Fitch Ratings has today affirmed Slovenia-based Nova Kreditna Banka Maribor's (NKBM) Long-term Issuer Default Rating (IDR) at 'A-' with a Stable Outlook. The agency has simultaneously affirmed NKBM's Short-term IDR of 'F2', Individual Rating of 'C/D', Support Rating of '1', and Support Rating Floor of 'A-'. The hybrid capital instruments of EUR100m and hybrid capital notes of EUR50m have been affirmed at 'BB.'

The bank's IDRs and Support Rating reflect Fitch's view of the extremely high likelihood of support from the Slovenian government in case of need. Fitch's opinion is based on NKBM's domestic importance as reflected by its considerable market share in assets and household deposits and its 51% indirect ownership by the Slovenian state. The current ownership structure is unlikely to change in the short-term, but even if the state decides to dispose of shares in NKBM, Fitch understands that it is likely to retain a significant minority stake in the business.

The Individual Rating reflects NKBM's moderate capitalisation, which relies to a certain degree on tier 2 capital. The Individual Rating also reflects the bank's weakened profitability due to increasing levels of non-performing loans ( NPLs), and its sizeable loan impairment charges. The latter absorbed 80% of pre- impairment operating profit in 2009. NKBM also relies to some extent on wholesale funding, EUR410m of which falls due in 2010. This is equal to 23% of non-equity funding at end-2009. Fitch understands that the bank is exploring a number of refinancing options in this respect. NKBM's Individual Rating also considers the bank's large size within the Slovenian banking system, strong franchise, stable retail funding base and adequate liquidity.

Fitch is of the opinion that NKBM's performance in 2010 will remain under pressure due to muted lending growth coupled with still elevated loan impairment charges and a continued inflow of NPLs that may start bottoming out only in H210, assuming a stabilisation of the economic environment.

NKBM is the second-largest banking group in Slovenia by total assets, with a share of about 11% in system assets and around 17% in household deposits, based on end-2009 data. The group provides mostly banking and insurance services for corporate and individual customers. The funding was split 66%/34% between customer deposits and wholesale financing. At end-2009 liquid assets totalled EUR600m. Fitch considers this adequate, although refinancing needs in H210 are sizeable. The bank is listed on the Ljubljana Stock Exchange.

Fitch Ratings; Balkans.Com