Nova Ljublj. S Regulatory News (NLB)

NLB to become the third largest bank in Serbia through the acquisition of an 83.23% ordinary shareholding in Komercijalna Banka a.d. Beograd

Pursuant to the provisions of the Rules of the Stock Exchange, Article 17 of the Regulation (EU) No. 596/2014, and Article 130 of the Market in Financial Instruments Act (ZTFI-1), Nova Ljubljanska banka, d.d., Ljubljana with registered office: Trg republike 2, 1000 Ljubljana, hereby publishes the following notice:

On 26 February 2020, Nova Ljubljanska banka d.d. ("NLB" or "NLB Group") entered into a share purchase agreement ("SPA") with the Republic of Serbia ("RoS") for the acquisition of an 83.23% ordinary shareholding in Komercijalna Banka a.d. Beograd ("KB").The closing of the transaction is expected in Q4 2020 and is subject to mandatory regulatory approvals from, amongst others, the European Central Bank, Bank of Slovenia and the National Bank of Serbia.

The consideration for the 83.23% shareholding amounts to EUR387 million ("Purchase Price"), which will be payable in cash on completion. In accordance with Serbian bank privatisation regulations, NLB is not required to launch a mandatory tender offer for minorities' shareholdings in KB.

The Purchase Price implies a valuation of EUR465 million for 100% of KB's ordinary share capital, representing a multiple of 0.77 x KB's IFRS consolidated shareholders' equity as at 30 June 2019 and a multiple of approximately 6x KB's estimated earnings for 2019. The Purchase Price will be subject to a 2% annual interest rate between 1 January 2020 and closing, with NLB benefiting from KB's earnings during that period under a "locked-box" mechanism. Subject to National Bank of Serbia approval, declared but unpaid dividends and employee benefits for prior financial years will be paid before closing. These are fully provided for in KB's IFRS financials. KB's existing shareholders will also receive a dividend equating to 50% of 2019 net income up to a maximum of EUR38 million before closing.

NLB will at all times exceed the Overall Capital Requirement and Pillar 2 Guidance of 15.25%. To deliver on this objective we will use capital instruments already issued and not yet accounted for (EUR240 million of Tier 2 instruments) and anticipated capital accretion stemming from retained earnings and/or ongoing RWA optimisation measures, potential AT1 issuance and non-controlling interest inclusion. NLB is striving to maintain a material dividend payment for 2019, however timing will be synchronised with the regulatory approval process and the implementation of capital optimisation measures. NLB is upholding its dividend policy which, subject to meeting its target capital ratio (currently 16.25%, review pending due to 50bps lower P2R), envisages a dividend payout ratio of approx. 70%.

The transaction strengthens NLB's presence and its focus on markets in SEE, consolidating its position as the largest banking group headquartered in the region. Serbia will become the largest foreign subsidiary of the NLB Group, contributing c.24% of the enlarged assets. KB will add more than 770,000 active retail clients and the largest branch network in the country with 203 branches to NLB's existing operations in Serbia. KB's subsidiaries in Bosnia-Herzegovina and Montenegro will also complement NLB's existing operations in those markets.

We are pleased to invite all interested stakeholders to participate in a live webcast on Thursday, 27th February 2020 at 15:00 CET, where the management board will present the recent acquisition, followed by Q&A session. For the webcast please register here. The Presentation will be published later.

Blaž Brodnjak, CEO of NLB, stated:

"The acquisition of Komercijalna Banka represents another very important milestone in NLB's development following the successful conclusion of NLB's own privatisation process in 2019. As the largest of our core foreign markets, strengthening our presence in Serbia in a controlled and value accretive manner has been a key strategic priority for the group. As a result of the transaction, NLB's market share in Serbia will increase to over 12.1% by total assets, making NLB the third largest banking group in the country with a very unique position of one of leading banks in all markets of Group's presence. NLB's operations in Serbia will be by far the largest outside of Slovenia, underlining the meaning of the respective transaction for the regional systemic financial institution.

We have been impressed both with the quality and potential of Komercijalna Banka's franchise and commend the Republic of Serbia's commitment to the very transparent and professional privatisation process. NLB will be strongly committed to further developing the bank and by focusing on client needs and experience leveraging its significant potential in the market. We therefore look forward to welcoming all of Komercijalna's stakeholders - in particular its employees and customers - to the NLB family."

The Minister of Finance of the Government of the Republic of Serbia, Siniša Mali, stated:

We are satisfied with the price achieved. The state is planning to invest the funds wisely, especially in the "Serbia 2025" investment plan, which will improve the quality of life of our citizens and further GDP growth. The performance of Komercijalna banka is excellent, but it can get even better, and I'm convinced that this can be achieved with the help of the new strategic partner. We believe that in the case of financial services in the open market a private owner can be a better owner that the state. NLB is a serious bank with a clear strategy and vision, and at the same time it is the only regional financial institution with listed GDRs on the London Stock Exchange. We are very pleased with the process which has been transparently and successfully completed. We hope that the transaction will be closed in the next few months.

NLB was advised by:

- UBS Investment Bank (financial adviser)

- Kinstellar (legal counsel)

- PricewaterhouseCoopers (accounting adviser).

About NLB Group

NLB Group is the largest banking and financial group in Slovenia with an strategic focus on selected markets in SEE It covers markets with a population of approximately 17 million people The Group is comprised of NLB as the main entity in Slovenia, six subsidiary banks in SEE, several companies for ancillary services (asset management insurance, real estate management, etc.), and a limited number of non-core subsidiaries in a controlled wind-down. NLB is a public listed company with shares listed on the Ljubljana Stock Exchange and Global Depositary Receipts listed on the London Stock Exchange. The largest shareholder is the Republic of Slovenia with 25% plus one share ownership.

About KB

Komercijalna banka a.d. Beograd was founded on 1 December, 1970, and was transformed into a joint stock company on 6 May, 1992, with headquarters in Belgrade, Serbia. It is listed on Belgrade Stock Exchange since 9 August, 2006. As at 30 November 2019, Republic of Serbia has been the major shareholder with 83.23% shareholding. The bank provides retail and corporate banking services in Serbia and also operates in two other SEE countries: Bosnia and Herzegovina and Montenegro. It also provides investment fund management services through KomBank Invest a.d. Beograd. As at 30 June 2019, it was third largest bank in Serbia ranked by total assets with 10.8% market share.

Contacts:

Ms. Valerija Pešec

Head of Investor Relations

Tel.: +386 1 476 9122

E-mail: valerija.pesec@nlb.si

Mr. Andrej Krajner

Director, Communications

Tel.: +386 1 476 2967

E-mail: andrej.krajner@nlb.si

Investor Relations

NLB d.d., Ljubljana