Nova Ljublj. S Regulatory News (NLB)

NLB Group Business Operations in 2020: Paving the Path to Banking Leader in Our Home Region

The preliminary unaudited financial results of NLB Group published last week show that 2020 was, despite the challenges of the COVID-19 pandemic and the resulting economic hibernation, a very solid year. Moreover, it was also a year that brought the importance of sustainable business and living to the forefront. In NLB Group, we protected our employees, invested in technology, and supported local communities. You may find key highlights and more details about the Group's business operations, as well as the acquisition of Komercijalna banka a.d. Beograd below and in the presentation. We also kindly invite you to join us today, on Wednesday, February 24, 2021, at 15:00 CET, at a webcast hosted by the Management Board of NLB d.d.

The Group's results in 2020 demonstrated the robustness and resilience of its sustainable business model. The challenges of the COVID-19 pandemic and the resulting economic hibernation had very moderate impact on revenues, with total net operating income of the NLB Group amounting to EUR 504.5 million, representing a moderate 2% decrease YoY (2019: EUR 517.2 million).

Key Financial Results

· Profit before impairments and provisions amounted to EUR 210.5 million, a mere 1% decrease YoY, supported by non-recurring income.

· Profit after tax amounted to EUR 268.9 million (please note the impact of the acquisition of Komercijalna banka a.d. Beograd further on).

· NLB Group established impairments and provisions in the amount of EUR 71.4 million, mostly related to the COVID-19 outbreak.

· The cost-of-risk related to credit risk stood at 74 basis points (NLB Group pre-acquisition 62 basis points).

· Strict cost discipline drove costs down by 4% YoY, totalling EUR 293.9 million and leading to a cost-to-income ratio of 58.3%.

· Only 3.4% of our exposure is still subject to COVID-19 moratoriums, with solid asset quality trends.

· The acquisition of Komercijalna banka a.d. Beograd at the end of December 2020 added EUR 4.3 billion to the Group's balance sheet, bringing NLB Group's total assets to nearly EUR 20 billion (EUR 19.6 billion).

Creating a South Eastern European Banking Leader

The acquisition of an 83.23% ordinary shareholding in Komercijalna banka a.d. Beograd at the end of December 2020 has strengthened NLB Group's position as one of Serbia's leading financial services providers and key financial institutions with over 12% market share by total assets. The conclusion of the process also marked another very important milestone in the Groups' strategy to become the leading financial institution focused on and headquartered in our home region - South-eastern Europe. More specifically, in all six markets where NLB Group operates, it now holds an above 10% market share, which confirms our position of systemic importance and provides us a base for increasing the value of our shares.

The integration process of Komercijalna banka has already started and is ongoing. We have, for example, nominated and confirmed a new Board of Directors and Management Board, and announced takeover intention for acquisition of all remaining regular and priority shares of Komercijalna banka. Additionally, the first consolidation of KB into NLB Group financial statements was completed with a strong effect on NLB Group's business results in 2020. As already stated, the negative goodwill in the amount of EUR 137.0 million, and additionally established EUR 13.4 million for expected credit losses on the performing portfolio for the Komercijalna banka group strongly contributed to NLB Group's profit after tax that amounted to EUR 268.9 million in 2020.

Acquisition Reaffirms our Dividend Capacity

We expect the transaction to have a positive effect on various indicators, including CIR, which will be 250 bps lower than was projected without acquisition from 2023. In addition, the synergy effects are estimated to be over EUR 20 million p.a. from 2023. The acquisition also reaffirmed our dividend capacity - we expect an additional 30% earnings per share to be projected as soon as in 2022, and we estimate that the Serbian market could contribute approximately EUR 100 million to the Group's profit already in 2024.

The capital adequacy of the NLB Group is strong and stands at 16.6%, which allows a dividend pay-out, subject to regulatory approvals. NLB is committed to returning capital to shareholders with EUR 92.2 million from 2020 profits already anticipated for dividend distribution - it should be noted that we have already received approval for EUR 25 million dividend payment as per ECB's limitation currently in place - while excess capital above the regulatory requirement provides a robust basis for continued growth.

About today's webcast

More details about the NLB Group business operations in 2020 and the acquisition of Komercijalna banka a.d. Beograd will be presented during a webcast. Members of the Management Board will, as usually, receive and address your questions live during the webcast, however, if you already know what you wish to ask them, you may submit your questions now. If you register for the event, you will be able to send them via web app, or you may simply send them to the email address IR@nlb.si.

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NLB d.d.