In accordance with the applicable legislation and good business practice Nova KBM d.d. hereby gives the following notice:

For 2015, Nova KBM reported a net profit of €34.4 million, while the net profit of the Nova KBM Group hit €16.9 million. Nova KBM and the Nova KBM Group both managed to reduce their operating costs and increase their market shares in terms of total assets, deposits and loans, while continuing to successfully implement the adopted restructuring programme. The level of net NPLs on the books of the Nova KBM Group fell by 31% last year. Nova KBM´s and the Nova KBM Group´s ROAE before tax were 7.06% and 4.11%, respectively, an improvement from 2014, while their total capital ratios stood at 28.07% and 25.13%, respectively. This data was taken from the audited 2015 Annual Report of the Nova KBM Group, which was approved by the Nova KBM Supervisory Board approved and which will be published on Friday, 25 March.

At the end of 2015, Nova KBM´s market share in terms of total assets was 9.5%, up 0.2 percentage points on 2014. In terms of customer deposits, Nova KBM succeeded in preserving its market share at 10.1%, with the volume of these deposits registering a growth of 2%, reaching €2.5 billion by the end of the year. Despite the ongoing challenging market conditions, Nova KBM managed to increase its market share in customer loans to 7.6%.

Enhancement of commercial activities and a reduction in costs

Particularly good results were achieved in household lending, a segment in which Nova KBM preserved its 9.8% market share, with Nova KBM´s total net loans outstanding to households amounting to €772 million at the end of 2015. An increase was registered in both the volume and number of loans outstanding to households. The volume of consumer loans approved last year was 54.4% above that of a year ago, while the volume of new housing loans was even 76.6% above that of 2014. In the area of corporate banking, Nova KBM enhanced its commercial activities, including through organizing several well-attended business events, thereby demonstrating its commitment to continuing to be a vital partner to its corporate customers. Deposits placed with Nova KBM by non-financial companies increased year-on-year by 26.8%, to €401.6 million at the end of 2015, while the volume of loans outstanding to this customer segment reached €607.1 million, which was below the 2014 year-end level. Loans outstanding to sole proprietors totalled €51.5 million, an increase relative to a year ago. With €229.3 million outstanding at the end of 2015, an increase was also registered in the total volume of guarantees provided by Nova KBM last year. The total volume of approved but unutilised loans and overdrafts amounted to €305.9 million, suggesting, among other things, either that companies are still cautious about undertaking large investment projects or that they have sufficient funds to finance investments. However, it must be emphasised that a positive trend in the lending business was registered at the end of the year.                    

After discussing the 2015 results, Peter Kukovica, Chair of the Nova KBM Supervisory Board, said: “In 2015, the Management Board worked closely with all Nova KBM Group employees to consistently and resolutely implement the adopted restructuring programme, in addition to taking a number of measures to improve the results and financial position of the Nova KBM Group. Despite the ongoing difficult economic conditions, the Nova KBM Group delivered a profitable performance and reduced its operating costs by 6%, while continuing to carry out its commercial activities in a prudent manner. The results achieved so far form a robust basis for successful future performance.”

“While the results of Nova KBM for 2015 are fully in line with our projections and estimates, the profit reported by the Nova KBM Group as a whole was somewhat below the projection, mainly as a result of costs incurred during the restructuring, as part of which the Nova KBM Group is liquidating its leasing companies and withdrawing its banking operations from non-core markets”, Robert Senica, President of the Management Board, commented on the results.

Improved sales-efficiency and presence in international markets

Compared to 2014, both Nova KBM and the Nova KBM Group saw a reduction in their interest income, earning €100.9 million and €122.4 million, respectively. Senica explained that all banks, not only Nova KBM, have been suffering from pressure on loan and deposit interest rates, which are at historically low levels and reflect the ECB´s monetary policy. “To deal with this situation, we will continue efforts to increase our non-interest income and will set up more efficient business models. In addition, we will exploit growth opportunities by introducing digitisation in the development of products and services”, said Senica, adding that last year Nova KBM managed to improve its sales-efficiency and launched some new and upgraded services.

Last year, Nova KBM´s performance continued to be monitored and assessed by several rating agencies. After it upgraded Nova KBM´s rating last year, Moody´s Investors Service affirmed the rating of Nova KBM, as well as the positive outlook on the rating, this February. Fitch Ratings also assigned a positive outlook on Nova KBM´s rating. Sabina Župec Kranjc, Member of the Management Board, said: “Foreign banks have reacted positively to the improved ratings and performance of Nova KBM, as suggested by their increased interest in our cooperation in the area of treasury operations. Through the execution of various campaigns, we have managed to enhance our presence and recognition in international markets, thereby gaining access to more favourable funding sources, including through capital markets.”

The level of NPLs declined by almost one third

The positive effects arising from the implementation of the adopted NPL strategy are continuing to be seen. At the end of 2015, the level of NPLs on the books of Nova KBM and the Nova KBM Group was about 31% lower than a year ago, with the proportion of the net NPLs within the loan portfolios of Nova KBM and the Nova KBM Group declining year-on-year by 6.57 percentage points (€117 million) and 6.46 percentage points (just over €144 million), respectively. Nova KBM is involved in a number of corporate restructurings, the aim of which is to help companies that are believed to have a healthy operating basis and growth potential to ensure their repayment capabilities and future operations. Aside from intensifying its commercial activities, in 2015 Nova KBM paid considerable attention to all types of banking risks, the effective management of which is considered to be of critical importance for its future business. By upgrading its information support system for the lending process, Nova KBM further optimized its business processes, while at the same time reducing the potential for making errors and, consequently, its exposure to operational risk. Using its in-house resources, Nova KBM developed and implemented an app-supported system for the early identification of any increase in risk (EWS). In addition, the Operational Risk Committee and the Supervisory Board Risk Committee were set up last year to strengthen Nova KBM´s risk management system.

Consolidation and restructuring continued throughout last year

To comply with the obligations arising from the adopted restructuring programme, the number of staff continued to be reduced last year at the level of both Nova KBM and the Nova KBM Group. At the end of 2015, Nova KBM had a total of 1,056 employees, while the number of employees working at the Nova KBM Group as a whole reached 1,591. Nova KBM further optimized its branch office network and made several organizational changes to improve its cost-efficiency. With regards to Nova KBM´s concern for social responsibility, for which it was awarded the full 'Family-Friendly Company' certificate last year, appropriate measures were taken to strengthen the relationships with employees and the social dialogue with them.

The restructuring programme and the commitments made to the European Commission place an obligation on the Nova KBM Group to gradually concentrate on its principal activity, banking. As a systemically important bank, in 2015 Nova KBM complied with all obligations imposed on it as a result of being subject to the Single Supervisory Mechanism (SSM). The project of merging PBS and Nova KBM, which started in 2015, is running to plan. While Nova KBM sold its shareholding in Moja naložba at the end of December 2015, the companies continue their cooperation in the area of sales. KBM Infond and M-PAY, which will remain within the Nova KBM Group, are performing as planned, while the liquidation proceedings against KBM Leasing, Gorica Leasing, KBM Leasing Hrvatska and Adria Abwicklungs (ex-Adria Bank) are under way and are expected to be completed soon, as is the sale of KBM Banka in Serbia.

This announcement will be available on the Bank's website (www.nkbm.si) as from 21. March 2016, for at least five years from the date of its issue.