NOVAKBM (KBM): Nova KBM´s provisioning expenses are coming down, prospects for 2014 are brighter - raport 29

UNI - EN REPORT No29/2013

In accordance with provisions of the Code of Best Practice for Warsaw Stock Exchange Listed Companies, the Ljubljana Stock Exchange Rules and the applicable legislation, Nova KBM d.d. hereby publishes the following announcement:

For the three-month period ended 31 March 2013, the Nova KBM Group reported a pre-tax, pre-provision profit from continuing operations of €8.6 million. The operations of both the Bank and the Nova KBM Group continued to be affected by adverse market conditions and declining economic activities. The increased credit risk, combined with a considerable number of bankruptcy proceedings, forced the management to set aside €19.9 million in provisioning expenses, as a result of which the Nova KBM Group posted a net loss from continuing operations of €8.4 million.

The results of the Bank and the Nova KBM Group for the first quarter of the year, which have today been published on the websites of the Ljubljana Stock Exchange and Warsaw Stock Exchange, as well as other issues most relevant to the operations of the Nova KBM Group, will be presented to the shareholders who have decided to attend the meeting with the Bank´s Management Board on Tuesday, 4 June. All interested shareholders who have not yet registered for this event may do so in the coming days or on the day of the event.

At the end of March, the Nova KBM Group´s total assets amounted to almost €5.4 billion, up 1.2% on 2012, with its total capital adequacy ratio and the EBA Core Tier I capital ratio standing at 9.15% and 7.52%, respectively. This level of capital adequacy has also been maintained in the last two months. In spite of the difficult market conditions, the Bank and its group perform well and meet the regulatory capital and liquidity requirements.

The large majority of the Bank´s and the Nova KBM Group´s loan portfolios has already been restructured, so it is expected that the 2013 level of provisioning expenses will be below the figure reported for 2012. The Bank has taken adequate measures to be ready to transfer its bad loans to the Bank Assets Management Company, and the first transfers are expected to take place in July. Since the discussions are still under way between the Bank and the competent institutions, it is not yet clear whether additional impairment losses will need to be set aside at the time of removing bad loans from the Bank´s books. Due to the harsh market conditions, further provisioning needs, and the negative macroeconomic outlook, the management forecast that the Nova KBM Group will end the year 2013 with a loss from continuing operations, although this is expected to be lower than that of 2012. Assuming that the economic climate will not deteriorate more than expected, the Nova KBM Group plans to report more favourable results in 2014.

Nova KBM´s Management Board and all Nova KBM Group employees are implementing measures to reverse negative performance trends. According to several international institutions, a decline in economic activity may be expected in Slovenia in 2013, which will certainly have an impact on the operations of the Nova KBM Group. The key factors that will drive the economic development in Slovenia are as follows: the continuation of public finance consolidation; the adoption of essential structural reforms; and the privatisation of state-owned enterprises.

The Nova KBM Group will adapt its operations to the current market conditions while focusing on making improvements in cost efficiency, on compliance with regulatory requirements, and on integrating its operations. All the activities will be carried out in line with the Nova KBM Group´s restructuring programme, which was drawn up at the end of March this year and which is currently being reviewed by the European Commission.

This announcement will be available on the Bank's website (www.nkbm.si) as from 30 May 2013.