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NOVA KBM, d.d., Maribor

Nova KBM's half-year results: stable and profitable performance - Unaudited results of operations of the Nova KBM Group and Nova KBM d.d. for the period January to June 2016

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

In the first six months of the year, Nova KBM and the Nova KBM Group performed successfully, as shown by the unaudited semi-annual financial report published today. For that period, the Nova KBM Group reported a net profit of €32.7 million, while the net profit of Nova KBM amounted to €29.3 million.

After successfully completing the merger of as many as two banks (PBS and KBS Banka) last autumn and at the beginning of this year, thus achieving the merged bank’s market share in terms of total assets of approximately 13 percent, a new vision and strategy of Nova KBM and its Group have been devised. The vision of Nova KBM is to become the best bank in Slovenia by 2020, by focusing on five strategic pillars in the implementation of such ambitious plans, client excellence, sustainable growth and profitability, effective risk management and strict compliance with all applicable regulations, operational efficiency and a proper organisational culture and concern for the development of employees. In addition to strengthening the Bank’s marketing activities, the branch network and the internal organisation of the Bank are being optimised to provide even better services, streamline work processes and strengthen the market position of Nova KBM.

Intense marketing activities

Nova KBM has expanded its retail banking services by adding the Komplet bundle, comprising a range of key services for day-to-day transactions at a uniform fee, and by upgrading its mbank@net mobile banking. Furthermore, the bank has upgraded the bundle accounts (Modri and Zmagovalni) for its corporate clients and intensified marketing of its e-cash service intended primarily for companies dealing with large amounts of cash.

Following its merger with KBS banka, the Bank expanded its investment banking services with the investments funds provided by the Austrian Raiffeisen Capital Management and offering custody services to institutional investors. Nova KBM has returned to the financial instruments market by issuing commercial papers for Gen-i in the amount of €27 million. At the beginning of the year, KBM Infond introduced the Infond 2040 target date sub-fund designed to meet savings goals with a long-term horizon. In collaboration with its strategic partner, Pošta Slovenije, the Bank has opened specialised bank counters at the post offices in Slovenske Konjice, Grosuplje and Fužine in Ljubljana, where Nova KBM’s banking staff enable customers to carry out any cashless services and provide other information to them concerning banking transactions.

Transformation of the Nova KBM Group

On 10 March, based on the consent of the Nova KBM Supervisory Board, the Nova KBM Management Board signed an agreement with Biser Bidco S.à r.l (Biser Bidco), pursuant to which all rights and obligations of Biser Bidco under the sale and purchase agreement (SPA) relating to the acquisition of the entire share capital of Summit Leasing Slovenija d.o.o. were transferred to Nova KBM. The SPA was signed on 3 March 2017 between Biser Bidco (as the buyer) and Sumitomo Corporation and Sumitomo Corporation Europe Limited (as the sellers). The closing of the Summit Leasing Slovenija d.o.o. acquisition process is subject to regulatory / ECB approval.

In accordance with the Nova KBM Group’s restructuring strategy, the Nova KBM Management Board has decided to begin the process of winding up KBM Invest, a Nova KBM subsidiary engaged in real estate business, by way of a simplified procedure without liquidation.

Profitable performance

In the first six months of the year, the Nova KBM Group reported a net profit of €32.7 million, while the net profit of Nova KBM amounted to €29.3 million. Total income earned by the Group in the first half of 2017 amounted to €70,2 million. Net interest income reached €39.5 million, while net fee and commission income totalled €22.9 million. Net impairments and provisions reversed by the Group in the first six months of 2017 amounted to €20.6 million. The operating costs (administration costs, including depreciation and amortisation) incurred by the Group in the first six months of 2017 totalled €55.5 million. Staff costs accounted for 52.7% of the total operating costs, followed by general and administrative costs (37.8%), and depreciation and amortisation (9.5%). The Group’s cost-to-income ratio reached 78.83% in the first six months of 2017.

Improved ratings

Better operating results have also been identified by international credit rating agencies. In May 2017, Fitch Ratings upgraded Nova KBM’s Long-Term Issuer Default Rating to ‘BB’ from ‘BB-‘, whereas in June of this year, Moody's Investor Service upgraded Nova KBM’s Long-Term Deposit Ratings to ‘Ba2’ from ‘B2’ and also raised the Baseline Credit Assessment (BCA) and adjusted BCA to ‘ba3’ from ‘b3’.

This announcement will be available on the Bank's website (www.nkbm.si) as from 31 August 2017.

Management Board of Nova KBM d.d.
Datum: 31.08.2017