NOVA KBM - going from the past to the future

Nova KBM d.d. is one of the leading Slovenian banks, with an excellent national and international reputation. Through a wide branch network and a complete range of services, we perform all retail and corporate transactions. In international business we have direct current account relations with sixty banks, whereas our correspondent network comprises of over six hundred banks worldwide.

Our business strategy is to offer our customers not only particular banking services, but also solutions to their financial problems. This is why we are developing, on a larger scale, personal sales through qualified bank staff, this being one of the biggest competitive advantages of the Bank.

We conduct our business through expertise, experience and a tradition of openness. We respond to any of our customers' needs, often resulting in our partners becoming our friends.

The traditional products of Nova KBM d.d. are completed by our specialised subsidiaries:

• MBH Brokerage House
• KBM Leasing - Leasing House
• KBM Infond - Investment Funds
• KBM Fineko - Real Estate Trading Company

NOVA KBM d.d. successfully ended the 1997 business year

According to data yet to be audited, the Bank increased its balance sheet total by 21 per cent in 1997, so that by 31 December 1997, it amounted to SIT 237.7 billion, or by SIT 5.6 billion more than planned.

Retail deposits were up 20 per cent in nominal terms and accounted for SIT 110.5 billion. On the other hand, corporate deposits recorded a nominal increase of 23 per cent, amounting to SIT 40.6 billion.

The Bank increased corporate lending by 38 per cent and totalled SIT 47.3 billion. Personal lending was up 17.2 per cent and amounted to SIT 25.7 billion at the end of the previous year.

International payments, whereby the Bank's long experience gives it a comparative advantage, totalled DM 3.1 billion last year.

According to the unaudited and unconsolidated Profit and Loss Account, last year the Bank recorded profits totalling SlT 2,175 billion, after tax, in its operations.

Favourable ratings

We pride ourselves at Nova KBM on ending the year 1997 successfully, similarly to 1996. This is proved by the latest rating by Thomson Bankwatch, one of the world renowned agencies dealing with bank operations assessment for the needs of international investors. Based on the long-term risk assessment, the rating was higher by one level than the year before and is now BBB, which means that the Bank is in the upper category of the European banks and indicates an acceptable capacity for capital and interest repayment in long-term investments. As to the short-term risk, the Bank reached the highest possible level - LC-1 - in 1996, meaning that Nova KBM is an entirely safe partner for any short-term business.

We remain a bank worth the trust

The rating by Thomson Bankwatch has always been important for Nova KBM, especially in recent years, since it represents better conditions for international borrowing. Today it facilitates active participation on both sides of the market. Nova KBM has shifted from being primarily a borrower to becoming an active creditor, with the rating inspiring confidence and providing broader opportunities for international banking. Undoubtedly the investments have to be safe and profitable, so that you can continue to entrust us with the money you have saved with much sacrifice.

We are and want to remain a bank worth the confidence - for you, for us and for the owner, both the present and the future one.

Comparison with the developed world

If we want to compare ourselves to the developed world we have to acquire the habits used there - their rules of the game and attitude to work. We have to improve our competitive advantage, open up our market, find niches in it where we can be successful - or else find other solutions by shifting to other areas and/or through strategic horizontal or vertical integration. This was more or less what was written in the Slovenian EU Accession Strategy which underwent some initial criticism, namely that it was only a summary of what had already been written in the recommendations of the European Commission for the accession of Slovenia. However, a careful reader may think differently. 'The domestic service industry will have to focus on those segments which will require a higher input of know-how and information technologies. Its efficiency and competitiveness will have to be increased through long-term strategic alliances with partners from the EU countries.' (EU Accession Strategy of the Republic of Slovenia, Ljubljana, December 1997).

Bank privatisation project

Similarly, as 1997 was marked by discussion and preparation all over Slovenia for entry into the EU, after successfully completing the rehabilitation, at the Bank we immediately started to think about the bank privatisation project. The Government helped us to overcome the most serious crisis by relieving us of part of the burden of bad loans, transferring them through bonds to the so-called 'public debt'. It is now time that this is re-paid. Of course the question is to what extent it will be able to be re-paid. This issue depends on the new banking law, as well as on the law on privatisation of state owned property, both of which are to be accepted before the end of this year. Both of them also include the question of what stake the state will be willing to transfer to foreign investors/banks.

In most other Central and Eastern European countries the foreign strategic partners are involved in the ownership transformation of the 'old' banks. Through their long-term strategic investment they can assure the transfer of knowledge from a developed banking and financial industry, smoother and more rational access to international financial markets, and the introduction of change management. The latter is still very weak in Slovenia, regardless of how many changes we have faced during our development.

From the experience of EEC countries, it is evident that reconciliation of viewpoints is of the utmost importance for all those involved - the state, the professional and political public, future owners, and last but not least, the employees of the bank to be privatised. If the interests are not agreed the transformation of ownership may be an extremely long and costly process, with predictable and unpredictable implications.

Regardless of the obstacles hindering the final transformation of current state property into private property, the privatisation will have to be initiated within the shortest time possible. We will have to start learning from the mistakes of others, working in close co-operation with all those interested, and involving the experts of international repute.

Other major projects at Nova KBM

Apart from privatisation, the bankers at Nova KBM will have to tackle a number of other complex projects associated with the internal development of the Bank, ensuring that it is as prepared as possible for the future. The rehabilitation process clearly showed that we are capable of using our skills and expertise to their full extent, and that we are willing to grasp the nettle. On this basis we are convinced that these development projects will also be successful. This is the only way in which we can establish a good foundation to follow the vision of Nova KBM, as set by the Board and approved by the Supervisory Board of Nova KBM. This will allow you, our partners, to have our best services available, whereby we meet your wishes and needs; for our owners, so that they will not regret their investment decision; and for us, the employees, to continue to do our jobs with satisfaction.