1,841
2,343
798
Balance as at
1 Jan 2019
Increases/
(Decreases)
in EUR thousands
Changes in
models/risk
parameters
Foreign
exchange
and other
movements
Balance as at
31 Dec 2019
1,323
1,541
798
342
182
-
(49)
(11)
-
1
2
-
1,617
1,714
798
applying the effective interest rate to the net amortised cost of the financial
EUR 705 thousand at NLB level relates to loans and advances to individuals
asset. Part of the contractually due interest for Stage 3 exposures that is not
measured at amortised cost and EUR 27,389 thousand at NLB Group
included in the income statement (so-called ‘excluded interest’) has been
level and EUR 22,284 thousand at NLB level to loans and advances to
in previous periods presented as a decrease of gross carrying amount of
legal entities measured at amortised cost). This increased the NPE ratio in
financial assets. In year 2020, the Bank of Slovenia changed the instructions
accordance with the EBA methodology by 0.15 percentage points for NLB
for reporting of monetary financial institutions and regards excluded
Group and by 0.20 percentage points for NLB. Comparative information
interest as part of gross carrying amount, even if not recognised in the
has not been adjusted in this respect.
income statement. Therefore, NLB Group changed the presentation as at
31 December 2020 and increased gross carrying amount and impairments
The table below illustrates how changes in the gross carrying amount of
for EUR 33,990 thousand on the Group level and EUR 25,112 thousand
loans and advances to customers in year 2020 contributed to changes in the
on the NLB level (of which EUR 4,347 thousand at NLB Group level and
loss allowance.
NLB Group
NLB
in EUR thousands
12-month
expected
credit losses
Lifetime ECL
not credit
- impaired
Lifetime ECL
credit-impaired
12-month
expected
credit losses
Lifetime ECL
not credit
- impaired
Lifetime ECL
credit-impaired
Total
Total
Balance as at 1 January 2020
7,092,324
471,017
348,827
7,912,168
4,350,549
189,426
147,389
4,687,364
Effects of translation of foreign
operations to presentation currency
(2,427)
(198)
(126)
(2,751)
Acquisition of subsidiaries (note 5.12.b)
1,836,970
-
40,379
1,877,349
-
-
-
-
-
-
Transfers
(258,846)
153,780
105,066
-
(151,114)
113,827
37,287
-
-
-
Increases/(Decreases)
334,625
(64,104)
(39,581)
230,940
81,181
(44,558)
(22,784)
13,839
c) Explanation of how significant changes in the gross carrying amount
NLB Group in the amount of EUR 3,290 thousand was mainly caused by
of financial instruments contributed to changes in the loss allowance
a decrease of carrying amount due to disposal of subsidiary (EUR 2,020
In year 2020, the gross carrying amount of debt securities measured at
thousand) and write-offs (EUR 2,106 thousand). At the NLB level, the loss
amortised cost decreased by EUR 150,216 thousand for NLB Group (2019:
allowance for other financial assets decreased only by EUR 47 thousand.
Write-offs
Foreign exchange
Excluded interest
(7)
(2,151)
-
(7)
(90)
30
increased by EUR 225,128 thousand) and decreased by EUR 207,062
Modification losses (note 4.12.)
(3,094)
(357)
(51,413)
(51,427)
(7)
(7)
(13,386)
(13,400)
(57)
31,706
(126)
(2,298)
31,736
(3,577)
(2,946)
(178)
-
-
-
-
(118)
22,989
-
(3,242)
22,989
-
thousand for NLB (2019: increased by EUR 210,482 thousand). Since they
In year 2020, the biggest change in loss allowance was recognised for loans
are all classified in Stage 1, the impact on the balance of loss allowance was
and advances to customers, as it increased by EUR 49,836 thousand at
not material. At the NLB Group level it increased by EUR 545 thousand
the NLB Group level (EUR 19,047 thousand relating to individuals and
Balance as at 31 December 2020
8,997,394
560,071
434,675
9,992,140
4,277,663
258,510
171,377
4,707,550
(2019: increased by EUR 242 thousand) and at the NLB level increased
EUR 30,789 thousand to legal entities), and EUR 24,607 thousand at the
In year 2019, loss allowance for loans and advances to other customers
2 and 3 with lifetime expected credit losses, while increases were realised
by EUR 224 thousand (2019: increased by EUR 294 thousand). Debt
NLB level (EUR 10,012 thousand relating to individuals and EUR 14,595
decreased by EUR 131,123 at the NLB Group level, and EUR 83,794 at the
in Stage 1 with only 12-month expected credit losses. The table below
securities measured at fair value through other comprehensive income
thousand to legal entities). The main reasons for this increase are changed
NLB level, regardless of the fact that the gross carrying amount increased
illustrates how changes in the gross carrying amount of loans and advances
increased only by EUR 59,493 thousand for NLB (2019: increased by EUR
risk parameters, which increased loss allowance by EUR 18,338 thousand
by EUR 333,968 thousand for NLB Group and EUR 33,328 thousand for
to customers in year 2019 contributed to changes in the loss allowance.
128,129 thousand), while for NLB Group they increased by EUR 1,354,686
at NLB Group level (EUR 7,324 thousand individuals and EUR 11,014
NLB. The most decreases in gross carrying amounts were realised in Stages
thousand (2020: increased by EUR 242,787), mainly due to acquisition
thousand legal entities) and by EUR 12,398 thousand at NLB level (EUR
of Komercijalna banka Beograd. Consequently, loss allowance for NLB
4,307 thousand individuals and 8,091 thousand legal entities) and an
increased only by EUR 629 thousand for NLB (2019: increased by EUR
increase of the gross carrying amount. At the NLB Group level, the gross
173 thousand), while for NLB Group it increased by EUR 3,885 thousand
carrying amount increased by EUR 2,079,972 thousand (EUR 1,014,105
(2019: increased by EUR 1,127 thousand).
thousand individuals and EUR 1,065,867 thousand legal entities), mainly
due to acquisition of subsidiaries, while at the NLB level it increased by
NLB Group
NLB
in EUR thousands
12-month
expected
credit losses
Lifetime ECL
not credit
- impaired
Lifetime ECL
credit-impaired
12-month
expected
credit losses
Lifetime ECL
not credit
- impaired
Lifetime ECL
credit-impaired
Total
Total
Changes in the gross carrying amount of loans to banks did not cause
EUR 20,186 thousand (increase of loans to individuals by EUR 35,157
Balance as at 1 January 2019
6,426,820
577,935
573,445
7,578,200
4,146,744
208,191
299,101
4,654,036
significant changes in the loss allowance. For NLB Group, the gross
thousand and decrease of loans to legal entities for EUR 14,971 thousand).
carrying amount of loans to banks increased by EUR 103,648 thousand
Effects of translation of foreign
operations to presentation currency
4,896
587
2,110
7,593
-
-
-
(2019: decreased by EUR 25,324 thousand) and loss allowance increased
Acquisition of subsidiaries (note 5.12.b) contributed EUR 1,877,349
Transfers
(6,887)
(17,381)
24,268
-
(12,370)
9,872
2,498
-
-
by EUR 46 thousand (2019: decreased by EUR 31 thousand), while at the
thousand to the gross carrying amount of loans and advances to customers
NLB level the gross carrying amount increased by EUR 13,982 thousand
on NLB Group level, of which EUR 849,428 thousand relates to individuals
(2019: increased by EUR 34,119 thousand) and loss allowance increased
and EUR 1,027,921 thousand to legal entities. For the performing part
by EUR 14 thousand (2019: increased by EUR 64 thousand). Increase of
of this portfolio, 12-month expected credit losses in the amount of EUR
gross carrying amount due to acquisition of subsidiaries was EUR 46,981
10,349 thousand were recognised.
thousand.
The loss allowance for other financial assets in year 2020 moved in line
with gross carrying amount and increased by EUR 647 thousand at NLB
excluded interest. NLB Group calculates interest income by applying the
effective interest rate to the gross carrying amount of financial assets other
Group level, while at the NLB level it decreased by EUR 511 thousand.
than credit-impaired assets. When a financial asset becomes credit-impaired
In year 2019, the decrease of loss allowance for other financial assets for
and is, therefore, regarded as Stage 3, interest income is calculated by
The gross carrying amount also increased due to changed presentation of
Increases/(Decreases)
666,201
(90,126)
(116,619)
459,456
213,446
(28,728)
(80,394)
104,324
Write-offs
Foreign exchange
Modification losses (note 4.12.)
(197)
1,515
(24)
(41)
92
(49)
(133,383)
(133,621)
(885)
(109)
722
(182)
(5)
2,734
-
(37)
128
-
(73,960)
(74,002)
144
-
3,006
-
Balance as at 31 December 2019
7,092,324
471,017
348,827
7,912,168
4,350,549
189,426
147,389
4,687,364
134
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 5.15. Financial liabilities, measured at amortised cost
Analysis by type of financial liabilities, measured at the amortised cost
c) Subordinated liabilities
Deposits from banks and central banks
Borrowings from banks and central banks
Due to customers
Borrowings from other customers
Subordinated liabilities
Other financial liabilities
Total
a) Deposits from banks and central banks and amounts due to customers
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
72,633
158,225
42,840
170,385
41,635
143,464
89,820
161,564
16,397,167
11,612,317
8,850,755
7,760,737
91,560
288,321
207,300
64,458
210,569
158,484
13
288,321
101,273
2,537
210,569
98,342
17,215,206
12,259,053
9,425,461
8,323,569
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
NLB Group and NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
Currency
Due date
Interest rate
Carrying amount
Nominal value
Carrying amount
Nominal value
EUR
EUR
EUR
06.05.2029
4.2% to 06.05.2024, thereafter
5Y MS + 4.159% p.a.
19.11.2029
3.65% to 19.11.2024, thereafter
5Y MS + 3.833% p.a.
05.02.2030
3.4% to 05.02.2025, thereafter
5Y MS + 3.658% p.a.
45,867
45,000
45,826
45,000
119,480
120,000
119,376
120,000
122,974
120,000
-
-
Subordinated bonds
Subordinated loans
EUR
20.09.2029
3.826% to 20.09.2024, thereafter
5Y IRS + 4.21% p.a.
-
-
45,367
45,000
Total
288,321
285,000
210,569
210,000
All issued subordinated bonds represent non-convertible Tier 2 instruments
c)
in priority to the obligations arising from shares or other instruments
(note 5.22.). In the event of bankruptcy or liquidation of the issuer,
which qualify as Common Equity Tier 1 capital instruments or
obligations arising from Tier 2 instruments shall be repaid:
additional Tier 1 instruments or have the same priority of repayment as
these instruments.
Deposit on demand
- banks and central banks
- other customers
- governments
- financial organisations
- companies
- individuals
Other deposits
- banks and central banks
- other customers
- governments
- financial organisations
- companies
- individuals
Total
b) Borrowings from banks and central banks and other customers
Loans
- banks and central banks
- other customers
- governments
- financial organisations
- companies
Total
As at 31 December 2020, NLB Group and NLB had EUR 140,713 thousand
in undrawn borrowings (31 December 2019: EUR 344,687 thousand).
52,250
31,298
41,635
86,366
a) after repayment of all unsubordinated obligations of the Issuer as well
13,633,889
9,463,888
8,128,950
6,917,810
307,082
192,224
214,472
134,735
86,276
137,204
69,855
114,836
3,223,612
2,212,002
1,551,952
1,352,522
9,910,971
6,902,679
6,353,518
5,380,597
20,383
11,542
-
2,763,278
2,148,429
721,805
117,428
134,716
398,595
42,909
126,156
299,094
2,112,539
1,680,270
35,515
34,474
192,955
458,861
3,454
842,927
31,027
32,147
175,368
604,385
16,469,800
11,655,157
8,892,390
7,850,557
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
158,225
170,385
143,464
91,560
20,183
70,956
421
64,458
16,657
44,157
3,644
13
-
-
13
249,785
234,843
143,477
161,564
2,537
-
-
2,537
164,101
as at all subordinated obligations (if any) which are expressed to rank in
In September 2019, NLB entered into a loan agreement relating to a EUR
priority to Tier 2 instruments;
45 million of subordinated loan intended for the inclusion into additional
capital to strengthen and optimise its capital structure. NLB may, according
b) with the same priority (pari passu) as, and proportionally with the
to valid legislation, only include the loan in calculation of additional capital
obligations arising from other instruments which qualify as Tier 2
after obtaining approval from the ECB. As such, approval had not been
instruments or have the same priority of repayment as the Tier 2
granted by 23 December 2019, and it was not reasonably expected to be
instruments;
granted in the near future, NLB announced the prepayment of the loan,
which was exercised in January 2020.
Movement of subordinated liabilities
Balance as at 1 January
Effects of translation of foreign operations to presentation currency
Cash flow items:
- new issued subordinated liabilities
- repayments of subordinated liabilities
- repayments of interest
Non-Cash flow items:
- accrued interest
- other
NLB Group
NLB
in EUR thousands
2020
210,569
-
67,383
119,222
(45,000)
(6,839)
10,369
10,243
126
2019
15,050
6
192,807
208,321
(15,002)
(512)
2,706
2,818
(112)
2020
210,569
-
67,383
119,222
(45,000)
(6,839)
10,369
10,243
126
2019
-
-
208,321
208,321
-
-
2,248
2,374
(126)
Balance as at 31 December
288,321
210,569
288,321
210,569
135
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 d) Other financial liabilities
Memorandum of Understanding signed in 2013 whose intent was to find
extraordinary legal measure with the Supreme Court of the Republic of
NLB Group
NLB
in EUR thousands
a solution to the transferred foreign currency savings of Ljubljanska banka
Croatia.
in Croatia (LB) on the basis of the Agreement on Succession Issues. The
Items in the course of payment
Debit or credit card payables
Suppliers
Lease liabilities (note 5.11.a)
Accrued expenses
Accrued salaries
Unused annual leave
Fees and commissions
Liabilities to brokerage firms and others for securities purchase and custody services
Other financial liabilities
Total
Other financial liabilities mainly include liabilities to insurance companies,
received warranties, obligation for purchase of securities, and trust services.
5.16. Provisions
a) Analysis by type of provisions
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
46,395
22,883
20,993
26,359
21,314
19,068
6,137
1,100
2,459
40,592
207,300
24,124
24,092
21,600
16,713
17,848
13,011
3,784
1,736
433
35,143
158,484
4,412
20,135
15,768
3,212
10,635
9,807
2,497
967
2,443
31,397
101,273
4,960
20,014
16,259
2,784
10,481
9,666
2,455
1,660
181
29,882
98,342
Memorandum also said that the Republic of Croatia would ensure the stay
Contrary to the decisions of the court described above in another case, a
of all the proceedings commenced by the PBZ and the ZaBa in relation to
claim filed by the PBZ was refused and the judgment became final in favour
the transferred foreign currency savings until the issue was finally resolved.
of NLB. The extraordinary legal measure with the Supreme Court of the
Republic of Croatia, filed by the plaintiff, was dismissed by the Supreme
Despite the agreement in the Memorandum of Understanding to stay
Court on 16 June 2015.
all of the proceedings commenced, the Court of Appeal, the County
Court of Zagreb, ruled in six claims (as explained below in detail) in
In the other cases, with respect to which court procedures described above
favour of the plaintiff. In three of those cases, NLB filed a constitutional
are pending, final court decisions have not yet been issued.
suit after extraordinary legal measure of NLB with the Supreme Court
of the Republic of Croatia was not successful, and in three NLB filed an
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
April 2018
PBZ
222,426.39 EUR
253,283.37 HRK
NLB Group
NLB
in EUR thousands
September 2017
ZaBa
492,430.53 EUR
748,583.75 HRK
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
November 2017
December 2018
PBZ
PBZ
220,115.98 EUR
688,268.12 HRK
375,938.42 EUR
679,926.08 HRK
March 2019
PBZ
9,185,141.76 USD
3,198,760.00 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.
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 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.
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.
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.
Provisions for guarantees and commitments (note 5.23.a)
Stage 1
Stage 2
Stage 3
Employee benefit provisions
Restructuring provisions
Provisions for legal risks
Other provisions
Total
42,174
15,796
2,767
23,611
20,707
15,565
46,602
11
125,059
39,421
12,909
2,444
24,068
17,704
14,500
16,627
162
88,414
28,543
7,510
732
20,301
14,220
15,354
5,673
-
63,790
29,163
6,145
653
22,365
14,743
14,182
2,211
85
60,384
The NLB Shareholders’ Meeting provided the Management Board of NLB
with the accrued interest, and shall not compensate NLB for its own costs or
with instructions how to act in the event of existing or potential new final
for the difference between the book value of its assets sold in enforcement
decisions by Croatian courts against LB and NLB regarding the transferred
proceedings and the price obtained for such assets in enforcement
foreign currency deposits, especially not to voluntarily settle the adjudicated
proceedings. There shall be no compensation for any voluntarily made
amounts, and also gave some additional instructions on the usage of
payments by NLB. In accordance with the ZVKNNLB and pursuant to the
Provisions for guarantees and commitments represent expected credit losses
In connection with legal risks, the largest amount of material monetary
legal remedies and regarding the management of the property from that
agreement between NLB and the Fund, as envisaged by the ZVKNNLB
in accordance with IFRS 9, employee benefits are recognised in accordance
claims relates to civil claims filed by Privredna banka Zagreb (the PBZ) and
perspective.
with IAS 19, while all other provisions are recognised according to IAS 37.
Zagrebačka banka (the ZaBa) against NLB, referring to the old savings of
(which was concluded on 14 August 2018), NLB has to contest the claims
made against it in court proceedings in relation to transferred foreign
LB Branch Zagreb savers, which were transferred to these two banks in a
On 19 July 2018, the National Assembly of the Republic of Slovenia passed
currency deposits, and use against court decisions that are disadvantageous
Legal risks
principal amount of approximately EUR 168 million (as per 31 December
the ‘Act for Value Protection of Republic of Slovenia’s Capital Investment
for NLB, all reasonable legal remedies and to continue to actively challenge
Provisions for legal risks are formed based on expectations regarding the
2020). Due to the fact the proceedings had been pending for such a long
in Nova Ljubljanska banka d.d., Ljubljana’ (Zakon za zaščito vrednosti
the judicial decisions of the courts of the Republic of Croatia in relation
probable outcome of legal disputes. As at 31 December 2020, NLB Group
time, the penalty interest already exceeds the principal amount. As NLB is
kapitalske naložbe Republike Slovenije v Novi Ljubljanski banki d.d.,
to transferred foreign currency deposits on the basis of which enforcement
was involved in 39 (31 December 2019: 31) legal disputes with material
not liable for the old foreign currency savings, based on numerous process
Ljubljana, hereinafter: ‘the ZVKNNLB’) which entered into force on 14
took place, leading, on the basis of ZVKNNLB, to the compensation of the
claims against Group members in the total amount of EUR 292,098
and content-related reasons, NLB has all along objected to these claims.
August 2018. In accordance with the ZVKNNLB, the Succession Fund of
sums recovered from NLB by enforcement. In the aforementioned case from
thousand, excluding accrued interest (31 December 2019: EUR 340,492
Two key reasons NLB is not liable for the old foreign currency savings
the Republic of Slovenia (Sklad Republike Slovenije za nasledstvo, javni
May 2015, the Succession Fund of the Republic of Slovenia has already
thousand). As at 31 December 2020, NLB was involved in 18 (31 December
are that it was only founded on the basis of the Constitutional Act on 27
sklad, hereinafter: ‘the Fund’), shall compensate NLB for the sums recovered
compensated the sums recovered from NLB by enforcement.
2019: 16) legal disputes with material monetary claims against NLB. The
total amount of these claims, excluding accrued interest, was EUR 179,996
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.
from NLB by enforcement of final judgements delivered by Croatian
courts with regard to the transferred foreign currency deposits, that is the
All procedures relating to the receivables of PBZ and ZaBa, as well as NLB’s
thousand (31 December 2019: EUR 177,075 thousand).
Moreover, this is a former Yugoslavia succession matter, as the governments
principle amount, accrued interest, expenses of court, attorney’s expenses
view on this matter were also discussed with the ECB as the supervisor of
of the Republic of Slovenia and the Republic of Croatia agreed in a
and other expenses of the plaintiff, and expenses related to enforcement
both Croatian banks.
136
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Provisions for legal risks for claims filed by PBZ and ZaBa are not formed,
Regardless of the negative judgement, in the financial statements NLB
since NLB believes that based on the factual and legal evaluation there are
Group did not recognise the negative impact due to protection provided
greater prospects for the court proceedings to end in favour of NLB than the
by the ZVKNNLB. For final judgements, NLB Group recognised the
opposite.
liabilities and related assets which currently amount to approximately EUR
21 million. They are included within other financial assets (note 5.6.d) and
other financial liabilities (note 5.15.d).
b) Movements in provisions for guarantees and commitments
NLB
12-month expected credit losses
Guarantees and commitments
Lifetime ECL not credit-impaired
Effects of
translation
of foreign
operations to
presentation
currency
Balance as at
1 Jan 2020
Acquisition of
subsidiaries
Transfer
Increases/
(Decreases)
Changes in
models/risk
parameters
Foreign
exchange
and other
movements
Balance as at
31 Dec 2020
Lifetime ECL credit-impaired
Guarantees and commitments
Of which: Purchased credit-impaired
in EUR thousands
Guarantees and commitments
Balance as at
1 Jan 2020
Transfer
Increases/
(Decreases)
in EUR thousands
Changes in
models/risk
parameters
Foreign
exchange
and other
movements
Balance as at
31 Dec 2020
6,145
653
193
136
947
(418)
22,365
(329)
(1,622)
228
363
(97)
(3)
(2)
7,510
732
(16)
20,301
1,049
659
1,863
(676)
(4)
15,796
-
(300)
(99)
727
-
2,767
NLB
Balance as at
1 Jan 2019
Transfer
Increases/
(Decreases)
in EUR thousands
Changes in
models/risk
parameters
Foreign
exchange
and other
movements
Balance as at
31 Dec 2019
Guarantees and commitments
1,984
-
1,838
-
(14)
3,808
1,249
(359)
(1,293)
(40)
(15)
23,611
12-month expected credit losses
1,249
-
1,838
-
(14)
5,057
Lifetime ECL not credit-impaired
Guarantees and commitments
4,071
513
2,223
(663)
Effects of
translation
of foreign
operations to
presentation
currency
Balance as at
1 Jan 2019
Transfer
Increases/
(Decreases)
Changes in
models/risk
parameters
Foreign
exchange
and other
movements
Balance as at
31 Dec 2019
in EUR thousands
Guarantees and commitments
Lifetime ECL credit-impaired
Guarantees and commitments
Of which: Purchased credit-impaired
821
(261)
28
24,624
(252)
(2,013)
Guarantees and commitments
688
-
1,296
65
(8)
-
8
1
3
-
2,318
2,596
(1,058)
(1,721)
655
(597)
(2,114)
-
1,296
245
(12)
-
1
-
14
-
12,909
2,444
24,068
1,984
c) Movements in employee benefit provisions
Post-employment benefits
Balance as at 1 January
Effects of translation of foreign operations to presentation currency
Acquisition of subsidiaries (note 5.12.b)
Additional provisions (note 4.9.)
Provisions released (note 4.9.)
Interest expenses (note 4.1.)
Utilised during year (payments)
Actuarial gains and losses
Balance as at 31 December
NLB Group
2020
15,320
(2)
3,374
983
(560)
76
(151)
(878)
18,162
2019
13,157
2
-
1,155
(708)
147
(210)
1,777
15,320
1
-
14
-
6,145
653
22,365
1,984
in EUR thousands
NLB
2020
13,165
-
-
672
(433)
27
(36)
(700)
12,695
2019
11,588
-
-
724
(670)
85
(85)
1,523
13,165
NLB Group
12-month expected credit losses
Guarantees and commitments
12,909
Lifetime ECL not credit-impaired
Guarantees and commitments
2,444
Lifetime ECL credit-impaired
Guarantees and commitments
24,068
Of which: Purchased credit-impaired
Guarantees and commitments
1,984
(4)
(5)
1
-
NLB Group
12-month expected credit losses
Guarantees and commitments
Lifetime ECL not credit-impaired
Guarantees and commitments
Lifetime ECL credit-impaired
9,044
3,264
Guarantees and commitments
26,774
Of which: Purchased credit-impaired
Guarantees and commitments
688
137
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Balance as at 1 January
Effects of translation of foreign operations to presentation currency
Acquisition of subsidiaries (note 5.12.b)
Additional provisions (note 4.9.)
Provisions released (note 4.9.)
Interest expenses (note 4.1.)
Utilised during year
Balance as at 31 December
Other employee benefits include NLB Group’s obligations for jubilee long-
service benefits.
d) Movements in restructuring provisions
Balance as at 1 January
Effects of translation of foreign operations to presentation currency
Disposal of subsidiaries
Additional provisions (note 4.13.)
Provisions released (note 4.13.)
Utilised during year
Balance as at 31 December
Other employee benefits
NLB Group
NLB
in EUR thousands
f) Movements in other provisions
2020
2,384
(1)
179
234
(112)
24
(163)
2,545
2019
2,247
2
-
329
(35)
37
(196)
2,384
2020
1,578
-
-
103
(38)
3
(121)
1,525
2019
1,570
-
-
164
-
11
(167)
1,578
Balance as at 1 January
Additional provisions (note 4.13.)
Provisions released (note 4.13.)
Utilised during year
Balance as at 31 December
5.17. Deferred income tax
a) Analysis by type of deferred income taxes
NLB Group
NLB
in EUR thousands
2020
162
34
(153)
(32)
11
2019
209
66
(105)
(8)
162
2020
85
-
(85)
-
-
2019
198
-
(105)
(8)
85
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
NLB Group
NLB
in EUR thousands
2020
14,500
(1)
(50)
3,500
-
(2,384)
15,565
2019
12,363
-
-
5,523
(45)
(3,341)
14,500
2020
14,182
-
-
3,500
-
(2,328)
15,354
2019
11,942
-
-
5,500
-
(3,260)
14,182
Deferred income tax assets
Valuation of financial instruments and capital investments
37,729
36,286
37,650
36,244
Impairment of financial assets
Provisions for liabilities and charges
Depreciation and valuation of non-financial assets
Fair value adjustments of financial assets measured at amortised cost
Tax reliefs
Other
3,190
8,489
4,063
938
1,179
111
910
4,109
1,087
-
-
-
947
3,138
140
-
-
-
784
3,196
154
-
-
-
Total deferred income tax assets
55,699
42,392
41,875
40,378
Deferred income tax liabilities
Valuation of financial instruments
Depreciation and valuation of non-financial assets
Impairment of financial assets
Fair value adjustments of financial assets measured at amortised cost
Other
Total deferred income tax liabilities
Net deferred income tax assets
21,023
1,515
3,271
592
1,984
28,385
31,789
(4,475)
11,159
1,296
3,270
-
-
15,725
29,500
(2,833)
11,871
10,131
193
597
-
-
12,661
29,214
-
201
477
-
-
10,809
29,569
-
NLB Group has adopted a business strategy and initiated key strategic
digitalisation and simplification, and adjustment of the organisational
initiatives, aiming among others towards a leaner organisation, optimisation
structure. These initiatives will result in fewer employees in the coming
of processes, implementation of a new IT strategy with a focus on
years.
e) Movements in provisions for legal risks
in EUR thousands
Net deferred income tax liabilities
Balance as at 1 January
Effects of translation of foreign operations to presentation currency
Acquisition of subsidiaries (note 5.12.b)
Disposal of subsidiaries
Additional provisions (note 4.13.)
Provisions released (note 4.13.)
Utilised during year
Exchange differences
Balance as at 31 December
NLB Group
2020
16,627
(8)
28,686
(119)
6,355
(1,659)
(3,280)
-
46,602
2019
13,076
24
-
-
5,837
(141)
(2,168)
(1)
16,627
NLB
2020
2,211
-
-
-
4,411
(181)
(768)
-
5,673
2019
2,180
-
-
-
251
(60)
(160)
-
2,211
138
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 in EUR thousands
in EUR thousands
Included in the income statement
- valuation of financial instruments and capital investments
- impairment of financial assets
- provisions for liabilities and charges
- depreciation and valuation of non-financial assets
- other
Included in other comprehensive income
- valuation and impairment of financial assets measured at
fair value through other comprehensive income
- actuarial assumptions and experience
NLB Group
2020
3,238
308
3,108
54
(336)
104
(1,619)
(1,486)
(133)
2019
8,041
8,305
100
293
(657)
-
(1,714)
(1,859)
145
NLB
2020
540
308
163
75
(6)
-
(895)
(762)
(133)
2019
8,556
8,305
87
136
28
-
(1,221)
(1,366)
145
NLB
Balance as at 1 January 2019
(Charged)/credited to profit and loss
(Charged)/credited to other comprehensive income
Balance as at 31 December 2019
(Charged)/credited to profit and loss
(Charged)/credited to other comprehensive income
Balance as at 31 December 2020
Deferred income tax liabilities
Provisions for
liabilities and charges
Valuation of financial
instruments and
capital investments
Depreciation and
valuation of non-
financial assets
Impairment of
financial assets
2,915
136
145
3,196
75
(133)
3,138
25,747
8,190
2,307
36,244
188
1,218
37,650
157
(3)
-
154
(14)
-
140
697
87
-
784
163
-
947
NLB Group
Valuation
of financial
instruments
and capital
investments
Depreciation and
valuation of non-
financial assets
Fair value
adjustments of
financial assets
measured at
amortised cost
Other
Impairment of
financial assets
Balance as at 1 January 2019
3,305
7,205
1,179
Effects of translation of foreign operations
to presentation currency
Charged/(credited) to profit and loss
6
(95)
54
2
(115)
4,067
2
115
-
Balance as at 31 December 2019
3,270
11,159
1,296
Effects of translation of foreign operations
to presentation currency
Charged/(credited) to profit and loss
Charged/(credited)to other comprehensive income
Acquisition of subsidiaries
Balance as at 31 December 2020
(7)
(861)
696
173
3,271
-
(120)
2,030
7,954
(2)
180
-
41
21,023
1,515
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,984
1,984
592
592
exceed the total amount of deferred tax assets for which a reversal is
arising from the impairments of investments in subsidiaries and associates
Charged/(credited) to other comprehensive income
Tax loss on which NLB did not recognize deferred tax assets, as at 31
In addition to NLB, Komercijalna banka Beograd also has a significant
December 2020 amounts to EUR 922,898 thousand (31 December 2019:
amount of tax loss for which no deferred tax assets are recognised. This tax
949,136 thousand). Slovenian tax law does not set deadlines by which
loss expires in 2021 and as at 31 December 2020 amounts to EUR 73,898
uncovered tax losses must be utilised, but the use of tax loss is limited to
thousand.
50% of the actual tax base. Impairments of investments in non-strategic
capital investments, where deferred tax assets are not recognised as they
NLB Group did not recognise deferred tax assets on temporary differences
expected within five years, amounts to EUR 242,861 thousand (2019: EUR
where it is not probable that the temporary difference will reverse in the
291,357 thousand).
b) Movements in deferred income taxes
Deferred income tax assets
foreseeable future. This temporary differences amounts to EUR 347,040
thousand as at 31 December 2020 (31 December 2019: EUR 322,077
thousand).
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
Tax relief
Fair value
adjustments
of financial
assets
measured at
amortised
cost
in EUR thousands
Other
Total
Balance as at 1 January 2019
3,671
25,834
1,627
905
Effects of translation of foreign
operations to presentation currency
(Charged)/credited to profit and loss
(Charged)/credited to other comprehensive income
-
293
145
-
8,190
2,262
2
(542)
-
Balance as at 31 December 2019
4,109
36,286
1,087
Effects of translation of foreign
operations to presentation currency
(Charged)/credited to profit and loss
(Charged)/credited to other comprehensive income
Acquisition of subsidiaries
Balance as at 31 December 2020
4
54
(133)
4,455
8,489
-
188
1,240
15
37,729
-
(156)
2,247
-
3,132
4,063
-
31
3,190
-
5
-
910
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,179
1,179
938
938
-
-
-
-
-
-
104
-
7
32,037
2
7,946
2,407
42,392
6
2,437
1,107
9,757
111
55,699
NLB
Balance as at 1 January 2019
Charged/(credited) to profit and loss
Charged/(credited) to other comprehensive income
Balance as at 31 December 2019
Charged/(credited) to profit and loss
Charged/(credited) to other comprehensive income
Balance as at 31 December 2020
Impairment of
financial assets
Valuation of financial
instruments and
capital investments
Depreciation and
valuation of non-
financial assets
444
-
33
477
-
120
597
6,606
(115)
3,640
10,131
(120)
1,860
11,871
232
(31)
-
201
(8)
-
193
in EUR thousands
Total
7,282
(146)
3,673
10,809
(128)
1,980
12,661
Total
29,516
8,410
2,452
40,378
412
1,085
41,875
in EUR thousands
Total
11,689
10
(95)
4,121
15,725
(9)
(801)
2,726
10,744
28,385
139
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 5.18. Income tax relating to components of other comprehensive income
in the aggregate, directly or indirectly 25% or more NLB shares with voting
5.21. Accumulated other comprehensive income and reserves
NLB Group
NLB
in EUR thousands
rights.
a) Reserves
The share premium account as at 31 December 2020 and 31 December
2020
Before tax
Tax expense
Net of tax
Before tax
Tax expense
Net of tax
Actuarial gains and losses
Financial assets measured at fair value
through other comprehensive income
878
(133)
10,364
(1,486)
745
8,878
Share of associates and joint ventures
(11,067)
-
(11,067)
175
(1,619)
(1,444)
700
4,012
-
4,712
(133)
(762)
-
(895)
567
3,250
-
3,817
The shares also give their holders the right to be informed, as well as the
2019 comprises paid-up premiums in the amount of EUR 822,173
pre-emptive right to subscribe for new shares on a pro rata basis in case of
thousand and the revaluation of share capital from previous years in the
a share capital increase, the right to a pro-rata share of remaining assets
amount of EUR 49,205 thousand.
in case of bankruptcy or liquidation or NLB and the right to receive a
dividend. In 2020, NLB did not pay any dividends for previous year (2019:
As at 31 December 2020 and 31 December 2019, profit reserves in the
7.13 EUR per share, which decreased retained earnings for EUR 142,600
amount of EUR 13,522 thousand relate entirely to legal reserves in
thousand).
accordance with the Companies Act.
Total
2019
Actuarial gains and losses
Financial assets measured at fair value
through other comprehensive income
Share of associates and joint ventures
Total
NLB Group
NLB
Board that in the period of 36 months from the adoption of the
retained earnings as at 31 December 2020.
in EUR thousands
In June 2019, the General Assembly of NLB authorised the Management
thousand (2019: net profit EUR 176,149 thousand) which is included in the
As at 31 December 2020 and 31 December 2019, NLB holds no own shares.
In 2020, NLB recorded a net profit in the amount of EUR 113,952
Before tax
Tax expense
Net of tax
Before tax
Tax expense
Net of tax
shareholders’ resolution, it can buy own shares of the Bank for the payment
of variable remuneration to certain employees as required by the Banking
(1,777)
13,413
9,673
21,309
145
(1,859)
(1,854)
(3,568)
(1,632)
11,554
7,819
17,741
(1,523)
145
(1,378)
Act and other relevant regulations. When disposing of own shares which
7,190
(1,366)
-
-
5,667
(1,221)
5,824
-
4,446
NLB acquires on the basis of this authorisation, the pre-emptive right of the
existing shareholders to acquire shares is completely excluded, provided that
own shares are disposed of for the purpose of paying variable remuneration
to employees of NLB in the form of NLB shares.
5.19. Other liabilities
b) Accumulated other comprehensive income
NLB Group
NLB
in EUR thousands
NLB Group
NLB
in EUR thousands
Deferred income
Taxes payable
Payments received in advance
Other liabilities
Total
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
12,364
5,009
2,195
859
9,012
4,209
1,991
-
20,427
15,212
5,391
4,107
199
-
9,697
6,142
3,039
53
-
9,234
Financial assets measured at fair value through other comprehensive income - debt securities
Financial assets measured at fair value through other comprehensive income - equity securities
Actuarial defined benefit pension plans
Foreign currency translation
Hedge of a net investment in a foreign operation
Total
38,852
3,644
(4,399)
45,040
2,840
(5,086)
(17,724)
(17,055)
754
21,127
754
26,493
27,242
452
(3,592)
-
-
24,156
288
(4,159)
-
-
24,102
20,285
5.20. Share capital
restrictions imposed by the regulators, Group’s risk appetite, target capital
The share capital of NLB amounts to EUR 200,000 thousand and did
adequacy at Group’s level and actual prevailing capital position at the time
not change in 2020. It is comprised of 20,000,000 no-par-value ordinary
of the proposal.
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.
The shares give to their holders the right to vote at the NLB’s meeting of
As at 31 December 2020, the major shareholder of NLB with significant
shareholders where, as a rule, each share entitles its holder to one vote.
influence is the Republic of Slovenia, owning 25.00% plus one share.
Nevertheless, a shareholder who acquires shares which, together with the
shares already held by such shareholder or by a third person on behalf of
The book value of a NLB share on a consolidated level as at 31 December
such shareholder, represent more than 25% of the NLB’s share capital,
2020 was EUR 97.6 (31 December 2019: EUR 84.3), and on solo level
may only exercise its voting rights under such shares if NLB’s Supervisory
was EUR 72.5 (31 December 2019: EUR 66.7). It is calculated as the ratio
Board approves such an acquisition. The Supervisory Board’s approval may
of net assets’ book value without other equity instruments issued and the
only be rejected if, following such an acquisition, such a person would hold
number of shares.
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
Distributable profit as at 31 December 2020 amounts to EUR 341,992
days. No such approval is necessary in respect of the shares acquired by a
thousand (31 December 2019: EUR 228,040 thousand), consists of NLB
person on behalf of third persons provided that such a person is not entitled
net profit for 2020 in the amount of EUR 113,952 thousand (2019: EUR
to exercise the voting rights arising out of such shares at its own discretion
176,149 thousand), and retained earnings from previous years in the amount
of EUR 228,040 thousand. Its allocation will be subject to a decision by
and undertakes to NLB that it will not exercise the voting rights based on
voting instructions unless such voting instructions are accompanied with a
the Bank’s General Assembly. The proposal for the General Assembly will
confirmation that the person giving such instructions is the beneficial owner
be prepared by the Management and the Supervisory Board, considering
of the shares in respect of which votes are to be exercised and does not hold
140
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 5.22. Capital adequacy ratios
in EUR thousands
NLB’s overall capital requirement on the consolidated level
NLB Group
NLB
SREP requirement
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
Paid up capital instruments
Share premium
Retained earnings - from previous years
Profit eligible - from current year
Accumulated other comprehensive income
Other reserves
Minority interest
Prudential filters: Additional Valuation Adjustments (AVA)
(-) Goodwill
(-) Other intangible assets
200,000
871,378
552,146
63,635
21,588
13,522
71,562
(3,632)
(3,529)
200,000
871,378
358,648
35,000
14,364
13,522
-
(2,194)
(3,529)
200,000
871,378
228,040
21,658
24,102
13,522
-
200,000
871,378
51,891
8,166
20,285
13,522
-
(1,755)
(1,701)
-
-
(33,222)
(36,013)
(9,914)
(25,980)
COMMON EQUITY TIER 1 CAPITAL (CET1)
1,753,448
1,451,176
1,347,031
1,137,561
Minority interest
Additional Tier 1 capital
TIER 1 CAPITAL
Capital instruments and subordinated loans eligible as Tier 2 capital
Minority interest
TIER 2 CAPITAL
TOTAL CAPITAL
RWA for credit risk
RWA for market risks
RWA for credit valuation adjustment risk
RWA for operational risk
14,614
14,614
-
-
-
-
-
-
284,595
12,806
297,401
44,595
284,595
44,595
-
-
-
44,595
284,595
44,595
2,065,463
1,495,771
1,631,626
1,182,156
10,222,923
7,720,232
4,805,127
4,344,829
1,250,563
523,050
657,088
274,025
200
663
200
663
Pillar 1 (P1R)
Pillar 2 (P2R)
Total SREP Capital Requirement (TSCR)
Combined buffer requirement (CBR)
Conservation buffer
O-SII buffer
Countercyclical buffer
Pillar 2 Guidance (P2G)
OCR + P2G
1,768,062
1,451,176
1,347,031
1,137,561
Overall capital requirement (OCR) = MDA threshold
from 12 March
2020 onwards
as at 1 January till
11 March 2020
CET1
AT1
T2
CET1
Tier 1
Total Capital
CET1
Tier 1
4.5%
1.5%
2.0%
1.55%
2.06%
2.75%
6.05%
8.06%
Total Capital
10.75%
CET1
CET1
CET1
CET1
Tier 1
Total Capital
CET1
CET1
2.5%
1.0%
0.0%
9.55%
11.56%
14.25%
1.0%
10.55%
4.5%
1.5%
2.0%
0.0%
0.0%
2.75%
7.25%
8.75%
10.75%
2.5%
1.0%
0.0%
10.75%
12.25%
14.25%
1.0%
11.75%
2019
4.5%
1.5%
2.0%
0.0%
0.0%
3.25%
7.75%
9.25%
11.25%
2.5%
1.0%
0.0%
11.25%
12.75%
14.75%
1.0%
12.25%
The Overall Capital Requirement (OCR) amounted to 14.25% for NLB on
Non-controlling interest (minority capital) was included in the capital - as at
the consolidated basis, consisting of:
June 2020 in the amount of EUR 31.7 million and as at December 2020 in
the total amount of EUR 99.0 million (of which EUR 66.1 million due to
947,342
941,594
566,385
605,581
• 10.75% TSCR (8% Pillar 1 Requirement and 2.75% Pillar 2
the acquisition of Komercijalna banka Beograd). In addition, risk mitigation
TOTAL RISK EXPOSURE AMOUNT (RWA)
12,421,028
9,185,539
6,028,800
5,225,098
Common Equity Tier 1 Ratio
Tier 1 Ratio
Total Capital Ratio
14.1%
14.2%
16.6%
15.8%
15.8%
16.3%
22.3%
22.3%
27.1%
21.8%
21.8%
22.6%
Requirement); and
contracts to reduce RWA on consolidated basis were concluded with MIGA
• 3.5% CBR (2.5% Capital Conservation buffer, 1% O-SII buffer and 0%
in the total amount of up to EUR 303.1 million and became effective as at
Countercyclical buffer).
31 July 2020.
The applicable OCR requirement for 2020 decreased from 14.75% to
The capital of NLB and NLB Group at the end of year 2020 remains strong
14.25%, as Pillar 2 Requirement decreased by 0.5 p.p. to 2.75%, as a result
in accordance with risk appetite orientations, at a level which covers all the
of better overall SREP assessment. Moreover, Pillar 2 Guidance (P2G)
current and announced regulatory capital requirements, including capital
which should be comprised entirely of CET1 capital, remains at a relatively
buffers and other currently known requirements, as well as the P2G.
European banking capital legislation – CRD IV, is based on the Basel III
(together with the Pillar 1 requirement it represents the minimum total
low level 1.0%.
guidelines. The legislation defines three capital ratios reflecting a different
SREP capital requirement – TSCR);
As at 31 December 2020, NLB Group capital ratios on a consolidated basis
quality of capital:
• The applicable combined buffer requirement (CBR): a system of capital
In 2021, NLB is required to maintain the same level of OCR at 14.25% on
stand at:
• Common Equity Tier 1 ratio (ratio between common or CET1 capital
breach of capital requirement, but triggers limitations in payment of
• 14.1% CET1 ratio,
and risk-weighted exposure amount or RWA), which must be at least
dividends and other distributions from capital. Some of the buffers are
In 2020, the Bank continued with strengthening and optimising the capital
• 14.2% Tier 1 ratio,
4.5%;
prescribed by law for all banks and some of them are bank-specific, set
structure. On 5 February 2020, the Bank issued subordinated Tier 2 notes
• 16.6% Total Capital ratio.
• Tier 1 capital ratio (Tier 1 capital to RWA), which must be at least 6%;
by the supervisory institution (CBR and TSCR together form the overall
(10NC5) in the aggregate nominal amount of EUR 120 million. On 25
buffers to be added on top of TSCR – breaching of the CBR is not a
a consolidated basis, with unchanged structure.
and
capital requirement – OCR);
March 2020, NLB obtained ECB permission for its inclusion in the capital,
In the scope of regulatory risks, which include credit risk, operational risk,
• Total capital ratio (total capital to RWA), which must be at least 8%.
• Pillar 2 Capital Guidance: capital recommendation set by the supervisory
so the instrument is included in capital as at 31 March 2020.
and market risk, NLB Group uses the standardised approach for credit and
In addition to the aforementioned ratios which form the Pillar 1
recommendation, and not obligatory. Any non-compliance does not affect
On 4 March 2020, the Bank also obtained ECB permission to include in the
risks is made according to the basic indicator approach. The same
requirement, NLB must meet other requirements and recommendations
dividends or other distributions from capital; however, it might lead to
capital subordinated Tier 2 notes issued in November 2019 in the amount
approaches are used for calculating the capital requirements for NLB on a
that are imposed by the supervisory institutions or by the legislation:
intensified supervision and the imposition of measures to re-establish a
prudent level of capital (including preparation of capital restoration plan).
of EUR 120 million. All the existing subordinated Tier 2 instruments in
total amount of EUR 284.6 million are therefore included in the capital.
standalone basis, except for the calculation of the capital requirement for
operational risks where the standardised approach is used.
institution through the SREP process. It is bank-specific and is a
market risks, while the calculation of capital requirement for operational
• The Pillar 2 Requirement (SREP requirement): bank-specific, obligatory
requirement set by the supervisory institution through the SREP process
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 As at 31 December 2020, the Total Capital Ratio for NLB Group stood at
The increase in RWA for market risks and CVA (EUR 727.1 million YoY)
b) Analysis of derivative financial instruments by notional amounts
16.6% (or 0.3 p.p. higher than at the end of 2019), and for NLB at 27.1%
is also mainly due to completion of the acquisition process of Komercijalna
(or 4.4 p.p. higher than at the end of 2019). As at 31 December 2020, the
banka Beograd. The increase in the RWA for operating risks (EUR 5.7
CET1 ratio stood at 14.1% (1.7 p.p. lower than at the end of 2019). The
million) derives from the higher three-year average of relevant income,
higher NLB Group total capital adequacy compared to the end of 2019
as defined in Article 316 of CRR, which represents the basis for the
derives from higher capital (increase of EUR 569.7 million YoY) which
calculation.
compensated RWA increase of EUR 3,235.5 million YoY for the Group.
Higher RWA derives from acquisition of Komercijalna banka Beograd.
The most important goal of internal capital adequacy assessment process
Total capital increased mainly due to inclusion of the Tier 2 notes (EUR
(ICAAP) in NLB Group, set up in accordance with ECB Guidelines, is
240.0 million), inclusion of undistributed profit for the year 2019 (EUR
ensuring adequate capital and sustainability on ongoing basis. The purpose
157.5 million), partial inclusion of 2020 profit (EUR 63.6 million), and
of this process is to have in place sound, effective, and comprehensive
inclusion of a minority interest in the capital calculation from June 2020
strategies and processes to assess and maintain capital on an ongoing
onwards (EUR 99.0 million as at 31 December 2020).
basis, as well the adequate distribution of internal capital for covering the
The RWA for credit risk in 2020 increased by EUR 2,502.7 million,
In addition, NLB Group gives strong emphasis on its integration into the
mainly due to completion of the acquisition process of Komercijalna
overall risk management system in order to assure proactive support for
nature and level of the risks to which NLB Group is or might be exposed.
banka Beograd. Excluding the acquisition, RWA for credit risk decreased
informed decision-making.
by EUR 173.9 million as the result of changes in regulation CRR and
MIGA guarantee for obligatory reserves in NLB Group banking members.
From an economic perspective, NLB Group manages its capital adequacy
CRR ‘Quick Fix’ brought more favourable treatment of SME exposures
by ensuring that all its risks are adequately covered by internal capital. A
(changes of prescribed SME supporting factor) and temporary treatment of
normative perspective is a multiyear forward-looking assessment of NLB
Swaps
- currency swaps
- interest rate swaps
Options
- interest rate options
- securities options
Forward contracts
- currency forward
Total
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
Short-term
Long-term
Short-term
Long-term
Short-term
Long-term
Short-term
Long-term
99,420
1,425,765
42,736
1,706,073
78,413
1,425,765
52,299
1,706,073
99,420
6,068
42,736
69,328
78,413
6,068
52,299
69,328
-
1,419,697
-
1,636,745
-
1,419,697
-
1,636,745
12,811
27,000
12,864
28,875
12,811
27,000
12,864
28,875
-
27,000
-
28,875
-
27,000
-
28,875
12,811
-
12,864
-
12,811
-
12,864
-
91,309
41,423
108,640
28,298
93,846
41,423
107,936
28,298
91,309
41,423
108,640
28,298
93,846
41,423
107,936
28,298
203,540
1,494,188
164,240
1,763,246
185,070
1,494,188
173,099
1,763,246
1,697,728
1,927,486
1,679,258
1,936,345
public debt issued in the currency of another Member State. Furthermore,
Group which shows its ability to fulfil all of its capital-related regulatory and
The notional amounts of derivative financial instruments that qualify
The fair values of derivative financial instruments are disclosed in notes 5.2.
inclusion of Serbia on the list of third countries whose supervisory and
supervisory requirements and risk appetite of NLB Group. Within these
for hedge accounting at NLB Group and NLB amount to EUR 573,753
and 5.5.
regulatory requirements are considered equivalent as EEA countries
capital constraints, NLB Group defines its management buffers in the Risk
thousand (31 December 2019: EUR 561,500 thousand) (note 5.5.b).
contributed significantly to RWA reduction at the beginning of 2020 (EUR
appetite above the regulatory and supervisory requirement and internal
Derivatives that qualify for hedge accounting are used to hedge interest rate
100.0 million). Due to changed treatment of intangible assets, which were
capital needs that allow it to sustainably follow its business strategy. A
risk.
previously deducted from capital in whole and now are partially included in
normative perspective includes several stress scenarios which are integrated
RWA, RWA increased by EUR 24.9 million.
into NLB Group’s annual business plan review and budgeting process.
c) Capital commitments
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
2,433
9,566
11,999
7,286
2,122
9,408
2,429
9,403
11,832
7,201
2,084
9,285
5.23. Off-balance sheet liabilities
a) Contractual amounts of off-balance sheet financial instruments
NLB Group
NLB
Capital commitments for purchase of:
in EUR thousands
Short-term guarantees
- financial
- non-financial
Long-term guarantees
- financial
- non-financial
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
222,440
119,309
103,131
904,002
359,787
544,215
210,469
111,526
98,943
705,989
272,071
433,918
122,136
112,461
61,322
60,814
567,532
196,681
370,851
58,920
53,541
502,012
171,989
330,023
- property and equipment
- intangible assets
Total
5.24. Funds managed on behalf of third parties
are charged to the respective fund, and no liability falls on NLB Group in
Funds managed on behalf of third parties are accounted separately from
connection with these transactions. NLB Group charges fees for its services.
NLB Group’s funds. Income and expenses arising with respect to these funds
Commitments to extend credit
1,816,441
1,346,012
1,306,791
1,072,458
Funds managed on behalf of third parties
Letters of credit
Other
Provisions (note 5.16.b)
Total
21,794
10,293
22,871
8,742
2,256
5,865
6,243
14,106
2,974,970
2,294,083
2,004,580
1,707,280
(42,174)
(39,421)
(28,543)
(29,163)
2,932,796
2,254,662
1,976,037
1,678,117
Fiduciary activities
Settlement and other services
Total
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
25,713,799
24,495,725
24,466,910
23,259,665
971,600
1,012,492
907,132
980,964
26,685,399
25,508,217
25,374,042
24,240,629
Fee income from all issued non-financial guarantees amounted to EUR
signed, bank and a client agree on all conditions for issuing guarantees.
4,910 thousand (2019: EUR 4,801 thousand) in NLB Group, and to EUR
Nevertheless, NLB Group can discontinue issuing guarantees if the client’s
4,397 thousand (2019: EUR 4,375 thousand) in NLB.
conditions worsen. As at 31 December 2020 unused guarantee lines at the
NLB Group level amount to EUR 307,093 thousand (31 December 2019:
Besides the instruments presented in the table above, NLB Group and NLB
EUR 307,199 thousand), and at the NLB level EUR 236,542 thousand (31
enter also into contracts related to guarantee lines. When the contract is
December 2019: EUR 247,485 thousand).
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Fiduciary activities
Assets
Clearing or transaction account claims for client assets
25,633,706
24,431,766
24,396,203
23,202,008
- from financial instruments
25,630,244
24,431,355
24,392,773
23,201,641
NLB Group
NLB
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
in EUR thousands
6. Risk management
NLB Group plans a prudent risk profile and optimal capital usage,
representing an important element of its business strategy and related mid-
Risk management in NLB Group is implemented in accordance with the
term financial targets. The management of credit risk, which is the most
set strategic guidelines, established internal policies and procedures which
important risk category in NLB Group, concentrates on taking moderate
take into account European banking regulations, the regulations adopted
risks – a diversified credit portfolio, adequate credit portfolio quality, the
by the Bank of Slovenia, the current EBA guidelines, and relevant good
sustainable costs of risk, and ensuring an optimal return considering the
banking practices. In addition, the Group is constantly enhancing and
risks assumed. As regards liquidity risk, the tolerance is low, while the
complementing the existing approaches, methodologies, and processes in all
activities are geared towards an adequate liquidity position on an ongoing
risk management segments with the aim to proactively and comprehensively
basis. The Group limited exposure to credit spread risk, arising from the
- receipt, processing, and execution of orders
9,194,539
9,574,811
8,502,331
8,930,064
support decision-making.
- management of financial instruments portfolio
528,206
522,263
-
-
valuation risk of debt securities portfolio servicing as liquidity reserves,
to the moderate level. The fundamental orientation in the management
- custody services
15,907,499
14,334,281
15,890,442
14,271,577
- to Central Securities Clearing Corporation or bank settlement account for sold financial instrument
- to other settlement systems and institutions for bought financial instrument (debtors)
Clients' money
- at settlement account for client assets
- at bank transaction accounts
Liabilities
49
3,413
80,094
42,029
38,065
124
287
63,959
28,250
35,709
17
3,413
70,707
32,642
38,065
80
287
57,657
21,948
35,709
Managing risks and capital efficiently is crucial for NLB Group sustained
of interest rate risk is to limit unexpected negative effects on revenues
long-term profitable operations. Robust Risk Management framework is
and capital, therefore, a moderate tolerance for this risk is stated. When
comprehensively integrated into decision-making, steering, and mitigation
assuming operational risk, the Group pursues the orientation that such a risk
processes within the Group. NLB Group gives high importance to the risk
must not significantly impact its operations. On this basis, changes of control
culture and awareness of all relevant risks within the entire Group.
activities, processes, and/or organisation were performed. Besides the
NLB Group’s Risk management framework supports business decision-
of potential damage. The conclusion of transactions in derivative financial
making on strategic and operating levels, comprehensive steering, proactive
instruments at NLB is primarily limited to servicing customers and hedging
risk management and mitigation by incorporating:
Bank’s own positions. In the area of currency risk, NLB Group pursues
Group also focuses on proactive mitigation, prevention, and minimisation
the goals of low to moderate exposure. The tolerance for other risk types
Clearing or transaction liabilities for client assets
25,713,799
24,495,725
24,466,910
23,259,665
• risk appetite statement and risk strategy orientations,
is low and focuses on minimising their possible impacts on NLB Group’s
- to client from cash and financial instruments
- receipt, processing, and execution of orders
25,707,581
24,492,746
24,461,033
23,258,161
9,230,406
9,606,633
8,538,198
8,961,886
• yearly review of strategic business goals, budgeting, and capital planning
entire operations. Environmental, social, and governance (ESG) risks do
process,
not represent a new risk category, but rather an aggravating factor for the
• internal capital adequacy assessment process (ICAAP) and internal
types of risks already managed through the established risk management
- management of financial instruments portfolio
537,283
527,134
-
-
liquidity adequacy assessment process (ILAAP),
framework.
- custody services
15,939,892
14,358,979
15,922,835
14,296,275
• recovery plan activities,
- to Central Securities Clearing Corporation or bank settlement account for bought financial instrument
- to other settlement systems and institutions for bought financial instrument (creditors)
- to bank or settlement bank account for fees and costs, etc.
72
5,755
391
83
2,514
382
72
5,414
391
83
1,039
382
• other internal stress-testing capabilities, early warning systems and on-
Risk management focuses on managing and mitigating risks in line with
going risk analysis,
the Group’s Risk Appetite and Risk Strategy. Within these frameworks, the
• regulatory and internal management reporting.
Group monitors a range of risk metrics, including internal capital allocation,
NLB Group uses the ‘three lines of defence framework’ as an important
usage of risk limits and potential deviations from limits and target values are
element of its internal governance, whereby Risk management function acts
regularly reported to the respective committees and/or the Management
in order to assure Group’s risk profile is in line with its risk appetite. The
Fee income for funds managed on behalf of third parties
NLB Group
NLB
they support business operations and enable efficient risk management by
in EUR thousands
as a second line of defence. Set governance and different risk management
Board of the Bank. The banking subsidiaries within NLB Group adapted a
tools enable adequate oversight of the Group’s risk profile. Moreover,
corresponding approach to monitor and manage their target risk profiles.
Fiduciary activities (note 4.3.b)
Settlement and other services
Total
2020
9,812
925
2019
9,267
1,435
10,737
10,702
2020
8,494
864
9,358
2019
7,775
1,185
8,960
incorporating escalation procedures and different mitigation measures when
NLB Group established a comprehensive stress-testing framework and other
necessary.
a) Risk management strategies and processes
early warning systems in different risk areas with the intention to strengthen
the existing internal controls and timely responding when necessary. Robust
and uniform stress-testing programme includes all material types of risk
The key goal of NLB Group’s Risk Management is to proactively
and relevant stress scenario analysis, according to the vulnerability of the
manage, assess, and monitor risks within the Group. Sound and
Group’s business model. It is integrated into Risk appetite, ICAAP, ILAAP,
holistic understanding of risk management is embedded into the entire
Recovery Plan, and budgeting process to support proactive management
organisation, focusing on risk identification at a very early stage, efficient risk
of the Group’s risk profile, namely the capital and liquidity positions on a
management, and mitigation of them with the aim of ensuring the prudent
forward-looking perspective. In addition, the Group also performs reverse
use of its capital and adequate liquidity structure to support the financial
stress tests with the aim to test its maximum recovery capacity. Other partial
resilience of the Group.
risk assessments are covered by the sensitivity analysis, based on relevant
stressed risk parameters, and integrated into the process of setting a risk
Key risk management guidelines of NLB Group are defined by its Risk
management limit system.
Appetite and Risk Strategy regarding the Group’s business model, based
on a forward-looking perspective. The Strategy of NLB Group, the Risk
For the purpose of an efficient risk mitigation process, NLB Group
Appetite, Risk Strategy, and the key internal policies of NLB Group – which
applies a single set of standards to retail and corporate loan collateral,
are approved by the Management and Supervisory Boards – specify the
representing a secondary source of repayment with the aim of efficient
strategic goals, risk appetite guidelines, approaches, and methodologies for
credit risk management and optimal capital consumption. The Group has
monitoring, measuring, and managing all types of risk in order to meet
internal strategic objectives and fulfil all external requirements. The main
a system for monitoring and reporting collateral at fair (market) value in
accordance with the International Valuation Standards (IVS). The eligibility
strategic risk guidelines are comprehensively integrated into decision-
of collateral, by types and ratios referring to prudent lending criteria, is
making, including the annual business plan review and budgeting process.
set within internal lending guidelines. Credit risk mitigation principles and
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 rules in NLB Group are described in more relevant details in the section
Committee of NLB. The process follows the co-decision principle, in which
d) Data and IT system
profile was moderate. The harmonisation in the area of the Group’s risk
Credit risk management. When hedging market risks, namely interest rate
the credit committee of the respective Group member first approves their
Risk data are calculated and stored in NLB Group Data Warehouse (DWH),
management framework and uniform data flow, based on Group’s Risk
risk and foreign exchange risk, in line with the set risk appetite, NLB Group
decision, following which the Credit Committee of NLB gives their opinion.
collected from NLB and other Group member’s DWH. The established
management Standards, is underway.
follows the principle of natural hedge or using derivatives in line with hedge
The resolution of the Credit Committee of NLB is made on the basis of all
process provides an integrated information in common reference structure
accounting principles.
available documentation, including a non-binding rating opinion prepared
where business users can access in a consistent and subject-oriented format.
6.1. Credit risk management
by the underwriting department of NLB. This same principle and process
Data are regularly checked and validated. Data used for internal risk
a) Introduction
b) Risk management structure and organisation
is set also for the issuing of credit exposures for the materially important
assessment, management, and reporting are the same as data which NLB
In its operations, NLB Group is exposed to credit risk, or the risk of losses
NLB Group’s corporate governance framework is based on the principles
clients of NLB Group.
Group uses for regulatory reporting.
of sound and responsible governance, in accordance with the applicable
legislation of the Republic of Slovenia, particularly the provisions of the
Risk monitoring in NLB Group members is operating within an
e) Main emphasis of risk management in 2020
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
Companies Act (ZGD-1) and the Banking Act (ZBan-2), Regulation on
independent and/or separate organisational unit. This way, monitoring
Efficient managing of risks and capital remains crucial for NLB Group to
Financial Reporting Standards, regulations issued by the European Central
Internal Governance Arrangements, the Management Body, and the
of risks is established on the basis of standardised and systemic risk
sustain long-term profitable operations. The Group further enhanced the
Bank or Bank of Slovenia, and the EBA guidelines. This area is governed
Internal Capital Adequacy Assessment Process for Banks and Savings
management approaches. This monitoring enables a comprehensive
robustness of its risk management system in all respective risk categories
in greater detail by the internal methodologies and procedures set out in
Banks, the EBA Guidelines on internal governance, the EBA Guidelines
overview of the Group’s and of each member’s statement of financial
in order to manage them proactively, comprehensively, and prudently.
internal acts.
on the assessment of the suitability of members of the management body,
position. In compliance with the risk appetite, risk management strategy
Risk identification in a very early stage, its efficient managing, and the
and key function holders, as well as the EBA Guidelines on remuneration
and policies of NLB Group, risk monitoring in each NLB Group member
corresponding mitigation processes represent essential steps in such a
Through regular reviews of the business practices and the credit portfolios
practices. Several layers of management provide cohesive risk management
is separated from its management and/or business function in order to
system. The business and operating environment relevant for NLB Group
of NLB entities, NLB ensures that the credit risk management of those
governance in NLB Group.
maintain the objectivity required when assessing business decisions. The
operations is changing with trends, such as: changing customer behaviour,
entities function in accordance with NLB Group’s risk management
organisational unit for managing risks directly reports to the Management
emerging new technologies and competitors, sustainable financing, and
standards to enable meaningfully uniform procedures at the consolidated
NLB Group established three lines of a defence framework with the aim
Board and its committees (Credit Committee, ALCO and the Operational
increasing new regulatory requirements. With that in mind, the risk
level.
of managing risks effectively. The three lines of defence concept provides
Risk Committee), which report to the Supervisory Board (the Risk
management framework is continuously adapting with the aim to detect and
a clear division of activities and defines roles and responsibilities for risk
Committee of the Supervisory Board or Board of Directors).
manage new potential emerging risks.
NLB Group manages credit risk at two levels:
management at different levels within the Group. Risk management in
the Group acts as a second line of defence, accountable for appropriate
c) Risk measurement and reporting systems
The Group gives special focus on the inclusion of risk analysis into the
• At the level of the individual customer/group of customers appropriate
managing, assessing, monitoring, and reporting of risks in the Bank as
As a systemic banking group, NLB Group is subject to the Single
decision-making process on strategic and operating levels, diversification
procedures are followed in various phases of the relationship with a
the main entity in Slovenia, and as the competence centre in charge of
Supervisory Mechanism (SSM), which is supervised by the Joint Supervisory
in order to avoid a large concentration, optimal usage of internal capital,
customer prior to, during, and after the conclusion of an agreement.
nine banking members and other non-core subsidiaries which are in
Team of the ECB and the Bank of Slovenia. The Group member complies
appropriate risk-adjusted pricing, regular education/trainings at all levels
Prior to concluding an agreement, a customer’s performance, financial
the controlled wind-out. As at 30 December 2020, the acquisition of
with the ECB regulation, while NLB Group subsidiaries operating outside
of management, and the assurance of overall compliance with internal
position, and past cooperation with NLB are assessed. For the purpose of
Komercijalna banka Beograd was completed. The harmonisation in the
Slovenia are also compliant with the rules set by the local regulators. With
policies/rules and relevant regulations.
area of the Group’s risk management framework and uniform data flow,
regards to capital adequacy, based on the provisions of the Directive (CRD),
objectively assessing a client’s operation comprehensively, internal scoring
models for particular client segments have been developed. It is also
based on Group’s Risk management Standards, is ongoing.
Decision (CRR), NLB Group applies the standardised approach to credit
The overall slow-down of the economy caused by the COVID-19 pandemic
important to secure high-quality collateral even though it does not affect a
and market risk, and the basic approach (a simplified approach with less
had some negative impacts on the loan portfolio quality and new loan
customer’s credit rating. This is followed by various forms of monitoring
Overall, the organisation and delineation of competencies in NLB Group’s
data granularity) to operational risks, with the exception of NLB which
generation. Nevertheless, the rating structure of credit portfolio remained
a customer, in particular an assessment of its ability to generate sufficient
risk management structure is designed to prevent conflicts of interest and
applies the standardised approach.
relatively stable, as well its structure stayed diversified. The cost of risk
cash flows for the regular settlement of its liabilities and contractual
ensure a transparent and documented decision-making process, subject to an
increased due to the impact of worsened macroeconomic environment,
obligations. In this part of the credit process, regular monitoring of clients
appropriate upward and downward flow of information. Risk management
Across the Group, risks are assessed, monitored, managed, or mitigated in
where its materiality and impacts on the risk profile of the loan portfolio
within the Early Warning System (EWS) is important. In the case of client
in NLB Group is managed within the Risk management business-line, which
a uniform manner, as defined in the Group’s Risk management standards,
in the future will mostly depend on the length and severity of disruption in
default, restructuring or work-out is initiated depending on the severity of
is a specialised business-line encompassing several professional areas, for
considering also the specifics of the markets in which individual NLB
corporate operations and the average income of private individuals. From
the client’s position.
which the Global Risk Department, the Corporate and the Retail Credit
Group members operate. For the purposes of measuring exposure to
the beginning of the COVID-19 pandemic NLB Group has complied
Analysis Department, and the Evaluation and Control Department are
credit risk, liquidity risk, interest rate risk in the banking book, valuation
with EBA guidelines on payment moratoria regarding forborne exposures,
• The quality and trends in the credit portfolio, including on-balance and
responsible within NLB, and which reports to the Assets and Liabilities
risk, operational risk, market risk, and non-financial risks, in addition to
namely by frequently performing the assessment of borrowers and ensuring
off-balance sheet exposures, are actively monitored and analysed at the
Committee (ALCO) of the Management Board and the Risk Committee of
the prescribed regulations, NLB Group uses internal methodologies and
effective early warning systems. In contrast, the Group faced growing excess
level of the overall portfolio of NLB Group and NLB.
the Supervisory Board. The Risk management business line is in charge of
approaches that enable more detailed monitoring and management of
liquidity, impacts of the pandemic did not cause any material liquidity
formulating and controlling the risk management policies of NLB Group,
risks. These internal methodologies are aligned with ECB, EBA and Basel
outflows. Following the indications of the outbreak of COVID-19 in
Comprehensive analyses are regularly performed to assure monitoring of
setting limits, establishing methodologies, overseeing the harmonisation of
guidelines, as well as best practices in banking methodologies. Following the
Slovenia and SEE, the Group has taken necessary measures to protect its
the portfolio quality through time and to identify any breach of limits or
risk management policies within the NLB Group, monitoring NLB Group’s
acquisition of Komercijalna banka group, the harmonisation process in the
customers and employees by ensuring the relevant safety conditions and
targets. Great emphasis is placed on the evolution of portfolio structure
risk exposures, and preparing external and internal reports.
area of risk management is underway.
making sure that the services offered by the Group are provided without any
in terms of client segmentation, credit rating structure, structure by stages
All members of NLB Group, which are included in the financial
As for risk reporting, NLB Group’s internal guidelines reflect, in addition to
with higher frequency than before crises to assure adequate and timely
is an important indicator of potential future losses that has to be closely
statements of NLB Group, report their exposure to risks to the competent
internal requirements, the substance and frequency of reporting required
oversight over the critical elements of risk management and executing
monitored.
organisational units within the Risk management business line. These
by the Bank of Slovenia and the ECB. In addition, each member of NLB
mitigation measures if needed.
organisational units then report all relevant risk information to the Assets
Group also complies with the requirements of its local regulations. Risk
In light of the COVID-19 circumstances in 2020, a detailed monitoring
and Liabilities Committee (ALCO) of the Management Board and the Risk
reporting is carried out in the form of standardised reports, pursuant to
As at 30 December 2020, the acquisition of Komercijalna banka
of COVID-19-related transactions has been initiated. The Bank
Committee of the Supervisory Board, which is where the Management
risk management policies based on common methodologies for measuring
Beograd was completed. NLB Group, including Komercijalna banka
monitors COVID-19-related moratoria in terms of the type of moratoria
Board and the Supervisory Board, adopt appropriate measures.
exposure to risks, uniform database structure within Data Warehouse
(DWH), comprehensive data quality assurance and automated report
group, concluded the year 2020 as self-funded, with strong liquidity and
a solid capital position, demonstrating the Group’s financial resilience.
(legislative, non-legislative, or private), the length of the moratoria period
granted and the behaviour of loans after the expiration of the grace
The credit ratings of clients that are materially important to NLB Group
preparation, which ensures the quality of reports and reduces the possibility
The acquired Komercijalna banka group has similar business model to
period.
and the issuing of credit risk opinions are centralised via the Credit
of errors.
the existing NLB Group, and respectively its impact on the Group’s risk
disruption. All relevant information was available to management bodies
(based on IFRS 9), and NPL ratios. Furthermore, the coverage of NPL
144
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Apart from analysing the portfolio as a whole, vintage analysis is used to
credit risk assessment in line with best banking practises, while at the same
and acquisition of Komercijalna banka group, while further reduction
(comparable to 2.7% at the end of 2019). Moreover, the coverage ratio
monitor the quality of new loans production and test the conservativity
time enabling faster responsiveness towards clients.
resulted from active workout activities. Reduction of NPLs on the Group
remains high at 57.3%, which is well above the EU average published by the
of the lending standards, which should ensure the portfolio quality is
level remained a strong focus in 2020. As at 31 December 2020 the share of
EBA (45.3% in 4Q 2020).
maintained within the Group Risk Appetite.
Lending growth in the corporate segment remained relatively moderate,
non-performing exposure by EBA methodology in NLB Group was 2.8%
Apart from default risk, the portfolio management is also focused on
situation contributed to a temporary slowdown in the growth of retail
c) Maximum exposure to credit risk
especially in the current specific circumstances. Besides that, the COVID-19
monitoring single name and industry concentration, migration, and FX
segment. As at 30 December 2020, with acquisition of Komercijalna
lending risk. Increasing emphasis is also placed on stress tests that forecast
banka, there were no major changes in the corporate and retail credit
the effects of negative macroeconomic movements on the portfolio,
portfolio structure. Credit portfolio remains well diversified, there is no large
on the level of impairments and provisions, and on capital adequacy.
concentration in any specific industry or client segment. The share of retail
Capital requirements for credit risk at NLB Group level within the first
portfolio in the whole credit portfolio is quite substantial with still prevailing
pillar are calculated according to the Standardised approach, while
segment of mortgage loans.
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
Starting in March 2020, the rise of the COVID-19 pandemic in Europe
name concentration add-on is based on the Granularity adjustment
(including the Bank strategic markets) give rise to new legislation in most
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
Cash, cash balances at central banks, and other demand deposits at banks
3,961,812
2,101,346
2,261,533
1,292,211
Financial assets held for trading
Non-trading financial assets mandatorily at fair value through profit or loss
84,855
27,233
24,038
16,717
18,831
30,935
24,085
20,571
Financial assets at fair value through other comprehensive income
3,446,491
2,091,805
1,671,204
1,611,711
methodology and an industry concentration add-on is estimated based on
countries of SE Europe, encouraging granting of moratoria to clients (both
Financial assets at amortised cost
the HHI concentration indexes.
retail and corporate) effected by the pandemic. In the markets where the
Bank is positioned, different types of regulation were approved (opt-in/
NLB and other NLB Group members assess the level of credit risk losses on
opt-out principles). Furthermore, during the year when the pandemic
an individual basis for material claims, and at the collective level for the rest
progressed, some governments decided for a second or even third package
of the portfolio.
of legislation, requiring the banks to prolong or grant new moratoria to its
existing clients. NLB Group followed the legislative rules in each market and
An individual review is performed for material Stage 3 financial assets which
provided moratoria to a material part of the portfolio, however, at the end
have been rated as non-performing based on the information regarding
of 2020 the grace periods have expired for a large part of the facilities.
significant financial problems encountered by a customer, regarding actual
breaches of contractual obligations such as arrears in the settlement of
At the same time, the Bank places great effort to appropriately monitor the
liabilities, whether financial assets will be restructured for economic or
clients in need of moratoria. Based on the EBA Guidelines for COVID-19
legal reasons, and the likelihood that a customer will enter into bankruptcy
legislative and non-legislative moratoria, the Bank did not consider
or a financial reorganisation. Expected future cash flows (from ordinary
COVID-19 moratoria as a forbearance measure if granted before 30
operations and the possible redemption of collateral) are assessed following
September 2020 or if granted after that date, but the cumulative moratoria
an individual review. If their discounted value differs from the book value of
period did not exceed nine months. Nevertheless, any moratoria granted
the financial asset in question, impairment must be recognised.
due to the COVID-19 situation not aligned with the legislative or non-
legislative standards, was checked for forbearance status on case-by-case
Collective ECL allowances are made for the remainder of the portfolio,
basis. Additionally, the clients who were granted COVID-19 moratoria or
which is not assessed on an individual basis. Based on IFRS 9 requirements,
new financing on the basis of the COVID-19 circumstances, were analysed
Debt securities
Loans to government
Loans to banks
Loans to financial organisations
Loans to individuals
Loans to other customers
Other financial assets
Derivatives - hedge accounting
Total net financial assets
Guarantees
Financial guarantees
Non-financial guarantees
Loan commitments
Other potential liabilities
1,503,087
1,653,848
1,277,880
1,485,166
368,400
197,005
158,871
271,389
93,403
100,054
170,742
158,320
177,198
182,582
144,352
131,442
4,933,093
3,938,035
2,377,770
2,352,625
4,159,496
3,280,246
1,838,468
1,901,950
113,138
-
97,415
788
54,503
-
67,279
788
18,953,481
13,669,084
10,037,384
9,214,762
1,126,442
479,096
647,346
916,458
383,597
532,861
689,668
258,003
431,665
614,473
230,909
383,564
1,816,441
1,346,012
1,306,791
1,072,458
32,087
31,613
8,121
20,349
financial assets measured at amortised cost are attributed to the appropriate
as part of the regular credit process using a wide variety of financial and
Total contingent liabilities
2,974,970
2,294,083
2,004,580
1,707,280
stage based on the estimated increase of credit risk of a single exposure
non-financial indicators and were downgraded or placed on the watch list if
since initial recognition. The stage of financial assets determines whether
increase in credit risk was identified.
Total maximum exposure to credit risk
21,928,451
15,963,167
12,041,964
10,922,042
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
In addition to moratoria, the governments in Serbia and Slovenia provide
default (LGD), which are calculated using historic data and statistical
public guarantee schemes for new financing of clients whose business has
Maximum exposure to credit risk is a presentation of NLB Group’s
balance sheet items in their net book value as reported in the statement of
modelling, as well as predicted macroeconomic parameters. For the off-
been severely damaged due to the COVID-19 pandemic. The guarantee
exposure to credit risk separately by individual types of financial assets and
financial position, and for off-balance sheet items in the amount of their
balance financial assets, the probability of the redemption of guarantees is
covers the financing up to 30% in Serbia and in the range of 70-80% in
contingent liabilities. Exposures stated in the above table are shown for the
nominal value.
considered when creating collective provisions. The models used to estimate
Slovenia. Nevertheless, the decision of granting such loans is left to the
future risk parameters are validated and back-tested on a regular basis to
discretion of each individual bank, and so the regular client review is
make loss estimations as realistic as possible.
performed in line with the bank lending standards.
b) Main emphasis in 2020
In 2020, the NLB Group reviewed IFRS 9 provisioning on an ongoing basis
In the process of constantly complementing and enhancing credit risk
by testing a set of relevant macroeconomic scenarios to adequately reflect
management, NLB Group focuses on taking moderate risks, and at the same
the current circumstances and related future impacts.
time ensuring an optimal return considering the risks assumed. Preserving
high credit portfolio quality represents the most important key aim, with
The COVID-19 pandemic had some negative impacts on the existing
a focus on the quality of new placements leading to a diversified portfolio
loan portfolio quality and new loan generation. Nevertheless, the Group’s
of customers. The Group is actively present on the market in the region,
credit portfolio quality remained solid with quite stable rating structure
financing existing and new creditworthy clients. To further enhance existing
risk management tools, the Group is constantly developing a wide range of
and diversified portfolio. Great emphasis was placed on intensive and
proactive handling of problematic customers and early warning system
advanced approaches supported by mathematical and statistical models in
for detecting increased credit risk at a very early stage. The stock of NPE
volume moderately increased, mainly as a result of COVID-19 impacts
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CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 NLB Group
in EUR thousands
Fully/over collateralised financial assets
Financial assets not or not fully
covered with collateral
Net value of loans
and advances
Fair value of
collateral
Net value of loans
and advances
Fair value of
collateral
33,375
78,426
149
111,950
132,532
532,990
2,338
667,860
20,822
45,161
1,478
67,461
5,922
55,545
89
61,556
31 Dec 2019
Financial assets at amortised cost
Loans to government
Loans to individuals
Loans to other customers
Other financial assets
Total
NLB Group
in EUR thousands
e) Collateral from loans mandatorily at fair value through profit or loss
NLB
in EUR thousands
Fully/over collateralised financial assets
Financial assets not or not fully
covered with collateral
Net value of loans
and advances
Fair value of
collateral
Net value of loans
and advances
Fair value of
collateral
3,219
18,101
21,683
9
6,405
42,505
94,608
1,519
43,012
145,037
-
6,948
10,585
352
17,885
-
1,954
22,802
39
24,795
NLB Group
in EUR thousands
Fully/over collateralised financial assets
31 Dec 2020
31 Dec 2019
Net value of loans
and advances
Fair value of
collateral
Net value of loans
and advances
Fair value of
collateral
d) Collateral from financial assets that are credit-impaired
31 Dec 2020
Financial assets at amortised cost
Loans to individuals
Loans to other customers
Other financial assets
Total
31 Dec 2019
Financial assets at amortised cost
Loans to government
Loans to individuals
Loans to other customers
Other financial assets
Total
31 Dec 2020
Financial assets at amortised cost
Loans to individuals
Loans to other customers
Other financial assets
Total
Fully/over collateralised financial assets
Financial assets not or not fully
covered with collateral
Net value of loans
and advances
Fair value of
collateral
Net value of loans
and advances
Fair value of
collateral
3,219
26,984
45,571
177
75,951
6,405
88,119
274,472
4,055
373,051
NLB
1,273
12,786
26,457
992
41,508
-
9,161
66,348
93
75,602
in EUR thousands
Fully/over collateralised financial assets
Financial assets not or not fully
covered with collateral
Net value of loans
and advances
Fair value of
collateral
Net value of loans
and advances
Fair value of
collateral
17,359
30,058
7
45,756
116,073
448
47,424
162,277
11,431
6,081
70
17,582
2,672
20,757
44
23,473
Loans mandatorily at fair value through profit or loss
25,076
47,725
14,961
28,981
NLB
in EUR thousands
Fully/over collateralised financial assets
31 Dec 2020
31 Dec 2019
Net value of loans
and advances
Fair value of
collateral
Net value of loans
and advances
Fair value of
collateral
Loans mandatorily at fair value through profit or loss
30,935
45,407
20,571
25,085
f) Credit protection policy
securities, and real-estate mortgages (the real estate must be, beside other
NLB Group applies a single set of standards to retail and corporate loan
criteria, located in the European Economic Area for the effect on capital to
collateral, as developed by NLB Group members in accordance with
be recognised).
regulatory requirements. The master document regulating loan collateral in
the NLB Group is the Loan Collateral Policy in NLB d.d. and NLB Group.
Loans made to companies and sole proprietors may be secured by other
The Policy has been adopted by the Management Board of NLB Group.
forms of collateral, as well (e.g., a lien on movable property, a pledge of an
The Policy represents the basic principles that NLB Group’s employees
equity stake, investment coupons, collateral by pledged/assigned receivables,
must take into account when signing, evaluating, monitoring, and reporting
etc.) if it is assessed that the collateral could generate a cash flow if it were
collateral, with the aim of reducing credit risk.
needed as a secondary source of payment. If there is of a lower probability
In line with the policy, the primary source of loan repayment is the debtor’s
conservative approach and accepts the collateral while reporting its value as
that this type of collateral would generate a cash flow, NLB Group takes a
solvency, and the accepted collateral is a secondary source of repayment in
zero.
case the debtor ceases to repay the contractual obligations.
NLB Group primarily accepts collateral complying with the Basel II
In compliance with relevant regulations, NLB Group has established a
requirements with the aim of improving credit risk management and
consuming capital economically. In accordance with Basel II, collateral
system for monitoring and reporting collateral at fair (market) value.
may consist of pledged deposits, government guarantees, bank guarantees,
The market value of real estate used as collateral is obtained from valuation
debt securities issued by central governments and central banks, bank debt
reports of licensed appraisers. The market value of movable property
g) The processes for valuing collateral
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CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 is obtained from valuation reports of licensed appraisers or from sales
NLB Group monitors the value of collateral during the loan repayment
• A pledge or assignment of receivables as collateral: cash receivables must
i) Evaluation risk of collateral
agreements. Both, valuation reports and sales agreements must not be
period in accordance with the mandatory periods and internal instructions.
have longer maturities than the maturity of the investment and they must
Client/counterparty credit risk is the key decision parameter when
older than one year. In NLB and members of NLB Group, most reports of
For example, the value of collateral using mortgaged real estate is monitored
not be due and not be paid.
approving exposures. Collateral is a secondary source of repayment, and
external real estate appraisers are controlled. Controls are performed by
annually by either preparing individual assessments or using the internal
• Other material forms of loan collateral (e.g., life insurance policies
therefore decisions on approvals of exposures should not primarily be based
internal appraisers. The subject of control is the content, value, scope, and
methodology for preparing an own value appraisal of real estate (which
pledged to NLB): The Bank accepts products of Vita, life insurance
on the provided collateral. However, collateral is an important comfort
format of the report, its compliance with international valuation standards,
applies to Republic of Slovenia, and partly, for the housing segment to
company d.d. Ljubljana – a pledge of an investment life insurance policy
element in the approval process and, depending on the credit rating of
and the estimated value. If they notice deviations, they estimate needed
Serbia, Montenegro, and Bosnia and Herzegovina) based on public records
and a life insurance policy with a guaranteed return that includes saving,
the client, a prerequisite. NLB Group has prescribed the minimum ratios
correction of the value of the external valuation (in %) and correct the
and indexes of real-estate value published by the relevant government
in addition to insurance.
value of the external valuation. The value adjustment can only be negative
authorities (the Surveying and Mapping Authority in the Republic of
between the value of collateral and the loan amount, depending on the
type of collateral and the client rating. The ratios are based on experience,
and can be applied only in a limited range. For the purposes of business
Slovenia). The value of pledged movable property is monitored once a year
Personal loan collateral is a method for reducing credit risk whereby a third
regulatory guidelines, and are prescribed in the Business Rules.
decisions and the calculation of the necessary impairments and provisions,
(in NLB automated, with a straight-line depreciation over the period of the
party undertakes to pay the debt in case of the primary debtor (borrower)
additional deductions (haircuts) are applied to the eventual adjusted market
remaining useful life).
defaulting.
value, depending on the type of collateral. These haircuts for purpose of
NLB Group pays particular attention to closely monitoring the fair value
of collateral, and to receiving regular and independent revaluations by
liquidation value are for real estate in the range of 30 to 70%, depending on
h) The main types of collateral taken by the NLB Group
NLB Group accepts the following types of personal loan collateral:
applying the International Valuation Standards. Through a detailed
the type of real estate and location, and for movables they range between 50
NLB Group accepts different forms of material and personal security as
examination of all collateral received, NLB has ensured that only collateral
and 100%, depending on the type of movable.
loan collateral.
• Joint and several guarantees by retail and corporate clients: for the
from which payment can be realistically expected if it is liquidated, is
collateralisation of private individuals’ loans, employees, or pensioners
considered.
The market value of financial instruments held by NLB Group is obtained
Material loan collateral gives the right in the case of a debtor (borrower)
are adequate guarantors. They must not be in the process of personal
from the organised market – such as the stock exchange, for listed financial
defaulting on their contractual obligations to sell a specific property to
bankruptcy. They are responsible for fulfilling the debtor’s obligations
NLB Group has the largest concentration of collaterals arising from
instruments or determined in accordance with the internal methodology for
recover claims, keep specific non-cash property or cash, or reduce or offset
for loans with a repayment period not exceeding 60 months. For the
mortgages on real estate, which is a relatively reliable and quality type
unlisted financial instruments (such collateral is used exceptionally and on a
the amount of exposure against the counterparty’s debt to the Bank.
collateralisation of legal entities investments, legal entities, individuals or
of collateral; however, among others due to the falling real estate market
small scale in loans granted to companies and sole proprietors).
private individuals are adequate guarantors.
prices in recent history, the Bank closely monitors the real-estate collateral
NLB Group accepts the following material types of loan collateral:
• Bank guarantees;
values and, where required, establishes higher amounts of impairments
NLB has compiled a reference list of licensed real estate appraisers for real
• Government guarantees (e.g., of the Republic of Slovenia);
and provisions for non-performing loans secured by real estate, based
estate. All appraisals must be made for the purpose of secured lending and
• Collateral in the form of business and residential real estate: land,
• Guarantees by national and regional development agencies with which
on estimated discounts of the real-estate value, which are expected to be
in accordance with the international valuation standards (IVS, EVS and
buildings and individual parts of buildings in a storeyed property intended
the Bank has a contract on the acceptance of guarantees (e.g. Slovene
achieved in a sale (expected payment from collateral). Priority is given to
RICS). Appraisals related to retail loans are generally ordered only from
for living in or performing a business activity, such as land in the area
Enterprise Fund);
appraisers with whom the NLB has a contract for real-estate valuations.
foreseen for construction, apartments, residential buildings, garages and
• Other types of personal loan collateral.
For corporate loans, appraisals are usually submitted by clients. If a client
holiday homes, business premises, industrial buildings, offices, shops,
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.
submits an appraisal that is not made by an appraiser included on the NLB’s
hotels, branches and warehouses, forests, parking spaces, etc. Objects can
Loans are very often secured by a combination of collateral types.
reference list, the NLB’s expert department which employs certified real
be completed or under construction. Priority is given to property where
Collateral consisting of securities entails market risk, specifically the risk
estate appraisers in construction with licences granted by the Slovenian
the pledge right of the bank is entered in the first place and real estate
The general recommendations on loan collateral are specified in the internal
of changes in the prices of securities on capital markets. To limit such risks
Ministry of Justice, and certified real-estate value appraisers with licences
is already owned by the debtor and/or the pledger. For real estate, there
instructions and include the elements specified below. The decision on the
and restrict the possibility of the value of instruments received as collateral
granted by the Slovenian Institute of Auditors, will verify the appraisal. The
must be a market, and it must be redeemable within a reasonable time.
type of collateral and the coverage of loan by collateral depends on the
falling below approved limits, the Rules determine minimum pledge ratios
expert department is also responsible for reviewing valuations of real estate
• Collateral in the form of movable property: priority is given to the types
client’s creditworthiness (credit ranking), loan maturity, and varies depending
for securing loans based on pledged securities and equity shares in NLB.
serving as collateral for large loans.
of movable property, that are highly likely to be sold in the event of
on whether the loan is granted to retail or a corporate client.
Deviations from the Rules are subject to the prior approval of the respective
Other NLB Group members obtain valuations from in-house appraisers
claims (their market value must be estimated with considerable reliability).
NLB has also created, in the area of real-estate loan collateral, an ‘online’
securities’ value is determined regarding the securities’ liquidity, maturity,
and outsourced appraisers, all possessing the necessary licences. NLB
Among the appropriate types of movable property, the bank includes
connection with the Surveying and Mapping Authority in the Republic of
correlation with changes in market indexes, i.e. by considering the key
Group has compiled a reference list of appraisers for valuations of real
motor vehicles, agricultural machinery, construction machinery,
Slovenia, which allows direct and immediate verification of the existence of
features reflecting the level of volatility of market prices, and the ability to
estate located outside the Republic of Slovenia. Appraisals must be made
production lines and series-produced machines, and some custom-made
property.
sell the securities at the market price.
execution, and the funds received are used to repay the collateralised
decision bodies of the Bank. The ratio between the loan amount and the
in accordance with the international valuation standards, and for larger
production machines.
exposures, real-estate evaluations must also be reviewed by an internal
• Collateral by a pledge of financial assets (bank deposits or cash-like
NLB Group strives to ensure the best possible collateral for long-term
Collateral consisting of the sureties of corporate clients, sureties of private
licensed appraiser with knowledge of the local real-estate market. If the
instruments, debt securities of different issuers, investment fund units,
loans, in particular mortgages where possible. As a result, the mortgaging
individuals, and bank guarantees entail the credit risk of the provider of the
appraisal does not correspond to the international valuation standards or if
equity securities, or convertible bonds):
of real estate is the most frequent form of loan collateral of corporate
collateral. NLB Group includes the amount of the guarantees received in
the value adjustment is greater than certain limit, the appraisal is rejected as
- Cash receivable collateral: bank deposits and savings with bank are
and retail clients. In corporate exposures, the next most frequent forms of
the exposure of the guarantor, and guarantees are only taken into account
inadequate.
appropriate in domestic and foreign currency;
collateral are government and corporate guarantees, while in retail loans, it
as collateral if the guarantor has sufficient overall creditworthiness.
- Debt securities: shares and bonds which, according to the bank’s
is guarantors.
When assuring collateral, NLB Group follows the internal regulations which
assessment, are suitable for securing investments and are traded on a
define the minimum security or pledge ratios. NLB Group strives to obtain
regulated market (marketable securities of higher-quality Slovenian and
collateral with a higher value than the underlying exposure (depending on
foreign issuers);
the borrower’s rating, loan maturity, etc.) with the aim of reducing negative
- The pledge of investment coupons of mutual funds managed by
consequences resulting from any major swings in market prices of the assets
management companies (a priority company NLB Skladi) and are,
used as collateral. If real estate, movable property, and financial instruments
according to the bank assessment, suitable for insurance of investments.
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.
• A pledge of an equity stake: non-marketable capital shares with a credit
rating of at least B are adequate.
The Collateral Manual regulates which forms of collateral are acceptable,
and which preconditions a type of collateral needs to fulfil to be able to be
considered.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 j) Credit quality analysis for financial assets and contingent liabilities
NLB Group
NLB
in EUR thousands
31 Dec 2020
Debt securities at amortised cost
A
B
Loss allowance
Carrying amount
Loans and advances to banks at amortised cost
A
B
C
Loss allowance
Carrying amount
Loans and advances to customers at amortised cost
A
B
C
D and E
Loss allowance
Carrying amount
Other financial assets at amortised cost
A
B
C
D and E
Loss allowance
Carrying amount
Debt instruments at fair value through
other comprehensive income
A
B
Loss allowance
Contingent liabilities
A
B
C
D and E
Loss allowance
Carrying amount
12-month
expected
credit
losses
Lifetime
ECL not
credit-
impaired
Lifetime
ECL
credit-
impaired
Purchased
credit-
impaired
financial
assets
12-month
expected
credit
losses
Lifetime
ECL not
credit-
impaired
Lifetime
ECL
credit-
impaired
Total
Purchased
credit-
impaired
financial
assets
31 Dec 2019
Total
Debt securities at amortised cost
1,118,700
388,072
(3,685)
1,503,087
67,862
128,784
500
(141)
197,005
-
-
-
-
-
-
-
-
-
5,809,837
76,453
2,964,808
198,112
222,630
285,588
-
-
-
-
-
-
-
-
-
-
-
-
- 1,118,700 1,118,700
-
-
388,072
161,021
(3,685)
(1,841)
- 1,503,087 1,277,880
-
-
-
-
-
67,862
158,475
128,784
500
(141)
-
-
(155)
197,005
158,320
-
-
-
-
-
-
-
-
-
- 5,886,290 3,110,739
42,762
- 3,162,920 1,132,586
111,683
-
508,218
34,338
104,065
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,118,700
161,021
(1,841)
1,277,880
158,475
-
-
(155)
158,320
3,153,501
1,244,269
138,403
-
-
390,921
43,791
434,712
-
-
169,036
2,341
171,377
(74,518)
(40,834)
(255,603)
(1,325)
(372,280)
(25,637)
(11,287)
(105,129)
(1,319)
(143,372)
A
B
Loss allowance
Carrying amount
Loans and advances to banks at amortised cost
A
B
C
Loss allowance
Carrying amount
Loans and advances to customers at amortised cost
A
B
C
D and E
Loss allowance
Carrying amount
8,922,757
519,319
135,318
42,466 9,619,860 4,252,026
247,223
63,907
1,022
4,564,178
Other financial assets at amortised cost
64,691
46,382
223
-
(276)
111,020
1,596,443
1,849,818
(8,656)
28
55
438
-
-
-
-
-
-
64,719
48,994
46,437
5,386
661
-
5,655
1,219
6,874
(5,243)
(4)
(5,553)
56
-
(73)
412
1,215
113,138
54,363
-
-
- 1,596,443 1,447,706
- 1,850,048
223,498
(798)
-
(9,482)
(2,343)
(30)
491
-
230
(28)
1
28
36
-
(2)
63
-
-
-
1,285,492
843
1,490,929
53,326
48,329
49,781
-
-
-
- 1,286,335
984,496
238
- 1,544,255
889,669
41,654
-
98,110
22,253
31,363
-
-
-
1,324
(1,251)
73
-
-
(798)
-
-
-
-
-
-
8
(4)
4
-
-
-
-
-
-
48,995
5,414
92
1,332
(1,330)
54,503
1,447,706
223,498
(3,141)
984,734
931,323
53,616
-
-
31,474
14,796
46,270
-
-
27,855
7,052
34,907
(15,796)
(2,767)
(18,554)
(5,057)
(42,174)
(7,510)
(732)
(16,493)
(3,808)
(28,543)
2,808,954
101,183
12,920
9,739 2,932,796 1,888,908
72,523
11,362
3,244
1,976,037
A
B
C
D and E
Loss allowance
Carrying amount
Debt instruments at fair value through
other comprehensive income
A
B
Loss allowance
Contingent liabilities
A
B
C
D and E
Loss allowance
Carrying amount
NLB Group
NLB
in EUR thousands
12-month
expected
credit
losses
Lifetime
ECL not
credit-
impaired
Lifetime
ECL
credit-
impaired
Purchased
credit-
impaired
financial
assets
12-month
expected
credit
losses
Lifetime
ECL not
credit-
impaired
Lifetime
ECL
credit-
impaired
Total
Purchased
credit-
impaired
financial
assets
1,316,405
340,583
(3,140)
1,653,848
68,270
24,728
500
(95)
93,403
-
-
-
-
-
-
-
-
-
4,887,014
47,299
2,180,375
132,989
24,935
290,729
-
-
-
-
-
-
-
-
-
-
-
-
- 1,316,405 1,316,405
-
-
340,583
170,378
(3,140)
(1,617)
- 1,653,848 1,485,166
-
-
-
-
-
68,270
144,392
24,728
500
(95)
101
-
(141)
93,403
144,352
-
-
-
-
-
-
-
-
-
- 4,934,313 3,173,430
10,940
- 2,313,364 1,155,231
38,324
-
315,664
21,888
140,162
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
1,316,405
170,378
(1,617)
1,485,166
144,392
101
-
(141)
144,352
3,184,370
1,193,555
162,050
-
-
344,050
4,777
348,827
-
-
143,605
3,784
147,389
(56,728)
(33,179)
(230,650)
(1,887)
(322,444)
(20,724)
(11,188)
(84,997)
(1,856)
(118,765)
7,035,596
437,838
113,400
2,890 7,589,724 4,329,825
178,238
58,608
1,928
4,568,599
71,271
24,439
192
-
(177)
95,725
1,631,116
460,427
(4,757)
982,227
3,442
1,108,696
43,620
17,348
65,554
33
49
466
-
-
-
-
5,855
(27)
521
-
262
(42)
(4,699)
1,156
-
-
(798)
-
-
-
-
-
-
16
(3)
13
71,304
59,971
24,488
6,720
658
5,871
(4,906)
179
-
(55)
6
18
88
-
(9)
-
-
-
2,129
(1,774)
97,415
66,815
103
355
-
-
-
- 1,631,116 1,504,437
460,689
107,274
(5,597)
(1,714)
-
-
-
985,669
782,113
806
- 1,152,316
781,518
20,201
-
82,902
11,580
41,422
-
-
(798)
-
-
-
-
-
-
9
(3)
6
-
-
-
-
-
-
59,977
6,738
267
2,138
(1,841)
67,279
1,504,437
107,274
(2,512)
782,919
801,719
53,002
-
-
66,252
6,944
73,196
-
-
62,696
6,944
69,640
(12,909)
(2,444)
(22,084)
(1,984)
(39,421)
(6,145)
(653)
(20,381)
(1,984)
(29,163)
2,095,362
110,172
44,168
4,960 2,254,662 1,569,066
61,776
42,315
4,960
1,678,117
The NLB Group’s client credit rating classification is based on an internally
The Rating Group A (AAA to A rating classes) includes the best clients
developed methodology, drawing from internal statistical analyses, good
with a low degree of default probability, characterised by high coverage of
banking practices, as well as Bank of Slovenia regulations, and ECB and
financial liabilities with free cash flow. The Rating Group A is considered as
EBA guidelines and requirements. The aligned rating methodology is used
across the entire NLB Group. It includes a uniform credit grade scale of
investment grade classification.
12 rating classes, out of which nine represent performing clients and three
The Rating Group B (BBB to B rating classes) includes clients with a low
non-performing clients.
credit risk, starting one notch lower than ‘A’ rating group clients. These
148
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 in EUR thousands
Collateral
and financial
guarantees
received on
forborne
exposures
clients show stable performance, acceptable financial ratios, and qualitative
In 2020, NLB Group applied a new default definition based on the EBA
elements, and have sufficient cash flow to settle their obligations, but may be
guidelines, where the materiality threshold for delays is determined in
more sensitive to changes in the industry or the economy. The Rating Group
absolute and relative terms (EUR 100 for retail and EUR 500 for non-retail
B classification is an investment grade for BBB, and an ‘invest with care’ for
segment and 1% of the total exposure on the client level). At the same time,
BB and B.
the assessment of rating for private individuals was improved by establishing
NLB Group
All forborne exposures
Impairment, provisions
and value adjustments
a common rating on the client level.
Non - performing
The 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
A standard corporate rating methodology, with the prescribed set of
clients are financed by the Bank only in the case when such support brings
parameters (qualitative and quantitative) applies to all the NLB Group bank
more positive effects for the Bank; however, the Rating Group C is overall
entities. Groups of connected clients are treated as materially important
considered as a substantial risk. The Bank reasonably restricts cooperation
for the NLB Group whenever exposure exceeds EUR 7 million. Materially
with such clients and decreases its exposure to them.
important clients are submitted to the NLB Credit Committee.
The Rating Groups D (D and DF rating classes) and E represent non-
NLB regularly reviews the business practices and credit portfolios of
performing clients that are treated as defaulted. D, DF, and E rating
NLB Group entities to make sure they are operating in accordance with
classified clients are ordinarily transferred to the specialised units for
the minimum risk management standards of NLB Group. This ensures
restructuring (which performs business and financial restructuring with a
appropriate standard processes for managing and reporting credit risks at
goal of minimising losses and restoring the client to a performing status)
the consolidated level.
or workout and legal support (with the goal of minimising losses due to
default).
k) Forborne loans
31 Dec 2020
Loans and advances (including at
amortised cost and fair value)
Governments
Other financial organisations
Non-financial organisations
Households
Debt instruments other than held for trading
303,802
Loan commitments given
1,586
NLB Group
All forborne exposures
Impairment, provisions
and value adjustments
Non - performing
Gross carrying
amount
Performing
Impaired
Defaulted
Performing
forborne
exposures
Non-performing
forborne
exposures
in EUR thousands
Collateral
and financial
guarantees
received on
forborne
exposures
303,802
55,354
223,376
248,448
(5,761)
(141,372)
142,714
1,342
2,425
254,947
45,088
1,050
50
33,882
20,372
55,354
942
292
2,375
292
2,375
(5)
-
(292)
(2,375)
-
50
195,993
221,065
(4,739)
(129,550)
114,395
24,716
24,716
(1,017)
(9,155)
28,269
223,376
248,448
(5,761)
(141,372)
142,714
644
644
(4)
(37)
1,332
31 Dec 2019
Loans and advances (including at
amortised cost and fair value)
Governments
Other financial organisations
Non-financial organisations
Households
Debt instruments other than held for trading
278,449
Loan commitments given
2,414
Gross carrying
amount
Performing
Impaired
Defaulted
Performing
forborne
exposures
Non-performing
forborne
exposures
278,449
65,090
213,359
213,359
(4,940)
(139,455)
130,954
5,945
1,959
237,588
32,957
-
24
53,970
11,096
65,090
1,520
5,945
1,935
5,945
1,935
-
-
(2,725)
(1,935)
3,219
24
183,618
183,618
(4,464)
(128,327)
104,518
21,861
21,861
(476)
(6,468)
23,193
213,359
213,359
(4,940)
(139,455)
130,954
894
894
(7)
(835)
1,309
Total exposures with forbearance measures
280,863
66,610
214,253
214,253
(4,947)
(140,290)
132,263
NLB
All forborne exposures
Impairment, provisions
and value adjustments
Non - performing
Gross carrying
amount
Performing
Impaired
Defaulted
Performing
forborne
exposures
Non-performing
forborne
exposures
in EUR thousands
Collateral
and financial
guarantees
received on
forborne
exposures
148,251
21,976
103,287
126,275
(1,522)
(73,298)
76,210
31 Dec 2020
Loans and advances (including at
amortised cost and fair value)
Other financial organisations
Non-financial organisations
Households
Debt instruments other than held for trading
148,251
Loan commitments given
1,560
2,397
117,671
28,183
22
9,522
12,432
21,976
920
2,375
85,161
15,751
2,375
108,149
15,751
-
(742)
(780)
(2,375)
(66,055)
(4,868)
103,287
126,275
(1,522)
(73,298)
640
640
(2)
(35)
Total exposures with forbearance measures
149,811
22,896
103,927
126,915
(1,524)
(73,333)
22
58,447
17,741
76,210
1,332
77,542
Total exposures with forbearance measures
305,388
56,296
224,020
249,092
(5,765)
(141,409)
144,046
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CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 NLB
All forborne exposures
Impairment, provisions
and value adjustments
in EUR thousands
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:
Non - performing
Gross carrying
amount
Performing
Impaired
Defaulted
Performing
forborne
exposures
Non-performing
forborne
exposures
Collateral
and financial
guarantees
received on
forborne
exposures
Nature of assets
Net value
Net value
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
168,852
45,830
123,022
123,022
(2,910)
(69,783)
92,366
Equity securities measured at fair value through OCI (note 5.4.b)
31 Dec 2019
Loans and advances (including at
amortised cost and fair value)
Governments
Other financial organisations
5,627
1,959
-
24
5,627
1,935
5,627
1,935
-
-
(2,407)
(1,935)
Non-financial organisations
137,872
37,670
100,202
100,202
(2,610)
(62,157)
Households
23,394
8,136
15,258
15,258
(300)
(3,284)
Debt instruments other than held for trading
168,852
45,830
123,022
123,022
(2,910)
(69,783)
Loan commitments given
2,389
1,495
894
894
(7)
(835)
Total exposures with forbearance measures
171,241
47,325
123,916
123,916
(2,917)
(70,618)
Forborne exposures of debt instruments by periods of forbearance
NLB Group
in EUR thousands
Up to 3 months
3 to 6 months
6 to 12 months
Over 12 months
13,455
32,950
46,405
5,745
3,759
9,504
9,963
1,786
11,749
3,819
1,286
5,105
NLB
1,858
7,140
8,998
8,166
1,967
10,133
24,317
65,200
89,517
42,420
70,114
112,534
in EUR thousands
Up to 3 months
3 to 6 months
6 to 12 months
Over 12 months
8,304
3,969
12,273
3,298
3,129
6,427
931
942
1,873
309
967
1,276
1,398
5,513
6,911
5,083
722
5,805
9,821
42,553
52,374
34,230
48,421
82,651
31 Dec 2020
Performing exposures
Non-performing exposures
Total exposures with forbearance measures
31 Dec 2019
Performing exposures
Non-performing exposures
Total exposures with forbearance measures
31 Dec 2020
Performing exposures
Non-performing exposures
Total exposures with forbearance measures
31 Dec 2019
Performing exposures
Non-performing exposures
Total exposures with forbearance measures
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.
3,219
24
71,389
17,734
92,366
1,283
93,649
Investment property (note 5.9.)
Property and equipment (note 5.8.)
Investments in subsidiaries and associates
Real estates (note 5.13.)
Other assets (note 5.13.)
Total
m) Analysis of loans and advances by industry sectors
NLB Group
Industry sector
Banks
Finance
Electricity, gas, and water
Construction industry
Heavy industry
Education
Agriculture, forestry, and fishing
Public sector
Individuals
Mining
Entrepreneurs
Services
-
36,130
13,268
-
75,151
866
125,415
3,289
32,465
1,440
-
50,467
855
88,516
-
4,079
7
2,412
4,926
-
-
3,464
7
2,442
5,292
-
11,424
11,205
in EUR thousands
31 Dec 2020
31 Dec 2019
Gross loans
Impairment
provisions
Net loans
(%)
Gross loans
Impairment
provisions
Net loans
197,146
(141)
197,005
116,593
(3,126)
113,467
298,612
(6,971)
291,641
361,494
(27,548)
333,946
952,671
(44,446)
908,225
13,883
91,780
(1,111)
(7,023)
12,772
84,757
301,205
(5,737)
295,468
1.98
1.14
2.93
3.35
9.12
0.13
0.85
2.97
79,662
(1,230)
78,432
314,276
(7,268)
307,008
725,020
(71,133)
653,887
(%)
1.20
1.16
2.23
2.65
93,498
(95)
93,403
93,479
(2,763)
90,716
178,504
(4,352)
174,152
236,394
(29,669)
206,725
857,269
(42,368)
814,901
10.45
10,762
61,261
(559)
(6,770)
10,203
54,491
184,435
(4,533)
179,902
0.13
0.70
2.31
0.79
3.08
6.57
7.90
8.03
0.47
1.14
18,441
(1,596)
16,845
151,217
(3,609)
147,608
599,180
(55,871)
543,309
745,260
(18,099)
727,161
752,835
(75,264)
677,571
24,604
102,321
(1,538)
(4,906)
23,066
97,415
0.22
1.89
6.97
9.33
8.69
0.30
1.25
5,027,648
(94,555)
4,933,093
49.55
4,013,488
(75,453)
3,938,035
50.52
10,333,053
(377,974)
9,955,079
100.00
8,122,948
(327,445)
7,795,503
100.00
Transport and communications
811,517
(25,029)
786,488
Trade industry
874,235
(75,309)
798,926
Health care and social security
48,620
(1,794)
46,826
118,691
(5,553)
113,138
Other financial assets
Total
150
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 31 Dec 2020
31 Dec 2019
in EUR thousands
o) Analysis of debt securities and derivative financial instruments by geographical sectors
in EUR thousands
NLB
Industry sector
Banks
Finance
Electricity, gas, and water
Construction industry
Heavy industry
Education
Agriculture, forestry, and fishing
Public sector
Individuals
Mining
Entrepreneurs
Services
Health care and social security
Other financial assets
Total
Gross loans
Impairment
provisions
Net loans
(%)
Gross loans
Impairment
provisions
Net loans
158,475
(155)
158,320
135,040
(4,405)
130,635
157,515
(2,892)
154,623
63,025
(8,463)
54,562
3.29
2.72
3.22
1.13
144,493
(141)
144,352
125,521
(3,441)
122,080
138,587
(2,497)
136,090
67,427
(11,545)
55,882
(%)
3.01
2.54
2.83
1.16
519,880
(14,445)
505,435
10.51
557,861
(13,994)
543,867
11.33
5,197
15,099
95,930
(38)
(865)
(1,793)
5,159
14,234
94,137
0.11
0.30
1.96
6,078
14,714
92,924
(56)
(809)
(1,689)
6,022
13,905
91,235
0.13
0.29
1.90
2,411,949
(34,179)
2,377,770
49.46
2,376,791
(24,166)
2,352,625
49.00
8,580
(74)
8,506
52,216
(3,014)
49,202
454,154
(44,827)
409,327
0.18
1.02
8.51
6,495
(47)
6,448
49,732
(1,604)
48,128
398,059
(29,139)
368,920
0.13
1.00
7.68
Transport and communications
589,269
(4,965)
584,304
12.15
645,791
(3,822)
641,969
13.37
Trade industry
204,343
(22,190)
182,153
26,288
55,833
(1,222)
(1,330)
25,066
54,503
3.79
0.52
1.13
217,068
(24,849)
192,219
10,887
69,120
(1,107)
(1,841)
9,780
67,279
4.00
0.20
1.40
4,952,793
(144,857)
4,807,936
100.00
4,921,548
(120,747)
4,800,801
100.00
n) Analysis of net loans and advances by geographical sectors
Country
Slovenia
Serbia
Other European Union members
Other countries
Total
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
4,360,051
4,405,416
4,354,155
4,401,362
2,146,793
157,557
454,299
180,385
3,290,678
2,755,403
134,303
73,252
246,226
103,458
100,261
195,720
9,955,079
7,795,503
4,807,936
4,800,801
31 Dec 2020
NLB Group
NLB
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
305,697
930,258
78,720
121,657
36,910
1,025
-
38,515
151,981
63,155
20,907
45,576
7,088
22,112
11,626
71,821
50,409
26,432
45,937
23,600
21,662
66,622
8,072
16,431
9,786
257,346
204,455
20,386
7,182
-
-
-
14,037
-
4,993
6,293
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,450
484,875
978,504
73,959
78,858
3,255
16,420
15,976
81,905
155,580
104,967
9,924
36,464
11,048
749
18,385
37,853
133,360
17,023
19,377
5,599
36,350
53,201
59,424
8,827
79,543
66,356
1,903,569
-
-
143,059
18,649
66,356
1,267,258
-
-
-
-
-
-
-
-
75,223
167,131
30,548
27,514
104,493
8,988
20,526
40,180
-
111
14,498
305,697
672
930,258
-
-
-
-
-
-
-
-
-
-
111
-
-
-
-
-
-
-
-
-
-
-
2,046
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
80
120
-
-
-
-
-
-
90
-
-
-
-
-
-
382
-
879
7
-
30
786
-
-
-
56
-
-
-
78,720
121,657
36,910
1,025
-
38,515
151,981
63,155
20,907
45,576
7,088
22,112
11,626
71,821
50,409
26,432
45,937
23,600
21,662
66,622
8,072
16,431
9,786
32,139
-
6,816
-
-
-
-
14,037
-
4,993
6,293
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,450
-
-
-
-
-
-
-
-
-
-
-
-
389,932
14,498
932,714
672
59,163
57,167
3,255
16,420
15,976
80,827
149,673
104,967
9,924
34,146
11,048
749
18,385
37,853
-
-
-
-
-
-
80
120
-
-
-
-
-
-
133,360
90
17,023
19,377
5,599
36,350
53,201
59,424
8,827
56,742
-
-
-
-
-
-
382
-
291,816
1,211
56,433
3,134
-
-
-
30,548
27,514
104,493
8,988
20,526
40,180
-
-
365
786
4
-
-
56
-
-
-
1,503,087
68,806
3,446,491
2,157
16,049
1,277,880
2,450
1,671,204
16,381
Country
Slovenia
Other members of
European Union
- Austria
- Belgium
- Bulgaria
- Czech Republic
- Denmark
- Finland
- France
- Germany
- Hungary
- Ireland
- Italy
- Latvia
- Lithuania
- Luxembourg
- Netherlands
- Poland
- Portugal
- Romania
- Slovakia
- Spain
- Sweden
- Other
United States of America
Other countries
- North Macedonia
- Montenegro
- Serbia
- Kosovo
- Bosnia and Herzegovina
- Albania
- Canada
- Great Britain
- Iceland
- Norway
- Other
Total
Other members of the European Union included in the item ‘Other’ are
Other members of the ‘Other countries’ in the item ‘Other’ are Israel,
Malta, Cyprus, Greece and Croatia.
Kazakhstan and Russia.
151
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 31 Dec 2019
NLB Group
NLB
in EUR thousands
p) Internal rating of derivatives counterparties
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
417,611
1,041
535,160
-
13,278
417,611
1,041
457,671
13,278
976,304
40
1,103,666
1,391
6,416
976,304
40
1,074,241
6,416
79,096
124,649
35,880
1,024
-
41,312
164,488
120,107
1,193
27,252
40,754
8,720
13,534
9,082
78,891
50,642
13,873
44,704
18,161
21,721
63,600
8,091
9,530
46,724
213,209
141,909
26,773
-
-
-
14,052
5,070
6,304
19,101
-
-
-
-
-
-
10
10
-
-
10
-
-
-
-
-
-
-
-
-
10
-
-
3,244
-
-
-
-
-
-
-
-
-
-
34,066
62,276
3,301
19,180
18,288
80,712
234,174
91,484
79,053
1,841
56,834
15,463
12,123
24,654
48,042
99,586
43,741
22,863
5,239
42,630
51,105
42,029
14,982
36,442
-
-
-
-
-
625
-
302
-
-
-
109
-
-
355
-
-
-
-
-
-
-
-
-
416,537
365
99,914
24,852
84,118
70,140
87,464
29,156
-
17,706
3,187
-
-
-
-
-
-
-
-
365
1,756
1,653,848
4,325
2,091,805
-
16
-
-
-
-
622
426
4,941
-
-
-
-
-
-
3
-
-
-
-
-
-
408
-
807
-
-
-
807
-
-
-
-
-
79,096
124,649
35,880
1,024
-
41,312
164,488
120,107
1,193
27,252
40,754
8,720
13,534
9,082
78,891
50,642
13,873
44,704
18,161
21,721
63,600
8,091
9,530
46,724
44,527
-
-
-
-
-
14,052
5,070
6,304
19,101
-
-
-
-
-
-
10
10
-
-
10
-
-
-
-
-
-
-
-
-
10
-
-
3,244
-
-
-
-
-
-
-
-
-
-
34,066
57,515
3,301
19,180
18,288
79,645
223,049
88,479
79,053
1,841
51,425
15,463
12,123
24,654
48,042
99,586
43,741
22,863
5,239
42,630
47,047
42,029
14,982
16,678
63,121
-
3,271
9,801
-
-
29,156
-
17,706
3,187
-
16
-
-
-
-
622
426
4,941
-
-
-
-
-
-
3
-
-
-
-
-
-
408
-
854
2
-
45
807
-
-
-
-
-
20,501
1,485,166
4,325
1,611,711
20,548
Country
Slovenia
Other members of
European Union
- Austria
- Belgium
- Bulgaria
- Czech Republic
- Denmark
- Finland
- France
- Germany
- Great Britain
- Hungary
- Ireland
- Italy
- Latvia
- Lithuania
- Luxembourg
- Netherlands
- Poland
- Portugal
- Romania
- Slovakia
- Spain
- Sweden
- Other
United States of America
Other countries
- North Macedonia
- Montenegro
- Serbia
- Kosovo
- Bosnia and Herzegovina
- Canada
- Iceland
- Norway
- Other
Total
A
B
C
D and E
Total
NLB Group
NLB
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
in %
73.56
15.35
10.90
0.19
100.00
74.14
16.34
9.52
0.00
100.00
in %
73.75
15.24
10.82
0.19
100.00
74.27
16.26
9.47
0.00
100.00
All derivatives in the banking book are entered into with counterparties with
transactions are covered through back-to-back transactions involving third
an external investment-grade rating.
parties 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
r) Debt securities in NLB’s and NLB Group’s portfolio that represent subordinated liabilities for the issuer
31 Dec 2020
Internal rating
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at amortised cost
- loans and advances to banks
- loans and advances to customers
Total
31 Dec 2019
Internal rating
Financial assets measured at amortised cost
- debt securities
- loans and advances to banks
- loans and advances to customers
Total
A
B
-
-
-
-
A
523
-
-
523
14,796
-
-
14,796
B
-
-
-
-
D
Total
14,796
A
-
-
-
67,128
-
14,796
67,128
-
-
-
-
NLB Group
C
-
-
-
-
NLB Group
C
-
-
-
-
D
Total
A
-
-
-
-
523
523
-
-
67,167
-
523
67,690
NLB
C
-
-
5,858
5,858
NLB
C
-
-
5,915
5,915
B
-
-
-
-
B
-
-
-
-
in EUR thousands
D
Total
-
-
-
-
-
67,128
5,858
72,986
in EUR thousands
D
Total
-
-
-
-
523
67,167
5,915
73,605
Other members of the European Union included in the item ‘Other’ are
Cyprus and Croatia.
Other members of the ‘Other countries’ in the item ‘Other’ are Australia
and Russia.
152
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 s) Presentation of net financial instruments by measurement category
NLB Group
in EUR thousands
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
Total
31 Dec 2020
Cash and obligatory reserves with central banks,
and other demand deposits at banks
-
-
-
3,961,812
17,317
3,514,290
1,503,087
2,157
3,260,940
1,480,478
67,799
50,449
-
-
135,102
22,609
-
-
-
-
-
-
-
-
3,961,812
5,103,500
4,812,381
71,970
50,449
157,711
10,989
16,049
Securities
- Bonds
- Shares
- Treasury bills
Derivatives
Loans and receivables
- Loans to government
- Loans to banks
9,768,232
48,633
9,841,941
- Loans to financial organisations
3,061
368,400
- Loans to individuals
365,339
197,005
158,845
-
26
197,005
158,871
4,913,793
19,300
4,933,093
4,133,250
26,246
4,184,572
113,138
-
113,138
- Loans to other customers
Other financial assets
Total financial assets
68,806
68,806
-
-
-
-
16,049
-
-
-
-
-
-
-
4,171
-
-
10,989
-
25,076
-
-
-
-
25,076
-
84,855
42,393
3,514,290
15,346,269
48,633
19,036,440
NLB Group
in EUR thousands
31 Dec 2019
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
Cash and obligatory reserves with central banks,
and other demand deposits at banks
Total
2,101,346
3,809,999
3,536,976
52,790
94,033
120,725
5,475
Securities
- Bonds
- Shares
- Commercial bills
- Treasury bills
Derivatives
Loans and receivables
- Loans to government
- Loans to banks
-
-
-
-
-
-
-
788
20,501
- Loans to financial organisations
-
-
-
-
-
-
-
-
-
-
28,013
8,563
-
-
-
-
-
-
-
-
-
-
-
-
-
4,325
4,325
-
-
-
-
19,713
-
-
-
-
-
-
-
-
-
2,101,346
10,398
2,141,428
1,653,848
1,756
1,913,623
1,617,272
3,167
-
-
5,475
-
14,961
-
-
-
-
14,961
-
49,623
66,020
112,162
-
-
-
-
-
-
-
-
-
7,638,615
44,512
267,796
3,593
93,403
100,010
3,914,839
3,262,567
97,415
-
44
23,196
17,679
-
-
-
-
-
-
-
-
7,698,088
271,389
93,403
100,054
3,938,035
3,295,207
97,415
- Loans to individuals
- Loans to other customers
Other financial assets
Total financial assets
24,038
25,359
2,141,428
11,491,224
44,512
788
13,727,349
As at 31 December 2020 and 31 December 2019, 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 amortised cost.
NLB
in EUR thousands
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
Total
-
2,450
2,450
-
-
16,381
-
-
-
-
-
-
-
-
-
2,261,533
2,261,533
4,171
1,716,351
1,277,880
3,000,852
-
1,598,760
1,277,880
2,879,090
4,171
-
-
30,935
-
-
-
-
30,935
-
45,147
72,444
-
-
-
-
-
-
-
-
-
-
-
49,318
72,444
16,381
4,722,498
4,753,433
170,742
158,320
177,198
170,742
158,320
177,198
2,377,770
2,377,770
1,838,468
1,869,403
54,503
54,503
18,831
35,106
1,716,351
8,316,414
10,086,702
NLB
in EUR thousands
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
-
4,325
4,325
-
-
-
19,760
-
-
-
-
-
-
-
-
-
1,292,211
2,716
1,656,657
1,485,166
-
1,509,559
1,457,153
2,716
44,946
-
-
-
-
20,571
-
-
-
-
20,571
-
-
28,013
102,152
-
-
-
-
-
-
-
-
-
-
4,712,951
182,582
144,352
131,442
2,352,625
1,901,950
67,279
-
-
-
-
-
-
788
-
-
-
-
-
-
-
Total
1,292,211
3,148,864
2,971,037
47,662
28,013
102,152
20,548
4,733,522
182,582
144,352
131,442
2,352,625
1,922,521
67,279
24,085
23,287
1,656,657
7,557,607
788
9,262,424
31 Dec 2020
Cash and obligatory reserves with central banks,
and other demand deposits at banks
Securities
- Bonds
- Shares
- Commercial bills
- Treasury bills
- Investment funds
Derivatives
Loans and receivables
- Loans to government
- Loans to banks
- Loans to financial organisations
- Loans to individuals
- Loans to other customers
Other financial assets
Total financial assets
31 Dec 2019
Cash and obligatory reserves with central banks,
and other demand deposits at banks
Securities
- Bonds
- Shares
- Commercial bills
- Treasury bills
- Investment funds
Derivatives
Loans and receivables
- Loans to government
- Loans to banks
- Loans to financial organisations
- Loans to individuals
- Loans to other customers
Other financial assets
Total financial assets
153
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 6.2. Market risk
6.2.1. Currency risk (FX)
a) Analysis of financial instruments by currency exposure
NLB defines market risk as the risk of potential financial losses due to
Foreign currency risk (FX) is a risk of the potential losses from the open FX
changes in rates and/or market prices (exchange rates, credit spreads,
positions due to the changes of the foreign currency rates. The exposures of
and equity prices), or in parameters that affect prices (volatilities and
NLB to the movement of the FX rates have impact on the financial position
correlations). Losses may impact profit or loss directly, for example in the
and cash flows of the Bank. The Bank measures and manages the FX risk
case of trading book positions. However, for the banking book positions
with a usage of combination of sensitivity analysis, VaR, scenarios, and
they are reflected in the revaluation reserve. The exposure to the market
stress-testing.
risk is to a certain degree integrated into the banking industry and offers an
opportunity to create financial results and value.
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 Global Risk Department of NLB is independent from the trading
the Bank and in accordance to the adopted policy of managing market risk
activities and reports to the Bank’s committee ALCO. Global Risk also
in the trading book of NLB. Trading FX risk is managed on an integrated
monitors and manages exposure to market risks separately for the banking
basis at a portfolio level.
and trading books. Exposures and limits are monitored daily and reported to
31 Dec 2020
Financial assets
Cash, cash balances at central banks, and
other demand deposits at banks
Financial assets held for trading
Non-trading financial assets mandatorily
at fair value through profit or loss
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at amortised cost
the ALCO committee on a regular basis.
NLB monitors and manages FX risk in the banking book according to the
- debt securities
The Bank uses a wide selection of quantitative and qualitative tools for
protect Common Equity Tier 1 against the negative effects of the volatility
measuring, managing, and reporting market risks such as value-at-risk
of the FX rates, whilst limiting the volatility in the income statement. FX
(VaR), sensitivity analysis, stress-testing, back-testing, scenarios, other market
exposures in banking book result from core banking business activities.
risk mitigants (concentration of exposures, gap limits, stop-loss limits, etc.),
net interest income sensitivity, economic value of equity, and economic
Each member is responsible for its own currency risk policy, which also
capital. Stress-testing provides an indication of the potential losses that could
includes a limit system and is in line with the parent Bank’s guidelines and
policy of managing FX risk in NLB. The policy is primarily composed to
occur in severe market conditions.
standards, as well as local regulatory requirements. Policies are confirmed by
either the local Management Board or Supervisory Board. NLB monitors
In the area of currency risk, NLB Group pursues the goal of low to medium
and manages NLB Group currency risk exposure on a monthly basis for
exposure. NLB monitors the open position of NLB Group on an ongoing
each member and on the consolidated level.
basis. The orientation of NLB Group in interest rate risk management is to
prevent negative effects on the net revenues arising from changed market
NLB Group banks follow the guidelines for managing FX lending in NLB
interest rates. The conclusion of transactions involving derivatives at NLB is
Group. The guidelines’ goal is to address risks stemming from the potential
limited to the servicing of the clients’ and hedging of the Group’s own open
excessive growth of FX lending, to identify hidden risks, and tail-event
positions. In accordance with the provisions of the Strategy on trading with
risks related to FX lending, to mitigate the respective risk, to internalise the
financial instruments in NLB Group, the trading activities in other NLB
respective costs, and to hold adequate capital with respect to FX lending.
Group members are very restricted.
For monitoring and managing NLB Group’s exposure to market risks
NLB, for which a daily limit is set, are monitored daily. FX positions are
uniform guidelines and exposure limits for each type of risk are set for
managed on the currency level so that they are always within the limits.
The positions of all currencies in the statement of financial position of
individual NLB Group entities. The methodologies are in line with
regulatory requirements on individual and consolidated levels, while
Regarding structural FX positions on a consolidation level, assets, and
reporting to the regulator on the consolidated level is carried out using
liabilities held in foreign operations are translated into euro currency at the
the standardised approach. Pursuant to the relevant policies, NLB Group
closing FX rate on the reporting date. Foreign exchange differences of non-
entities must monitor and manage exposure to market risks and report
euro assets and liabilities against euro are recognised in OCI, and therefore
to NLB accordingly. The exposure of an individual NLB Group entity is
affect shareholder’s equity and CET1 capital. NLB Group ALM employs
regularly monitored and reported to the Assets and Liabilities Committee of
strategies to manage this foreign currency exposure, including matched
NLB Group (NLB Group ALCO).
funding of assets and liabilities.
Exposure to currency risks is discussed at daily liquidity meetings and
monthly meetings of the Assets and Liabilities Committee of NLB Group
(ALCO), and quarterly on the consolidated level.
NLB Group
in EUR thousands
EUR
USD
CHF
Other
Total
3,017,875
46,572
101,712
795,653
3,961,812
40,910
32,104
2,450
4,579
-
-
41,495
5,710
84,855
42,393
2,395,335
206,985
14,796
897,174
3,514,290
1,285,569
74,422
7,816,698
52,010
13,844
11,408
47,796
36,337
20,445
-
-
11,065
49,276
41
-
206,110
63,722
1,503,087
197,005
1,717,549
9,619,860
40,642
113,138
-
13,844
- loans and advances to banks
- loans and advances to customers
- other financial assets
Fair value changes of the hedged items in
portfolio hedge of interest rate risk
Total financial assets
14,728,767
376,572
176,890
3,768,055
19,050,284
Financial liabilities
Financial liabilities held for trading
Derivatives - hedge accounting
Financial liabilities measured at amortised cost
- deposits from banks and central banks
- borrowings from banks and central banks
15,485
61,161
28,242
140,358
-
-
7,668
11,889
-
-
5,574
5,978
-
-
31,149
-
15,485
61,161
72,633
158,225
- due to customers
13,228,655
328,533
161,887
2,678,092
16,397,167
- borrowings from other customers
- subordinated liabilities
- other financial liabilities
Total financial liabilities
Net on-balance sheet financial position
Derivative financial instruments
Net financial position
31 Dec 2019
Total financial assets
Total financial liabilities
91,560
288,321
123,362
13,977,144
751,623
30,748
782,371
11,460,626
10,487,637
-
-
23,139
371,229
5,343
651
5,994
260,127
232,710
-
-
-
-
1,836
58,963
91,560
288,321
207,300
175,275
2,768,204
17,291,852
1,615
999,851
1,758,432
(2,303)
(43,314)
(14,218)
(688)
956,537
1,744,214
105,818
91,618
1,909,769
13,736,340
1,522,496
12,334,461
Net on-balance sheet financial position
972,989
27,417
14,200
387,273
1,401,879
Derivative financial instruments
16,442
(14,336)
(4,232)
(7,707)
(9,833)
Net financial position
989,431
13,081
9,968
379,566
1,392,046
154
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 NLB
in EUR thousands
b) FX sensitivity analysis
EUR
USD
CHF
Other
Total
Scenarios
USD
CHF
CZK
RSD
MKD
JPY
AUD
HUF
HRK
BAM
31 Dec 2020
Appreciation of
USD
CHF
CZK
RSD
MKD
Other
31 Dec 2020
Financial assets
Cash, cash balances at central banks, and
other demand deposits at banks
Financial assets held for trading
Non-trading financial assets mandatorily
at fair value through profit or loss
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at amortised cost
- debt securities
- loans and advances to banks
- loans and advances to customers
- other financial assets
Fair value changes of the hedged items in
portfolio hedge of interest rate risk
2,188,898
11,345
14,042
47,248
2,261,533
16,381
30,527
2,450
4,579
1,589,855
96,888
1,266,472
158,215
4,482,044
34,136
13,844
11,408
105
31,245
19,751
-
-
-
-
-
-
-
-
18,831
35,106
29,608
1,716,351
-
-
1,277,880
158,320
49,111
1,778
4,564,178
-
616
-
54,503
13,844
Total financial assets
9,780,372
177,771
63,153
79,250
10,100,546
Financial liabilities
Financial liabilities held for trading
Derivatives - hedge accounting
Financial liabilities measured at amortised cost
- deposits from banks and central banks
- borrowings from banks and central banks
- due to customers
- borrowings from other customers
- subordinated liabilities
- other financial liabilities
Total financial liabilities
15,500
61,161
5,945
8,635,809
125,597
13
288,321
79,721
9,212,067
-
-
9,675
129,809
11,889
-
-
19,908
171,281
-
-
6,456
47,542
5,978
-
-
39
60,015
-
-
19,559
37,595
-
-
-
1,605
58,759
15,500
61,161
41,635
8,850,755
143,464
13
288,321
101,273
9,502,122
Net on-balance sheet financial position
568,305
6,490
3,138
20,491
598,424
Derivative financial instruments
4,136
(2,491)
(3,299)
(12,169)
(13,823)
Net financial position
572,441
3,999
(161)
8,322
584,601
31 Dec 2019
Total financial assets
Total financial liabilities
8,957,777
8,142,363
176,516
142,395
66,028
61,999
71,094
51,957
9,271,415
8,398,714
Net on-balance sheet financial position
815,414
34,121
4,029
19,137
872,701
Derivative financial instruments
21,804
(21,784)
(2,760)
(7,168)
(9,908)
Net financial position
837,218
12,337
1,269
11,969
862,793
NLB Group and NLB
31 Dec 2020
31 Dec 2019
+/-7%
+/-4%
+/-8%
+/-1%
+/-3%
+/-8%
+/-10%
+/-9%
+/-2%
+/-0%
+/-4%
+/-3%
+/-3%
+/-2%
+/-2%
+/-5%
+/-5%
+/-4%
+/-1%
+/-0%
NLB Group
NLB
in EUR thousands
Effects on income
statement
Effects on other
comprehensive
income
Effects on income
statement
Effects on other
comprehensive
income
(345)
(293)
(4)
9
4
85
-
231
-
7,096
7,663
91
(97)
(32)
(4)
22
19
89
(3)
83
29
3
(22)
(18)
(70)
5
(11)
-
-
-
-
-
(11)
10
-
-
-
-
-
10
Effects on comprehensive income
(544)
15,081
Depreciation of
USD
CHF
CZK
RSD
MKD
Other
Effects on comprehensive income
295
270
3
(9)
(4)
(68)
487
-
(213)
-
(6,959)
(7,151)
(89)
(14,412)
155
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 31 Dec 2019
Appreciation of
USD
CHF
CZK
RSD
MKD
Other
Effects on comprehensive income
Depreciation of
USD
CHF
CZK
RSD
MKD
Other
Effects on comprehensive income
NLB Group
NLB
in EUR thousands
while it also contributes to the stability of the interest rate margin, which
Each member of NLB Group is responsible for its own interest rate risk
is why valuation risk has been included in the Group’s interest rate risk
policy, which includes the limit system and is in line with the parent Bank’s
Effects on income
statement
Effects on other
comprehensive
income
Effects on income
statement
Effects on other
comprehensive
income
management model.
guidelines and standards, as well as with the local regulatory requirements.
NLB regularly monitors the interest rate risk exposure of each individual
340
(218)
1
11
3
78
215
(314)
204
(1)
(10)
(3)
(71)
(195)
-
164
-
2,083
4,310
237
6,794
-
(154)
-
(2,009)
(4,132)
(236)
(6,531)
298
8
1
14
13
80
NLB Group also manages interest rates risk by using plain vanilla derivative
member of NLB Group in accordance with the Standards for Risk
financial instruments (interest rate swaps, overnight index swaps, cross
Management in NLB Group. The aforementioned document comprises
(11)
currency swaps, and forward rate agreements), most of which are treated
guidelines for uniform and effective interest rate risk management within
-
-
-
-
-
according to hedge accounting rules. Interest rate risk exposure arises
individual NLB Group members.
mainly from banking book positions; particularly in a current low interest
rate environment, where NLB Group recorded an increased volume of fixed
Interest rate risk in the banking book is measured, monitored, and reported
interest rate loans and long-term banking book securities on the assets side
weekly in the case of NLB by the Global Risk Department, while positions
and transformation of deposits from term to sight.
are managed by Financial Markets and the monthly Group level. Exposure
to interest rate risk is discussed on ALCO monthly on NLB’s individual level
and quarterly on the consolidated level.
414
(11)
(276)
10
a) Analysis of financial instruments according to the exposure to interest rate risk
Illustrated below are the carrying amounts of financial instruments
categorised by the earlier of contractual reprising or residual maturity.
NLB Group
in EUR thousands
Non-interest
bearing
Total
Interest
bearing
Up to 1
Month
1 Month to
3 Months
3 Months
to 1 Year
1 Year to
5 Years Over 5 Years
(7)
(1)
(13)
(12)
(73)
-
-
-
-
-
(382)
10
31 Dec 2020
Financial assets
6.2.2. Managing market risks in the trading book
consistent methodologies, models, and limit systems. NLB Group manages
Market risk exposure in the trading book arises mostly as a result of the
interest rate risk exposure through application of two main measures:
changes in interest rates, credit spreads, FX rates, and equity prices.
The Management Board determines low total risk appetite and limits by the
measures the extent to which the economic value of the banking book
risk type. The limits are monitored daily by the Global Risk Department.
would change if interest rates changes according to the scenario.
NLB uses an internal VaR model based on the variance-covariance method
which measures the impact of the interest rate change on future net
for other market risks. The daily calculation of the VAR value is adjusted
interest income over a one-year period, assuming constant balance sheet
• Sensitivity of net interest income – using EaR method (Earnings at Risk),
• Economic value sensitivity – using BPV method (Basis Point Value), which
Cash, cash balances at central banks, and
other demand deposits at banks
3,961,812
1,255,642
2,706,170
2,706,170
Financial assets held for trading
84,855
16,049
68,806
15,170
-
-
-
-
44,775
8,861
-
-
Non-trading financial assets mandatorily
at fair value through profit or loss
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at amortised cost
42,393
15,160
27,233
709
11,192
13,879
1,171
282
3,514,290
67,799
3,446,491
193,663
89,570
408,497
2,008,154
746,607
- debt securities
1,503,087
-
1,503,087
76,716
45,405
76,178
695,030
609,758
- loans and advances to banks
197,005
8,643
188,362
148,527
36,127
3,708
-
-
to Basel standards (99% confidence interval, a monitored period of 250
volume and structure.
- loans and advances to customers
9,619,860
69,958
9,549,902
2,328,747
1,383,720
2,781,228
2,106,629
949,578
business days, a 10-day holding position period).
6.2.3. Interest rate risk
NLB Group regularly measures interest rate risk exposure in the banking
book under various standardised and additional scenarios of changes in the
Interest rate risk is the risk to NLB Group’s capital and profit or loss arising
level and shape of interest rate yield curve, including all significant sources
from changes in market interest rates. Interest rate risk management of NLB
of risk, taking into account behavioural and modelling assumptions. Part
Group includes all interest rate-sensitive on- and off-balance sheet assets and
of non-maturing deposits, which is considered as a core part is allocated
liabilities which are divided into the trading and banking book according to
long-term by using replicating portfolio. Optionality risk is mainly derived
regulatory standards. It takes into account the positions in each currency.
from behavioural options, reflected in prepayments and withdrawals, and
Interest rate risk management in NLB Group is adopted in accordance
embedded options such as caps and floors. Moreover, considering expected
- other financial assets
113,138
113,138
Fair value changes of the hedged items in
portfolio hedge of interest rate risk
13,844
13,844
-
-
-
-
-
-
-
-
-
-
-
-
Total financial assets
19,050,284
1,560,233
17,490,051
5,469,702
1,566,014
3,328,265
4,819,845
2,306,225
Financial liabilities
Financial liabilities held for trading
15,485
15,485
Derivatives - hedge accounting
61,161
61,161
-
-
-
-
-
-
-
-
-
-
with the risk appetite and risk strategy, based on general Basel standards
cash flows, non-performing exposures, as well as off-balance sheet items are
Financial liabilities measured at amortised cost
on interest rate management in the banking book (IRRB; hereinafter:
considered when measuring interest rate risk exposure. Optionality models
‘Standards’) and final European Banking Authority guidelines.
are, to a large extent, based on linear regression using the historical data as
input.
- deposits from banks and central banks
72,633
1,103
71,530
51,534
19,610
163
223
- borrowings from banks and central banks
158,225
-
158,225
2,777
8,043
134,364
13,041
In the trading book interest rate risk is measured on the basis of the VaR
- due to customers
16,397,167
102,981
16,294,186
14,106,104
419,267
1,071,490
686,051
11,274
method and BPV method, in accordance with the adopted policy for
The interest rate risk is closely measured, monitored, and managed
managing market risk in the trading book of NLB.
within approved risk limits and controls. The Group manages interest
The interest rate risk in the banking book is measured and monitored
rate positions and stabilises its interest rate margin primarily with the
pricing policy and a fund transfer pricing policy. An important part of the
- borrowings from other customers
- subordinated liabilities
- other financial liabilities
91,560
288,321
-
-
288,321
91,560
18,581
207,300
207,270
30
3,868
3,690
-
7,064
26,329
35,718
1,759
282,872
11
14
-
-
-
5
within a framework of Interest rate risk management policy that establishes
interest rate risk management is presented by the banking book securities
Total financial liabilities
17,291,852
388,000
16,903,852
14,179,001
454,478
1,214,851
1,008,530
46,992
portfolio, whose primary purpose is to maintain adequate liquidity reserves,
Total interest repricing gap
(8,709,299)
1,111,536
2,113,414
3,811,315
2,259,233
156
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
-
-
-
-
Annual Report 2020 31 Dec 2019
Financial assets
NLB Group
in EUR thousands
Non-interest
bearing
Total
Interest
bearing
Up to 1
Month
1 Month to
3 Months
3 Months
to 1 Year
1 Year to
5 Years Over 5 Years
31 Dec 2020
Financial assets
NLB
in EUR thousands
Non-interest
bearing
Total
Interest
bearing
Up to 1
Month
1 Month to
3 Months
3 Months
to 1 Year
1 Year to
5 Years Over 5 Years
Cash, cash balances at central banks, and
other demand deposits at banks
2,101,346
644,013
1,457,333
1,457,333
Financial assets held for trading
24,038
19,713
4,325
1,040
-
21
-
37
-
-
Non-trading financial assets mandatorily
at fair value through profit or loss
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at amortised cost
25,359
8,642
16,717
7,165
3,760
1,728
3,781
2,141,428
49,623
2,091,805
112,049
238,266
177,088
996,792
567,610
-
3,227
283
Cash, cash balances at central banks, and
other demand deposits at banks
2,261,533
192,405
2,069,128
2,069,128
Financial assets held for trading
18,831
16,381
2,450
-
-
-
-
1
-
2,449
-
-
Non-trading financial assets mandatorily
at fair value through profit or loss
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at amortised cost
35,106
4,171
30,935
1,515
14,900
14,112
126
282
1,716,351
45,147
1,671,204
91,312
19,936
185,583
867,674
506,699
- debt securities
1,653,848
-
1,653,848
100,245
106,742
103,961
561,810
781,090
- debt securities
- loans and advances to banks
93,403
533
92,870
65,918
23,860
2,188
902
2
- loans and advances to banks
1,277,880
158,320
-
3
1,277,880
66,893
13,792
41,502
556,444
599,249
158,317
7,363
22,824
109,853
3,274
15,003
- loans and advances to customers
7,589,724
71,720
7,518,004
1,653,925
1,281,613
2,443,003
1,415,059
724,404
- loans and advances to customers
4,564,178
42,747
4,521,431
1,061,961
933,029
1,503,250
508,354
514,837
- other financial assets
Derivatives - hedge accounting
Fair value changes of the hedged items in
portfolio hedge of interest rate risk
97,415
97,415
788
788
8,991
8,991
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- other financial assets
Fair value changes of the hedged items in
portfolio hedge of interest rate risk
54,503
54,503
13,844
13,844
-
-
-
-
-
-
-
-
-
-
-
-
Total financial assets
10,100,546
369,201
9,731,345
3,298,172
1,004,481
1,854,301
1,938,321
1,636,070
Total financial assets
13,736,340
901,438
12,834,902
3,397,675
1,654,262
2,728,005
2,978,344
2,076,616
Financial liabilities
Financial liabilities held for trading
17,903
17,903
Financial liabilities measured at fair
value through profit or loss
7,998
7,998
Derivatives - hedge accounting
49,507
49,507
-
-
-
-
-
-
-
-
-
-
-
-
Financial liabilities measured at amortised cost
- deposits from banks and central banks
42,840
805
42,035
34,576
2,552
4,907
-
-
-
-
- borrowings from banks and central banks
170,385
-
170,385
2,845
5,559
146,993
14,838
- due to customers
11,612,317
79,124
11,533,193
9,837,184
356,977
856,938
479,620
-
-
-
-
150
2,474
Financial liabilities
Financial liabilities held for trading
15,500
15,500
Derivatives - hedge accounting
61,161
61,161
Financial liabilities measured at amortised cost
- deposits from banks and central banks
- borrowings from banks and central banks
- due to customers
- borrowings from other customers
- subordinated liabilities
- other financial liabilities
-
-
-
-
41,635
41,635
-
-
-
-
-
-
-
-
-
143,464
85
2,816
128,674
11,889
-
-
-
-
8,850,755
8,449,271
159,095
175,979
65,690
720
13
288,321
-
-
5
-
13
-
3,690
1,759
282,872
-
11
14
-
-
-
41,635
143,464
8,850,755
13
288,321
-
-
-
-
-
101,273
101,243
30
- borrowings from other customers
- subordinated liabilities
- other financial liabilities
64,458
210,569
-
-
210,569
45,367
158,484
158,438
46
6
64,458
1,287
2,011
7,322
24,395
29,443
-
-
1,754
163,448
11
29
-
-
Total financial liabilities
9,502,122
177,904
9,324,218
8,490,996
165,601
306,436
360,465
720
Total interest repricing gap
(5,192,824)
838,880
1,547,865
1,577,856
1,635,350
Total financial liabilities
12,334,461
313,775
12,020,686
9,921,265
367,099
1,017,925
682,330
32,067
Total interest repricing gap
(6,523,590)
1,287,163
1,710,080
2,296,014
2,044,549
157
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 NLB
in EUR thousands
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:
-
3,227
283
-
-
-
-
-
31 Dec 2019
Financial assets
Non-interest
bearing
Total
Interest
bearing
Up to 1
Month
1 Month to
3 Months
3 Months
to 1 Year
1 Year to
5 Years Over 5 Years
Cash, cash balances at central banks, and
other demand deposits at banks
1,292,211
164,725
1,127,486
1,127,486
Financial assets held for trading
24,085
19,760
4,325
1,040
-
21
-
37
-
-
23,287
2,716
20,571
7,845
6,610
2,821
3,012
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
Net interest income sensitivity
Net interest income sensitivity - as % of Equity
13,852
0.78%
14,689
1.01%
7,493
0.55%
8,488
0.75%
1,656,657
44,946
1,611,711
25,798
186,222
115,877
795,629
488,185
1,485,166
144,352
-
18
1,485,166
97,672
73,519
84,662
453,767
775,546
points represents a realistic and practical scenario. The calculations of the
standardised interest rate shock scenarios or more if necessary, according to
144,334
15,880
12,010
97,210
4,124
15,110
sensitivity of net interest income are implemented in technological support.
the situation on financial markets. Calculations are considering behavioural
and automatic options, as well as the allocation of non-maturing deposits.
The values in the table are calculated on short-term interest rate gaps,
cash flows and provides a comprehensive view of the possible long-
where the applied parallel interest rate shock down by 50/100 basis
term effects of changing interest rates at least under the six prescribed
- loans and advances to customers
4,568,599
49,123
4,519,476
1,086,078
1,022,248
1,557,001
440,464
413,685
The ‘EVE’ (Economic Value of Equity) method is a measure of the
Non-trading financial assets mandatorily
at fair value through profit or loss
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at amortised cost
- debt securities
- loans and advances to banks
- other financial assets
Derivatives - hedge accounting
Fair value changes of the hedged items in
portfolio hedge of interest rate risk
67,279
67,279
788
788
8,991
8,991
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total financial assets
9,271,415
358,346
8,913,069
2,361,799
1,300,630
1,857,608
1,696,996
1,696,036
Financial liabilities
Financial liabilities held for trading
17,892
17,892
Financial liabilities measured at fair
value through profit or loss
7,746
7,746
Derivatives - hedge accounting
49,507
49,507
-
-
-
-
-
-
Financial liabilities measured at amortised cost
- deposits from banks and central banks
- borrowings from banks and central banks
- due to customers
- borrowings from other customers
- subordinated liabilities
- other financial liabilities
89,820
161,564
7,760,737
2,537
210,569
-
-
-
-
-
89,820
89,820
161,564
85
5,559
142,871
13,049
7,760,737
7,233,733
194,230
256,289
74,580
1,905
2,537
-
210,569
45,367
-
-
-
32
2,505
1,754
163,448
11
29
-
-
-
98,342
98,296
46
6
-
-
-
-
-
-
-
-
-
-
-
-
sensitivity of changes in market interest rates on the economic value of
The assessment of the impact of a change in interest rates of 200 basis
financial instruments. The EVE represents the present value of net future
points on the economic value of the banking book position:
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
Interest risk in banking book - EVE
Interest risk in banking book - EVE as % of Equity
128,370
7.27%
88,355
6.09%
82,116
5.98%
71,979
6.33%
The applied sudden parallel interest rate shock up is by 200 basis points,
Liquidity risk is defined as an important risk type for NLB Group, and
which represents a “worst case” scenario for NLB Group. The calculation
one which must be managed carefully. NLB Group has a liquidity risk
takes into the account allocation of the core part of non-maturing deposits
management framework in place that enables maintaining a low risk
and other behavioural assumptions.
tolerance for liquidity risk. NLB Group formulated a set of liquidity risk
metrics and limits to manage liquidity position within the requirements
Exposure to the interest rate risk of the banking book mainly arises from
set by the regulator. By maintaining a smooth long-term maturity profile,
investments in long-term debt securities and loans with fixed interest rate,
limiting dependence on wholesale funding, and holding a solid liquidity
as well as from transformation of term to sight deposits due to low interest
buffer, the NLB Group maintains a sound and robust liquidity position, even
rate environment. Long-term interest positions of other members in NLB
under severely adverse conditions.
Group, of which present a majority of their exposure to interest-rate risk (an
Total financial liabilities
8,398,714
173,441
8,225,273
7,369,011
199,789
400,957
253,611
1,905
economic point of view), mainly arise from a portfolio of mortgage loans
The Management Board approves the Liquidity Risk Management Policy,
Total interest repricing gap
(5,007,212)
1,100,841
1,456,651
1,443,385
1,694,131
with a fixed interest rate.
6.3. Liquidity risk
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
Liquidity risk is the risk that NLB Group is unable to meet all its actual and
development of the Bank’s funding and liquidity position and decides on
Cash flows are presented by taking into account their contractual maturity
b) A net interest income sensitivity analysis and an economic
potential payments or collateral posting obligations, as well as the risk that
liquidity risk-related issues in NLB Group.
and according to the amortisation schedule. Financial instruments without
view of interest rate risk in the banking book
NLB Group is unable to fund the growth of assets at reasonable prices, or
maturity such as sight deposits and financial instruments with expired
The analysis of interest income sensitivity for the horizon of the next 12
only at excessive cost.
maturity such as non-performing loans are presented in the first gap
months assumes a sudden parallel interest rate shock down by 50 basis
irrespective of their behavioural characteristics and the Bank’s expectations.
points for EUR, USD, and CHF currencies, while for all other significant
There are two types of risk:
For the purpose of risk management, the Bank use different cash flow
currencies a 100 basis points sudden parallel interest rate shock down is
Risk tolerance for liquidity risk is low, therefore NLB Group always
maintains an adequate level of liquidity to provide sufficient funds for
settling its liabilities, even if a specific stress scenario is realised. NLB Group
measures and manages its liquidity in three stages:
modelling techniques.
implied. The analysis assumes that the positions used remain unchanged.
• Funding liquidity risk is the risk of not being able to accommodate both
expected and unexpected current and future cash outflows and collateral
• Current exposure and compliance with the limits,
needs because insufficient cash is available. Eventually, this will affect the
• Forward-looking and stress-testing,
Group’s daily operations or its financial conditions.
• Liquidity in exceptional circumstances.
• Market Liquidity risk is a risk that the Group cannot sell an asset on time
at a reasonable price due to insufficient market depth (insufficient supply
and demand) or market disruptions. Market risk includes the sensitivity in
liquidity value of a portfolio due to changes in the applicable haircuts and
market value.
158
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 The objectives of monitoring and managing liquidity risk in NLB Group are
The Group members have defined a liquidity management plan for
The structure of liquidity reserves is shown in the following table.
as follows:
exceptional circumstances that lays down guidelines and a plan of activities
• ensuring a sufficient level of liquid assets;
• minimising the costs of maintaining liquidity;
• optimising the amount of liquidity reserves;
circumstances. It also provides for the establishment of a system of liquidity
management that ensures the maintenance of NLB Group’s liquidity and
protects the commercial interests of its customers and shareholders.
• ensuring an appropriate level of liquidity for different situations and stress
scenarios;
Liquidity risk management in NLB Group is under strict monitoring
Liquid assets
for recognising problems, searching for solutions, and handling exceptional
Liquid assets
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
• anticipating emergencies or crisis conditions, and implementing
by NLB as a parent bank. Reporting to NLB by all Group members is
contingency plans in the event of extraordinary circumstances;
performed daily. Global Risk gives guidelines and defines minimal standards
• preparing dynamic projections of liquidity taking several cash-flow
for Group members regarding liquidity risk management in NLB Group
scenarios of the Bank into account; and
Risk Management Standards. Each Group member is responsible for
• preparing proposals for establishing additional financial assets as collateral
ensuring adequate liquidity via the necessary sources of funding and
for sources of funding.
their appropriate diversification and maturity, and by managing liquidity
reserves and fulfilling the requirements of regulations governing liquidity.
Overall assessment of the liquidity position of NLB Group is assessed in the
The exposure of an individual NLB Group member towards liquidity risk
Internal Liquidity Adequacy Assessment Process (ILAAP) at least once per
is regularly monitored and reported to ALCO, and to local Assets and
year for NLB Group, and it includes a clear formal statement on liquidity
Liabilities Committees.
adequacy, supported by an analysis of ILAAP outcomes. NLB Group
Cash, cash balances at central banks, and other demand deposits at banks
3,961,812
2,101,346
2,261,533
1,292,211
Time deposits at banks
Trading book securities
Banking book securities
ECB eligible loans
Total liquid assets
128,074
68,806
91,076
4,325
63,405
2,450
62,651
4,325
5,008,841
3,745,653
2,949,084
3,096,877
582,986
545,247
582,986
545,247
9,750,519
6,487,647
5,859,458
5,001,311
As at 31 December 2020, 81.8% (31 December 2019: 78.9%) of debt
Corporate Debt Securities in Large Corporates, which clearly define the
maintains a sufficient amount of liquidity reserves in the form of high credit
The year 2020 was largely influenced by the COVID-19 pandemic, which
securities in the banking book of NLB Group were government securities
objectives and characteristics of the associated portfolio.
quality debt securities that are eligible for refinancing via the ECB/central
was also reflected in the liquidity risk management of NLB Group. Greater
(including government guaranteed bonds – GGB), and 8.4% (31 December
bank or on the market. In the current situation, NLB Group also strives to
emphasis was placed on improving the quality and monitoring of daily
2019: 7.8%) were senior unsecured bonds. With the acquisition of
The ECB-eligible credit claims comprise loans which fulfil the high
follow as closely as possible the long-term trend of diversification on both
data, including daily monitoring of movements in loans and deposits, as
Komercijalna banka group, the structure of liquid assets did not change
eligibility criteria set by the ECB itself and for domestic loans are specified
the liability and asset sides of the balance sheet. NLB Group regularly
well as daily calculations of the LCR indicator. Especially in the first half
significantly, while the amount of liquid assets increased by EUR 2,226,951
in the general terms about execution of monetary policy framework (Part 4)
performs stress tests with the aim of testing the liquidity stability and the
of the year, the intensity of liquidity reporting increased significantly,
thousand.
availability of liquidity reserves in various stress situations. In addition,
both internally, to ALCO of the NLB Group, as well as at the request
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
special attention is given to the fulfilment of the liquidity regulation (CRR/
of the regulator. In addition to regular monthly reporting, weekly and
The purpose of banking book securities is to provide liquidity, along with
eligible counterparty. As such, these ECB credit claims are included among
CRD), with monitoring and reporting of the liquidity coverage ratio (LCR)
daily reporting to the Management Board was also introduced, while the
stabilisation of the interest margin and interest rate risk management
liquidity reserves.
according to the Delegated Act and net stable funding ratio (NSFR). This
regulator introduced several new reports, with an emphasis on monitoring
simultaneously. When managing the portfolio, NLB Group uses conservative
also includes monitoring and reporting of Additional Liquidity Monitoring
daily liquidity. The second half of the year, and especially the end of 2020,
principles, particularly with respect to the portfolio’s structure in terms of
Members of NLB Group manage their liquid assets on a decentralised basis
Metrics (ALMM) on solo and consolidated levels. In accordance with
was marked by the acquisition of the Komercijalna banka group on 30
issuers’ ratings and asset class. The framework for managing the banking
in compliance with the local liquidity regulation and valid policies of NLB
the Commission Implementing Regulation (EU), NLB Group regularly
December 2020, which required many coordination activities, which will
book securities are the Policy for managing debt securities in the Financial
Group.
monitors and issues quarterly reports on asset encumbrance.
continue next year. The liquidity risk of the NLB Group has not changed
Markets’ banking book and the Policy for Managing Domestic (Slovenian)
Within regular liquidity stress-testing NLB Group regularly prepares a
continues to maintain a favourable liquidity position.
b) Encumbered assets
significantly due to the acquisition of the Komercijalna banka group, as it
static liquidity mismatch table by residual maturity and dynamic liquidity
projections taking several cash-flow scenarios into account to ensure
a) Managing NLB Group’s liquidity reserves
monitoring over the liquidity position of each NLB Group member.
NLB Group has liquidity reserves available to cover liabilities that fall or
The Group manages its liquidity position (liquidity within one day) daily,
Liquidity reserves are comprised of cash, the settlement account at the
for a period of several days or weeks in advance, based on the planning and
central bank, sight deposits and term deposits at banks, and debt securities
monitoring of cash flows. Each NLB Group member is responsible for its
and loans eligible as collateral for the Eurosystem’s liquidity providing
own liquidity position and carries out the following activities:
operations, on the basis of which the Bank may generate the requisite
may become due. Liquidity reserves must become available on short notice.
• managing intraday liquidity;
• planning and monitoring cash flows;
liquidity at any time. The available liquidity reserves are liquidity reserves
decreased by the reserve requirement, required balances for the continuous
performance of payment transactions, encumbered securities, and/or credit
• monitoring and complying with the liquidity regulations of the central
claims for different purposes (secured funding).
bank;
• adopting business decisions;
The minimum amount of liquidity reserves is determined on the basis of the
• forming and managing liquidity reserves; and
methodology pertaining to liquidity risk stress tests. The amount represents
• performing liquidity stress test to define the liquidity buffer for smooth
the survival of a severe stress over a period of three months in a combined
functioning of the payment system in stressed circumstances.
stress scenario.
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.
NLB Group
NLB
in EUR thousands
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
securities
Carrying
amount of
unencumbered
assets
Fair value of
unencumbered
securities
991,649
-
2,462,193
-
102,458
708
708
82,251
80,949
-
-
-
1,966,670
-
49,318
49,318
52,336
55,519
4,968,205
5,017,867
52,336
55,519
2,899,198
2,951,975
80,204
-
1,124,897
-
-
9,874,875
1,053,435
18,440,959
-
-
72,943
-
227,737
-
-
4,734,993
1,148,687
10,798,866
-
-
2020
Loans on demand
Equity instruments
Debt securities
Loans and advances other
than loans on demand
Other assets
Total
159
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 NLB Group
NLB
in EUR thousands
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
securities
Carrying
amount of
unencumbered
assets
Fair value of
unencumbered
securities
443,953
-
-
-
1,317,496
-
86,302
58,265
58,265
-
-
-
1,041,184
-
47,662
47,662
50,944
57,697
3,700,790
3,755,463
50,944
57,697
3,050,258
3,101,857
71,105
-
566,002
-
-
7,724,398
807,137
13,608,086
-
-
64,711
-
201,957
-
-
4,736,090
724,406
9,599,600
-
-
2019
Loans on demand
Equity instruments
Debt securities
Loans and advances other
than loans on demand
Other assets
Total
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:
e) Non-derivative cash flows
disclosed in the table are the undiscounted contractual cash flows
The tables below illustrate the cash flows from non-derivative financial
determined on the basis of spot rates at the end of the reporting period.
instruments by residual maturities at the end of the year. The amounts
NLB Group
in EUR thousands
Up to 1 Month
1 Month
to 3 Months
3 Months
to 1 Year 1 Year to 5 Years
Over 5 Years
Total
31 Dec 2020
Financial liabilities and credit-related commitments
Financial liabilities measured at amortised cost
- deposits from banks and central banks
52,434
19,813
558
491
-
73,296
- borrowings from banks and central banks
666
727
18,146
130,821
10,273
160,633
- due to customers
14,111,895
379,127
1,080,487
848,237
19,059
16,438,805
- borrowings from other customers
- subordinated liabilities
- other financial liabilities
1,041
-
137,463
2,899
4,426
8,762
9,719
6,803
14,402
43,382
41,400
42,917
39,743
328,352
3,756
96,784
380,981
207,300
NLB Group
NLB
Non-financial guarantees
25,177
67,127
154,766
334,078
66,198
647,346
in EUR thousands
Credit risk related commitments
563,821
226,551
703,691
408,880
424,681
2,327,624
2019
2020
2019
Total
14,892,497
709,432
1,988,572
1,850,206
892,062
20,332,769
Equity instruments
Debt securities
Loans and advances other than loans on demand
Other assets
Total
d) Source of encumbrance
2020
268,249
10,438
146,750
197,157
198,874
176,532
-
-
-
111,726
20,165
20,249
10,679,630
7,361,858
3,809,244
3,703,078
11,105,067
7,670,741
4,028,283
3,899,859
NLB Group
NLB
2020
2019
2020
2019
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
Deposits
Other sources of encumbrance
76,187
91,250
65,056
78,174
76,187
91,250
65,056
78,174
5,978
12,055
3,875
1,021,592
8,955
4,107
14,553
5,978
12,055
8,955
14,553
473,274
-
124,433
-
109,230
Total
86,040
1,124,897
78,118
566,001
82,165
227,738
74,011
201,957
in EUR thousands
Financial liabilities measured at fair value through profit or loss
-
129
96
7,773
Total financial assets
5,228,895
651,541
2,434,589
7,867,386
4,621,083
20,803,494
31 Dec 2019
Financial liabilities and credit-related commitments
NLB Group
in EUR thousands
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 measured at amortised cost
- deposits from banks and central banks
- borrowings from banks and central banks
34,762
829
3,171
713
4,728
20,183
179
132,649
19,175
173,549
- due to customers
9,748,905
310,184
923,914
646,400
11,446
11,640,849
- borrowings from other customers
- subordinated liabilities
- other financial liabilities
547
45,447
99,576
2,384
-
6,592
6,801
7,984
13,629
29,818
25,080
34,037
28,387
194,798
3,258
67,728
272,126
158,484
Credit risk related commitments
519,894
141,560
542,244
291,615
265,909
1,761,222
Non-financial guarantees
26,319
47,942
146,477
244,240
67,883
532,861
-
-
7,998
42,840
As at 31 December 2020, NLB Group and NLB had a large share of
assets equalled EUR 1,125 million (31 December 2019: EUR 566 million),
Total
10,476,279
514,067
1,664,664
1,411,791
590,856
14,657,657
unencumbered assets. Other sources of encumbrance mostly relate to the
relating to the deposit guarantee scheme and to secure funding received
obligatory reserve. On the NLB Group level, the amount of encumbered
from international financial organisations.
Total financial assets
3,089,393
766,986
1,897,395
5,418,262
3,864,711
15,036,747
160
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 NLB
in EUR thousands
f) An analysis of the statement of financial position by residual contractual maturity
Up to 1 Month
1 Month
to 3 Months
3 Months
to 1 Year 1 Year to 5 Years
Over 5 Years
Total
NLB Group
in EUR thousands
31 Dec 2020
Financial liabilities and credit-related commitments
Financial liabilities measured at amortised cost
- deposits from banks and central banks
- borrowings from banks and central banks
41,635
85
-
704
-
-
13,547
121,751
- due to customers
8,412,546
108,942
184,159
143,115
- borrowings from other customers
- subordinated liabilities
- other financial liabilities
-
-
70,217
-
4,426
6,134
13
6,803
582
-
41,400
23,813
-
9,561
4,775
-
328,352
527
41,635
145,648
8,853,537
13
380,981
101,273
Credit risk related commitments
478,872
143,562
418,866
261,282
270,333
1,572,915
Non-financial guarantees
18,203
41,599
90,299
245,158
36,406
431,665
Total
9,021,558
305,367
714,269
836,519
649,954
11,527,667
Total financial assets
2,800,273
217,309
1,008,108
3,878,926
2,904,506
10,809,122
NLB
in EUR thousands
Financial liabilities measured at fair value through profit or loss
-
Financial liabilities measured at amortised cost
- deposits from banks and central banks
- borrowings from banks and central banks
89,820
85
-
-
-
-
7,746
-
713
17,004
128,181
- due to customers
7,192,671
138,709
274,599
148,107
-
-
18,537
10,017
7,746
89,820
164,520
7,764,103
- borrowings from other customers
- subordinated liabilities
- other financial liabilities
-
45,447
63,098
-
-
6,403
32
6,801
3,053
2,505
25,080
25,707
-
2,537
194,798
272,126
81
98,342
Financial assets held for trading
16,046
15,173
47,223
6,412
- loans and advances to customers
538,078
421,665
1,733,251
4,252,968
2,673,898
9,619,860
- other financial assets
80,692
8,319
3,380
20,597
150
113,138
31 Dec 2020
Cash, cash balances at central banks, and
other demand deposits at banks
Non-trading financial assets mandatorily
at fair value through profit or loss
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at amortised cost
- debt securities
- loans and advances to banks
Fair value changes of hedged items in
portfolio hedge of interest rate risk
Non-current assets held for sale
Property and equipment
Investment property
Intangible assets
Current income tax assets
Deferred income tax assets
Other assets
Total assets
Financial liabilities held for trading
Derivatives - hedge accounting
Financial liabilities measured at amortised cost
Up to 1 Month
1 Month
to 3 Months
3 Months
to 1 Year 1 Year to 5 Years
Over 5 Years
Total
3,961,812
-
-
-
3,961,812
-
1
6,067
120
24,954
1,171
10,081
352,474
57,055
337,298
1,960,192
807,271
3,514,290
74,540
154,686
47,087
36,706
76,672
4,375
695,030
609,758
1,503,087
1,238
-
197,005
84,855
42,393
-
-
-
-
-
-
1,656
327
-
-
-
-
-
-
22
-
-
8,658
-
-
-
-
2,691
-
24,548
9,109
54,992
885
-
78,847
41,501
32,274
-
-
28,759
8,337
12,959
-
13,844
8,658
170,270
249,117
13,341
29,394
7,988
-
2,703
154
54,842
61,668
7,988
4,369
31,789
97,140
5,210,926
595,256
2,246,272
7,169,022
4,344,379
19,565,855
15,485
61,161
-
-
-
-
-
-
-
-
-
15,485
61,161
72,633
31 Dec 2019
Financial liabilities and credit-related commitments
Up to 1 Month
1 Month
to 3 Months
3 Months
to 1 Year 1 Year to 5 Years
Over 5 Years
Total
Investments in associates and joint ventures
- deposits from banks and central banks
52,434
19,813
163
223
- borrowings from banks and central banks
658
717
17,468
129,215
10,167
158,225
Credit risk related commitments
462,738
112,337
357,075
198,855
192,711
1,323,716
- due to customers
14,109,959
375,751
1,069,785
825,076
16,596
16,397,167
Non-financial guarantees
19,401
37,667
92,882
197,417
36,197
383,564
- borrowings from other customers
Total
7,873,260
295,829
751,446
733,598
452,341
10,106,474
Total financial assets
1,835,982
455,148
1,027,315
3,627,280
3,080,579
10,026,304
- subordinated liabilities
- other financial liabilities
- lease liabilities
Provisions
When determining the gap between the financial liabilities and financial
compiled a substantial amount of high-quality liquid investments, mostly
Current income tax liabilities
assets in the maturity bucket of up to one month, it is necessary to be
government securities and selected loans, which are accepted as adequate
aware of the fact that financial liabilities include total demand deposits,
financial assets by the ECB.
and that NLB may apply a stability weight of 60% to demand deposits
when ensuring compliance with the central bank’s regulations concerning
Liabilities and credit-related commitments are included in maturity buckets
calculation of the liquidity position. To ensure NLB Group’s and NLB’s
based on their residual contractual maturity.
liquidity, and based on its approach to risk, in previous years NLB Group
Deferred income tax liabilities
Other liabilities
Total liabilities
Credit risk related commitments
Non-financial guarantees
977
-
136,371
1,092
8,507
644
763
9,467
2,731
3,690
7,703
1,059
1,183
358
-
412
9,120
1,759
9,552
4,850
32,785
-
-
2,690
41,072
37,660
-
282,872
25,970
16,947
79,159
-
3,301
1,521
1,345
2,411
3,425
-
411
91,560
288,321
180,941
26,359
125,059
1,002
4,475
6,337
20,427
14,397,518
413,417
1,148,172
1,122,484
361,224
17,442,815
563,821
25,177
226,551
67,127
703,691
154,766
408,880
334,078
424,681
2,327,624
66,198
647,346
Total liabilities and credit-related commitments
14,986,516
707,095
2,006,629
1,865,442
852,103
20,417,785
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 NLB Group
in EUR thousands
NLB
in EUR thousands
31 Dec 2019
Cash, cash balances at central banks, and
other demand deposits at banks
Financial assets held for trading
Non-trading financial assets mandatorily
at fair value through profit or loss
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at amortised cost
- debt securities
- loans and advances to banks
Up to 1 Month
1 Month
to 3 Months
3 Months
to 1 Year 1 Year to 5 Years
Over 5 Years
Total
31 Dec 2020
Up to 1 Month
1 Month
to 3 Months
3 Months
to 1 Year 1 Year to 5 Years
Over 5 Years
Total
2,101,346
20,753
600
-
21
461
-
37
-
-
2,428
12,945
-
2,101,346
3,227
8,925
24,038
25,359
246,264
220,646
157,256
956,226
561,036
2,141,428
Cash, cash balances at central banks, and
other demand deposits at banks
Financial assets held for trading
Non-trading financial assets mandatorily
at fair value through profit or loss
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at amortised cost
2,261,533
16,381
526
-
-
-
1
158
26,084
-
2,449
3,885
-
-
4,453
2,261,533
18,831
35,106
91,312
19,936
185,583
867,674
551,846
1,716,351
74,571
63,799
108,115
127,645
562,425
781,092
1,653,848
- debt securities
24,393
2,764
2,440
7
93,403
- loans and advances to banks
66,893
392
13,792
22,824
41,502
50,274
556,444
599,249
1,277,880
28,990
55,840
158,320
- loans and advances to customers
487,218
367,641
1,420,888
3,185,043
2,128,934
7,589,724
- loans and advances to customers
322,669
141,946
609,404
2,029,791
1,460,368
4,564,178
1,012
912
22,486
- other financial assets
33,661
218
- other financial assets
Derivatives - hedge accounting
Fair value changes of hedged items in
portfolio hedge of interest rate risk
Non-current assets held for sale
Property and equipment
Investment property
Intangible assets
Investments in associates and joint ventures
Current income tax assets
Deferred income tax assets
Other assets
Total assets
73,005
788
-
-
-
-
-
-
202
-
-
-
-
-
-
-
-
29
-
-
-
43,191
-
-
-
-
6,053
-
-
903
-
28,441
40,760
11,147
-
-
29,419
7,596
-
-
8,088
97,415
788
8,991
11,556
28,395
7,499
-
81
-
52,316
39,542
7,499
6,284
29,500
63,811
3,087,230
730,600
1,790,423
4,859,831
3,706,004
14,174,088
Financial liabilities held for trading
Financial liabilities measured at fair value through profit or loss
Derivatives - hedge accounting
Financial liabilities measured at amortised cost
- deposits from banks and central banks
- borrowings from banks and central banks
17,903
-
49,507
34,762
815
-
129
-
3,171
705
-
96
-
4,728
19,393
-
7,773
-
179
-
-
-
-
17,903
7,998
49,507
Fair value changes of hedged items in
portfolio hedge of interest rate risk
Non-current assets held for sale
-
43,191
Property and equipment
167,164
195,605
Investment property
Intangible assets
Investments in subsidiaries, associates and joint ventures
Current income tax assets
Deferred income tax assets
Other assets
Total assets
Financial liabilities held for trading
Derivatives - hedge accounting
Financial liabilities measured at amortised cost
- deposits from banks and central banks
- borrowings from banks and central banks
- due to customers
9,747,598
307,696
913,343
632,382
11,298
11,612,317
- subordinated liabilities
130,528
18,944
170,385
- borrowings from other customers
42,840
- due to customers
8,412,510
108,772
183,709
141,077
- borrowings from other customers
- subordinated liabilities
- other financial liabilities
- lease liabilities
Provisions
Current income tax liabilities
Deferred income tax liabilities
Other liabilities
Total liabilities
Credit risk related commitments
Non-financial guarantees
485
45,367
99,205
371
10,559
1,798
-
8,653
2,202
-
7,300
684
641
473
-
544
5,980
1,754
11,001
2,628
32,464
-
-
1,397
27,547
28,244
-
163,448
24,265
9,772
42,888
-
2,478
4,000
-
3,258
1,862
-
355
618
64,458
210,569
141,771
16,713
88,414
2,271
2,833
15,212
- other financial liabilities
- lease liabilities
Provisions
Other liabilities
Total liabilities
10,017,023
323,545
992,784
881,812
228,027
12,443,191
Total liabilities and credit-related commitments
9,103,742
305,224
728,060
834,610
608,553
11,580,189
519,894
26,319
141,560
47,942
542,244
146,477
291,615
244,240
265,909
1,761,222
67,883
532,861
Credit risk related commitments
Non-financial guarantees
478,872
18,203
143,562
41,599
418,866
90,299
261,282
245,158
270,333
1,572,915
36,406
431,665
Total liabilities and credit-related commitments
10,563,236
513,047
1,681,505
1,417,667
561,819
14,737,274
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
-
-
-
-
-
-
-
-
6,558
-
-
-
-
-
-
-
-
-
40
-
4,454
-
-
-
1,719
1,923
20,584
885
-
22,173
8,300
13,058
65,140
-
-
29,214
5,106
-
-
12,959
-
69,502
-
15,047
54,503
13,844
4,454
91,675
8,300
28,105
683,863
750,722
-
-
-
1,923
29,214
11,664
15,500
61,161
41,635
85
-
-
-
-
-
-
-
-
-
704
12,948
120,260
-
-
70,144
73
495
5,064
-
3,690
6,006
128
669
94
13
1,759
-
582
19,463
421
-
-
21,899
1,914
41,533
1,487
-
-
-
9,467
4,687
-
15,500
61,161
41,635
143,464
8,850,755
13
282,872
288,321
12
515
1,630
2,631
98,061
3,212
63,790
9,697
8,606,667
120,063
218,895
328,170
301,814
9,575,609
18,684
8,282
29,249
2,799,925
198,874
926,090
3,648,587
3,453,127
11,026,603
Annual Report 2020 Up to 1 Month
1 Month
to 3 Months
3 Months
to 1 Year 1 Year to 5 Years
Over 5 Years
Total
the relevant maturity buckets based on residual maturities. The amounts
NLB
in EUR thousands
g) Derivative cash flows
disclosed in the table are the contractual undiscounted cash flows prepared
The table below illustrates cash flows from derivatives, broken down into
on the basis of spot rates on the reporting date.
31 Dec 2019
Cash, cash balances at central banks, and
other demand deposits at banks
Financial assets held for trading
Non-trading financial assets mandatorily
at fair value through profit or loss
Financial assets measured at fair value
through other comprehensive income
Financial assets measured at amortised cost
- debt securities
- loans and advances to banks
1,292,211
20,800
365
-
21
144
-
37
785
-
3,227
18,994
-
-
2,999
1,292,211
24,085
23,287
25,798
186,222
115,877
795,629
533,131
1,656,657
74,400
8,925
73,519
12,011
107,934
453,767
775,546
1,485,166
48,149
8,358
66,909
144,352
- loans and advances to customers
360,469
162,053
659,576
1,937,129
1,449,372
4,568,599
- other financial assets
Derivatives - hedge accounting
Fair value changes of hedged items in
portfolio hedge of interest rate risk
Non-current assets held for sale
Property and equipment
Investment property
Intangible assets
Investments in subsidiaries, associates and joint ventures
Current income tax assets
Deferred income tax assets
Other assets
Total assets
43,901
788
-
-
-
-
-
-
-
-
5,472
314
600
22,464
-
-
-
-
-
-
-
23
-
-
-
-
5,532
-
-
-
1,719
5,440
-
903
-
19,637
9,303
10,199
65,170
-
-
29,569
5,670
-
-
-
8,088
-
70,267
-
15,781
67,279
788
8,991
5,532
89,904
9,303
25,980
286,360
353,249
-
-
-
5,463
29,569
11,142
1,833,129
434,307
951,319
3,374,349
3,208,453
9,801,557
Financial liabilities held for trading
Financial liabilities measured at fair value through profit or loss
Derivatives - hedge accounting
Financial liabilities measured at amortised cost
- deposits from banks and central banks
- borrowings from banks and central banks
17,892
-
49,507
89,820
85
-
-
-
-
-
-
-
-
-
7,746
-
-
-
-
-
-
17,892
7,746
49,507
89,820
705
16,296
126,165
18,313
161,564
- due to customers
7,192,603
138,492
273,855
145,898
9,889
7,760,737
- borrowings from other customers
- subordinated liabilities
- other financial liabilities
- lease liabilities
Provisions
Other liabilities
Total liabilities
-
45,367
63,067
31
231
3,949
-
-
6,269
134
309
333
32
1,754
2,452
601
22,313
334
23,770
1,937
37,531
4,000
-
81
-
618
95,558
2,784
60,384
9,234
7,462,552
146,242
317,637
349,552
192,349
8,468,332
Credit risk related commitments
Non-financial guarantees
462,738
19,401
112,337
37,667
357,075
92,882
198,855
197,417
192,711
1,323,716
36,197
383,564
Total liabilities and credit-related commitments
7,944,691
296,246
767,594
745,824
421,257
10,175,612
31 Dec 2020
Foreign exchange derivatives
- Forwards
- Outflow
- Inflow
- Swaps
- Outflow
- Inflow
Interest rate derivatives
- Interest rate swaps and cross-currency swaps
- Outflow
- Inflow
Total outflow
Total inflow
31 Dec 2019
Foreign exchange derivatives
- Forwards
- Outflow
- Inflow
- Swaps
- Outflow
- Inflow
- Outflow
- Inflow
- Caps and floors
- Outflow
- Inflow
Total outflow
Total inflow
NLB Group
in EUR thousands
Up to 1 Month
1 Month
to 3 Months
3 Months
to 1 Year 1 Year to 5 Years
Over 5 Years
Total
(24,456)
(28,334)
(65,976)
(13,817)
24,494
28,368
66,041
13,828
(20,709)
(49,105)
(36,055)
20,297
49,112
36,034
-
-
-
-
-
-
(132,583)
132,731
(105,869)
105,443
(692)
73
(2,962)
(11,378)
(42,239)
(18,643)
(75,914)
718
4,394
8,777
2,348
16,310
(45,857)
(80,401)
(113,409)
(56,056)
(18,643)
(314,366)
44,864
78,198
106,469
22,605
2,348
254,484
NLB Group
in EUR thousands
Up to 1 Month
1 Month
to 3 Months
3 Months
to 1 Year 1 Year to 5 Years
Over 5 Years
Total
(28,609)
(79,443)
28,636
79,494
(34,425)
34,370
(1,170)
94
-
-
(3,893)
3,897
(2,772)
1,024
-
-
(7,913)
7,919
(73,630)
73,797
(20,868)
20,886
-
-
-
-
-
-
(136,833)
136,935
(111,948)
112,064
(12,146)
(44,445)
(23,811)
(84,344)
6,359
15,742
14,139
37,358
-
-
(4)
4
-
-
(4)
4
(64,204)
(86,108)
(93,689)
(65,317)
(23,811)
(333,129)
63,100
84,415
88,075
36,632
14,139
286,361
2,505
-
2,537
Interest rate derivatives
-
163,448
210,569
- Interest rate swaps and cross-currency swaps
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 31 Dec 2020
Foreign exchange derivatives
- Forwards
- Outflow
- Inflow
- Swaps
- Outflow
- Inflow
Interest rate derivatives
- Interest rate swaps and cross-currency swaps
- Outflow
- Inflow
Total outflow
Total inflow
31 Dec 2019
Foreign exchange derivatives
- Forwards
- Outflow
- Inflow
- Swaps
- Outflow
- Inflow
Interest rate derivatives
- Interest rate swaps and cross-currency swaps
- Outflow
- Inflow
- Caps and floors
- Outflow
- Inflow
Total outflow
Total inflow
NLB
in EUR thousands
Up to 1 Month
1 Month
to 3 Months
3 Months
to 1 Year 1 Year to 5 Years
Over 5 Years
Total
(23,685)
(31,650)
(65,976)
(13,817)
23,715
31,685
66,041
13,828
(24,874)
(53,580)
24,821
53,592
(6,063)
6,068
-
-
-
-
-
-
(135,128)
135,269
(84,517)
84,481
6.4. Management of non-financial risks
a) Operational risk
Through comprehensive identification of operational risks, possible future
losses are identified, estimated, and appropriately managed. The major
When assuming operational risks, NLB Group follows the guideline that
operational risks are actively managed with the measures taken to reduce
such risks may not materially impact its operations and, therefore, the risk
them. An operational risk profile is prepared once a year on the basis of
appetite for operational risks is low to moderate. The risk is also gradually
the operational risk identification. Special emphasis is put on the most
decreasing due to the reduced complexity of operations in NLB Group,
topical risks, among which in particular are those with a low probability of
with disinvestment process of non-core activities and optimisation of
occurrence and very high potential financial influence. For this purpose,
internal processes. NLB Group has set up a system of collecting loss events,
the Bank has developed the methodology of stress-testing for operational
identification, assessment, and management of operational risks, all with
risk. The methodology is a combination of modelling loss event data and
the aim of ensuring quality management of operational risks. This is
scenario analysis for exceptional, but plausible events. Scenario analyses are
particularly valid in strategic banking members.
made based on experience and knowledge of experts from various critical
All NLB Group banking members monitor risk appetite limits for
areas.
operational risk. The upper tolerance limit is defined as the limit amount of
The capital requirement for operational risk is calculated using the basic
net loss that an individual member still allows in its operations. If the sum of
indicator approach at NLB Group level and using the standardised
net loss exceeds the tolerance limit, a special treatment of major loss events
approach at the NLB level.
(692)
73
(2,962)
(11,378)
(42,239)
(18,643)
(75,914)
is required and, if necessary, takes additional measures for the prevention
718
4,394
8,777
2,348
16,310
or mitigation of the same or similar loss events are taken. The warning
b) Business Continuity Management (BCM)
(49,251)
(88,192)
(83,417)
(56,056)
(18,643)
(295,559)
48,609
85,995
76,503
22,605
2,348
236,060
NLB
in EUR thousands
Up to 1 Month
1 Month
to 3 Months
3 Months
to 1 Year 1 Year to 5 Years
Over 5 Years
Total
(27,908)
(79,443)
27,935
79,494
(36,436)
36,380
(7,021)
7,019
(7,913)
7,919
(78,099)
78,228
(20,868)
20,886
-
-
-
-
-
-
(136,132)
136,234
(121,556)
121,627
(1,170)
(2,772)
(12,146)
(44,445)
(23,811)
(84,344)
94
1,024
6,359
15,742
14,139
37,358
-
-
-
-
-
-
(4)
4
-
-
(4)
4
and critical limit of loss events are also defined, which in case of exceeding
In NLB Group, business continuity management is carried out to protect
require escalation procedures an acceptance of possible additional risk
lives, goods, and reputation. Business continuity plans are prepared to be
management measures. In addition, the Bank does not allow certain risks
used in the event of natural disasters, IT disasters, and the undesired effects
in its business – for them a so-called ‘zero tolerance’ was defined. For
of the environment to mitigate their consequences.
monitoring some specific more important key risk indicators, that could
show a possible increase of an operational risk, the Bank developed a
The concept of the action plan that is prepared each year is such that
specific methodology as an early warning system. Such risks are periodically
the activities contribute to the upgrading or improvement of the Business
monitored in different business areas, and the results are discussed at the
Continuity Management System. The basis for modernising the business
Operational Risk Committee. The latter was named as the highest decision-
continuity plans is the regular annual Business Impact Analysis (BIA).
making authority in the area of operational risk management. Relevant
On its basis, the adequacy of the plans for office buildings HR plans and
operational risk committees were also appointed at other NLB Group
IT plans is checked. The best indicator of the adequacy of the business
banks. The Management Board serves in this role at other subsidiaries.
continuity plans is testing. In 2020 just four manual procedures and an IT
The main task of the afore-mentioned bodies is to discuss the most
test were carried out at NLB (no evacuation test because of the COVID-19
significant operational risks and loss events, and to monitor and support
pandemic). No major deviations were discovered.
the effective management of operational risks including their mitigation
within an individual entity. All NLB Group entities, which are included in
In NLB Group, know-how and methodologies are transferred to the
the consolidation, have adopted relevant documents that are in line with
members (except non-core members which are in the process of liquidation).
NLB standards. In banking members, these documents are in line with the
The members have adopted appropriate documents which are in line with
development of operational risk management and regularly updated. The
the standards of NLB and revised in accordance with the development of
whole NLB Group uses uniform software support, which is also regularly
business continuity management. The activity of the members is monitored
upgraded.
throughout the year, and expert assistance is provided if necessary.
In NLB Group, the reported incurred net loss arising from loss events
For more efficient functioning of the business continuity management
in 2020 were higher than in the previous year, partially also due to the
system in NLB Group, training courses and visits to individual banking
COVID-19 pandemic. Nevertheless, the reported incurred net loss remain
members are also provided. In 2020, visits of NLB Group banking
within the set tolerance limits for operational risk.
subsidiaries were suspended due to COVID-19 situation, nevertheless all
In general, considerable attention is paid to reporting loss events, their
sent to the members with the purpose to help and act in the uniform way.
preventive and response measures with regard to business continuity were
(65,514)
(89,236)
(98,158)
(65,317)
(23,811)
(342,036)
mitigation measures and defining operational risks in all segments. To treat
64,409
87,537
92,506
36,632
14,139
295,223
major loss events appropriately and as soon as possible, the Bank introduced
With regards to IT failures, the Bank successfully used the IT plans
an escalation scale for reporting bigger or more important loss events to
and instructions for manual procedures, and thus also ensured business
the top levels of decision-making at NLB and the Supervisory Board of
operations in emergency situations.
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
Following the indications of the outbreak of COVID-19 in Slovenia
events. Furthermore, the methodology to monitor, analyse and report key
and SEE, NLB Group has taken measures to protect its customers
risk indicators is established, servicing as an early warning system. The aim
and employees, such as (but not limited to) ensuring the relevant safety
is to improve business and supporting processes, as well enabling prompt
response.
conditions and making sure that the services offered by the Group are
provided without any disruption. The NLB Group continuously offered
necessary services to clients, especially through digital channels (mobile
banking, video calls and telebanking), which the NLB Group continues to
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 develop at an accelerated pace. A Crisis Management Team was activated
or liability may be exchanged in multiple active markets, the principal
a) Financial and non-financial assets and liabilities measured at fair value in the financial statements
in the Bank and other banking members with full engagement of the
market for the asset or liability must be determined. In the absence of a
Management Board members. Special attention was paid to continuous
principal market, the most advantageous market for the asset or liability
provision of services to clients, their monitoring, health protection measures
must be determined.
and prevention of cyber fraud.
• Level 2 – A valuation technique where inputs are observable, either
directly (i.e., prices) or indirectly (i.e., derived from prices). Level 2
c) Management of other types of non-financial risks – capital
includes prices quoted for similar assets or liabilities in active markets and
risk, strategic risks, reputation risk, and profitability risk
prices quoted for identical or similar assets, and liabilities in markets that
Risks not included in the regulatory capital requirements (standardised
are not active. The sources of input parameters for financial instruments,
approach) but have or might have an important influence on the risk
such as yield curves, credit spreads, foreign exchange rates, and the
profile of NLB Group, are regularly assessed, monitored, and managed.
volatility of interest rates and foreign exchange rates, is Bloomberg.
In addition, they are integrated into internal capital adequacy assessment
• Level 3 – A valuation technique where inputs are not based on observable
process (ICAAP). NLB Group established internal methodologies for
market data. Unobservable inputs are used to the extent that relevant
identifying and assessing specific types of risk, referring to the Group’s
observable inputs are not available. Unobservable inputs must reflect the
business model or arising from other external circumstances. If a certain
assumptions that market participants would use when pricing an asset or
risk is assessed as a materially important risk, relevant disposable preventive
liability. This level includes non-tradable shares and bonds, and derivatives
and mitigation measures are applied, including regular monitoring of
associated with these investments and other assets and liabilities for which
their effectiveness. On this basis, internal capital is considered and its
fair value cannot be determined with observable market inputs.
consumption regularly monitored.
6.5. Fair value hierarchy of financial and non-financial assets and liabilities
in an active market for an identical asset or liability. An active market is
Fair value is the price that would be received when selling an asset or paid
a market in which transactions for an asset or liability are executed with
Wherever possible, fair value is determined as an observable market price
31 Dec 2020
Financial assets
Financial instruments held for trading
Debt instruments
Derivatives
Financial assets measured at fair value
through other comprehensive income
Debt instruments
Equity instruments
Non-trading financial assets mandatorily
at fair value through profit and loss
Debt instruments
Equity instruments
Loans
Financial liabilities
to transfer a liability in an orderly transaction between market participants
sufficient frequency and volume to provide pricing information on an
Financial instruments held for trading
at the measurement date. NLB Group uses various valuation techniques to
ongoing basis. Assets and liabilities measured at fair value in active markets
determine fair value. IFRS 13 specifies a fair value hierarchy with respect
are determined as the market price of a unit (e.g. share) at the measurement
to the inputs and assumptions used to measure financial and non-financial
date, multiplied by the quantity of units owned by NLB Group. The fair
assets and liabilities at fair value. Observable inputs reflect market data
value of assets and liabilities whose market is not active is determined using
obtained from independent sources, while unobservable inputs reflect
valuation techniques. These techniques bear a different intensity level of
the assumptions of NLB Group. This hierarchy gives the highest priority
estimates and assumptions, depending on the availability of observable
to observable market data when available, and the lowest priority to
market inputs associated with the asset or liability that is the subject of the
unobservable market data. NLB Group considers relevant and observable
valuation. Unobservable inputs shall reflect the estimates and assumptions
Derivatives
Derivatives - hedge accounting
Non-financial assets
Investment properties
Non-current assets held for sale
Non-financial assets impaired during the year
market prices in its valuations, where possible. The fair value hierarchy
that other market participants would use when pricing the asset or liability.
Recoverable amount of property and equipment
comprises the following levels:
For non-financial assets measured at fair value and not classified at Level
Recoverable amount of investments in
subsidiaries, associates and joint ventures
• Level 1 – Quoted prices (unadjusted) on active markets. This level includes
1, fair value is determined based on valuation reports provided by certified
listed equities, debt instruments, derivatives, units of investment funds,
valuators. Valuations are prepared in accordance with the International
and other unadjusted market prices of assets and liabilities. When an asset
Valuation Standards (IVS).
NLB Group
NLB
in EUR thousands
Level 1
Level 2
Level 3
Total fair
value
Level 1
Level 2
Level 3
Total fair
value
2,450
2,450
81,619
66,356
-
15,263
786
-
786
84,855
68,806
16,049
2,450
2,450
15,595
-
-
15,595
786
-
786
18,831
2,450
16,381
2,068,317
1,444,146
1,827
3,514,290
1,663,619
52,458
274
1,716,351
2,060,346
1,385,245
7,971
58,901
900
927
67,799
3,446,491
1,663,619
7,585
-
1,671,204
13,146
2,157
10,989
-
-
-
-
-
-
-
-
-
-
-
-
29,247
42,393
-
2,157
4,171
15,160
25,076
25,076
15,485
15,485
61,161
-
-
-
15,485
15,485
61,161
22,632
32,210
54,842
8,658
3,897
-
-
-
-
8,658
3,897
-
-
-
-
-
-
-
-
-
-
-
-
-
44,873
274
45,147
7,947
27,159
35,106
-
-
-
-
4,171
4,171
7,947
22,988
30,935
15,500
15,500
61,161
8,300
4,454
-
280
-
-
-
-
-
-
15,500
15,500
61,161
8,300
4,454
-
4,670
4,950
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Annual Report 2020
31 Dec 2019
Financial assets
Financial instruments held for trading
Debt instruments
Derivatives
Derivatives - hedge accounting
Financial assets measured at fair value
through other comprehensive income
Debt instruments
Equity instruments
Non-trading financial assets mandatorily
at fair value through profit and loss
Debt instruments
Equity instruments
Loans
Financial liabilities
Financial instruments held for trading
Derivatives
Derivatives - hedge accounting
Financial liabilities measured at fair
value through profit or loss
Non-financial assets
Investment properties
Non-current assets held for sale
Non-financial assets impaired during the year
Recoverable amount of property and equipment
Recoverable amount of investments in
subsidiaries, associates and joint ventures
NLB Group
NLB
in EUR thousands
Level 1
Level 2
Level 3
Total fair
value
Level 1
Level 2
Level 3
Total fair
value
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.
4,325
4,325
-
-
18,906
-
18,906
788
807
-
807
-
24,038
4,325
19,713
788
4,325
4,325
-
-
18,953
-
18,953
788
807
-
807
-
24,085
4,325
19,760
788
1,847,901
289,418
4,109
2,141,428
1,603,904
52,494
259
1,656,657
1,847,739
244,066
-
2,091,805
1,603,904
7,807
-
1,611,711
162
45,352
4,109
49,623
7,682
1,756
5,926
-
-
-
-
-
-
-
-
-
-
-
-
-
17,677
25,359
-
2,716
1,756
8,642
14,961
14,961
17,903
17,903
49,507
-
-
-
17,903
17,903
49,507
-
7,998
7,998
23,383
28,933
52,316
43,191
4,299
-
-
-
-
43,191
4,299
-
-
-
-
-
-
-
-
-
-
-
-
-
-
44,687
259
44,946
7,516
15,771
23,287
-
-
-
-
2,716
2,716
7,516
13,055
20,571
17,892
17,892
49,507
-
-
-
17,892
17,892
49,507
-
7,746
7,746
9,303
5,532
-
310
-
-
-
9,303
5,532
-
5,222
5,532
Derivatives
Fair value
hierarchy
1
2
3
Equities
Equity stake
Funds
Debt securities
Loans
Equities
Currency
Interest
market value from
exchange market
regular valuation by
fund management
company
market value from
exchange market
valuation model
valuation model
valuation model
valuation model
valuation model
valuation model
valuation model
valuation model
valuation model
valuation model
(underlying
in level 1)
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
from level 1 to 3
equity not liquid
(not trading for
2 months)
from level 3 to 1
equity included in
exchange market
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
and from 2 to 3
companies
in insolvency
proceedings
from level 2 to 1
and from 3 to 1
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)
For 2020 and 2019, neither NLB Group nor NLB had any significant
Non-financial assets on Level 2 of the fair value hierarchy at NLB Group
transfers between levels of valuation of financial instruments measured at
and NLB include investment properties.
fair value in financial statements.
c) Financial and non-financial assets and liabilities at
income approach based on an estimation of future cash flows discounted to
When valuing bonds classified on Level 2, NLB Group primarily uses the
Level 2 regarding the fair value hierarchy
the present value.
Financial instruments on Level 2 of the fair value hierarchy at NLB Group
and NLB include:
The input parameters used in the income approach are the risk-free yield
curve and the spread over the yield curve (credit, liquidity, country).
• debt securities: bonds not quoted on active markets and valuated by a
valuation model;
Fair values for derivatives are determined using a discounted cash flow
• derivatives: derivatives except forward derivatives and options on equity
model based on the risk-free yield curve. Fair values for options are
instruments that are not quoted on active markets;
determined using valuation models for options (the Garman and Kohlhagen
• performing loans measured at fair value, which according to IFRS 9 do
model, binomial model, and Black-Scholes model).
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.
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
166
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 is assessed. When valuing an investment property, average rents at similar
Non-financial assets on Level 3 of the fair value hierarchy at NLB Group
Movements of financial assets and liabilities at Level 3
locations and capitalisation ratios such as: the risk-free yield, risk premium
include investment properties.
and the risk premium to account for capital preservation are used. Rents at
similar locations are generated from various sources, like data from lessors
NLB Group uses three valuation methods for the valuation of equity
and lessees, web databases, and own databases. NLB Group has observable
financial assets mentioned in first bullet: the income, market, and cost
data for all investment property at its disposal. If observable data for similar
approaches.
locations are not available, NLB Group uses data from wider locations and
appropriately adjusts such data.
NLB Group selects valuation model and values of unobservable input data
within a reasonable possible range, but uses model and input data that other
d) Financial and non-financial assets and liabilities
market participants would use.
at Level 3 of the fair value hierarchy
Financial instruments on Level 3 of the fair value hierarchy in NLB Group
At least one of the three valuation methods are used for the valuation of
and NLB include:
investment property. The majority of investment property is valued using
the income approach where the present value of future expected returns
• equities: mainly financial equities that are not quoted on active markets;
is assessed. When valuing an investment property, average rents at similar
• derivative financial instruments: forward derivatives and options on equity
locations and capitalisation ratios such as: the risk-free yield, risk premium
instruments that are not quoted on an active organised market. Fair
and the risk premium to account for capital preservation are used. Rents at
values for forward derivatives are determined using the discounted cash
similar locations are generated from various sources, like data from lessors
flow model. Fair values for equity options are determined using valuation
and lessees, web databases, and own databases. NLB Group has observable
models for options (the Garman and Kohlhagen model, binomial model,
data for all investment property at its disposal. If observable data for similar
and Black-Scholes model). Unobservable inputs include the fair values of
locations are not available, NLB Group uses data from wider locations and
underlying instruments determined using valuation models. The source of
appropriately adjusts such data.
observable market inputs is the Bloomberg information system; and
• non-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. In
defining the expected cash flows for non-performing loans, the value of
collateral and other pay off estimates can be used.
NLB Group
Balance as at 1 January 2019
Effects of translation of foreign
operations to presentation currency
Valuation:
- through profit or loss
- recognised in other
comprehensive income
Exchange differences
Increases
Decreases
Transfers to Level 3
Balance as at 31 December 2019
Effects of translation of foreign
operations to presentation currency
Acquisition of subsidiaries
Valuation:
- through profit or loss
- recognised in other
comprehensive income
Exchange differences
Increases
Decreases
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
in EUR thousands
Financial liabilities
measured at fair
value through
profit or loss
Derivatives
Debt
instruments
Equity
instruments
Equity
instruments
Loans and other
financial assets
Total financial
assets
Loans and other
financial liabilities
329
-
478
-
-
-
-
-
807
-
-
(21)
-
-
-
-
-
-
-
-
-
-
-
-
-
900
-
-
-
-
3,960
106
-
43
-
-
-
-
4,109
53
85
-
21
-
(3,341)
927
1,923
23,800
30,012
4,190
-
-
106
-
7,128
14,291
21,897
3,798
-
-
-
-
-
43
-
7,147
7,147
(6,935)
(30,277)
(37,212)
600
2,716
-
-
-
14,961
-
-
600
22,593
53
985
-
10
-
-
-
7,998
-
-
1,642
(2,720)
(1,099)
(8,006)
-
(187)
-
-
4,171
-
(48)
20,399
(7,516)
25,076
21
(235)
20,399
(10,857)
31,860
-
8
-
-
-
Balance as at 31 December 2020
786
900
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 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
in EUR thousands
Financial liabilities
measured at fair
value through
profit or loss
Derivatives
Equity
instruments
Equity
instruments
Loans and other
financial assets
Total financial
assets
Loans and other
financial liabilities
NLB Group
2019
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
in EUR thousands
Financial liabilities
measured at fair
value through
profit or loss
Derivatives
Equity
instruments
Equity
instruments
Loans and other
financial assets
Loans and other
financial liabilities
248
1,923
21,596
24,096
3,981
Items of Income statement
NLB
Balance as at 1 January 2019
Valuation:
- through profit or loss
- recognised in other comprehensive income
Exchange differences
Increases
Decreases
Transfers to Level 3
Balance as at 31 December 2019
Valuation:
- through profit or loss
- recognised in other comprehensive income
Exchange differences
Increases
Decreases
329
478
-
-
-
-
-
807
(21)
-
-
-
-
-
11
-
-
-
-
259
-
15
-
-
-
7,128
13,346
20,952
3,755
-
-
-
(6,935)
600
2,716
1,642
-
(187)
-
-
-
-
7,146
(29,033)
-
13,055
11
-
7,146
(35,968)
600
16,837
-
10
-
-
-
7,746
(2,831)
(1,210)
(7,754)
-
(48)
19,833
(7,021)
22,988
15
(235)
19,833
(7,021)
28,219
-
8
-
-
-
Balance as at 31 December 2020
786
274
4,171
NLB Group and NLB recognise the effects from valuation of trading
comprehensive income in the accumulated other comprehensive income
instruments in income statement line ‘Gains less losses from financial
item ‘Financial assets measured at fair value through other comprehensive
assets and liabilities held for trading,’ effects from valuation of non-trading
income.’
equity instruments and loans mandatorily measured at fair value through
profit or loss in income statement line ‘Gains less losses from non-trading
In 2020 and in 2019, NLB Group and NLB recognised the following
financial assets mandatorily at fair value through profit or loss,’ and effects
unrealised gains or losses for financial instruments that were at Level 3 as at
from valuation of financial assets measured at fair value through other
31 December:
NLB Group
2020
Items of Income statement
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
in EUR thousands
Financial liabilities
measured at fair
value through
profit or loss
NLB
2019
Items of Income statement
Derivatives
Equity
instruments
Equity
instruments
Loans and other
financial assets
Loans and other
financial liabilities
Gains less losses from financial assets and liabilities held for trading
478
Gains less losses from financial assets and liabilities held for trading
(21)
Gains less losses from non-trading assets mandatorily
at fair value through profit or loss
Foreign exchange translation gains less losses
Item of Other comprehensive income
Financial assets measured at fair value through
other comprehensive income
-
-
-
-
-
-
-
1,642
(187)
-
(2,720)
(48)
-
8,006
(8)
21
-
-
-
Gains less losses from financial assets and liabilities held for trading
478
Gains less losses from non-trading assets mandatorily
at fair value through profit or loss
Foreign exchange translation gains less losses
Item of Other comprehensive income
Financial assets measured at fair value through
other comprehensive income
-
-
-
-
-
-
43
-
845
-
-
-
14,291
-
-
-
(3,798)
(10)
-
NLB
2020
Items of Income statement
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
in EUR thousands
Financial liabilities
measured at fair
value through
profit or loss
Derivatives
Equity
instruments
Equity
instruments
Loans and other
financial assets
Loans and other
financial liabilities
Gains less losses from financial assets and liabilities held for trading
(21)
Gains less losses from non-trading assets mandatorily
at fair value through profit or loss
Foreign exchange translation gains less losses
Item of Other comprehensive income
Financial assets measured at fair value through
other comprehensive income
-
-
-
-
-
-
-
1,642
(187)
-
(2,831)
(48)
-
7,754
(8)
15
-
-
-
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
in EUR thousands
Financial liabilities
measured at fair
value through
profit or loss
Derivatives
Equity
instruments
Equity
instruments
Loans and other
financial assets
Loans and other
financial liabilities
Gains less losses from non-trading assets mandatorily
at fair value through profit or loss
Foreign exchange translation gains less losses
Item of Other comprehensive income
Financial assets measured at fair value through
other comprehensive income
-
-
-
-
-
-
11
-
845
-
-
-
13,346
-
-
-
(3,755)
(10)
-
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Movements of non-financial assets at Level 3
Investment property
Balance as at 1 January
Effects of translation of foreign operations to presentation currency
Acquisition of subsidiaries (note 5.12.b)
Additions
Disposals
Transfer from/(to) property and equipment
Transfer from/(to) non-current assets held for sale
Transfer from/(to) other assets
Net valuation to fair value
Balance as at 31 December
in EUR thousands
NLB Group
2020
28,933
(24)
19,643
609
(189)
(62)
17
(16,790)
73
32,210
2019
32,208
84
-
-
(4,188)
(363)
550
-
642
28,933
e) Fair value of financial instruments not measured
purposes only and do not impact NLB Group statement of financial
at fair value in financial statements
position or income statement.
Financial instruments not measured at fair value are not managed on a fair
value basis. For these instruments fair values are calculated for disclosure
The table below shows estimated fair values of financial instruments not
Deposits and borrowings
The estimated fair value of other deposits and borrowings from customers
The fair value of sight deposits and overnight deposits equals their carrying
is based on discounted cash flows using interest rates for new deposits with
value. However, their actual value for NLB Group depends on the timing
similar residual maturities.
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
Other financial assets and liabilities
term deposits. Therefore, their economic value for NLB Group differs from
The carrying amount of other financial assets and liabilities is a reasonable
the carrying amount.
approximation of their fair value as they mainly relate to short-term
receivables and payables.
Fair value hierarchy of financial instruments not measured at fair value in financial statements
NLB Group
NLB
in EUR thousands
31 Dec 2020
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
1,267,437
288,484
7,182
1,563,103
1,254,337
79,503
- loans and advances to banks
- loans and advances to customers
- other financial assets
Financial liabilities measured at amortised cost
- deposits from banks and central banks
-
-
-
-
-
-
-
197,220
9,873,137
113,138
72,648
155,673
16,414,382
93,020
234,629
46,372
-
207,300
-
-
-
-
-
-
-
-
-
197,220
9,873,137
113,138
72,648
155,673
16,414,382
93,020
-
-
-
-
-
-
-
165,966
4,674,069
54,503
41,635
140,702
8,860,267
13
281,001
234,629
46,372
207,300
-
101,273
-
-
-
-
-
-
-
-
-
-
1,333,840
165,966
4,674,069
54,503
41,635
140,702
8,860,267
13
281,001
101,273
in EUR thousands
measured at fair value in the statement of financial position.
- borrowings from banks and central banks
NLB Group
NLB
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
Carrying value
Fair value Carrying value
Fair value Carrying value
Fair value Carrying value
Fair value
- due to customers
- borrowings from other customers
- subordinated liabilities
- other financial liabilities
Financial assets measured at amortised cost
- debt securities
1,503,087
1,563,103
1,653,848
1,715,350
1,277,880
1,333,840
1,485,166
1,543,518
NLB Group
NLB
- loans and advances to banks
197,005
197,220
93,403
93,503
158,320
165,966
144,352
150,520
- loans and advances to customers
9,619,860
9,873,137
7,589,724
7,775,128
4,564,178
4,674,069
4,568,599
4,713,622
31 Dec 2019
Level 1
Level 2
Level 3
Total fair
value
Level 1
Level 2
Level 3
Total fair
value
- other financial assets
113,138
113,138
97,415
97,415
54,503
54,503
67,279
67,279
Financial assets measured at amortised cost
- debt securities
1,464,677
250,673
Financial liabilities measured at amortised cost
- deposits from banks and central banks
72,633
72,648
42,840
42,690
41,635
41,635
89,820
89,820
- borrowings from banks and central banks
158,225
155,673
170,385
178,374
143,464
140,702
161,564
169,312
- due to customers
16,397,167
16,414,382
11,612,317
11,630,157
8,850,755
8,860,267
7,760,737
7,768,365
- loans and advances to banks
- loans and advances to customers
- other financial assets
- borrowings from other customers
91,560
93,020
64,458
63,868
13
13
2,537
2,548
Financial liabilities measured at amortised cost
- subordinated liabilities
288,321
281,001
210,569
211,889
288,321
281,001
210,569
211,889
- other financial liabilities
207,300
207,300
158,484
158,484
101,273
101,273
98,342
98,342
Loans and advances to banks
Loans and advances to customers
The estimated fair value of deposits is based on discounted cash flows
The estimated fair value of loans and advances represents the discounted
using prevailing market interest rates for instruments with similar credit risk
amount of estimated future cash flows expected to be received. Expected
and residual maturities. The fair value of overnight deposits equals their
cash flows are discounted at current market rates for debts with similar
carrying value.
credit risk and residual maturities to determine their fair value.
- deposits from banks and central banks
- borrowings from banks and central banks
- due to customers
- borrowings from other customers
- subordinated liabilities
- other financial liabilities
-
-
-
-
-
-
-
93,503
7,775,128
97,415
42,690
178,374
11,630,157
63,868
166,349
45,540
-
158,484
-
-
-
-
-
-
-
-
-
-
1,715,350
1,437,771
105,747
93,503
7,775,128
97,415
42,690
178,374
11,630,157
63,868
-
-
-
-
-
-
-
150,520
4,713,622
67,279
89,820
169,312
7,768,365
2,548
211,889
166,349
45,540
158,484
-
98,342
-
-
-
-
-
-
-
-
-
-
1,543,518
150,520
4,713,622
67,279
89,820
169,312
7,768,365
2,548
211,889
98,342
169
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 6.6. Offsetting financial assets and financial liabilities
In 2013, NLB Group also novated certain standardised derivatives (some
7. Analysis by segment for NLB Group
NLB Group has entered into bilateral foreign exchange netting
interest rate swaps) to a clearing house or central counterparty. A system of
arrangements with certain banks and corporates. Cash flows from such
daily margins assures the mitigation and collateralisation of exposures, as
a) Segments
transactions that are due on the same day in the same currency, are settled
well as the daily settlement of cash flows for each currency.
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
All derivatives are conducted under the conditions of signed Master
transaction. Assets and liabilities related to these netting arrangements are
Agreements (MA), with international banks ISDA MA is in place along with
not presented in a net amount in the statement of financial position because
CSA annex and for corporates domestic MA is in place, which enable daily
netting rules apply to cash flows and not to an instrument as a whole.
evaluation and exchange of margining.
in EUR thousands
2020
Total net income
NLB Group
Net income from external customers
184,758
81,124
213,881
12,713
NLB Group
in EUR thousands
Corporate
and
Investment
Banking in
Slovenia
Retail
Banking in
Slovenia
Strategic
Foreign
Markets
Financial
Markets in
Slovenia
Non-Core
Members
Other
activities Unallocated
Total
170,358
75,185
209,091
39,633
5,445
4,537
908
1,199
2,012
(813)
7,958
7,472
486
240
203
37
Intersegment net income
(14,400)
(5,939)
(4,790)
26,921
Net interest income
81,395
34,007
159,261
23,471
Net interest income from external customers
96,357
40,873
163,255
(3,126)
Intersegment net interest income
(14,962)
(6,866)
(3,994)
26,598
Administrative expenses
(102,089)
(37,878)
(94,862)
(6,972)
(11,848)
(11,047)
Depreciation and amortisation
(12,043)
(3,911)
(14,162)
(619)
(1,011)
(685)
Reportable segment profit/(loss) before
impairment and provision charge
Other net gains/(losses) from equity investments
in subsidiaries, associates and joint ventures
Negative goodwill
56,226
33,396
100,067
32,042
(7,414)
(3,774)
874
-
-
-
-
137,858
-
-
-
-
-
-
Impairment and provisions charge
(15,069)
8,982
(59,084)
(1,267)
2,854
(7,770)
Profit/(loss) before income tax
42,031
42,378
178,841
30,775
(4,560)
(11,544)
Owners of the parent
Non-controlling interests
Income tax
Profit for the year
42,031
42,378
175,792
30,775
(4,560)
(11,544)
-
-
-
-
3,049
-
-
-
-
-
-
-
Reportable segment assets
2,545,714
2,043,324
9,346,255
5,218,038
131,204
273,332
Investments in associates and joint ventures
7,988
-
-
-
-
-
Reportable segment liabilities
7,367,145
1,519,067
7,879,089
557,402
4,571
115,540
Additions to non-current assets
15,679
6,047
13,517
418
695
2,941
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
507,670
504,484
3,186
299,573
299,573
-
(264,696)
(32,431)
210,543
874
137,858
(71,354)
277,921
274,872
3,049
(5,165)
(5,165)
269,707
19,557,867
7,988
17,442,815
39,298
-
-
-
-
31 Dec 2020
Amounts not set off in the statement of financial position
Financial assets/liabilities
Derivatives - assets
Derivatives - liabilities
Gross amounts of
recognised financial
assets/liabilities
15,820
76,646
Impact of master
netting agreements
Financial instruments
collateral
608
608
594
74,861
31 Dec 2019
Amounts not set off in the statement of financial position
NLB Group
Financial assets/liabilities
Derivatives - assets
Derivatives - liabilities
Gross amounts of
recognised financial
assets/liabilities
19,695
67,399
Impact of master
netting agreements
Financial instruments
collateral
16
59,657
4,061
4,061
NLB
31 Dec 2020
Amounts not set off in the statement of financial position
Financial assets/liabilities
Derivatives - assets
Derivatives - liabilities
Gross amounts of
recognised financial
assets/liabilities
16,189
76,661
Impact of master
netting agreements
Financial instruments
collateral
594
74,861
623
623
NLB
31 Dec 2019
Amounts not set off in the statement of financial position
Financial assets/liabilities
Derivatives - assets
Derivatives - liabilities
Gross amounts of
recognised financial
assets/liabilities
Impact of master
netting agreements
Financial instruments
collateral
19,742
67,399
4,061
4,061
16
59,657
NLB Group and NLB have no financial assets/liabilities set off in the
statement of financial position.
Net amount
14,618
1,177
in EUR thousands
Net amount
15,618
3,681
in EUR thousands
Net amount
14,972
1,177
in EUR thousands
Net amount
15,665
3,681
170
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 NLB Group
in EUR thousands
Corporate
and
Investment
Banking in
Slovenia
Retail
Banking in
Slovenia
Strategic
Foreign
Markets
Financial
Markets in
Slovenia
Non-Core
Members
Other
activities Unallocated
Total
165,689
80,236
212,072
35,612
11,484
14,051
2019
Total net income
Net income from external customers
172,730
85,002
214,841
19,227
11,382
13,991
Intersegment net income
(7,041)
(4,766)
(2,769)
16,385
Net interest income
87,409
37,264
157,543
33,604
Net interest income from external customers
94,829
41,348
160,463
17,703
102
2,740
4,277
Intersegment net interest income
(7,420)
(4,084)
(2,920)
15,901
(1,537)
60
(73)
(133)
60
Administrative expenses
(106,454)
(40,518)
(94,912)
(6,888)
(13,170)
(13,400)
Depreciation and amortisation
(11,546)
(3,937)
(12,931)
(621)
(1,300)
(1,271)
Reportable segment profit/(loss) before
impairment and provision charge
Other net gains/(losses) from equity investments
in subsidiaries, associates and joint ventures
47,689
35,780
104,229
28,103
(2,986)
(621)
4,197
-
-
-
-
-
Impairment and provisions charge
(4,382)
21,043
(11,295)
(475)
(108)
(5,776)
Profit/(loss) before income tax
47,504
56,823
92,934
27,628
(3,094)
(6,397)
Owners of the parent
Non-controlling interests
Income tax
Profit for the year
47,504
56,823
84,692
27,628
(3,094)
(6,397)
-
-
-
-
8,242
-
-
-
-
-
-
-
Reportable segment assets
2,551,708
2,042,200
4,731,350
4,412,561
169,456
259,314
Investments in associates and joint ventures
7,499
-
-
-
-
-
Reportable segment liabilities
6,464,417
1,341,878
4,043,172
465,168
8,791
119,766
Additions to non-current assets
13,310
4,618
13,994
342
291
4,111
-
-
-
-
-
-
-
-
-
-
-
-
-
-
519,143
517,172
1,971
318,487
318,487
-
(275,342)
(31,607)
212,194
4,197
(994)
215,397
207,155
8,242
(13,579)
(13,579)
193,576
14,166,589
7,499
12,443,191
36,667
-
-
-
-
Segment reporting is presented in accordance with the strategy on the basis
• Corporate and Investment Banking in Slovenia, which includes banking
of the organisational structure used in management reporting of NLB
with Key Corporate Clients, SMEs, Investment Banking and Custody,
Group’s results. NLB Group’s segments are business units that focus on
Restructuring and Workout and part of the new subsidiary NLB
different customers and markets. They are managed separately because each
Lease&Go that includes operations with corporate clients.
business unit requires different strategies and service levels.
• Strategic Foreign Markets, which consist of the operations of strategic
Group banks in the strategic markets (North Macedonia, Bosnia and
The business activities of NLB are divided into several segments. Interest
Herzegovina, Kosovo, Montenegro, and Serbia). As a result of the
income and expenses are reallocated between segments on the basis of
acquisition of Komercijalna banka Beograd at the end of the year
fund transfer prices (FTP). Other NLB Group members are, based on their
2020, NLB Group acquired three banks: Komercijalna banka Beograd,
business activity, included in only one segment except NLB Lease&Go
Komercijalna banka Podgorica, and Komercijalna banka Banja Luka, as
which is according to its business activities divided into two segments.
well as an investment fund company KomBank Invest Beograd.
The segments of NLB Group are divided into core and non-core segments.
financial instruments, while they also present the results of asset and
• Financial Markets in Slovenia include treasury activities and trading in
The core segments are the following:
liabilities management (ALM).
• Other accounts for the categories whose operating results cannot be
allocated to specific segments as well as a new subsidiary ‘The NLB
• Retail Banking in Slovenia, which includes banking with individuals
Cultural Heritage Management Institute.’
and asset management (NLB Skladi), and part of new subsidiary NLB
Lease&Go that includes operations with retail clients as well as the
contribution to the result of the associated company Bankart (in 2019 also
Non-Core Members include the operations of non-core Group members,
namely REAM and leasing entities (with the exception of NLB Lease&Go),
of the joint venture NLB Vita and in 2020 realised a gain on sale of this
NLB Srbija and NLB Crna Gora.
investment).
Data for 2019 are adjusted to changed schemes prescribed by the Bank of
There was no income from transactions with a single external customer that
Slovenia (relocation of some items from the other net operating income to
amounted to 10% or more of NLB Group’s income.
other general and administrative expenses), so there might be changes in
previously reported numbers (note 2.3.).
b) Geographical information
NLB Group is primarily a financial group, and net interest income
country in which individual NLB Group entities are located.
Geographical analysis includes a breakdown of items with respect to the
represents the majority of its net revenues. NLB Group’s main indicator of a
segment’s efficiency is net profit before tax.
NLB Group
Slovenia
South East Europe
North Macedonia
Serbia
Montenegro
Croatia
Revenues
Net income
Profit/(loss) before
income tax
Income tax
in EUR thousands
2020
2019
2020
2019
2020
2019
2020
2019
322,128
332,511
290,376
297,134
93,362
114,711
(1,154)
(2,821)
265,600
266,923
214,486
218,126
184,266
100,034
(3,963)
(10,692)
81,710
84,134
64,466
66,701
21,008
36,216
(1,566)
(3,211)
35,240
33,578
28,046
26,143
130,912
31,291
33,121
25,033
28,321
2,741
42
63
454
799
(1,019)
4,997
8,353
(105)
1,323
(426)
(12)
(172)
(1,909)
(100)
Bosnia and Herzegovina
69,616
70,975
57,079
58,945
15,776
28,738
(1,572)
(2,857)
Kosovo
Western Europe
Germany
Switzerland
Czech Republic
Total
47,701
45,052
39,408
37,217
14,848
21,835
(1,710)
(2,443)
3
2
1
-
571
7
564
-
(378)
80
(458)
-
1,911
55
1,856
1
293
(433)
726
-
665
(276)
941
(13)
(48)
-
(48)
-
(66)
-
(66)
-
587,731
600,005
504,484
517,172
277,921
215,397
(5,165)
(13,579)
The column ‘Revenues’ includes interest and similar income, dividend
The column ‘Net Income’ includes net interest income, dividend income,
income, and fee and commission income.
NLB Group
Slovenia
South East Europe
North Macedonia
Serbia
Montenegro
Croatia
Bosnia and Herzegovina
Kosovo
Western Europe
Germany
Switzerland
Total
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.
Non-current assets
Total assets
Number of employees
in EUR thousands
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
31 Dec 2020
31 Dec 2019
153,671
151,934
10,142,675
9,350,558
219,886
142,870
9,411,671
4,811,617
37,181
34,971
1,576,941
1,448,179
109,167
25,549
4,587,600
639,351
17,934
381
39,576
15,647
58
58
-
30,089
2,045
709,797
533,849
4,390
12,497
34,246
1,654,026
1,381,718
15,970
878,917
796,023
158
152
6
11,509
1,648
9,861
11,913
1,787
10,126
2,691
6,098
877
3,198
467
7
1,086
463
3
1
2
2,750
3,124
903
494
312
7
934
474
4
1
3
373,615
294,962
19,565,855
14,174,088
8,792
5,878
171
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 The table below presents data on NLB Group members before
intercompany eliminations and consolidation journals.
8. Related-party transactions
Revenues
Net income
Profit/(loss) before
income tax
Income tax
member of the key management personnel of the reporting entity. Related
related parties have control, joint control, or significant influence
parties of NLB Group and NLB include: key management personnel
A number of banking transactions are entered into with related parties in
2020
2019
2020
2019
2020
2019
2020
2019
(Management Board, other key management personnel and their family
the normal course of business. The volume of related-party transactions
in EUR thousands
A related party is a person or entity that is related to NLB Group in such a
Related-party transactions with Management Board and other key
manner that it has control or joint control, has a significant influence, or is a
management personnel, their family members and companies these
341,092
415,437
328,302
372,613
120,806
185,857
(1,221)
(2,926)
265,889
267,546
211,337
216,145
44,271
99,862
(3,949)
(10,635)
members); the Supervisory Board; companies in which members of the
and the outstanding balances are as follows:
Management Board, key management personnel, or their family members
have control, joint control, or a significant influence; a major shareholder of
81,673
84,105
62,658
65,151
20,788
36,088
(1,566)
(3,211)
NLB with significant influence, subsidiaries, associates and joint ventures.
NLB Group
Slovenia
South East Europe
North Macedonia
Serbia
Montenegro
Croatia
35,318
33,798
28,386
26,869
(6,761)
31,376
33,381
24,356
28,236
187
145
142
468
772
(1,019)
4,919
8,368
(105)
1,337
(426)
(12)
(115)
(1,909)
(100)
Bosnia and Herzegovina
69,678
71,054
56,791
58,264
16,032
28,604
(1,572)
(2,857)
Kosovo
Western Europe
Germany
Switzerland
Czech Republic
Total
47,699
45,066
38,678
36,853
15,044
21,988
(1,710)
(2,443)
335
2
333
-
1,688
2
1,686
-
(144)
81
(225)
-
2,886
56
588
(432)
2,830
1,020
1
-
2,033
(275)
2,308
(13)
(34)
-
(34)
-
(6)
-
(6)
-
607,316
684,671
539,495
591,645
165,665
287,739
(5,204)
(13,567)
Management Board and
other Key management
personnel
Family members of
the Management
Board and other key
management personnel
in EUR thousands
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
NLB Group and NLB
2020
2019
2020
2019
2020
2019
2020
2019
Loans issued
Balance at 1 January
Increase
Decrease
Balance at 31 December
Interest income
Deposits received
Balance at 1 January
Increase
Decrease
Balance at 31 December
Interest expense
Other financial assets
Other financial liabilities
Guarantees issued and credit commitments
Fee income
Other income
Other expenses
2,119
1,476
(1,311)
2,284
40
1,579
1,392
1,903
1,192
(976)
2,119
41
1,732
1,367
(1,361)
(1,520)
1,610
1,579
(4)
2
2,759
242
15
16
(11)
(4)
-
2,759
246
11
20
(8)
520
184
347
492
130
90
231
245
(260)
(319)
(220)
(346)
444
8
871
826
(741)
956
-
-
-
78
7
-
-
520
8
447
1,175
(751)
871
-
-
-
82
6
-
-
-
1
193
207
(264)
136
-
-
8
6
101
-
(76)
130
3
102
265
(174)
193
-
-
4
91
5
-
(54)
248
109
(52)
305
7
198
277
(152)
323
-
-
-
33
1
-
-
413
43
(208)
248
5
341
158
(301)
198
-
-
-
18
2
-
-
Key management compensation
Board or employee performing special work and refers to the period to
The performance of key management is defined by financial and non-
which the variable part of the salary for performance relates.
financial criteria. They are entitled to the annual variable part of the salary
based on their achievement of the financial and non-financial performance
The members of the Management Board under the contract shall be
criteria, which encompass the goals of NLB Group or NLB, the goals of
entitled to a variable portion of the performance remuneration on the basis
the organisational unit, and the personal goals of the employee performing
of NLB Group’s financial objectives, financial objectives targeted in an
special work.
area which is within the competence of each member of the Management
Board and on the basis of the personal objectives of the member of the
Members of the Management Board are entitled to a contractual gross
Management Board of the Bank. The objectives and criteria of each
salary considering the limitations of the Slovenian legislation (Zban-2). The
applicable Remuneration Policy for the Employees Performing special job in
member of the Management Board shall be determined each year by the
Supervisory Board of the Bank at the time of adoption of the Bank’s annual
NLB d.d. regulates the remuneration of the members of the Management
business plan.
172
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 The variable portion of performance receipts for a given financial year
of the variable remuneration must consist of instruments. The employee
Payments to individual members of the Management Board
may not exceed eight average gross monthly salaries of a member of the
performing special job may only transfer such instruments with the Bank’s
Management Board in the financial year. The members of the Management
approval which cannot be issued before the expiry of two years after the
Board shall be entitled to a variable part of the performance benefit only in
acquisition. The latter applies to both – the non-deferred and deferred part
proportional part to the actual period of employment (duration of the term
of the variable remuneration.
Member
Blaž Brodnjak
01.12.2012
of office) of the Bank during the period to which the variable part of the
performance benefit relates.
The deferred part of the variable part of the salary must be deferred for
a period of at least three and at most five years of the day on which the
The non-deferred part of variable remuneration is paid no later than
non-deferred part of such variable remuneration is paid, according to the
three months after the adoption of the Annual Report of NLB d.d. for
legislation (ZBan-2).
the business year to which the variable remuneration relates. Variable
remuneration part of payment of an employee performing special work is
Upon the conclusion of the General Meeting of Shareholders, members
awarded and paid in cash, provided that the amount does not exceed EUR
of the Supervisory Board receive payment for their performance, while
50 thousand for each financial year, and if this is permissible in accordance
the previously mentioned amounts are limited to a decision of the General
with the relevant regulation.
Meeting of Shareholders and are in full compliance with the applicable
If the variable remuneration part of payment of an employee performing
special work exceeds EUR 50 thousand for each financial year and if this
The table below shows payments in presented periods.
is permissible in accordance with the relevant regulation, then at least 50%
recommendations of corporate governance.
Andreas Burkhardt
18.09.2013
Management Board
Other key management personnel
Supervisory Board
in EUR thousands
2020
1,401
4
259
4
-
1,668
2019
1,676
4
-
6
162
1,848
2020
5,501
95
108
49
-
5,753
2019
5,064
86
-
72
1,316
6,538
2020
649
34
-
-
-
2019
357
85
-
-
-
683
442
NLB Group and NLB
Short-term benefits
Cost refunds
Long-term bonuses:
- severance pay
- other benefits
- variable part of payments
Total
Short-term benefits include:
• monetary benefits (gross salaries, supplementary insurance, holiday
allowances, other bonuses); and
• non-monetary benefits (company cars, health care, apartments, etc.).
The reimbursement of cost comprises food allowances and travel expenses.
Archibald Kremser
31.07.2013
Petr Brunclík
18.05.2020
László Pelle
26.10.2016 - 31.01.2020
Short-term benefits:
- gross salary and holiday allowance
- benefits and other short-term bonuses
Costs refunds
Long-term bonuses:
- other benefits
- variable part of payments
Total
Short-term benefits:
- gross salary and holiday allowance
- benefits and other short-term bonuses
Costs refunds
Long-term bonuses:
- other benefits
- variable part of payments
Total
Short-term benefits:
- gross salary and holiday allowance
- benefits and other short-term bonuses
Costs refunds
Long-term bonuses:
- other benefits
- variable part of payments
Total
Short-term benefits:
- gross salary and holiday allowance
- benefits and other short-term bonuses
Costs refunds
Long-term bonuses:
- other benefits
- variable part of payments
Total
Short-term benefits:
- gross salary and holiday allowance
- benefits and other short-term bonuses
Costs refunds
Long-term bonuses:
- severance payments
- other benefits
- variable part of payments
Total
2020
384,734
2,250
1,304
940
-
389,228
352,796
17,861
1,212
940
-
372,809
366,484
24,331
1,248
940
-
393,003
170,517
20,647
710
705
-
192,579
57,624
4,343
129
258,750
117
-
320,963
in EUR
2019
433,882
2,173
1,016
1,409
45,497
483,977
397,291
18,515
1,047
1,409
45,497
463,759
412,973
25,393
1,028
1,409
45,497
486,300
-
-
-
-
-
-
355,473
30,364
1,261
-
1,409
25,000
413,507
173
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Payments to individual members of the Supervisory Board
Member
Andreas Klingen
22.06.2015
Primož Karpe
11.02.2016
David Eric Simon
04.08.2016
Peter Groznik
08.09.2017
Gregor Rok Kastelic
10.06.2019
Shrenik Dhirajlal Davda
10.06.2019
Mark William Lane Richards
10.06.2019
Verica Trstenjak
15.06.2020
Sergeja Kočar
17.06.2020
Bojana Šteblaj
17.06.2020
Janja Žabjek Dolinšek
20.11.2020
Petra Kakovič Bizjak
17.06.2020 - 10.09.2020
Session fees
Annual compensation
Costs refunds
Session fees
Annual compensation
Costs refunds
Session fees
Annual compensation
Costs refunds
Session fees
Annual compensation
Costs refunds
Session fees
Annual compensation
Costs refunds
Session fees
Annual compensation
Costs refunds
Session fees
Annual compensation
Costs refunds
Session fees
Annual compensation
Costs refunds
Session fees
Annual compensation
Costs refunds
Session fees
Annual compensation
Costs refunds
Session fees
Annual compensation
Costs refunds
Session fees
Annual compensation
Costs refunds
2020
-
84,000
2,690
-
89,583
8,235
-
75,000
6,455
-
66,000
429
-
70,625
4,239
-
66,000
3,917
-
75,000
3,617
-
33,933
-
-
5,662
153
-
5,255
457
-
169
-
-
7,302
178
in EUR
2019
5,940
41,136
17,200
7,260
48,980
9,698
6,380
36,994
16,770
5,720
32,214
4,056
1,980
21,901
4,406
2,200
23,072
6,136
2,200
26,008
4,119
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Member
László Zoltan Urbán
11.02.2016 - 15.06.2020
Alexander Bayr
04.08.2016 - 15.06.2020
Simona Kozjek
08.09.2017 - 28.02.2019
Vida Šeme Hočevar
08.09.2017 - 28.02.2019
Session fees
Annual compensation
Costs refunds
Session fees
Annual compensation
Costs refunds
Session fees
Annual compensation
Costs refunds
Session fees
Annual compensation
Costs refunds
Related-party transactions with subsidiaries, associates and joint ventures
Loans issued
Balance at 1 January
Increase
Decrease
Balance at 31 December
Interest income
Impairment
Deposits received
Balance at 1 January
Effects of translation of foreign operations to presentation currency
Increase
Decrease
Balance at 31 December
Interest expense
Other financial assets
Other financial liabilities
Guarantees issued and credit commitments
Fee income
Fee expense
Other income
Other expense
2020
-
31,875
1,456
-
36,000
2,799
-
-
-
-
-
-
in EUR
2019
5,445
33,384
6,759
6,765
38,758
15,992
935
3,750
-
1,155
5,000
22
NLB Group
in EUR thousands
Associates
Joint ventures
2020
2019
2020
2019
1,066
165
(125)
1,106
32
27
842
-
4,461
(1,330)
3,973
-
19
596
38
15
1,176
112
(222)
1,066
34
21
722
-
1,920
(1,800)
842
-
18
1,294
31
9
(13,977)
(14,101)
177
(699)
192
(545)
1,205
11
(365)
851
11
(23)
8,455
(3)
90,966
(95,984)
3,434
(62)
1
-
21
983
(952)
144
(37)
2,981
37
(1,813)
1,205
21
66
4,424
17
92,618
(88,604)
8,455
(66)
539
250
26
4,985
(2,138)
134
(23)
174
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 NLB
in EUR thousands
Related-party transactions with major shareholder with significant influence
The volumes of related party transactions with major shareholder are as follows:
Subsidiaries
Associates
Joint ventures
2020
2019
2020
2019
2020
2019
Loans issued
Balance at 1 January
Increase
Decrease
Balance at 31 December
Interest income
Impairment
Deposits
Balance at 1 January
Increase
Decrease
Balance at 31 December
Interest income
Impairment
Deposits received
Balance at 1 January
Increase
Decrease
Balance at 31 December
Interest expense
Derivatives
Fair value
Contractual amount
Other financial assets
Other financial liabilities
160,634
187,744
98,221
95,047
(89,679)
(122,157)
169,176
160,634
5,007
(1,835)
4,694
1,461
70,469
56,784
658,253
376,939
(659,336)
(363,254)
69,386
70,469
21
4
34
(12)
80,806
40,313
7,934,453
13,862,854
(7,995,844)
(13,822,361)
19,415
(21)
354
12,424
948
800
80,806
(228)
47
9,743
984
235
Guarantees issued and credit commitments
55,068
32,727
Income/(expense) provisions for guaranties and commitments
Received loan commitments and financial guarantees
Fee income
Fee expense
Other income
Other expense
Gains less losses on derecognition of financial
assets/liabilities held for trading
Gains less losses from non-trading financial assets
mandatorily at fair value through profit or loss
(53)
6,692
6,857
(25)
780
(1,065)
1,208
436
(461)
3,297
6,276
(19)
533
(443)
(225)
(419)
1,066
165
(125)
1,106
32
27
-
-
-
-
-
-
842
4,461
(1,330)
3,973
-
-
-
19
480
38
-
-
15
1,176
112
(222)
1,066
34
21
-
-
-
-
-
-
1,174
10
(333)
851
10
(23)
-
-
-
-
-
-
2,940
35
(1,801)
1,174
19
66
-
-
-
-
-
-
722
1,920
5,418
86,850
2,588
82,911
(1,800)
(91,984)
(80,081)
842
284
5,418
-
-
-
18
1,174
31
-
-
9
(11,140)
(11,918)
177
(664)
-
-
192
(542)
-
-
-
-
-
1
-
21
-
-
925
(332)
144
(37)
-
-
-
-
-
539
116
26
-
-
4,847
(771)
133
(23)
-
-
Loans issued
Balance at 1 January
Increase
Decrease
Balance at 31 December
Interest income
Investments in securities
Balance at 1 January
Increase
Decrease
Valuation
Balance at 31 December
Interest income
Other financial assets
Other financial liabilities
Guarantees issued and credit commitments
Fee income
Fee expense
Other income
Other expense
Gains less losses on derecognition of financial assets/liabilities not classified at FVPL
Gains less losses on derecognition of financial assets/liabilities held for trading
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.
NLB Group
Shareholder
in EUR thousands
NLB
Shareholder
2020
2019
2020
2019
28,206
1,607
(6,594)
23,219
720
850,965
866,414
79,156
3,320
(54,270)
28,206
1,563
908,263
767,386
28,206
1,607
(6,594)
23,219
720
778,088
758,140
76,374
3,270
(51,438)
28,206
1,513
855,872
630,949
(1,026,883)
(836,044)
(940,974)
(720,857)
1,372
691,868
8,219
807
6
1,241
194
(30)
206
(6)
14,660
43
11,360
850,965
13,014
651
22
1,168
144
(35)
181
(5)
2,809
(360)
1,869
597,123
8,681
807
6
1,241
194
(30)
206
(6)
14,660
43
12,124
778,088
14,047
651
22
1,168
144
(35)
181
(5)
2,809
(360)
175
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Amount of significant transactions
concluded during the year
Number of significant transactions
concluded during the year
in EUR thousands
9. Events after the reporting date
NLB published Takeover Bid for acquisition of all remaining regular shares
of Komercijalna banka Beograd (i.e. 2,820,270 regular shares or 16.77% of
this class of shares) at RSD 3,315.47 per one share and all priority shares
of Komercijalna banka (i.e 373,510 priority shares or 100% of this class of
shares) at RSD 934.72 per one share. Takeover bid is open for acceptance
for 30 days, beginning from 11 March 2021.
NLB Group and NLB
Loans
Borrowings, deposits and business accounts
NLB Group and NLB
Loans
Debt securities measured at amortised cost
Borrowings, deposits and business accounts
NLB Group and NLB
Interest income from loans
Fees and commissions income
Interest income from debt securities measured at amortised cost
Interest expense from borrowings, deposits, and business accounts
2020
2019
2020
2019
-
-
57,113
179,309
-
-
1
2
Year-end balance of all
significant transactions
Number of significant
transactions at year-end
in EUR thousands
2020
516,058
76,396
70,006
2019
582,081
78,014
115,500
2020
2019
6
1
1
6
1
2
Effects in income statement during the year
in EUR thousands
2020
3,669
27
1,166
(290)
2019
3,175
175
2,139
(849)
176
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Alternative Performance Indicators
Table 43b: NLB Group’s banking subsidiaries CIR calculation
NLB Banka, Skopje
NLB Banka, Banja Luka NLB Banka, Sarajevo
NLB Banka, Prishtina NLB Banka, Podgorica NLB Banka, Beograd
(in EUR million and %)
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
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
Cost of risk - Calculated as the ratio between credit impairments and
provisions annualized from the income statement and average net loans to
investors and as such useful for disclosure. The APIs are used internally to
customers.
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.
Table 42: NLB Group cost of risk calculation
Numerator
Credit impairments and provisions(i)
Denominator
Average net loans to customers(ii)
Cost of risk
NLB Group
(in EUR million and bps)
2020(iii)
47.6
7,696.1
62
2019
-14.5
7,339.4
-20
(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 income statement) in the period divided
by number of months for reporting period and multiplied by 12. The net established Credit impairments and provisions are shown with a positive sign, 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 balance of previous year end (31 December) and monthly balances of the last day of each month from January to month t divided by
(t+1).
(iii) NLB Group (w/o Komercijalna Banka group).
Cost to income ratio (CIR) - Indicator of cost efficiency, calculated as
the ratio between total costs and total net operating income.
Table 43a: NLB Group and NLB CIR calculation
Numerator
Total cost
Denominator
Total net operating
income
Cost to income
ratio (CIR)
26.5
26.8
13.9
13.5
15.1
14.8
12.3
11.8
13.6
13.8
20.4
19.8
62.7
65.2
30.1
30.7
26.7
27.6
38.7
36.9
24.3
26.6
26.6
25.2
42.3%
41.2%
46.1%
44.1%
56.5%
53.6%
31.8%
32.0%
56.0%
51.9%
76.4%
78.6%
CIR is adjusted for 2019 to changed schemes prescribed by the BoS.
FVTPL - Financial assets measured mandatorily at fair value through
profit or loss (FVTPL) are not classified into stages and are therefore
Stage 3 – An impaired portfolio: NLB Group recognises lifetime
allowances for these financial assets. Definition on default is harmonised
shown separately (before deduction of fair value for credit risk; loans with
with EBA guidelines.
contractual cash flows that are not solely payments of principal and interest
on the principal amount outstanding).
A significant increase in credit risk is assumed: when a credit rating
significantly deteriorates at the reporting date in comparison to the
IFRS 9 classification into stages for loan portfolio:
credit rating at initial recognition; when a financial asset has material
IFRS 9 requires an expected loss model, where an allowance for the
assessment); if NLB Group expects to grant the client forbearance or if
expected credit losses (ECL) are formed. Loans measured at amortised
the client is placed on the watch list.
delays over 30 days (days past due are also included in the credit rating
costs (AC) are classified into the following stages (before deduction of loan
loss allowances):
The remaining minor part (0.30 per cent. December 2020; 0.27 per cent.
December 2019) represents FVTPL. Classification into stages is calculated
Stage 1 – A performing portfolio: no significant increase of credit risk
since initial recognition, NLB Group recognises an allowance based on a
in internal data source, by which the NLB Group measures the loan
portfolio quality and is also published in Business Report of Annual and
12-month period;
Interim Reports.
(in EUR million and %)
lifetime period;
Stage 2 – An underperforming portfolio: a significant increase in credit
risk since initial recognition, NLB Group recognises an allowance for a
NLB Group
NLB
Table 44a: NLB Group Stage 1 calculation
2020
2019
2018
2020
2019
2018
Numerator
Total costs
Denominator
Total net operating income
Cost to income ratio (CIR)
CIR is adjusted for 2018 and 2019 to changed schemes prescribed by the BoS.
293.9
305.0
292.3
180.5
191.1
180.3
504.5
58.3%
517.2
59.0%
496.9
58.8%
311.7
57.9%
354.7
53.9%
324.8
55.5%
Numerator
Total (AC) loans in Stage 1
Denominator
Total gross loans and advances
IFRS 9 classification into Stage 1
NLB Group
(in EUR million and %)
2020
2019
2018
12,650.8
8,947.7
7,816.7
13,686.6
92.4%
9,793.5
91.4%
9,017.2
86.7%
177
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Table 44b: NLB Group (w/o Komercijalna Banka group) Stage 1 calculation
Table 44f: NLB Group (w/o Komercijalna Banka group) Stage 3 calculation
NLB Group (w/o Komercijalna Banka group)
(in EUR million and %)
NLB Group (w/o Komercijalna Banka group)
(in EUR million and %)
Numerator
Total (AC) loans in Stage 1
Denominator
Total gross loans and advances
IFRS 9 classification into Stage 1
2020
Numerator
10,065.6
Total (AC) loans in Stage 3
11,061.0
91.0%
Denominator
Total gross loans and advances
IFRS 9 classification into Stage 3
2020
435.3
11,061.0
3.9%
Table 44c: NLB Group Stage 2 calculation
Table 44g: NLB Group and NLB Group (w/o Komercijalna Banka group) Stage 1 in the Corporate segment calculation
Numerator
Total (AC) loans in Stage 2
Denominator
Total gross loans and advances
IFRS 9 classification into Stage 2
NLB Group
(in EUR million and %)
2020
2019
2018
560.1
471.1
577.9
13,686.6
4.1%
9,793.5
4.8%
9,017.2
6.4%
Numerator
Total (AC) loans in Stage 1 to Corporates
Denominator
Total gross loans to Corporates
Corporates - IFRS 9 classification into Stage 1
NLB Group
(in EUR million and %)
NLB Group (w/o Komercijalna
Banka group)
2020
4,135.7
4,921.0
84.0%
2020
3,169.6
3,920.3
80.9%
Table 44d: NLB Group (w/o Komercijalna Banka group) Stage 2 calculation
(in EUR million and %)
Table 44h: NLB Group and NLB Group (w/o Komercijalna Banka group) Stage 2 in the Corporate segment calculation
Numerator
Total (AC) loans in Stage 2
Denominator
Total gross loans and advances
IFRS 9 classification into Stage 2
Table 44e: NLB Group Stage 3 calculation
Numerator
Total (AC) loans in Stage 3
Denominator
Total gross loans and advances
IFRS 9 classification into Stage 3
NLB Group (w/o Komercijalna Banka group)
2020
560.1
11,061.0
5.1%
Numerator
Total (AC) loans in Stage 2 to Corporates
Denominator
Total gross loans to Corporates
Corporates - IFRS 9 classification into Stage 2
NLB Group
(in EUR million and %)
NLB Group (w/o Komercijalna
Banka group)
2020
426.8
4,921.0
8.7%
2020
426.8
3,920.3
10.9%
NLB Group
(in EUR million and %)
2020
2019
2018
475.7
348.6
573.3
13,686.6
3.5%
9,793.5
3.6%
9,017.2
6.4%
Table 44i: NLB Group and NLB Group (w/o Komercijalna Banka group) Stage 3 in the Corporate segment calculation
Numerator
Total (AC) loans in Stage 3 to Corporates
Denominator
Total gross loans to Corporates
Corporates - IFRS 9 classification into Stage 3
NLB Group
(in EUR million and %)
NLB Group (w/o Komercijalna
Banka group)
2020
358.6
4,921.0
7.3%
2020
324.0
3,920.3
8.3%
178
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Table 44j: NLB Group and NLB Group (w/o Komercijalna Banka group) Stage 1 in the Retail segment calculation
Table 45a: NLB Group LCR calculation
Numerator
Total (AC) loans in Stage 1 to Retail
Denominator
Total gross loans to Retail
Retail - IFRS 9 classification into Stage 1
NLB Group
2020
4,779.2
5,029.7
95.0%
(in EUR million and %)
NLB Group (w/o Komercijalna
Banka group)
2020
Numerator
31 Dec
2020
30 Nov
2020
31 Oct
2020
30 Sep
2020
31 Aug
2020
31 Jul
2020
30 Jun
2020
31 May
2020
30 Apr
2020
31 Mar
2020
29 Feb
2020
31 Jan
2020
31 Dec
2019
NLB Group
(in EUR million and %)
3,935.5
Stock of HQLA
5,003.0
4,849.5
4,746.2
4,710.4
4,730.0
4,726.0
4,737.7
4,449.6
4,292.4
3,974.2
3,901.5
3,799.7
3,985.0
4,180.2
94.1%
Denominator
Net liquidity
outflow
1,943.1
1,586.9
1,555.4
1,553.9
1,569.3
1,616.3
1,594.0
1,439.9
1,457.0
1,308.0
1,231.2
1,092.4
1,226.4
LCR
257.5%
305.6%
305.1%
303.1%
301.4%
292.4%
297.2%
309.0%
294.6%
303.8%
316.9%
347.8%
324.9%
Table 44k: NLB Group and NLB Group (w/o Komercijalna Banka group) Stage 2 in the Retail segment calculation
Based on the EC’s Delegated Act on LCR.
NLB Group
(in EUR million and %)
NLB Group (w/o Komercijalna
Banka group)
Table 45b: NLB Group (w/o Komercijalna Banka group) LCR calculation
Numerator
Total (AC) loans in Stage 2 to Retail
Denominator
Total gross loans to Retail
Retail - IFRS 9 classification into Stage 2
2020
133.3
5,029.7
2.7%
2020
133.3
4,180.2
3.2%
Numerator
Stock of HQLA
Denominator
Net liquidity outflow
LCR
Table 44l: NLB Group and NLB Group (w/o Komercijalna Banka group) Stage 3 in the Retail segment calculation
Based on the EC’s Delegated Act on LCR.
NLB Group (w/o Komercijalna Banka group)
(in EUR million and %)
31 Dec 2020
4,703.5
1,642.1
286.4%
Numerator
Total (AC) loans in Stage 3 to Retail
Denominator
Total gross loans to Retail
Retail - IFRS 9 classification into Stage 3
NLB Group
(in EUR million and %)
NLB Group (w/o Komercijalna
Banka group)
2020
117.1
5,029.7
2.3%
2020
111.4
4,180.2
2.7%
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
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%
stress period.
coverage). The parameters of the stress scenario are defined under Basel III
guidelines. Below presented calculations are based on internal data sources.
The LCR requires financial institutions to maintain a sufficient reserve of
high-quality liquid assets (HQLA) to withstand a crisis that puts their cash
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 46a: NLB Group and NLB LTD calculation
NLB Group
NLB
(in EUR million and %)
31 Dec 2020
31 Dec 2019
31 Dec 2018
31 Dec 2020
31 Dec 2019
31 Dec 2018
Numerator
Net loans to customers
9,644.9
7,604.7
7,148.4
4,595.1
4,589.2
4,478.1
Denominator
Deposits from customers
16,397.2
11,612.3
10,464.0
Net loan to deposit ratio (LTD)
58.8%
65.5%
68.3%
8,850.8
51.9%
7,760.7
59.1%
7,033.4
63.7%
179
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Table 46b: NLB Group’s banking subsidiaries LTD calculation
Table 47c: NLB Group member banks in SEE total net interest margin on the basis of interest bearing assets calculation
(in EUR million and %)
(in EUR million and %)
NLB Banka, Skopje
NLB Banka, Banja Luka NLB Banka, Sarajevo
NLB Banka, Prishtina NLB Banka, Podgorica NLB Banka, Beograd
NLB Group member banks in SEE
31 Dec
2020
31 Dec
2019
31 Dec
2020
31 Dec
2019
31 Dec
2020
31 Dec
2019
31 Dec
2020
31 Dec
2019
31 Dec
2020
31 Dec
2019
31 Dec
2020
31 Dec
2019
1-12 2020
1-9 2020
1-6 2020
1-3 2020
1-12 2019
Numerator
Net loans to customers
956.9
915.1
430.7
411.7
399.2
399.3
559.2
540.1
367.3
346.3
472.2
412.0
Numerator
Net interest income(i)
Denominator
159.3
159.1
158.0
160.1
157.5
Denominator
Deposits from
customers
Net loan to deposit
ratio (LTD)
1,288.8
1,175.6
633.5
618.1
521.6
515.2
748.3
685.4
431.7
436.5
496.3
437.3
Average interest bearing assets(ii)
Net interest margin on interest bearing assets
4,782.3
3.33%
4,744.2
3.35%
4,694.1
3.37%
4,669.5
3.43%
4,390.9
3.59%
74.2%
77.8%
68.0%
66.6%
76.5%
77.5%
74.7%
78.8%
85.1%
79.3%
95.1%
94.2%
(i)(ii) Please refer to notes under Table 47a.
Table 47d: NLB net interest margin on the basis of interest bearing assets calculation
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 47a: NLB Group net interest margin on the basis of interest bearing assets calculation
NLB Group
(in EUR million and %)
1-12 2020
1-9 2020
1-6 2020
1-3 2020
1-12 2019
Numerator
Net interest income(i)
Denominator
NLB
(in EUR million and %)
1-12 2020
1-9 2020
1-6 2020
1-3 2020
1-12 2019
138.9
139.4
142.4
149.5
158.1
Numerator
Net interest income(i)
Denominator
299.6
299.9
301.8
311.2
318.5
(i)(ii) Please refer to notes under Table 47a.
Average interest bearing assets(ii)
Net interest margin on interest bearing assets
9,620.4
1.44%
9,455.8
1.47%
9,270.4
1.54%
9,078.1
1.65%
8,537.9
1.85%
Average interest bearing assets(ii)
14,492.7
14,009.2
13,791.1
13,560.3
12,845.9
Table 47e: NLB Group’s banking subsidiaries net interest margin on the basis of interest bearing assets calculation
Net interest margin on interest bearing assets
2.07%
2.14%
2.19%
2.29%
2.48%
(i) Net interest income is annualized, calculated as sum of interest income and interest expenses in the period divided by number of days in the period and multiplied by number of days in the year.
(ii) NLB internal information. Average interest bearing assets for the NLB Group and SEE banking 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). Average interest bearing assets for NLB are calculated as sum of balance of the previous year end (31 December) and daily balances in the period (from 1
January to day d – last day in reporting month) divided by (d+1).
Numerator
NLB Banka, Skopje
NLB Banka, Banja Luka NLB Banka, Sarajevo
NLB Banka, Prishtina NLB Banka, Podgorica NLB Banka, Beograd
(in EUR million and %)
1-12 2020
1-12 2019
1-12 2020
1-12 2019
1-12 2020
1-12 2019
1-12 2020
1-12 2019
1-12 2020
1-12 2019
1-12 2020
1-12 2019
Table 47b: NLB Group (w/o Komercijalna Banka group) net interest margin on the basis of interest bearing assets calculation
Net interest income(i)
48.1
49.0
18.6
18.5
17.8
18.0
32.3
31.0
20.6
20.3
21.8
20.7
Numerator
Net interest income(i)
Denominator
Average interest bearing assets(ii)
Net interest margin on interest bearing assets
(i)(ii) Please refer to notes under Table 47a.
NLB Group (w/o Komercijalna Banka group)
(in EUR million and %)
1-12 2020
299.6
14,187.6
2.11%
Denominator
Average interest
bearing assets(ii)
Net interest margin on
interest bearing assets
1,453.0
1,338.5
756.7
738.9
611.9
608.1
817.7
715.8
499.9
475.2
643.1
514.4
3.3%
3.7%
2.5%
2.5%
2.9%
3.0%
3.9%
4.3%
4.1%
4.3%
3.4%
4.0%
(i)(ii) Please refer to notes under Table 47a.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Net interest margin on total assets - Calculated as ratio between net
interest income annualized and average total assets.
Table 48: NLB Group and NLB net interest margin on total assets calculation
NLB Group
NLB
(in EUR million and %)
NPL - 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
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
recourse to collateral (before deduction of loan loss allowances).
days past due, or loans unlikely to be repaid without recourse to collateral
NPL per cent. - Share of non-performing loans in total loans: non-
performing loans as a percentage of total loans to clients before deduction
(before deduction of loan loss allowances). Share of non-performing loans
is calculated on the basis of internal data source, by which the NLB Group
monitors the loan portfolio quality.
Numerator
Net interest income(i)
Denominator
Average total assets(ii)
1-12 2020
1-12 2019
1-12 2018
1-12 2020
1-12 2019
1-12 2018
Table 50a: NLB NPL calculation
299.6
318.5
312.9
138.9
158.1
158.0
15,086.4
13,311.7
12,515.5
10,336.2
9,206.3
8,870.9
Numerator
(in EUR million and %)
NLB
2020
2019
2018
Net interest margin on total assets
2.0%
2.4%
2.5%
1.3%
1.7%
1.8%
Total Non-Performing Loans
208.4
169.5
342.9
(i) Net interest income is annualized, calculated as sum of interest income and interest expenses in the period divided by number of days in the period and multiplied by 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 sum of total assets of the previous year end (31 December) and daily balances in the period (from 1 January to day d – last day in reporting month) divided
by (d+1).
Denominator
Total gross loans
NPL per cent.
6,980.8
3.0%
5,989.9
2.8%
5,455.5
6.3%
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 Finrep 18; before deduction of allowances for the expected credit
before deduction of allowances for the expected credit losses; ratio in gross
Table 50b: NLB Group NPL calculation
terms.
NLB Group
(in EUR million and %)
losses). Non-performing exposures measured by fair value loans through
Where Non-Performing Exposure includes risk exposure to D and E
P&L (FVTPL) are taken into account at fair value increased by amount of
rated clients (includes loans and advances, debt securities and off-balance
negative fair changes for credit risk.
exposures, which are included in report Finrep 18; before deduction of
Numerator
2020
2019
2018
2017
2016
2015
2014
2013
2012
NPE per cent. (on-balance and off-balance) / Classified on-balance
and off-balance exposures - NPE per cent. in accordance with EBA
allowances for the expected credit losses). Share of NPEs is calculated on
the basis of internal data source, by which the NLB Group monitors the
portfolio quality. Below presented calculations are based on internal data
methodology: NPE as a percentage of all exposures to clients in Finrep18,
sources.
Table 49a: NLB and NLB Group NPE calculation
Total Non-Performing Loans
474.7
374.7
622.3
844.5
1,299.2
1,895.5
2,623.4
2,797.7
3,683.6
Denominator
Total gross loans
13,686.6
9,793.5
9,017.2
9,130.4
9,443.7
9,829.2
10,432.6
10,936.6
13,083.8
NPL per cent.
3.5%
3.8%
6.9%
9.2%
13.8%
19.3%
25.1%
25.6%
28.2%
NLB
NLB Group
Table 50c: NLB Group (w/o Komercijalna Banka group) NPL calculation
(in EUR million and %)
Numerator
Total Non-Performing on-balance and off-
balance Exposure in Finrep18
Denominator
2020
2019
2018
2020
2019
2018
235.1
221.0
384.7
513.0
432.7
674.8
Total on-balance and off-balance exposures in Finrep18
12,223.1
11,087.8
9,763.5
22,042.3
16,228.5
14,410.5
NPE per cent.
1.9%
2.0%
3.9%
2.3%
2.7%
4.7%
Numerator
Total Non-Performing Loans
Denominator
Total gross loans
NPL per cent.
Table 49b: NLB Group (w/o Komercijalna Banka group) NPE calculation
NLB Group (w/o Komercijalna Banka group)
(in EUR million and %)
Table 50d: NLB Group’s banking subsidiaries NPL calculation
NLB Group (w/o Komercijalna Banka group)
(in EUR million and %)
2020
434.8
11,061.0
3.9%
(in EUR million and %)
Numerator
Total Non-Performing on-balance and off-balance Exposure in Finrep18
Denominator
Total on-balance and off-balance exposures in Finrep18
NPE per cent.
2020
464.8
17,738.6
2.6%
NLB Banka, Skopje
NLB Banka, Banja Luka NLB Banka, Sarajevo
NLB Banka, Prishtina NLB Banka, Podgorica NLB Banka, Beograd
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
63.2
48.3
13.7
7.6
24.7
18.6
17.5
10.9
27.3
18.1
8.7
8.0
Numerator
Total Non-
Performing Loans
Denominator
Total gross loans
1,239.1
1,147.1
590.2
598.0
553.4
563.8
768.2
714.4
470.0
455.3
605.5
512.9
NPL per cent.
5.1%
4.2%
2.3%
1.3%
4.5%
3.3%
2.3%
1.5%
5.8%
4.0%
1.4%
1.6%
181
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Table 50e: Komercijalna Banka group NPL calculation
Table 52a: NLB and NLB Group NPL coverage ratio 2 calculation
Komercijalna
Banka, Beograd
Komercijalna Banka,
Banja Luka
Komercijalna Banka,
Podgorica
(in EUR million and %)
NLB
NLB Group
(in EUR million and %)
2020
2019
2018
2020
2019
2018
Numerator
Total Non-Performing Loans
Denominator
Total gross loans
NPL per cent.
2020
1.2
198.4
0.6%
35.2
2,315.1
1.5%
Numerator
Loan loss allowances non-performing loan portfolio
120.7
96.2
195.8
272.1
243.7
402.0
3.6
130.0
2.7%
Denominator
Total Non-Performing Loans
NPL coverage ratio 2 (NPL CR 2)
208.4
57.9%
169.5
56.7%
342.9
57.1%
474.7
57.3%
374.7
65.0%
622.3
64.6%
NPL coverage ratio 1 - The coverage of the gross non-performing
loans portfolio with loan loss allowances on the entire loan portfolio - loan
accounts in respect of the total of impaired loans. NPL coverage ratio 1 is
calculated on the basis of internal data source, by which the NLB Group
impairment in respect of non-performing loans. It shows the level of
monitors the quality of loan portfolio.
credit provisions that the entity has already absorbed into its profit and loss
Table 51a: NLB NPL coverage ratio 1 calculation
(in EUR million and %)
NLB
2020
2019
2018
Numerator
Table 52b: NLB Group (w/o Komercijalna Banka group) NPL coverage ratio 2 calculation
NLB Group (w/o Komercijalna Banka group)
(in EUR million and %)
Numerator
Loan loss allowances non-performing loan portfolio
Denominator
Total Non-Performing Loans
NPL coverage ratio 2 (NPL CR 2)
2020
272.0
434.8
62.6%
Loan loss allowances entire loan portfolio
158.4
129.2
225.8
Table 52c: NLB Group’s banking subsidiaries NPL coverage ratio 2 calculation
Denominator
Total Non-Performing Loans
NPL coverage ratio 1 (NPL CR 1)
208.4
76.0%
169.5
76.2%
342.9
65.8%
NLB Banka, Skopje
NLB Banka, Banja Luka NLB Banka, Sarajevo
NLB Banka, Prishtina NLB Banka, Podgorica NLB Banka, Beograd
(in EUR million and %)
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Table 51b: NLB Group NPL coverage ratio 1 calculation
2020
2019
2018
2017
2016
2015
2014
2013
2012
NLB Group
(in EUR million and %)
Numerator
Loan loss allowances
entire loan portfolio
Denominator
388.4
334.2
479.6
654.8
988.7
1,368.1
1,801.8
1,948.9
2,184.1
Total Non-Performing Loans
474.7
374.7
622.3
844.5
1,299.2
1,895.5
2,623.4
2,797.7
3,683.6
NPL coverage ratio 1 (NPL CR 1)
81.8%
89.2%
77.1%
77.5%
76.1%
72.2%
68.7%
69.7%
59.3%
Table 51c: NLB Group (w/o Komercijalna Banka group) NPL coverage ratio 1 calculation
Numerator
Loan loss allowances entire loan portfolio
Denominator
Total Non-Performing Loans
NPL coverage ratio 1 (NPL CR 1)
2020
378.0
434.8
86.9%
NPL coverage ratio 2 - The coverage of the gross non-performing loans
portfolio with loan loss allowances on the non-performing loans portfolio.
NPL coverage ratio 2 is calculated on the basis of internal data source, by
which the NLB Group monitors the loan portfolio quality.
NLB Group (w/o Komercijalna Banka group)
Loan loss allowances non-performing loan portfolio
(in EUR million and %)
Numerator
Denominator
Total Non-Performing Loans
NPL coverage ratio 2 (NPL CR 2)
Numerator
Loan loss allowances
non-performing
loan portfolio
Denominator
Total Non-
Performing Loans
NPL coverage ratio
2 (NPL CR 2)
43.6
33.7
8.7
6.0
17.0
15.4
14.2
9.4
13.9
9.9
5.2
3.8
63.2
48.3
13.7
7.6
24.7
18.6
17.5
10.9
27.3
18.1
8.7
8.0
69.0%
69.7%
63.6%
78.8%
68.9%
82.9%
81.2%
86.0%
50.9%
54.8%
59.8%
47.1%
Table 52d: Komercijalna Banka group NPL coverage ratio 2 calculation
Komercijalna
Banka, Beograd
Komercijalna Banka,
Banja Luka
Komercijalna Banka,
Podgorica
(in EUR million and %)
2020
0.0
1.2
0.0%
0.0
35.2
0.0%
0.0
3.6
0.0%
Net NPL Ratio - 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
deduction of loan loss allowances; ratio in net terms. Below presented
calculations are based on internal data sources.
182
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Table 53: NLB and NLB Group Net NPL Ratio calculation
Table 56: NLB and NLB Group Gross NPL ratio (EBA def.) (BoS) calculation
NLB
NLB Group
NLB
NLB Group
(in EUR million and %)
(in EUR million and %)
Numerator
Numerator
Net volume of non-performing loans
87.8
73.3
147.1
202.7
131.0
220.2
Gross volume of Non-Performing Loans and advances
199.1
164.3
328.4
466.0
372.9
613.9
2020
2019
2018
2020
2019
2018
2020
2019
2018
2020
2019
2018
Denominator
Total Net Loans
6,822.4
5,860.7
5,229.7
13,298.2
9,459.2
8,537.5
Gross volume of Loans and advances in Finrep18
7,028.2
6,050.9
5,482.4
13,795.3
9,888.1
9,087.0
Denominator
Net NPL ratio per cent. (%Net NPL)
1.3%
1.3%
2.8%
1.5%
1.4%
2.6%
Gross NPL ratio per cent. (% NPL)
2.8%
2.7%
6.0%
3.4%
3.8%
6.8%
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. Below presented
calculations are based on internal data sources.
NPL coverage ratio (EBA def.) - The NPL coverage ratio is the ratio of
the amount of accumulated impairment, negative changes in fair value due
the EBA methodology (report Finrep18). Loans and advances classified as
held for sale, cash balances at CBs and other demand deposits are excluded
Table 54: NLB and NLB Group Received collaterals for NPLs / NPL calculation
(in EUR million and %)
Table 57: NLB and NLB Group NPL coverage ratio (EBA def.) calculation
to credit risk to the non-performing loans and advances, in accordance with
both from the denominator and from the numerator.
NLB
NLB Group
2020
2019
2018
2020
2019
2018
Numerator
Gross volume of Non-Performing Loans covered by collaterals
137.2
122.1
243.8
288.1
249.7
419.3
Denominator
Total Non-Performing Loans
Received collaterals for NPLs / NPL
208.4
65.8%
169.5
72.0%
342.9
71.1%
474.7
60.7%
374.7
66.6%
622.3
67.4%
Numerator
Volume of allowances and value adjustments for credit
losses on Non-Performing loans and advances(i)
Denominator
NLB
NLB Group
(in EUR million and %)
2020
2019
2018
2020
2019
2018
110.1
91.2
180.7
265.3
240.4
391.2
Gross volume of Non-Performing loans and advances(i)
NPL coverage ratio per cent. (% CR)
199.1
55.3%
164.3
55.5%
328.4
55.0%
466.0
56.9%
372.9
64.5%
613.9
63.7%
Non-performing loans and advances (EBA def.) - Non-performing
loans include loans and advances in accordance with EBA Methodology
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
(i) Without loans and advances classified as held for sale, cash balances at CBs and other demand deposits.
that are classified as to D and E, namely loans at least 90 days past due, or
gross carrying amount of loans and advances, in accordance with the EBA
loans unlikely to be repaid without recourse to collateral (before deduction
methodology (report Finrep18). For the purpose of this calculation, loans
NPL coverage ratio (EBA def.) (BoS) – The NPL coverage ratio is
the ratio of the amount of accumulated impairment, negative changes in
accordance with the EBA methodology (report Finrep18). Cash balances at
CBs and other demand deposits are included in the calculation.
of loan loss allowances).
and advances classified as held for sale, cash balances at CBs and other
fair value due to credit risk to the non-performing loans and advances, in
Table 55: NLB and NLB Group Gross NPL ratio (EBA def.) calculation
demand deposits are excluded both from the denominator and from the
numerator. Below presented calculations are based on internal data sources.
Numerator
Gross volume of Non-Performing Loans and
advances without loans held for sale, cash
balances at CBs and other demand deposits
Denominator
Gross volume of Loans and advances in Finrep18
without loans held for sale, cash balances
at CBs and other demand deposits
NLB
NLB Group
(in EUR million and %)
2020
2019
2018
2020
2019
2018
199.1
164.3
328.4
466.0
372.9
613.9
4,958.8
4,923.3
4,840.6
10,340.6
8,127.5
7,811.0
Gross NPL ratio per cent. (% NPL)
4.0%
3.3%
6.8%
4.5%
4.6%
7.9%
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
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
the total gross carrying amount of loans and advances, in accordance with
the EBA methodology (report Finrep18). Cash balances at CBs and other
dashboard. Below presented calculations are based on internal data sources.
Table 58: NLB and NLB Group NPL coverage ratio (EBA def.) (BoS) calculation
Numerator
Volume of allowances and value adjustments for credit
losses on Non-Performing loans and advances
Denominator
NLB
NLB Group
(in EUR million and %)
2020
2019
2018
2020
2019
2018
110.1
91.2
180.7
265.3
240.4
391.2
Gross volume of Non-Performing loans and advances
NPL coverage ratio per cent. (% CR)
199.1
55.3%
164.3
55.5%
328.4
55.0%
466.0
56.9%
372.9
64.5%
613.9
63.7%
Collaterals received / NPL (EBA def.) - The NPL collateral ratio is the
ratio of the collateral received for non-performing loans and advances to the
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
gross carrying amount of collateralized non-performing loans and advances,
subject of calculation.
in accordance with the EBA methodology (report Finrep18). The calculation
183
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 Table 59: NLB and NLB Group NPL coverage ratio (EBA def.) calculation
NLB
NLB Group
(in EUR million and %)
Operational business margin (OBM) – Calculated as the ratio
between operational business net income annualized and average assets.
2020
2019
2018
2020
2019
2018
Table 62: NLB Group and NLB OBM calculation
Numerator
Volume of collateral received up to the carrying
amount of each loan or advance
Denominator
Gross volume of collateralized Non-
Performing loans and advances
38.6
12.9
23.4
61.3
23.9
46.4
NPL coverage ratio per cent. (% CR)
43.5%
33.6%
39.9%
88.8
38.2
58.7
144.6
42.4%
67.4
35.4%
112.5
41.2%
Net stable funding ratio (NSFR) - The net stable funding ratio is a
liquidity risk standard requiring financial institutions to hold enough stable
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
funding to cover the duration of their long-term assets.
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
NSFR is defined as the amount of available stable funding relative to
and residual maturities of the various assets held by that institution as well as
the amount of required stable funding, and is based on the current Basel
those of its off-balance-sheet (OBS) exposures. Below presented calculations
Committee guidelines. This ratio should be equal to at least 100% on an
are based on internal data sources.
NLB Group
NLB
(in EUR million and %)
2020
2019
2018
2020
2019
2018
Numerator
Operational business net income(i)
490.3
502.1
484.0
257.7
268.6
262.2
Denominator
Average total equity(ii)
OBM
15,086.2
13,311.7
12,515.5
10,336.3
9,215.3
8,847.4
3.2%
3.8%
3.9%
2.5%
2.9%
3.0%
(i) Operational business net income is annualized, calculated as operational business income in the period divided by the number of months for the reporting period and multiplied by 12. 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).
Table 60: NLB Group NSFR calculation
Numerator
Amount of available stable funding
Denominator
Amount of required stable funding
NSFR
NLB Group
(in EUR million and %)
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).
31 Dec 2020
31 Dec 2019
Table 63: NLB Group and NLB ROE b.t. calculation
16,514.6
11,957.9
9,966.8
165.7%
7,495.5
159.5%
Numerator
Result before tax(i)
Denominator
Average total equity(ii)
ROE b.t.
NLB Group
NLB
(in EUR million and %)
2020
2019
2018
2020
2019
2018
277.9
215.4
233.3
113.9
177.7
177.5
1,808.1
15.4%
1,700.7
12.7%
1,768.7
13.2%
1,384.6
8.2%
1,328.7
13.4%
1,426.8
12.4%
EVE (Economic Value of Equity) 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
markets. Calculations are taking into account behavioural and automatic
options as well as allocation of non-maturing deposits.
(i) Result before tax is annualized, calculated as result before tax in the period divided by number of months for reporting period and multiplied by 12.
(ii) NLB internal information. Average total equity (including non-controlling interests) is calculated as sum of balance as at end of previous year end (31 December) and monthly balances of the last day of each month from
provides a comprehensive view of the possible long-term effects of changing
The assessment of the impact of a change in interest rates of 200 bps on the
January to month t divided by (t+1).
interest rates at least under the six prescribed standardised interest rate
economic value of the banking book position:
shock scenarios or more if necessary, according to the situation on financial
Table 61: NLB Group EVE calculation
Return on equity after tax (ROE a.t.) – Calculated as the ratio
between result after tax annualized and average equity.
NLB Group
Table 64a: NLB Group and NLB ROE a.t. calculation
(in EUR thousands and %)
31 Dec 2020
31 Dec 2019
31 Dec 2018
31 Mar 2019
30 Jun 2019
30 Sep 2019
31 Mar 2020
30 Jun 2020
30 Sep 2020
31 Dec 2020
w/o KB
-128,370
-88,355
-102,397
-105,256
-77,841
-102,319
-68,129
-59,547
-98,185
-110,838
Numerator
Interest risk in
banking book – EVE
Denominator
Equity (Tier I)
1,765,000
1,451,176
1,458,318
1,460,078
1,425,298
1,424,020
1,426,936
1,616,921
1,622,945
1,765,000
EVE as % of Equity
-7.3%
-6.1%
-7.0%
-7.2%
-5.5%
-7.2%
-4.8%
-3.7%
-6.1%
-6.3%
Numerator
Result after tax(i)
Denominator
Average equity(ii)
ROE a.t.
NLB Group
NLB
(in EUR million and %)
2020
2019
2018
2020
2019
2018
269.7
193.6
203.6
114.0
176.1
165.3
1,751.2
15.4%
1,658.0
11.7%
1,729.9
11.8%
1,384.6
8.2%
1,328.7
13.3%
1,426.8
11.6%
(i) Result after tax is annualized, calculated as result after tax in the period divided by number of months for reporting period and multiplied by 12.
(ii) NLB internal information. Average equity is calculated as sum of balance as at end of 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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Annual Report 2020 Table 64b: NLB Group (w/o Komercijalna Banka group) ROE a.t. calculation
NLB Group (w/o Komercijalna Banka group)
(in EUR million and %)
Return on assets (ROA a.t.) – Calculated as the ratio between result
after tax annualized and average total assets.
Numerator
Result after tax(i)
Denominator
Average equity(ii)
ROE a.t.
(i)(ii) Please refer to notes under Table 64a.
Table 64c: NLB Group’s banking subsidiaries ROE a.t. calculation
2020
141.3
1,741.1
8.1%
(in EUR million and %)
Table 66a: NLB Group and NLB ROA a.t. calculation
Numerator
Result after tax(i)
Denominator
Average total assets(ii)
ROA a.t.
NLB Group
NLB
(in EUR million and %)
2020
2019
2018
2020
2019
2018
269.7
193.6
203.6
114.0
176.1
165.3
15,086.2
13,311.7
12,515.5
10,336.3
9,215.3
8,847.4
1.8%
1.5%
1.6%
1.1%
1.9%
1.9%
NLB Banka, Skopje
NLB Banka, Banja Luka NLB Banka, Sarajevo
NLB Banka, Prishtina NLB Banka, Podgorica NLB Banka, Beograd
(i) Result after tax is annualized, calculated as result after tax in the period divided by number of months for reporting period and multiplied by 12.
(ii) NLB internal information. Average total assets is calculated as sum of balance as at end of previous year end (31 December) and monthly balances of the last day of each month from January to month t divided by (t+1).
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Numerator
Result after tax(i)
19.2
32.9
10.1
17.1
5.9
9.0
13.3
19.5
1.4
7.6
2.6
4.1
Table 66b: NLB Group’s banking subsidiaries ROA a.t. calculation
NLB Banka, Skopje
NLB Banka, Banja Luka NLB Banka, Sarajevo
NLB Banka, Prishtina NLB Banka, Podgorica NLB Banka, Beograd
(in EUR million and %)
Denominator
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Average equity(ii)
219.4
202.8
93.3
86.1
84.3
80.5
92.1
78.0
68.2
67.6
74.2
69.8
Numerator
ROE a.t.
8.8%
16.2%
10.8%
19.9%
7.0%
11.2%
14.5%
25.1%
2.0%
11.2%
3.5%
5.9%
Result after tax(i)
19.2
32.9
10.1
17.1
5.9
9.0
13.3
19.5
1.4
7.6
2.6
4.1
(i)(ii) Please refer to notes under Table 64a.
Return on assets (ROA b.t.) – Calculated as the ratio between result
before tax annualized and average total assets.
Table 65: NLB Group and NLB ROA b.t. calculation
Numerator
Result before tax(i)
Denominator
Average total assets(ii)
ROA b.t.
NLB Group
NLB
(in EUR million and %)
2020
2019
2018
2020
2019
2018
277.9
215.4
233.3
113.9
177.7
177.5
Denominator
Average total assets(ii)
1,507.2
1,377.1
784.9
759.3
639.3
620.0
824.9
720.6
541.0
520.3
662.8
537.1
ROA a.t.
1.3%
2.4%
1.3%
2.3%
0.9%
1.5%
1.6%
2.7%
0.3%
1.5%
0.4%
0.8%
(i)(ii) Please refer to notes under Table 66a.
Total capital ratio (TCR) - Total capital ratio is the own funds of the
institution expressed as a percentage of the total risk exposure amount.
Table 67a: NLB Group and NLB TCR calculation
NLB Group
NLB
(in EUR million and %)
31 Dec 2020
31 Dec 2019
31 Dec 2018
31 Dec 2020
31 Dec 2019
31 Dec 2018
15,086.2
13,311.7
12,515.5
10,336.3
9,215.3
8,847.4
Numerator
1.8%
1.6%
1.9%
1.1%
1.9%
2.0%
Total capital (Own funds)
2,065.5
1,495.8
1,453.4
1,631.6
1,182.2
1,208.3
(i) Result before tax is annualized, calculated as result before tax in the period divided by number of months for reporting period and multiplied by 12.
(ii) NLB internal information. Average total assets is calculated as sum of balance as at end of previous year end (31 December) and monthly balances of the last day of each month from January to month t divided by (t+1).
Denominator
Total risk exposure Amount (Total RWA)
Total capital ratio
12,421.0
16.6%
9,185.5
16.3%
8,677.6
16.7%
6,028.8
27.1%
5,225.1
22.6%
5,023.6
24.1%
Table 67b: NLB Group’s banking subsidiaries TCR calculation
NLB Banka, Skopje
NLB Banka, Banja Luka NLB Banka, Sarajevo
NLB Banka, Prishtina NLB Banka, Podgorica NLB Banka, Beograd
(in EUR million and %)
31 Dec
2020
31 Dec
2019
31 Dec
2020
31 Dec
2019
31 Dec
2020
31 Dec
2019
31 Dec
2020
31 Dec
2019
31 Dec
2020
31 Dec
2019
31 Dec
2020
31 Dec
2019
Numerator
Total capital
190.6
188.4
78.4
70.1
74.7
68.9
103.2
98.2
52.1
46.1
84.5
81.1
Denominator
Total risk exposure
Amount (Total RWA)
1,212.5
1,149.2
452.3
439.9
416.4
431.1
579.7
599.1
321.5
308.1
443.1
416.3
Total capital ratio
15.7%
16.4%
17.3%
15.9%
17.9%
16.0%
17.8%
16.4%
16.2%
15.0%
19.1%
19.5%
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Annual Report 2020
NLB Group Chart
Nova Ljubljanska banka d.d., Ljubljana
Core members
Non-core members
Banks
Foreign countries
Financial institutions
Slovenia
Companies
Slovenia
100%
100%
100%
100%
Bankart, Ljubljana(ii)
NLB Cultural Heritage
Management Institute
40.08%
40.08%
100%
100%
NLB Banka, Beograd
99.997%
99.997%
NLB Skladi, Ljubljana
NLB Banka, Sarajevo
NLB Banka, Podgorica
NLB Banka, Prishtina
NLB Banka, Banja Luka
NLB Banka, Skopje
Komercijalna Banka,
Beograd
97.35%
97.35%
99.83%
99.83%
81.21%
81.21%
99.85%
99.85%
86.97%
86.97%
83.23%
83.23%
NLB Lease&Go, Ljubljana
Komercijalna Banka,
Banja Luka(iii)
99.998%
100%
Komercijalna Banka,
Podgorica
Kombank INvest,
Beograd
100%
100%
100%
100%
The chart shows voting rights shares. The Group includes entities according to the definition in the Financial Conglomerates Act (Article 2).
Subsidiary
Associate
Joint venture
Company Name
%
%
direct share
indirect share at the group level
(i) 90% direct ownership Prvi Faktor, Ljubljana in liquidation, 5% NLB, 5% SID banka d.d.
(ii) Abanka merged into Nova KBM, which currently has a 29.22% share in Bankart. This is over the 25% threshold set
in the Founding agreement - no shareholder other than NLB can have more than 25% capital share in Bankart.
(iii) 99.998% direct ownership Komercijalna Banka, Beograd, 0.002% NLB.
Financial institutions
Slovenia
NLB Leasing, Ljubljana
in liquidation
100%
100%
Optima Leasing, Zagreb
in liquidation
100%
100%
Prvi faktor, Ljubljana
in liquidation
50%
50%
Prvi faktor, Beograd
in liquidation(i)
Prvi faktor, Sarajevo
in liquidation
Prvi faktor, Zagreb
in liquidation
90%
95%
100%
100%
100%
100%
Companies
Slovenia
PRO-REM, Ljubljana
in liquidation
100%
100%
BH-RE, Sarajevo
in liquidation
OL Nekretnine, Zagreb
in liquidation
100%
100%
100%
100%
S-REAM, Ljubljana
REAM, Zagreb
ARG-Nepremičnine, Horjul
100%
100%
100%
100%
75%
75%
Foreign countries
Foreign countries
NLB InterFinanz, Zürich
in liquidation
100%
100%
NLB InterFinanz, Beograd
in liquidation
100%
100%
NLB Leasing, Beograd
in liquidation
LHB AG, Frankfurt
100%
100%
100%
100%
REAM, Beograd
REAM, Podgorica
Tara Hotel, Budva
SPV 2, Beograd
NLB Srbija, Beograd
NLB Crna Gora, Podgorica
100%
100%
100%
100%
12.71%
100%
100%
100%
100%
100%
100%
100%
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Annual Report 2020
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-2.
(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
Strategy and Business
Development
Legal and Secretariat
Communications
Human Resources and
Organization Development
CEO
Internal Audit
Worker’s council(i)
Compliance
and Integrity
Group Steering
CRO
Global Risk
Credit Risk -
Corporate and Retail
CFO
CMO
COO
Group Real Estate
Management
Sales Development and
Management
IT Architecture
Controlling
CSA & Cross-border Financing
IT Delivery
Evaluation and Control
Financial Accounting
and Administration
Large Corporates
Data Management
Restructuring
Financial Markets
Small and Mid Corporates
IT Shared Service Centre
Workout and
Legal support
Trade Finance Services
Investment Banking
and Custody
NLB Group IT Security
Governance
IT Infrastructure
Private Banking
Procurement
NLB Contact Centre
Payments Processing
Sales Support
Cash Processing
Distribution Network
Area Branch
Ljubljana
Area Branch
Southwest Slovenia
Area Branch Northwest
and Central Slovenia
Area Branch
Northeast Slovenia
Area Branch
Southeast Slovenia
Micro Enterprises
Mobile Banking
Distribution Network
Back Office
Financial
Markets Processing
Corporate Banking
Processing
Retail Banking
Processing
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Annual Report 2020
NLB Group Directory
Nova Ljubljanska banka d.d., Ljubljana
Trg republike 2
1520 Ljubljana, Slovenia
Tel: +386 1 476 39 00, +386 1 477 20 00
Mobile banking
Trg republike 2
1520 Ljubljana, Slovenia
Tel: +386 1 476 44 39
CSA & Cross-border Financing
Trg republike 2
1520 Ljubljana, Slovenia
Tel: +386 1 476 26 18
E-mail: info@nlb.si
www.nlb.si
Blaž Brodnjak, CEO & CMO
Archibald Kremser, CFO
Andreas Burkhardt, CRO
Petr Brunclík, COO19
Slovenian network
Ljubljana Area Branch
Trg republike 2
1520 Ljubljana, Slovenia
Tel: +386 1 476 23 30
Innovative Entrepreneurship Centre
Large corporates
Trg republike 2
1520 Ljubljana, Slovenia
Tel: +386 1 476 31 49
Small and Mid-corporates
Small Enterprises I
Trg republike 2
1000 Ljubljana, Slovenia
Tel.: +386 1 476 49 52
Institutional Investors
Trg republike 2
1520 Ljubljana, Slovenia
Tel: +386 1 476 24 92
Large Corporates
Trg republike 2
1520 Ljubljana, Slovenia
Tel: +386 1 476 26 92
Northwest and Central Slovenia Area Branch
Titova cesta 2
Small Enterprises II
Members of NLB Group
NLB Banka a.d., Beograd20
Bulevar Mihajla Pupina 165 v
11070 Belgrade, Serbia
Tel: +381 11 71 51 522
E-mail: info@nlb.rs
www.nlb.rs
Branko Greganović,
President of the Executive Board
Vlastimir Vuković,
Member of the Executive Board21
Dejan Janjatović,
Member of the Executive Board22
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, CEO
Marko Popovič, Executive Officer
Dino Redžepagić, Executive Officer
Ljubljanska cesta 62
1230 Domžale, Slovenia
Tel: +386 1 724 55 01
Northeast Slovenia Area Branch
Titova cesta 2
2000 Maribor, Slovenia
Tel: +386 2 234 45 04
Southeast Slovenia Area Branch
Seidlova cesta 3
8000 Novo mesto, Slovenia
Tel: +386 7 339 14 56
Southwest Slovenia Area Branch
Cesta Zore Perello - Godina 7
6000 Koper, Slovenia
Tel: +386 5 610 30 10
Private Banking
Trg republike 2
1520 Ljubljana, Slovenia
Tel: +386 1 476 23 66
Micro Enterprises
Trg republike 2
1520 Ljubljana, Slovenia
Tel: +386 1 476 50 01
2000 Maribor, Slovenia
Tel.: +386 2 234 45 09
Central region
Trg republike 2
1520 Ljubljana, Slovenia
Tel.: +386 1 476 26 11
Northeast region
Ljubljanska cesta 62
1230 Domžale, Slovenia
Tel.: +386 1 724 54 75
Southwest region
Cesta Zore Perello - Godina 7
6000 Koper, Slovenia
Tel.: +386 5 610 30 29
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
19. From 18 May 2020.
20. Jelena Živković is a Member of the Executive Board from 5 January 2021.
21. Till 4 January 2021.
22.Till 4 January 2021.
NLB Banka d.d., Sarajevo
Komercijalna Banka a.d. Banja Luka29
Ul. Koševo br. 3, 71000 Sarajevo - Centar
Jevrejska 69, 78000 Banja Luka, Republic of
71000 Sarajevo, Bosnia and Herzegovina
Srpska, Bosnia and Herzegovina
NLB Banka sh.a., Prishtina
Rr. Ukshin Hoti nr. 124
10000 Prishtina, Kosovo
Tel: +383 38 744 000
E-mail: info@nlb-kos.com
https://nlb-kos.com/
Albert Lumezi,
Tel: +387 33 720 300
E-mail: info@nlb.ba
www.nlb.ba
Lidija Žigić,
President of the Management Board
President of the Management Board
Gem Maloku,
Denis Hasanić,
Member of the Management Board
Member of the Management Board
Lavdim Koshutova,
Jure Peljhan,
Member of the Management Board
Member of the Management Board
Tel: +387 51 244 700
E-mail: office@kombank-bl.com
www.kombank-bl.com
Boško Mekinjič,
President of the Management Board
Siniša Smiljanić,
Member of the Management Board30
Dragana Vujičić Stefanović,
Member of the Management Board
NLB Banka a.d. Banja Luka23
Komercijalna Banka a.d. Beograd24
Kombank INvest a.d. Beograd
Milana Tepića 4
Svetog Save 14, 11000 Belgrade, Serbia
Kralja Petra 19, 11000 Belgrade, Serbia
78000 Banja Luka, Republic of Srpska,
Tel: +381 11 30 80 100
Tel.: +381 11 330 8310
Bosnia and Herzegovina
Tel: +387 51 248 588
E-mail: helpdesk@nlbbl.com
www.nlb.ba
Radovan Bajić,
President of the Management Board
Marjana Usenik,
Member of the Management Board
Dragan Injac,
Member of the Management Board
NLB Banka AD Skopje
Majka Tereza 1
1000 Skopje, North Macedonia
Tel: +389 2 5 100 865
E-mail: info@nlb.mk
www.nlb.mk
Antonio Argir,
President of the Management Board
Günter Friedl,
E-mail: posta@kombank.com
www.kombank.com
Vladimir Medan,
President of the Management Board25
Una Sikimič,
Member of the Management Board26
Miroslav Perić,
Member of the Management Board27
Pavao Marjanović,
Member of the Management Board28
Dragiša Stojanović,
Member of the Management Board
Komercijalna Banka a.d. Podgorica
Ulica Cetinjska 12, 81000 Podgorica,
Montenegro
Tel: +382 20 426 300
E-mail: office@kombank.me
www.kombank.me
Mirko Marojevič,
E-mail: vladimir.garic@kombankinvest.com
www.kombankinvest.com
Vladimir Garić, Director
NLB Lease&Go, leasing, d.o.o., Ljubljana31
Šlandrova ulica 2, 1000 Ljubljana, Slovenia
Tel: +386 1 586 29 10
E-mail: info@nlbleasego.si
www.nlbleasego.si
Andrej Pucer, Director
Anže Pogačnik, Director
NLB Leasing d.o.o., Ljubljana – v likvidaciji
Šlandrova ulica 2
1000 Ljubljana, Slovenia
Tel: +386 1 586 29 10
E-mail: info@nlbleasing.si
Anže Pogačnik, Liquidator
NLB Leasing d.o.o. Beograd – u likvidaciji
Member of the Management Board
President of the Management Board
Bulevar Mihajla Pupina 165 v
Peter Zelen,
Veselin Vuković,
Member of the Management Board
Member of the Management Board
Igor Dačevski,
Srđan Savić,
Member of the Management Board
Member of the Management Board
11070 Belgrade, Serbia
Tel: +381 11 222 01 01
E-mail: info@nlbleasing.rs
Veljko Tanić, Liquidator
23. Goran Babić is a Member of the Management Board from 1 January 2021.
24. Vlastimir Vuković is a President of the Management Board from 4 February 2021. Dejan Janjatović is a Member of the Management Board from 4 February 2021.
25. Till 4 February 2021.
26. Till 4 February 2021.
27. Till 22 March 2021.
28. Till 31 March 2021.
29. Martin Mavrič is a Member of the Management Board from 23 March 2021.
30. Till 22 March 2021.
31. Claus-Peter Martin Mueller is a Director from 1 January 2021.
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MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Optima Leasing d.o.o. u likvidaciji, Zagreb
NLB Skladi, upravljanje
Miramarska 24
10000 Zagreb, Croatia
Tel: +385 1 61 77 225
E-mail: info@optima-leasing.hr
Vjekoslav Budimir, Liquidator
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
REAM d.o.o., Zagreb
Miramarska 24/6
10000 Zagreb, Croatia
Tel: +385 1 56 25 914
NLB Srbija d.o.o., Beograd
Bulevar Mihajla Pupina 165 v
11070 Belgrade, Serbia
Tel: +381 11 22 25 366
E-mail: lamija.hadziosmanovic@ream-cro.com
E-mail: office@nlbsrbija.co.rs
E-mail: julijana.milic@nlb.si
Lamija Hadžiosmanović, Director
www.nlbsrbija.co.rs
Veljko Tanić, Director
Prvi faktor d.o.o., v likvidaciji, Ljubljana32
Kruno Abramovič, President of the
Julijana Milić, Director
Slovenska cesta 17
1000 Ljubljana, Slovenia
Management Board
Blaž Bračič, Member of the
E-mail: klemen.hauko@prvifaktor.si
Management Board
Klemen Hauko, Liquidator
Prvi faktor – faktoring d.o.o.,
Beograd – u likvidaciji
Bulevar Mihajla Pupina 165 v
11070 Novi Beograd, Serbia
Tel: +381 11 222 54 00
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
OL Nekretnine d.o.o. u likvidaciji, Zagreb
Bulevar Džorža Vašingtona 102, I sprat/20
NLB Crna Gora d.o.o., Podgorica
Miramarska 24
10000 Zagreb, Croatia
Tel: +385 1 56 25 914
81000 Podgorica, Montenegro
Tel: +382 686 661 553
E-mail: marko.celebic@nlb.me
E-mail: lamija.hadziosmanovic@ream-cro.com
Marko Čelebić, Executive Director
E-mail: ivan.strek@ream-cro.com
Barbara Šink, Authorised Representative
Lamija Hadžiosmanović, Liquidator
Goran Laličević, Authorised Representative
Ivan Štrek, Liquidator
S-REAM d.o.o., Ljubljana
E-mail: zeljko.atanaskovic@prvifaktor.rs
Aleksander Kurtevski, Director
REAM d.o.o., Beograd – Novi Beograd
Čopova 3
Željko Atanasković, Liquidator
Prvi faktor d.o.o. u likvidaciji, Sarajevo
Jure Kvaternik, Director
Rainer Schamberger, Director
Bulevar Mihaila Pupina 165 v
11070 Belgrade, Serbia
Tel: +381 11 22 25 374
Mis Irbina 26/1
LHB Aktiengesellschaft, Frankfurt am Main
E-mail: vladimir.vasilijevic@ream-srb.com
Matjaž Jevnišek, President of the Management
Bulevar Mihaila Pupina 165 v
SPV2 d.o.o., Beograd – Novi Beograd
Branches and representative offices
71000 Sarajevo, Bosnia and Herzegovina
Große Bockenheimer Str. 33-35
Tel: +387 61 066 055
E-mail: denan.bogdanic@prvifaktor.ba
Đenan Bogdanić, Liquidator
60313 Frankfurt, Germany
Tel: +49 69 21 65 78 20
E-mail: info@lhb.de
Prvi faktor d.o.o. u likvidaciji, Zagreb33
Board
Hektorovičeva 2
10000 Zagreb, Croatia
Tel: +385 1 6165 000
E-mail: info@prvifaktor.hr
Jure Hartman, Liquidator
NLB InterFinanz AG in Liquidation, Zürich
Beethovenstrasse 48
8002 Zürich, Switzerland
Tel: +41 44 283 17 15
PRO-REM d.o.o., Ljubljana - v likvidaciji
Čopova 3
1000 Ljubljana, Slovenia
Tel: +386 1 586 29 16
E-mail: info@prorem.si
www.nlbrealestate.com
Jovica Jakovac, Liquidator
Vladimir Vasilijević, Director
Veljko Tanić, Director
11070 Belgrade, Serbia
Tel: +381 11 22 25 374
E-mail: office@ream-srb.com
Vladimir Vasilijević, Director
Tara Hotel d.o.o., Budva
81000 Podgorica, Montenegro
E-mail: gligor.bojic@nlb.me
Lamija Hadžiosmanović, Liquidator
Gligor Bojić, Director
Bulevar Džordža Vašingtona 102, Podgorica
Marko Čelebić, Director
1000 Ljubljana, Slovenia
Tel: +386 (0)41 307 759
E-mail: info@s-ream.com
www.nlbrealestate.com
Jovica Jakovac, Director
Lamija Hadžiosmanović, Director
of NLB Group members outside
their country of residence
NLB InterFinanz AG in liquidation
Ljubljana Branch in liquidation
Puharjeva ulica 3
1000 Ljubljana, Slovenia
Komercijalna banka, branch
Kosovska Mitrovica
Čika Jovina 11, 38 220 Kosovska Mitrovica
E-mail: info@nlbinterfinanz.ch
REAM d.o.o., Podgorica
BH-RE d.o.o., Sarajevo u likvidaciji
Goran Dželajlija, Director
Jean-David Barnezet Llort, Liquidator
Bul. Džordža Vašingtona br. 102, I. sprat/20,
Trg solidarnosti br. 2a
Polona Žižmund, Liquidator
81000 Podgorica, Montenegro
Tel: +382 20 674 900
71000 Sarajevo, Bosnia and Herzegovina
E-mail: denis.silajdzic@nlbleasing.ba
NLB InterFinanz d.o.o., Beograd – u likvidaciji
E-mail: gligor.bojic@nlb.me
Denis Silajdžić, Director
Bulevar Mihajla Pupina 165 v
11070 Belgrade, Serbia
Tel: +381 11 22 25 351
Liljana Zoraja, Liquidator
Gligor Bojić, Director
Marko Furlan, Authorised Representative
32. France Zupan and Iztok Zupanc are liquidators from 1 March 2021.
33. Vjekoslav Budimir is liquidator from 1 March 2021.
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CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020
Definitions and Glossary
of Selected Terms
ALCO
ALM
ALMM
Asset and Liability Committee
Asset and Liability Management
Additional Liquidity Monitoring Metrics
AML/CTF
Anti-Money Laundering and Counter-Terrorism Financing
BCM
Business Continuity Management
BIA
BiH
BMR
BoS
bps
Business Impact Analysis
Bosnia and Herzegovina
Benchmarks Regulation
Bank of Slovenia
Basis Points
CAGR
Compound Annual Growth Rate
CB
CBR
CEE
CEO
CET1
CFO
CIR
CMO
COO
CRD
CRO
CRR
CSD
CSR
CVA
DGS
DPS
DWH
EBA
EBRD
EC
ECB
ECL
EEA
EPS
E&S
Central Bank
Combined Buffer Requirement
Central Eastern Europe
Chief Executive Officer
Common Equity Tier 1
Chief Financial Officer
Cost-to-Income Ratio
Chief Marketing Officer
Chief Operating Officer
Capital Requirements Directive
Chief Risk Officer
Capital Requirements Regulation
Central Security Depository
Corporate Social Responsibility
Credit Value Adjustments
Deposit Guarantee Scheme
Dividends Per Share
Data Warehouse
European Banking Authority
European Bank for Reconstruction and Development
European Commission
European Central Bank
Expected Credit Losses
European Economic Area
Earnings Per Share
Environmental and Social
ESG
ESMS
EU
EVE
EVS
EWS
Environmental, Social and Governance
Environmental and Social Management System
European Union
Economic Value of Equity
European Valuation Standards
Early Warning System
FATCA
Foreign Account Tax Compliance Act
FDI
FTP
FVTPL
FX
GDP
GDPR
GDR
HR
HQLA
IAS
IASB
ICAAP
IFRIC
IFRS
ILAAP
IMAD
IMF
IVS
JV
KB
KDD
KPI
LCR
LGD
LTD
M&A
MAR
Foreign Direct Investments
Fund Transfer Pricing
Fair Value Loans Through Profit or Loss
Foreign Exchange
Gross Domestic Product
General Data Protection Regulation
Global Depositary Receipts
Human Resources
High Quality Liquid Assets
International Accounting Standard
International Accounting Standards Board
Internal Capital Adequacy Assessment Process
International Financial Reporting Interpretations Committee
International Financial Reporting Standard
Internal Liquidity Adequacy Assessment Process
Institute of Macroeconomic Analysis and Development
International Monetary Fund
International Valuation Standards
Joint Venture
Komercijalna banka
Central Securities Clearing Corporation
Key Performance Indicator
Liquidity Coverage Ratio
Loss Given Default
Loan-to-Deposit Ratio
Mergers and Acquisitions
Market Abuse Regulation
MiFID II
Markets in Financial Instruments Directive
MiFIR
MIGA
Markets in Financial Instruments Regulation Rules
Multilateral Investment Guarantee Agency (part of the World Bank Group)
MREL
Minimum Requirement of Own Funds and Eligible Liabilities
NLB or the Bank
NLB d.d.
NLB Skladi
NLB Assets Management
NPE
NPL
NSFR
OCR
P2R
p.p.
POCI
POS
PD
PSD2
REAM
RICS
ROA
ROE
RoS
RWA
SEE
SME
SREP
SRF
SSM
TCR
Non-Performing Exposures
Non-Performing Loans
Net stable funding ratio
Overall Capital Requirement
Pillar 2 Requirements
Percentage point(s)
Purchased or originated credit impaired
Point of Sale
Probability of Default
Payments Services Directive
Real Estate Asset Management
Royal Institution of Chartered Surveyors
Return on Assets
Return on Equity
Republic of Slovenia
Risk Weighted Assets
South Eastern Europe
Small and Medium-sized Enterprises
Supervisory Review and Evaluation Process
Single Resolution Fund
Single Supervisory Mechanism
Total Capital Ratio
The Group
NLB Group
TLOF
TLTRO
TREA
TSCR
UN
UN SDG
ZBan-2
ZGD-1
ZTFI-1
ZVOP-2
Total Liabilities and Own Funds
Targeted Longer-Term Refinancing Operations
Total Risk Exposure Amount
Total SREP Capital Requirement
United Nations
United Nations Sustainability Development Goals
Slovenian Banking Act
The Companies Act
Financial Instruments Market Act
The Slovenian Personal Data Protection Act
190
CONTENTS
MB Statement SB Statement Key highlights Acquisition of KB Risk factors & Outlook Performance Overview Risk Management Financial Report
Annual Report 2020 This is Our Home
NLB d.d., Ljubljana
nlb.si
Text: NLB d.d.
Production: Gigodesign, Taktik
Photographs: Primož Korošec, Archive NLB
Copyright: NLB d.d., Ljubljana
Ljubljana, April 2021