Nova Ljubljanska Banka D.D.

The stable outlook reflects our expectation that NLB will keep its solid earnings and asset quality performance over the next 12-24 months, strengthened by the bank's robust risk management standards, business diversity in Slovenia, and operations in SEE. We expect NLB will create value from its bank acquisitions on the back of successful integrations and targeted synergies. The outlook also reflects our view that NLB will maintain sound capital and ALAC buffers. We expect the bank to preserve a solid balance sheet and financial performance despite potential spillover effects from the Russia-Ukraine war and risks from the economic slowdown in Europe. We could lower the ratings over the next 12-24 months if the bank reported a lower level of ALAC-eligible

...S&P Global Ratings expects Nova Ljubljanska Banka D.D. (NLB) to remain highly profitable despite mild asset quality deterioration until 2026. NLB is benefiting from higher interest rates across its regions, with net interest margins reaching 4.5% as of June 30, 2024. Taking into account expected policy rate cuts by central banks in NLB's six core operating countries, we forecast NLB's net interest margin to decline to 3.75%-4.00% by year-end 2026, which is still a high level, contributing to solid revenue. We project the cost of risk to normalize at about 30-40 basis points (bps) over the next 12-24 months, which is still relatively low considering the higher economic risks in SEE. We expect the bank's risk-adjusted capital (RAC) ratio to remain close to 9.5% in the next two years, but we note downside risks to our...

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