NOVAKBM (KBM): Nova KBM has implemented more than 100 measures to improve its performance - raport 27

UNI - EN REPORT No27/2013

In accordance with the provisions of the Ljubljana Stock Exchange Rules, Nova KBM d.d., Ulica Vita Kraigherja 4, Maribor, hereby gives the following notice:

Nova KBM´s Supervisory Board yesterday discussed the unaudited results of operations of the Bank and the Nova KBM Group for the first quarter of the year, and was informed of the issues most relevant to the operations of the Bank. For the three-month period ended 31 March 2013, the Group posted a pre-tax, pre-provision profit from continuing operations. The Nova KBM Group´s full results for the first quarter of the year will be released by the end of this week, in accordance with the Bank´s financial calendar. The supervisors were given assurance that the Bank is ready to transfer its bad loans to the state´s 'bad bank'. First transfers are expected to be carried out in July. In addition, the supervisors discussed measures taken to reduce the Bank´s operating costs, and were given a report on the progress of the Nova KBM Group´s restructuring towards a more efficient and competitive institution. The report on preparations for the Shareholders´ Meeting of the Bank, scheduled for 10 June, was presented to the supervisors as well. The Supervisory Board regarded as positive the decision reached by the Management Board to intensify the dialogue with the Bank shareholders and to invite them to a special meeting on 4 June in Maribor. (The deadline for the registration is Thursday, 30 May 2013.)

Both the Bank and the Nova KBM Group perform well and meet the regulatory capital and liquidity requirements, with their liquidity ratios being above the prescribed minimum. The Bank has taken adequate measures to be ready to transfer its bad loans to the Bank Assets Management Company. First transfers will presumably be carried out in July. Loans given to customers that have filed for bankruptcy will be transferred first, irrespective of the industries these customers were active in. It is expected that the transfer of bad loans will help the Bank provide more efficient support to existing and promising new projects, thus further contributing to the entrepreneurial environment. In this regard, it must be pointed out that the Bank has already implemented a number of measures aimed at improving its customer relationship function and risk management. The preparations for the planned capital raising are under way as well.

The supervisors were also informed of the progress of the RAST project, the aim of which is to reduce the operating costs across the entire Nova KBM Group. To date, over 100 measures have been implemented to reduce the operating costs and increase revenues of the Bank. The following measures are expected to contribute the most to the cost saving efforts: streamline of business processes; reorganisation of the Bank; reduction in staff and procurement costs; and implementation of synergies within the Nova KBM Group. These measures are expected to reduce the Bank´s operating costs by approximately €8.5 million per annum, beginning from 2015, with additional €1.7 million per annum being saved by measures implemented at the Nova KBM Group level.

The Management Board is working intensively with the trade union and employees on the final stage of the Bank´s restructuring, which is expected to be completed in July. As part of the restructuring, the number of organisational units will be reduced and the administration simplified. The number of employees will be gradually reduced by about 100 by the end of the year, mainly by implementing the so-called soft measures. Also, the number of business divisions and executive directors will be reduced, as will be the number of employees on individual employment contracts. Certain bonuses of managers have already been eliminated or reduced. Following the restructuring, Nova KBM is expected to be more efficient and competitive, hence more profitable.

This notice will be available on the Bank´s website from 29 May 2013, for a period of at least five years.