Earnings call transcript: NLB Group Q2 2025 sees 1.21% stock rise

NLB Group’s (NLB) recent earnings call for the second quarter of 2025 revealed strong financial performance, with net income reaching €148 million. The company’s stock saw a 1.21% increase, closing at €165.5, approaching its 52-week high of €168. With a market capitalization of $3.85 billion and a P/E ratio of 5.82, InvestingPro analysis suggests the stock is currently trading below its Fair Value. This positive market reaction reflects investor confidence in the bank’s solid performance and strategic initiatives.

Key Takeaways

• NLB reported a net income of €148 million for Q2 2025.
• The stock price increased by 1.21%, nearing its 52-week high.
• The company declared a dividend of €12.85 per share.
• NLB launched a new mobile app and expanded digital services.
• Asset growth was reported at 7% semiannually.

Company Performance

NLB Group demonstrated strong performance in the second quarter of 2025, with a net income of €148 million. This reflects a solid operational foundation, bolstered by a 7% semiannual asset growth and year-over-year revenue growth of 5.76%. The bank continues to expand its digital footprint, launching a new mobile app and deploying Apple Pay in several regional markets. These efforts align with the company’s focus on innovation and digital transformation. InvestingPro data shows the company maintains a "GOOD" overall financial health score, with particularly strong marks in profitability and price momentum metrics.

Financial Highlights

• Net income: €148 million for Q2 2025
• Asset growth: 7% semiannual
• Dividend: €12.85 per share
• Net operating income: 5% period-on-period growth
• Net interest margin: Above 3%

Market Reaction

Following the earnings announcement, NLB’s stock price increased by 1.21%, closing at €165.5. This movement positions the stock near its 52-week high of €168, indicating positive investor sentiment. InvestingPro reveals two key insights: the stock has shown strong returns over the last three months, and it maintains a significant dividend yield of 7.12%. The strong financial performance and strategic initiatives appear to have bolstered market confidence. Subscribers to InvestingPro can access 10 additional exclusive ProTips and comprehensive valuation metrics for NLB Group.

Outlook & Guidance

NLB Group is targeting low double-digit loan growth and has provided a revenue guidance of €1.3 billion for the next year, with aspirations to reach €2 billion by 2030. The company is also exploring potential inorganic growth opportunities in the region, maintaining a focus on a cost of risk guidance between 30-50 basis points. For detailed analysis of NLB’s growth trajectory and peer comparison, investors can access the comprehensive Pro Research Report available exclusively on InvestingPro, which covers over 1,400 top stocks with actionable intelligence and expert insights.

Executive Commentary

CEO Vlad Brodnjak emphasized the bank’s growth potential, stating, "The best is still to come." CFO Art Paul Krenser highlighted the long-term focus, saying, "We are not managing quarterly results, we are managing the 2030 agenda." These statements underscore NLB’s strategic vision and commitment to sustainable growth.

Risks and Challenges

• Operational expense growth of 8% could pressure profit margins.
• Inflation, although moderating, remains a concern in regional markets.
• The cost-income ratio at 46.7% suggests room for operational efficiency improvements.
• Regulatory changes in Serbia could impact future operations.
• Integration challenges from recent acquisitions, such as Summit Leasing.

Q&A

During the earnings call, analysts inquired about potential defense and infrastructure financing opportunities, as well as the company’s fee income growth strategies. NLB’s management addressed these queries, providing clarity on the bank’s strategic direction and regulatory environment in Serbia.

Full transcript - Nova Ljubljanska Banka dd Ljubljana (NLBR) Q2 2025:

Mina, Conference Operator, Chorus Call: Ladies and gentlemen, thank you for standing by. I am Mina, your Chorus Call operator. Welcome and thank you for joining the NLB Group Conference Call and Live Webcast to present and discuss the NLB Group Second Quarter and First Half twenty twenty five Financial Results. All participants will be in a listen only mode and the conference is being recorded. The presentation will be followed by a question and answer session.

At this time, I would like to turn the conference over to Mr. Vlad Brodnjak, CEO Mr. Art Paul Krenser, CFO Mr. Andreas Burkhardt, CRO. Mr.

Brodnjak, you may now proceed.

Vlad Brodnjak, CEO, NLB Group: Thank you very much, and warm welcome, everyone, to our semiannual webcast performance call. Let me draw your attention to the standard disclaimer and then start talking about what we believe, of course, is a transition to the future. Behind us, we are looking more or less to a very strong robust quarter. What we are specifically happy about is that we are able to show growth, growth of business in all dimensions, be it from private individuals to corporates and geographies. So this is really a very solid output from this perspective.

On the other hand, we have been able through this growth and of course other measures that we took more or less already one years point ago started taking them, stable revenue evolution. They’re in the rate declining environment of 175 bps year on year. Basically, we have been able to keep stable revenues. And that’s, of course, due to M and A activity through the SLS acquisition, Summit Leasing acquisition, but also through predominantly organic growth. And this is really a strong boost for the future.

On the other hand, we kept investing. So there is a bit of a hike in dynamics of investment, and this is really acceleration of digitization and proper awarding of talents group wide. We really want to now accelerate client experience related features that we offer to our clients. We are really happy that we were able to put in production a new mobile app in Slovenia, which was already in the previous version awarded as the best in the country, but now we have we added other features and we further significantly improved client experience. Our hub in Belgrade has really now become a powerful output engine.

So this is really and will be digital now more or less operating with a capacity that is approaching 150 people. And towards mid of next year, we would already be seeing somewhere close to 200 people. And this is one of the stronger ICT hubs actually in the region generally, but this is really going to help us enormously in scaling actually the platformization of the solutions we use. So NOB Pay has been the first such uniform platform and NOB Click, so called mobile app used in Slovenia is going to be rolled out also in Serbia and other countries in subsequent years, really in an accelerated way and pace adding client relevant features and by that really enabling end to end offering and hopefully and for sure improving also client experience. With that, so there’s been significant progress already in digitization.

If we’re looking at, for example, just a couple of data points, 58% overall mobile more or less mobile app penetration in Slovenia, other countries catching up. But on the other hand, we are really also looking at, for example, overdraft self-service that are close to 80% already, credit card self-service limits for credit cards, for example, self-service to the mobile app, well north of 70%. So these are really the first steps into the direction of more than 80% overall digital production with private individuals when it comes to standardized services. That’s a challenging target, but we believe we are well on track to deliver on that. It is really something that we believe is a key driver of success, and that’s something that is going to be really focused focusing our activities moving on.

We are specifically also adding now significant, I would say, attention to engagement processes, through the use of artificial intelligence in all possible corners meaningfully clearly. And by that, of course, adding relevance to what is end to end digital service already. I would specifically highlight successful completion of the integration of both leasing entities in Slovenia. You know that we closed the transaction of acquisition of Summit Leasing on nineeleven last year, and I’m happy that it took us a bit more than nine months only to have full completion of the integration. So on the July 7, the business was operationally merged on the July 4 legally, but on seventh fully operationally.

And by now, no hiccups from this angle. So we are really happy that now this business is really already fully focusing on new production and growth, and the first synergies are kicking in already since as of July 7, we will already see the reductions of planned FTEs. We have been specifically proud collectively as a team that after quite some time, it was actually years measured in years, NLB was really the biggest advocate and promoter of bringing Apple Pay services to the last missing Southern European geographies. We’re talking about markets of North Macedonia, Kosovo and both Boston And Herzegovina. And we were launching this among the first in Boston And Herzegovina actually, but the first and still the only one in North Macedonia and Kosovo.

And this means that NOB is actually bringing modern contemporary services of payments from payments universe to these countries as actually a key promoter of it. And that’s really something that the whole team collectively is enormously proud of. Strategy execution is well on track. We are really now talking about acceleration. So we really now in the narrative used internally in the house using more or less client relevant features to be delivered in agile way quickly.

Slovenia is the first Serbia to follow and other geographies then, of course, immediately after. And by that, really addressing, I would say, value proposition to younger generations and affluent clients as well in a sense that they can really communicate with us 20 fourseven seamlessly. So we are talking about mobile first 20 fourseven and easy but safe services to be offered in a relevant way. So not only reactively when clients need us, but also proactively in a sense that we anticipate when and where at which point of time, at what location and through which channel we would actually be offering the service. What is the next milestone we are hoping for in the not too distant future is actually reaching the A grading in terms of the rating.

That’s something that would be another really not only emotionally, but also from business perspective, extremely important milestone. So we’re just one notch south of with the recent upgrade from Sandoz and Pus, and Moody’s is also on that level. So we are really looking forward to the upcoming quarters and I would say, year and a half or two where, of course, I can’t anticipate that, but we would hope that there would be further recognition for such a milestone and would enormously impact, of course, the reputation of the business. We continue with our clear commitment to achieving EHA targets. I know this is these days not necessarily so popular topic, but NOB is not shying away from it.

We believe in, you know, midterm and long term sustainability targets of the planet, but above all our regions. So, you know, poor quality of area in the region is still poor quality of area in our region, and this is affecting quality of life for our people. So, of course, we will still keep addressing it and addressing it very intensively. And the same is true for other aspects of equal opportunities and principles of what the S and G pillar actually stand for. We have paid out the first half of the dividend foreseen for this year.

So combined, this is EUR 12.85 per share, which is also at today’s prices still a highly attractive dividend yield. And in this respect, we are, of course, creating value for shareholders. But looking back also to the share performance, it’s been very solid throughout the last period. We’ve been growing asset base. So if you look at the banks around, our growth is significant.

It is, of course, partly due to the M and A activity and acquisition of leasing. But on the other hand, also organically, this is very strong output. We’re talking about 7% semiannual growth of assets of asset base, which is very, very solid. And if you, of course, look into combined, it is more than 20%. Deposits have been following.

We have not yet even started properly or intensively attracting them, but somehow there is a shift towards side deposits, which is, I’d say, a specific phenomenon, but not that specific necessarily in European terms. And on the other hand, this is, of course, the biggest treasure that our bank has been operating with, access to household accounts, access to corporate accounts and the side dimension of it is just of enormous value. Net operating income showed solid growth. So this is a 5% growth, more or less, in this period and 6% year on year, which is very, very solid. And I believe this is a good evidence that this growth is actually yielding the results also in terms of the revenue output.

And once we see the rate environment hitting more or less the lending level, so it’s now 200 basis points. Have we seen it already? Or is it 175? Let’s see. But further incremental effect should not be that detrimental.

Once we see the floor, more or less, we would, of course, at the same time, start really then, of course, benefiting from the growth as well. We are focusing on containing costs. So we don’t see this as a challenge. We see this actually as conscious investment into talents and really accelerated digitization. So we are more focusing on overall efficiency of the business and focusing more on costincome ratio than absolute cost level And 46.7% compared to, of course, peers is not standing out negatively.

So this is something that we are really focusing on. We rather see it actually as a very solid performance still. Result of the tax in terms of quarter, robust. There are, of course, some one off effects coming from the cost of risk, which was not only benign, which actually positively contributed to the results in the first half of the year. The health of portfolios is still very, very high, very, very strong.

In this respect, of course, households are standing out still. There are some pockets, but overall from portfolio level, this is a very, very healthy portfolio. We’ve seen some hiccups in especially automotive sector. So suppliers to predominantly German automotive businesses have experienced trouble, and we’ve been dealing with this consciously. That’s why we have not yet moved the needle when it comes to the overall yearly guidance.

I’ll talk about this later on. But of course, the first half result is in this respect extremely robust. Net interest margin has naturally been decreasing clearly due to the rate reductions, but overall, we keep the pace, keep the level that we believe is very strong from long term perspective. We were talking about keeping the levels above 3%. We are still solidly above 3%.

And, you know, we are very close to the lending rate. So this is something that we believe is here to stay in a sense of keeping the very, very solid levels of margins. And returns clearly impaired a bit given the rate reductions, but we will keep investing and will, of course, I believe now see more stable evolution of revenue, actually further growth of revenue and by that address profitability overall solidly. By that, I would pass the word to Archibald to guide you through some details.

Art Paul Krenser, CFO, NLB Group: All right. Let me try to get the slides first in all. So as usual, I started with a macro update. There is not too much to comment other what everyone follows in media. I think broadly speaking, the region is fine and developments are still on average visibly above what you see in Eurozone.

So this is a growth area. It’s a growth territory, both Slovenia and even more so our subsidiary markets. So and you’ll see in the asset growth numbers that this delivers very, very solid asset growth potential and inflation also a little bit elevated coming down in all markets. So in that sense, yes, still, of course, lots of news flow from global contexts to some extent or the local developments. But broadly speaking, very solid environment and full of growth opportunities as we see it.

I’m struggling a bit with In terms of banking markets as such, you see that, first of all, loan penetration still offer plenty of growth to the upside. If you compare to Eurozone averages, you see that here and there we had already catch up. So if you look at Kosovo, it’s already fairly close. Other markets still have lots of room to grow. Also, LTDs have gone up slightly, but still are in healthy territory.

That’s for sure. Plasz mentioned it some a space that we start watching a bit more closely. And overall, you see that loan growth is phenomenal, and that’s really a feature of this region that to some extent surprised us a little bit, given all the headwinds that we face. But broadly speaking, solid environment, very bankable, very robust performance. We’ll talk about asset quality and still plenty of room to grow going forward.

We talked about already last time the economic footprint of our geographies and the message is unchanged. This is a very diversified region in terms of production and segments of production. And you’ll see in the asset quality that so far, with a few exceptions, we are doing very well and diversification remains a key strength of our portfolio. In terms of the business performance as such, the headlines you heard, we are approaching €30,000,000,000 balance sheet. So on our journey to 50,000,000,000, billion is almost in reach.

And when we published this strategy, we were closer to 25. So that’s already a first good milestone. You see phenomenal loan growth dynamics year to date, 7%. That’s really very substantial. And that is, of course, already baking in the leasing acquisition.

So that’s really organic growth. You see year on year 20%. That is obviously including the boost from leasing. But overall, very, very strong loan growth, something that we were even a bit surprised with. Deposits are following and not as strong as loans.

Clearly, we’ve seen some of LTDs going up in subsidiary markets, But that’s a sweet spot to operate in. It clearly helps profitability. And you see that you’ve seen before already normalized ROE substantially above 20%. So very solid performance. We are operating at sweet spot of balance sheet dynamics.

Balance sheet itself, as we call it rock solid, LTDs, as I said, coming a bit closer to sweet spot operating points, so not too low, not too high. And we’ll try to keep it around this territory going forward. We also said that we are predominantly retail funded. You see deposits from individuals being 70%. I’m trying to go forward.

Thank you. Loan dynamics, I mentioned it’s really strong growth across the board. So not much else to say. It’s both retail, it’s both corporates. It’s particularly strong in our subsidiary banks.

You see SCE banks year to date 10%. That’s really phenomenal. And of course, helpful to keep revenue dynamics, which we’ll talk about in a minute. The rate environment, of course, rates have come down. ECB basically year on year, we heard one hundred and seventy five two hundred, depending on what you look.

And look at the margins and the rates coming down only basically something like 50 bps. So that’s a fairly solid performance, of course, helped by the fact that we are predominantly fixed rate oriented these days. And that, of course, helps maintain interest income. Next slide, please. On the deposits, not much else to add.

We are growing. That’s important. There is a shift here and there from sites to terms to basically fund some of this phenomenal growth. And obviously that comes at slightly higher costs. In Slovenia, actually, it’s the other way around.

With 35% market share and deposit taking, we are clearly dialing down a bit on term deposits simply because rates coming down. People are happy to invest more in higher yielding products such as, for example, our mutual fund universe. Next slide, please. So the funding costs in that sense are staying quite stable on the deposit side. And that is, of course, a bit of an offset of our very strong position in Slovenia with some of the dynamics I mentioned earlier on our subsidiary banks.

Next one, please. On the P and L, we are happy to report that income year on year is rising, revenues are rising 5%. And that is a combination of, of course, all the things I mentioned earlier, very strong loan growth, very disciplined balance sheet management, NII flat year on year, 1% up and very good developments on fee and commission income. Of course, that’s a highly competitive market. So but this year, we have been able to show fee and commission income growth across the board.

If you look closer, you’d see that a lot of it comes, of course, from increasingly value added services in asset and wealth management. Cost is a bit of a standout at the moment, but there were quite some one offs and nonrecurring elements in this dynamic. The like for like cost dynamic is something in the ballpark of 8%. So something we feel comfortable with as we invest very deliberately in talent and technology. But of course, at some point, and that’s a discussion for sure next year, we will, of course, take out capacity where we can shift production to digital channels.

And that’s, of course, in markets like Slovenia already quite visible in other markets to follow. Overall, very strong quarter with results after tax EUR 148,000,000. So of course, helped by cost of risk releases that we will hear of later. But also please stay on slide before. Pre provision income pre provision income, please the previous slide and one more.

Thank you. Pre provision income, very solid as 2% year on year and 3% quarter on quarter. So we feel very comfortable with where we are. We know there is work to be done, but that’s a very robust platform for also net income growth going forward because cost is, of course, a game of investing and containment. And we specifically the CTO onboarding Reinhardt is now taking a lot of attention also on process and efficiencies.

So that’s a theme for the upcoming quarters. Next slide, please. On net interest income, basically the main things I’ve mentioned, we see a margin that is on the net interest margin side, of course, following a bit dynamics on the short end. Let’s not forget on the long end, there is quite some upside that we have taken advantage of with deliberate investment in duration, stabilizing net interest margin, I think quite nicely. And if you look at the business margin overall, it’s even more stable because of the positive developments on the fee side I mentioned earlier.

Next. Next, please. Next, please. NII sensitivity is something we kept managing very deliberate throughout last year and continuing into this year. Not much to say then it’s basically half the value it was a year ago.

And of course, that helps a lot in not just maintaining NII income, but also being a platform for NII growth going forward. Next, please. On the non interest income side, I said we are very comfortable with our developments, especially around investment universe. So you see here very strong developments and increasingly also with help of innovations we put in place. Blasch mentioned deployment of Apple Pay across the region.

We think we will be able to maintain and increase customer loyalty. And that will translate not just into fee income, but ultimately also into keeping our funding base stable and at relatively low cost. Next, please. On the cost side, I think the headline number is showing quite some cost dynamic. But if you normalize for all the integration dynamics and some nonrecurring items, 8% is something we acknowledge is on the higher end.

So we would not like this cost growth going forward necessarily. So there’ll be some cost mitigant measures taking place. And of course, we said at some point, headcounts will come down on a global scale. You see that trend is, of course, playing out even this year. And let’s not forget, we have integrated, of course, the new operation in leasing.

We haven’t done yet all the headcount reductions or they are not yet shown in terms of the leasing integration as such. But broadly speaking, we, of course, increasingly, as we get more digital, we’ll also reduce employee numbers, mostly on a natural attrition basis. And besides, Blasch said, investing in technology is key to winning in that. We will not go bananas in terms of spend on IT, but certainly we’ll be willing to spend at benchmark levels of between 1012% of revenues. Next slide, please.

On capital, actually not much to say other than, of course, we see a bit of reduction in the capital ratio, especially a function of the growth, the phenomenal growth. And in that sense, of course, we make sure that with appropriate measures in capital management, we still are able to fund future growth. So we will maintain payout ratios for the time being at around 50. We have indicated landing zone between fifty and sixty or so going forward. That should provide sufficient capital generation for strong organic growth.

And of course, if and when M and A comes to play, have opportunities in AT1 that at the moment we are not using yet to potential. Next, please. With that, I hand over to Andreas to study with technology. Thank you very much.

Andreas Burkhardt, CRO, NLB Group: And next slide, please. Yes, so on asset quality, I mean on this slide you don’t see too many news anymore given what the colleagues already said. So in all areas, we see relatively strong loan growth. And of course, what you can see, and that was also mentioned before already, is that in the region outside Slovenia, we are growing even stronger than in Slovenia itself. That’s why slowly after this increase also through leasing we are now coming slowly again a little bit back in the percentage.

Next slide. Asset quality, I mean Blasch mentioned it. Quality is still very, very good. What you saw actually last year is a little bit of a jump in stage two on the corporate side. We were discussing that, so here primarily we are talking steel and automotive.

This has now for the time being largely stabilized. On the other side you see now recently a little bit of a jump in retail. There is some inflow in stage two but the much bigger effect here is actually that the statistical models in our subsidiary banks became much sharper and much more detailed. So you see movements much more granular and this is of course also triggering more of stage two, so that’s actually more precisely looking on items. But this is now a stable state from that perspective.

So from methodological changes you shouldn’t see additional jumps here. Next slide. Yes, here of course no big news on the distribution. We are very well distributed between the industries and that has of course since last quarter not changed much. Next slide please.

Art Paul Krenser, CFO, NLB Group: On

Andreas Burkhardt, CRO, NLB Group: NPLs, see still, I have to say, absolute volumes being very stable. So in the last half of a year, actually EUR 3,000,000 plus. Of course, this translates still in percentage, in slightly decreasing percentage because overall we are growing. Also, we still see a third of this NPL volume with no delays, so cases which mostly are on the way up rather than on the way down. And you still see a very strong collateralization.

What has in the meanwhile fully normalized is the distribution between the countries on the NPLs. So originally, if you go years back, you might still remember a stronger participation here of Slovenia due to historic reasons and this is now much normalized. Next slide, please. I guess that’s from the risk side, the interesting slide for today. So you saw actually a very, very good second quarter and this has turned for the time being the provisioning into a slight release with the first half of a year.

The biggest contribution here actually is the IFRS nine review. This is happening every year in June and we saw here mostly positive effects. Actually, we had a slight charge in Slovenia, a little bit more than 2,000,000. And on the other in the other countries releases, actually very much also in line with our expectation. Honestly speaking, I was rather here expecting a net of 10 to 12, so at the end it ended up a little bit better.

Then very, very moderate charges on cost of risk and again from written off receivables, quite a nice contribution in a positive sense, so repayments here. And this ends up with, yes, well, actually a release of €20,000,000 in the second quarter, which makes our cost of risk, of course, at the moment looking very, very well. What I have to say is that we are living in a very vivid environment. As Sona already won case in this quarter, which is coming in from the not so small cases. If you ask me, I’m very confident that we will stay of course within the guidance of 30 to 50 bps cost of risk, but it would be from my perspective in this environment for sure premature now to give you a better indication than that.

So if you ask me, we will come to that range but probably, most probably actually from my point of view, stay at the lower end of that. That’s from my side for now. And with this, I’m handing back over to Blasch. Thank Let’s

Vlad Brodnjak, CEO, NLB Group: move to the outlook slide, please. And by that, talk about what we expect towards the end of the year. Andreas was pretty clear when it comes to cost of risk. There is no change in guidance here. What is obvious is that with 7% semiannual growth, talking about high single digit annual growth is a bit conservative, right?

So in this respect, we have improved the guidance here to low double digit levels. We would see potentially in Q3, Q4 still some hiccups, predominantly from automotive and metal industry, but some restructuring cases have been well on track and it has been wherever, of course, applicable playing a very responsible role. And we believe that we will not see major fallouts. But of course, rather talking about 30 basis points from today’s perspective is to be on the prudent side and not necessarily not, of course, ridiculous. We are keeping the efficiencies at the levels that we guided for, so 48%, depending now still a bit on our rate environment and further growth and ability as something to be achieved.

We are currently at 46.3%. So we are still very well within. And other targets, we don’t change as of now. Revenue dynamics is pretty solid. So of course, we don’t expect it to be below EUR 1,200,000,000.0.

And where it ends, we’ll see. We are keeping clearly the potential for the inorganic growth. We’ve been looking around continuously. We’ve said that always. And currently, there’s nothing that we have been engaged in.

There doesn’t there don’t seem to be many actionable assets. But here and there, there are some tactical eventual opportunities in other areas such as fleet management, such as some portals and so on. But as said, we have been analyzing potential opportunities from various industries, so be it insurance, be it classical banking, be it leasing, being other stuff. And we will, of course, communicate immediately when anything of that became relevant to be communicated. Currently, we have not been in, to the material extent, engaged in something like this.

So we believe this is a very solid value proposition also for the upcoming year. As said, once we see the rates stabilizing, we with this growth and focus on efficiency of our investments and talent deployment, we believe we will be again growing the revenue base and by that keep also, of course, the profitability levels, keeping the dividend payout ratios and in absolute terms, pretty attractive dividends. What is, of course, at the end, worthwhile mentioning, at least, and Archibald mentioned that the arrival of Reinhart is, of course, significantly adding to the capacity of the Managing Board to deliver the transition and execute the strategy. So we are very happy that he’s with us now for 2.5 already. On the other hand, today’s decision of the Supervisory Board to grant further trust into the three of us is also pretty meaningful because this brings certain midterm visibility and predictability when it comes to the core of the management board.

I mean this is something that we believe is very important since you’re looking in our eyes, and you’re by that simply counting on us to be focusing for the upcoming strategic period until the 2030, full force and fully motivated on delivery. And by that, we officially, of course, thank the Supervisory Board for the trust. On the other hand, also to all of our clients and colleagues in the bank and the banking group staying with us on this exciting journey that we believe is yet to begin properly. So the best is still to come. By that, I would wrap it up and open floors for questions.

Thank you very much.

Mina, Conference Operator, Chorus Call: The first question is from the line of Sikhimich Jovan with ODDO. Please go ahead.

Sikhimich Jovan, Analyst, ODDO: Yes. Good afternoon, guys. Thanks a lot for presentation. I would have several questions. I mean, I think, Blaise, you mentioned it several times about NII picking up.

But can we be a bit more precise here? I mean, the growth has been really excellent with what 13%, 14% year over year. There is no apparently, there is no space to cut deposit costs into the rate drop apparently because you were previously quite at a low level, right? So you are exposed to on the loan side to downward repricing on Euribor, right? But which portion of loans still needs to be repriced down?

And when would you really expect the NII pace to kind of pick up at least a bit given this kind of great loan growth? Well, it would

Vlad Brodnjak, CEO, NLB Group: be very difficult to talk about picking it up. We are keeping it stable. We always said that we would believe that it would remain well above 3%, and this is what we are looking at. So I would not yet hope for a quick pickup in the rates in the margin. But keeping it stable is, to me, already a solid achievement.

And it’s a combination, obviously, of various measures. It’s not only loan activity. Hratchi, you might add something here.

Art Paul Krenser, CFO, NLB Group: I mean, the revenue side, I understood you look for revenue growth. And yes, I think with the loan growth remaining strong and we see it strong and you’re right, the tensions are here and there in some pockets, the funding aspect of it, because we maintain our principle of all entities or subsidiaries remaining self funded. But at margin of 3.5% and growth rates in the also next year, probably high single digits, at least, I think there is a potential for a solid single digit revenue growth. And you know what number it’s going to be. There are so many elements going into that equation.

But I think that is that’s a good as a guidance I can give you for now. And that’s what you see also in our outlook for ’26 indicated, right?

Vlad Brodnjak, CEO, NLB Group: You guide for €1,300,000,000 exactly.

Sikhimich Jovan, Analyst, ODDO: Because I mean if you make a run rate, what was the base of revenues in the first half was where?

Art Paul Krenser, CFO, NLB Group: Let So I mean, me year take something a little bit in excess of 1,200, right, what we guide for?

Sikhimich Jovan, Analyst, ODDO: Yes, exactly. And

Art Paul Krenser, CFO, NLB Group: again, fee fee income growth year to date, something like mid single digits. I see NII in an equal ballpark. It can be better with better circumstances here and there. But let’s say as a baseline, we talk mid single digits in revenue growth and that should deliver the outlook as you have it in front of you. So, I mean, it’s always combined equation, NII, non NII, and there’s always a bit of movement and shift.

But I think it shows that there is revenue growth potential. Ideally, we exceed that. And I mean, ambition, to remind you, is 2,000,000,000 by 02/1930. Right? So that’s chest in itself, CAGRs of revenue growth that are in the mid single digits, So

Sikhimich Jovan, Analyst, ODDO: mid single digit, just to understand it, be for this year as well, right?

Vlad Brodnjak, CEO, NLB Group: Well, it is at this level as of now, right? But we don’t know yet what’s going to be finally terminally happening with the rates. So we are offsetting this with growth, with some solid positioning of liquidity reserves on the longer end, where we see some promising yields and so on. It’s a combination of measures. We can’t be preciser than that.

Very likely, we would show you more than EUR 1,200,000,000.0 this year. What exactly? Let’s see. And we are as precise as we can be for the next year, are talking about EUR 1,300,000,000.0, which is a solid growth of revenues, right? While we will, of course, focus still on accelerated investments, so EUR 26,000,000,000 is still on the investment side.

That’s why you see costincome ratio still at these levels. Towards EUR 2,030, we would hope for being able to reduce this to down to EUR 45,000,000,000 as a ratio.

Sikhimich Jovan, Analyst, ODDO: Okay. And you provided, I think, like for like OpEx growth, cost growth, 8% or 7% to 8%. What is the correspondent revenue growth excluding leasing?

Art Paul Krenser, CFO, NLB Group: Well, leasing is not yet very visible. We talk EUR 20,000,000 or so on the half year mark. So it’s not yet very visible.

Sikhimich Jovan, Analyst, ODDO: Thanks. And I have a last one on capital. I think last time you mentioned this Basel IV impact of around EUR 1,000,000,000, if I’m not mistaken, on risk weighted assets. So it’s still not in the numbers, right?

Art Paul Krenser, CFO, NLB Group: No. Obviously not. So the trading book is still something that, as you know very well, is being debated at European level. When it eventually really comes or kicks in, keep shifting the target and we happily follow not booking it. So it helps.

Sikhimich Jovan, Analyst, ODDO: But you don’t have any kind of horizon when it may happen?

Art Paul Krenser, CFO, NLB Group: Well, I mean, the talk is 27% now, right? So but let’s see. And yes, it’s indeed, it’s still the same €1,000,000,000 And just to remind everybody, we don’t really have a trading book. But for us, what matters is our equity participations in non euro currencies, and they basically then amount to what the regulator considers a trading position. That is actually the trigger for this EUR 1,000,000,000 roughly.

Andreas Burkhardt, CRO, NLB Group: Superteel. Thank you. Thank you very much. Thank you.

Mina, Conference Operator, Chorus Call: Ladies and gentlemen, at this time, we will go on with questions submitted from our webcast participants. The first webcast question question is from Ada Grimstev with Erste Asset Management. And I quote, In terms of takeover targets, which regions would make the most strategic sense, potential size of acquisition? Thank you.

Vlad Brodnjak, CEO, NLB Group: I’m sorry, could you repeat? I didn’t fully understand the question. Which regions? Which regions? Yes.

Mina, Conference Operator, Chorus Call: Which regions?

Vlad Brodnjak, CEO, NLB Group: Okay. I mean, this will be, of course, our markets. This is what we’ve been telling throughout last also through the presentation of the strategy for the upcoming period. It would be, of course, our home region, which is predominantly, of course, former Yugoslav territory. And we, under our region, also see Albania because this is one of the Western Balkans countries on the accession.

It seems potentially accelerated accession. We see Prime Minister Mr. Rama really acting very decisively in this direction. So Albania would be, of course, one of our desired market entries. We haven’t found any reasonable opportunities by now, and we will simply keep analyzing eventual opportunities.

So as I mentioned before, we have not been engaged in anything, but the region of interest is Former Yugoslavia plus Albania.

Mina, Conference Operator, Chorus Call: Thank you. The next webcast question is from Miguel Diaz with Wood and Co. And I Code. Hi guys. Congrats on the strong results.

Just some questions from my side, please. NFC, since like me and conscious, we’re expecting a better performance here. How do you see development moving forward? Is this year development likely to be mid single digit or high single digit is still within reach?

Vlad Brodnjak, CEO, NLB Group: You’re talking about net fee and commission income, I NFC, mean, it’s between mid single to high single digit. It really depends on also seasonality a bit. So I will be very confidently saying mid single digit, but there is some hope it might be better. There is strong pressure, obviously, from regulatory and especially when it comes to payments, right? There is it seems a very strong focus of regulators, even not only politicians, but also regulators on limiting certain fees.

And let’s see how this plays out. We’ve seen this in various geographies lately as a quite common phenomenon from, let’s say, some things being enacted in Croatia, where we don’t yet have a sizable banking operation. We’ve seen some stuff in Montenegro. We’ve seen some announcements and halfway threats in some other markets. So depending on where this ends, more or less it would more or less determine.

I would not see it below, let’s say, mid single digits, but can you do more? It’s also a bit of a function of to what extent the environment will be susceptible for it.

Art Paul Krenser, CFO, NLB Group: And I would just add that particularly strong and we are very happy our developments in asset management. So part of the answer is simply also finding new services as we did in Slovenia with Wealth and Asset Management because providing value added services is the best protection from competition. And here we found something that, as you know, we are deploying now in other markets. So there is room to grow. It’s on us to find these niches and pockets.

That’s for sure one of them. And we have 1,000,000 customers in Serbia not serviced with this product that we sell very successfully in Slovenia. So part of the answer is external pressure and part of the answer is our ability to continue to add to the service spectrum, which we are, of course, very actively working on.

Mina, Conference Operator, Chorus Call: Thank you. We have an audio question from the line of Dodik Bladen with Erste Bank. Please go ahead, Mr. Bladen.

Dodik Bladen, Analyst, Erste Bank: Yes. Good afternoon, gentlemen. Thanks for the call and congratulations on the results. Well, I have this long shot question. You Mr.

Brodin mentioned this halfway threats already. So do you have any or of course, if you can comment expectations on what might Serbia and Central Bank require from the banking sector regarding the interest rates? And I mean, it’s arguable whether it’s justified or not, the margins and interest rates or anything, but if you can give us any kind of insight?

Vlad Brodnjak, CEO, NLB Group: I would really not want to speculate in this respect and comment regulatory measures that are not yet clearly profiled. So don’t know, Archie, we do have a bit more concrete view on it. But currently, we are still living under the assumption that it would be at least halfway reasonable, right? Because otherwise, of course, it might raise some eyebrows from international society as well. So in this respect, I can’t really in detail comment what is to expect.

In aggregate terms, on the banking group level, it should not be detrimental and should not still be catering for when it comes to the rates and margins and total revenue, the levels that we simply presented.

Art Paul Krenser, CFO, NLB Group: And just to add, Serbia is for sure a big opportunity for us maintains and remains to be a big opportunity for us in terms of growth. There is so much that we can still do from a very solid foundation on all dimensions, actually in all levers of our operating model from revenue, new customer acquisition. We are kind of halfway done with transforming the bank that we bought. And so there is still plenty of room to grow also in Serbia. But of course, regulation will always be there, not just Serbia, but in many other markets and all other markets.

And it’s always a tension between trying to make everybody still happy with banking as a service. I think banks are fundamentally important to all these economies. So whatever politics or regulators have in mind, I think the role of the bank as a key financing source in these markets is not to be underestimated or forgotten. So especially when times get tougher.

Vlad Brodnjak, CEO, NLB Group: Yes, it should actually improve your ability to lend to people because, you know, lower rates at the end of the day mean higher creditworthiness in terms of what annuity can someone afford on one side. On the other side, it’s, of course, also very relevant for us to understand that we have, in the meantime, become number three lender in Serbia. So Archibald was mentioning our progress in Serbia. And you also made personally this analysis that I’ve seen on LinkedIn published as well, Bladezzo. So thank

In the meantime, we are a podium player in lending activities in Serbia, and we continue we plan to continue this way.

Dodik Bladen, Analyst, Erste Bank: I got it. I also was thinking about the reaction from the international institutions regarding this but okay, let’s see what happens. And then second long shot, I mean, considering the surprise on the movements on the risk cost side, can you give us maybe some of insight to how many of these repayments of written off receivables you still have in your sleeves by the end of this year?

Vlad Brodnjak, CEO, NLB Group: At the end of the day, it’s EUR 8,000,000, right? It’s from EUR 29,500,000,000.0 balance sheet. So yes, it’s yes, it might appear as high, but EUR 8,000,000 is not really material amount for this banking group, right? So and you can hardly plan for that. So it’s we are positively surprised as well that we are still collecting from something that we believe is uncollectible.

So it is really hard to say, is it much more to come or not much more to come? We don’t operate with this assumption. The rest is coming simply from model calculations and based on IFRS nine and other simply requirements and prescribed developments. In this respect, our quality of portfolios is simply very high. There are only a couple of pockets where we see these hiccups, and we are actively dealing with them.

And that’s why we are sticking still to this, let’s say, around 30 basis points guidance. But otherwise, we simply are sitting on a very healthy book.

Andreas Burkhardt, CRO, NLB Group: I mean, generally speaking, the written off portfolio is aging. So it’s also in being written off aging, and it’s shrinking. So honestly speaking, 8,000,000 is already some positive surprise in that sense. We are definitely expecting that this will get less and less, and it’s natural to get less and less. The last time when we had really a substantial add on here was when we were buying Commerzana Bunker in Serbia, and that actually was the only thing we underestimated a little bit in the due diligence process.

So from that we saw still quite some backflows, more than expected. But of course also this is now slowly dying out simply because we are working already long enough on it. I would say the workout team not only here in the bank but in the group the workout teams are excellent and that again again gives us a little bit of positive surprises. But I have to warn that the surprises from the tenancy, of course, will become smaller.

Dodik Bladen, Analyst, Erste Bank: Okay, thank much. You

Vlad Brodnjak, CEO, NLB Group: We’ve kept saying this for ten years, unfortunately.

Dodik Bladen, Analyst, Erste Bank: I understand, yes. Okay. Thank you very much once again.

Vlad Brodnjak, CEO, NLB Group: Thank you, Malte. Thank you.

Mina, Conference Operator, Chorus Call: The next question is a webcast from our we have question from Ian Slana from European Investment Bank. And I quote, congratulations on solid loan growth across your markets in the first half twenty twenty five in light to sustain this and given the rising sovereign’s defense budget and related infrastructure investments across EU, do you see increased defense or dual use public spending as a potential medium term opportunity for loan growth, either directly or through supply chain financing? And are there any regulatory, reputational or capital allocation constraints that would limit your ability to finance projects tied to the sector? Thank you.

Vlad Brodnjak, CEO, NLB Group: Of course, we have committed to certain eligibility and non eligibility of industries. And in this respect, within our ESG agenda, we could hardly see us directly financing weapons or ammo or something like this. Whatever is a dual use infrastructure, sovereign sponsored, of course, you could see us being playing at, which means railway construction, road construction, whatever other basic infrastructure, hospitals, energy production, if it’s renewable, energy efficiency improvements. So of course, whatever is labeled dual use and has a civil, of course, purpose, you would see us very, very interested in supporting direct civil life protection equipment, maybe, but life taking away equipment, necessarily. So this would require also a bit different views from European Commission and European Central Bank approach towards the industry as a whole.

So on one side, yes, the sentiment within the ESG movement has been changing, but the regulatory has not yet been followed. If you look at, for example, some horizontal audits or whatever, you get questions that clearly are signaling that nothing has changed from the regulator’s point of view. So this would require really fundamental shift in how mentally European Commission and regulators and supervisors are looking at this. You know, systemically important commercial banks directly financing defense. This requires, I would say, strategic discussion.

Some are on tables around that, that would have to give also some confidence and comfort to the boards of banks, you know, that they might not be penalized because of that at a certain point of time. NLB’s posture has continuously been a pacifistic posture. We believe in peace and, you know, and life as a sacred thing. We don’t believe that life can be taken away by anyone. So we don’t want to support something that can take life away.

On the other hand, of course, if something is protecting life and above all, if it is actually a dual use infrastructure, basic infrastructure, which is still significantly lacking, especially in some other countries in the region, also in Slovenia still. If you’re talking about speed railway tracks from Port Of Copart to Hungarian and Austrian border, if this is a dual use label project, of course, we’re interested, right? And the same is true for some other, of course, countries as well in the region. There is still basic infrastructure buildup that needs to happen simply for normal prosperity of this, not only within the defense context.

Mina, Conference Operator, Chorus Call: Thank you. We have a follow-up question from the line of Sikhime Chiovan with ODDO. Please go ahead, sir.

Sikhimich Jovan, Analyst, ODDO: Yes. Thank you. I just have a question for Andreas, also a follow-up on cost of risk. I mean, if you stick to lower end of 30 to 50 basis point guidance, it would imply, I think, more than €30,000,000 with this kind of underlying strong loan growth for the remaining two quarters of the year. So it would be, I think, would be the sharpest provisioning ever.

So what should happen from this perspective that you book more than EUR 30,000,000 provisioning for the next two quarters?

Andreas Burkhardt, CRO, NLB Group: Look, I mean, the environment is really very vivid. We see certain industries here in Slovenia freezing less easy than in previous years. And I mentioned already here we are talking, for example, steel, we are talking automotive. It’s pretty specific, I have to say. So it’s developed, prepared companies are still doing fine, but we see here much more smoke than in the past.

We slowly see a little bit, surprisingly less for the time being still, outside Slovenia. But honestly speaking, if you see one to mid sized or bigger cases really coming into discussion, that’s easily possible. So that’s also not I mean, look on our size of portfolio, 30,000,000 is not a very big figure. We were now, of course, used to that for years. Honestly speaking, we had a brilliant cost of risk.

The only time when we had a little bit of an outshoot was in 2020. So the first years of COVID, first year of COVID, we had something like 70 bps. But otherwise always very close to zero. You saw a little bit of an uptick, by the way, in the last quarter last year already, which I also said that that would be easily possible. I’m relatively convinced that the second half of the year will not be such an easy walk.

I’m convinced that we have a very good portfolio quality overall, and that will also not change. So I’m not expecting any explosions, but I’m expecting that we will see a little bit more cost of risk in the second half of the year. So anything better than that might happen. But honestly speaking, at that point of time would not be fair to guide to.

Sikhimich Jovan, Analyst, ODDO: Okay. Thanks. And this I hope you also allocated some kind of some portion of provisioning to the Stage two loans where kind of automotive and steel companies are now kind of booked, right?

Andreas Burkhardt, CRO, NLB Group: Of course. I mean, be very fair, when we talk about cost of risk this year, this is to the bigger extent that happened already last year. Saw in the last quarter of last year a relatively sharp increase of Stage two in Corporate. And that, of course, was also triggering this provisioning charge, what you saw towards the end of last year.

Sikhimich Jovan, Analyst, ODDO: Okay. And you don’t share how big those exposures are?

Andreas Burkhardt, CRO, NLB Group: Well, look, I mean, what I cannot talk is about single tickets. So that’s why I cannot

Sikhimich Jovan, Analyst, ODDO: Single tickets, not I

Art Paul Krenser, CFO, NLB Group: mean, you see the sector breakdowns. And I mean, take your views. You see a fairly granular split on staging. So I encourage you to take closer looks at the Pillar three disclosure.

Sikhimich Jovan, Analyst, ODDO: Yes, we’ll do.

Art Paul Krenser, CFO, NLB Group: So it’s fairly granular data. And of course, whatever is staged is provided for with fairly visible levels. Mean, they were on display a couple of minutes ago. So in other words, as Andreas said, it’s always true and fair view. But of course, we keep learning as we go along and it’s still a crystal ball to some extent.

Vlad Brodnjak, CEO, NLB Group: It’s basically a couple of cases you can count on the fingers of one hand that can now flip this or other way. And this is plus minus €10,000,000 easily, which is today simply too early to tell. And €30,000,000 absolute amount from these billions of loans is really immaterial realistically. And a single case can flip to be a good case. And then, of course, you can’t even be releasing something or flips to restructuring and unlikely to pay.

And then you need fundamental MRA signing and some other stuff, right, which provisions which is immediately driving 30% provision or something and derating and so on. It is really very, very on the edge situation in some of the cases, but these are really single cases. And that’s why we are when we are saying around 30 basis points, this is something we can really firmly stand behind. With a bit of luck, it can be less. We would not expect much more.

Sikhimich Jovan, Analyst, ODDO: Great. Thank you. Pretty clear. Thank you. Thanks.

Mina, Conference Operator, Chorus Call: Next question is a webcast question from Ryan Floyd with Berger Capital. And I quote, I can understand that net interest income hasn’t grown because of declining interest rates. However, I would have thought that non one off fee and commission income would have grown more year on year when inflation is around 2% in Slovenia. Help us to understand how you can grow commission income mid to high single digits above inflation in the future.

Vlad Brodnjak, CEO, NLB Group: Well, by focusing simply on incremental production of especially asset management service, which Arthur was mentioned on a couple of occasions during the presentation, which is, of course, first not eating into capital base and is not consuming capital because it’s not building a risk weighted asset base and so on. There has been a stretch in payments and cards universe. Of course, here, competition has been high and regulatory pressure has been kicking in. So it is really by simply focusing on comprehensive offering of financial financial services. And by this actually, growing the assets under management and offering growing also insurance sales of the banking group and so on.

If you look at the production of bank assurance products and asset management products, this is a very solid new opportunity going forward because we have barely started doing this in Serbia. We have bought an asset management company in Macedonia, North Macedonia, right? And now we are giving focus to it, setting KPIs, cross selling or discussions between the entities. So the bank, this is the distribution channel and, of course, the asset management company on the other side, which is product factory. So together with NLB funds, which is proprietarily held, 100% owned business in Slovenia and has looked through supervisory and product origination mandate.

In this context, we are also seeking for finding ways on how to actually significantly leverage growth or fee income through this product portfolio predominantly. And then at the same time, you see the bank assurance. Look, in Slovenia, the average premium per capita annually is around €1,200 whereby in countries of the Northern And Eastern Europe, it’s still less than €100 So it’s 12 fold potential for growth in the upcoming twenty, thirty years, right? So counting on high single digit growth from this angle is by no means over ambitious. It’s simply realistic to expect if you’re focused on it.

So that’s my short answer.

Mina, Conference Operator, Chorus Call: Thank you. The next question is a webcast question from Robert Brozan with PKO BB Securities. I quote, thank you for your presentation and congrats on the results. Here is Robert Brozan from PKO. A question, why given all the tailwinds you are mentioning volumes, cost of risk, you have adjusted 2025 outlook from above 20% to around 20?

Thank you.

Art Paul Krenser, CFO, NLB Group: Well, it’s just an acknowledgment of the fact that we don’t want to curtail investment in specifically technology initiatives. And that is basically twisting and tweaking a little bit the costs. But we deliberately say whatever creates customer value and establishes a platform for growth and future efficiencies, we will not optimize one year’s financial results to the detriment of future benefits. And especially with the CTO coming in, Reinhard and then Tim also taking on IT agenda and main mission to accelerate deployment of technology. This is just basically giving him the space to operate also effectively.

So it’s nothing fanciful. It’s just the statement of we will keep spending where we see meaningful outcomes. Investor before asked how to grow fee business, well, invest in services, for example, for micro businesses where we are not yet on par with best in class and to create that cost cost. But it has it’s a driver for future fee income growth. So to deploy Apple Pay is not an immediate payoff.

It rather costs money, but it’s a platform for client retention. It’s a platform for client acquisition. So we don’t manage the quarterly result. We manage the 2030 agenda and that’s a growth agenda and growth requires in the investment.

Mina, Conference Operator, Chorus Call: Thank you. The next question is a webcast question from Nick Bajet with Frontera Capital. And I quote, do you think that auto and metals industry issues are company specific? Or could they be the leading edge of a structural competitiveness problem for these sectors?

Andreas Burkhardt, CRO, NLB Group: I mean, look, from what we can see so far, rather company specific. Of course, everybody is feeling it a little bit. And, of course, you know, some effects are also indirect. So if you see, for example, steel industry where the steel industry here is very low exposed to The US, but partially clients of these steel companies are. And they, of course, when they order something today, which they get in two months, they are not sure which tariffs will then be applied if they export something to The US.

So that’s not making life easier. So situation both in steel and automotive is, of course, an an attention point. But from the companies we have, at least as our clients, nevertheless, situation overall is pretty stable. The thing is there are a few companies which were either catched in the wrong part of investment cycle or also sometimes doing some managerial mistakes or having still some historical burden. So there are a couple of reasons, but it’s very specific.

It’s very company specific. More than that, for the time being, speaking, for our portfolio of clients we don’t see.

Mina, Conference Operator, Chorus Call: Thank you. In the interest of time, we will now turn over to management for any closing comments, and or webcast questions will be answered via e mail.

Vlad Brodnjak, CEO, NLB Group: All right. Thank you very much to everyone for hanging in there and for many questions and proper comments. It’s been a thrilling journey, as I always end up with. Now we have, as of today, been even more motivated because we say we have midterm visibility and predictability in terms of who is going to deliver the strategy. So the managerial team and the broader, of course, team of NLB Group is fully committed to delivering this strategy.

It’s the region of growth, it’s the region of accession, it’s the region of opportunities. And in this respect, the best is still to come. Thank you for being part of our journey.

Mina, Conference Operator, Chorus Call: Ladies and gentlemen, the conference has now concluded and you may disconnect your telephone. Thank you for calling and have a good afternoon.

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