Banking Industry Country Risk Assessment: Slovenia

The economic risk trend for banks operating in Slovenia is stable, stemming from our view that medium-term economic prospects in Slovenia continue to support banks in the country. For 2024-2025, we expect higher wages, domestic demand, and public investments will support economic growth. We believe private sector leverage, NPAs, and credit losses will remain low, although we forecast a moderate increase for the latter two in 2024. We view the industry risk trend for Slovenian banks as stable. Cost efficiency, profitability, and corporate governance standards have materially improved, thanks to the sector consolidation that makes Slovenian banks structurally more resilient through a full economic cycle. Funding risks are low due to a strong deposit base and high liquidity buffers, despite

...Slovenian banks benefit from the relatively wealthy economy and substantially improved asset quality that results from the strong deleveraging of the private sector and workout efforts. We expect banking operations in the country will remain robust, supported by an improving economic environment. Banks' improving cost efficiency and the ongoing consolidation through mergers and acquisitions (M&As) strengthened the sector's competitive standing, in our view. Slovenia has the highest GDP per capita in central and eastern Europe (CEE). That said, risks for Slovenian banks remain elevated due to potential spillovers from the Russia-Ukraine war. Additionally, subdued economic growth in Europe could impair Slovenia because of its tight integration in EU supply chains....

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