NLB Group Q1 2025 slides: Strong asset growth offset by declining profitability

Introduction & Market Context

Nova Ljubljanska Banka dd Ljubljana (LJSE:NLBR) released its Q1 2025 financial results on May 8, 2025, showcasing continued expansion across Southeastern Europe while facing profitability headwinds. The Slovenian banking group, which operates in six countries, reported significant asset and loan growth but experienced pressure on key profitability metrics.

The bank’s stock closed at €136 on the reporting date, down from €142 following its Q4 2024 earnings announcement, suggesting ongoing investor concerns despite the company’s regional growth story. NLB continues to implement its Strategy 2030, launched in May 2024, which aims to double the group’s balance sheet, revenues, and profit by the end of the decade.

Quarterly Performance Highlights

NLB Group reported total assets of €28.7 billion as of March 31, 2025, representing a 10% increase year-over-year. This growth was primarily driven by a 22% expansion in gross loans to customers, which reached €17.3 billion. Customer deposits also showed healthy growth, increasing by 8% to €22.1 billion.

As shown in the following chart of key financial metrics:

Net operating income grew by 5% year-over-year to €312.2 million. However, the cost-income ratio deteriorated, rising from 41.7% in Q1 2024 to 46.7% in Q1 2025, indicating increasing operational costs. The result after tax showed mixed performance, with a 45% increase quarter-over-quarter to €125.8 million, but a 10% decrease compared to the same period last year.

Detailed Financial Analysis

Profitability metrics revealed some challenges for NLB Group in the first quarter. The net interest margin declined from 3.73% in Q1 2024 to 3.46% in Q1 2025, reflecting pressure on interest-earning assets. The cost of risk stood at 37 basis points, while return on equity (ROE) reached 15.3%, with normalized ROE at 21.4%.

The following chart illustrates these profitability trends:

Despite these challenges, NLB maintains strong capital positions and continues to deliver value to shareholders. The bank successfully issued senior preferred notes totaling €500 million, maturing in January 2029, with a 3.5% annual interest rate, demonstrating continued access to capital markets.

Strategic Initiatives

NLB Group maintains a significant presence across Southeastern Europe, with market-leading positions in several countries. The bank operates seven banking entities across the region, along with five leasing companies and three asset management companies, serving more than 2.9 million active clients through 387 branches.

The following map illustrates NLB’s regional presence and market share:

The group continues to focus on digital transformation, rolling out AI enterprise licenses (Microsoft (NASDAQ:MSFT) Copilot, ChatGPT Enterprise, and Google (NASDAQ:GOOGL) AgentSpace) to 10% of group employees. Additionally, NLB’s newly established NLB Car&Go company completed the acquisition of the online vehicle sales platform doberavto.si to complement its leasing activities.

NLB Group’s strategic focus is summarized in the following overview:

Forward-Looking Statements

NLB Group operates in a region with varying economic growth prospects. While Slovenia, the bank’s home market, shows moderate growth forecasts, other markets in the region are expected to grow more rapidly, potentially offering greater expansion opportunities.

The regional economic outlook is illustrated in the following chart:

The bank’s Strategy 2030, launched in May 2024, aims to double NLB Group’s balance sheet, revenues, and profit by 2030. However, the rising cost-income ratio presents a challenge to these ambitious goals. According to previous guidance, NLB is targeting stable revenues around €1.2 billion in 2025, with a cost-to-income ratio expected to be around 48%, aiming to reduce this ratio below 45% by 2030.

The bank’s sustainability initiatives continue to gain recognition, with Morningstar Sustainalytics awarding NLB both Top Regional and Top Industry (Banks) badges. With an ESG Risk Rating of 10.5, NLB ranks in the top 5th percentile of global banks, underscoring its commitment to sustainable banking practices.

As NLB navigates the complex economic environment of Southeastern Europe, investors will be watching closely to see if the bank can maintain its growth trajectory while addressing the profitability challenges evident in its Q1 2025 results.

Full presentation:

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.