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Market Report, "Slovenia Commercial Banking Report Q3 2012", published

Fast Market Research recommends "Slovenia Commercial Banking Report Q3 2012" from Business Monitor International, now available


Boston, MA -- (SBWIRE) -- 08/22/2012 -- BMI View: The combination of a rapidly deteriorating domestic economy and the need for banks to repair their balance sheets indicates that asset and loan growth will prove particularly weak over the medium term. Given the degree of banking sector leverage and the urgent need for reforms, banks could face serious difficulties in raising additional capital on the private market, instead requiring state-led capital injections. The European Central Bank's Long-Term Refinancing Operations (LTRO) in late December and most recently on February 29, have significantly eased liquidity concerns across the region. However, while this has helped to bolster confidence in the eurozone banking system, it is unlikely to translate into improved domestic lending conditions within Slovenia in the foreseeable future. At this stage, in light of the onus placed on domestic banks to raise new capital, repair their balance sheets and return to a more sustainable degree of leverage, and also given the deteriorating domestic macroeconomic environment, we remain secure in our forecasts for lacklustre loan and asset growth over the coming years. Slovenia Commercial Banking Report Q2 2012 © Business Monitor International Ltd Page 34 Indeed, the most recent data released by the Bank of Slovenia shows that both asset and loan growth were in negative territory for the final three months of 2011. We expect a further year of negative growth for both total assets and client loans, to the tune of -1.0%. Moroever, through to 2016, we forecast average asset and loan growth of just 3.9% and 3.2% respectively, a far-cry from the 19.1% and 25.1% chalked up in the 2005-2008 period. Domestic Economy Reeling According to the most recent data released by the Statistical Office of the Republic of Slovenia, real GDP contracted 2.8% in year-on-year (y-o-y) terms in the final quarter of 2011, down from - 0.5 the previous quarter. This represented a 0.7% contraction in real GDP in Q411 compared to the previous quarter, the largest contraction since the first quarter of 2009. In turn, we will be looking to revise down our already weak growth forecast for 2012 at 0.3% in the near future. Considering that the new administration is committed to tighten fiscal austerity more aggressively this year, with unemployment rising back above 12.0% at the end of 2011, and with banks struggling with weakening asset quality, there is neither scope for demand or supply of funds to pick up anytime soon. Indeed, banks such as NLB and Abanka Vipa reported sizeable losses in 2011 as a result of higher impairments and provisions. And, as we stressed last quarter, banks' loan books are set to come under increasing pressure over the coming quarters with non-performing loan (NPL) rates set to head higher (see our online service, December 5, 'Banks' Loan Books Under Increasing Pressure'). Slovenia Commercial Banking Report Q2 2012 © Business Monitor International Ltd Page 35 Focus On Ca

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