S&P Global Ratings upgrades Nova Ljubljanska Banka to BBB+

Investing.com -- S&P Global Ratings has raised its long-term issuer credit rating on Slovenia’s largest bank, Nova Ljubljanska Banka (NLB), to ’BBB+’ from ’BBB’ with a stable outlook.

The upgrade, announced Wednesday, reflects NLB’s strong financial performance and solid asset quality despite economic uncertainties in Southeastern Europe (SEE). The ratings agency also upgraded the bank’s resolution counterparty rating to ’A-’ from ’BBB+’ while affirming short-term ratings at ’A-2’.

S&P raised ratings on NLB’s senior unsecured debt to ’BBB+’ from ’BBB’, Tier 2 instruments to ’BB+’ from ’BB’, and additional Tier 1 instrument to ’BB-’ from ’B+’.

The bank has outperformed peers with a ’bbb-’ stand-alone credit profile thanks to its leading deposit franchise in core markets. In the first quarter of 2025, NLB reported a return on average common equity of 15.7%, despite falling net interest margins and increased loan losses.

NLB is committed to its "Strategy 2030," which aims to double its balance sheet and after-tax profits by 2030 through expansion in SEE, business model diversification, and operating model upgrades. The bank plans organic balance sheet growth of 7-10% annually over the next two years, potentially boosted by acquisitions.

The bank’s financial metrics remain strong compared to peers. As of December 2024, NLB reported a 17.3% return on average common equity and a 2.1% non-performing asset ratio, compared to peer group medians of 13.1% and 2.9% respectively.

NLB maintains a strong deposit franchise with the highest market shares in retail (37%) and corporate deposits (23%) in Slovenia as of March 2025. The bank’s regulatory Tier 1 capital ratio stood at 15.9% as of March 2025, with management guidance setting a minimum ratio of 15.0%.

The stable outlook indicates S&P expects NLB to maintain robust financial performance over the next 12-24 months while implementing its business strategy. The bank plans to invest €170-200 million from 2025-2030 to transition toward a "digital-first operating model."

S&P noted that negative rating actions could occur if economic conditions in NLB’s core markets deteriorate significantly or if competition in Slovenia intensifies, pressuring asset quality and profitability.

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