Fitch IBCA Ratings - Press Releases - Fitch IBCA Assigns Ratings to Banka Koper of Slovenia

Fitch IBCA Assigns Ratings to Banka Koper of Slovenia

Fitch IBCA-London-26th March 1999: Fitch IBCA, the international rating agency, has assigned a Long-term rating of "BB+", a Short-term rating of "B" and an Individual Rating of "D" to Banka Koper of Slovenia. The bank's Support rating of "4" is affirmed.

Banka Koper (Koper) is the fourth largest bank in Slovenia. It is a regional bank, based in the west of the country, covering the coastal region between Italy and Croatia through a network of 24 branches. It is privately-owned, although three large shareholders each hold a stake of just under 20%. The break-up of the former Yugoslavia in 1991 created many problems for the banking sector in Slovenia. Poor asset quality, caused by widespread business failure in the early 1990s, together with economic measures designed to introduce and stabilise a new currency, have affected all the banks. Koper, since gaining its independence from the former Ljubljanska Banka system, which was broken up in 1994, has made good progress in addressing these problems. Profitability is improving and the bank is expanding its fee-generating activities in response to declining net interest margins. Capital adequacy is sound, with a total capital ratio of 20.6% at end-1997. However, although the quality of the bank's loan portfolio has improved, gross non-performing loans accounted for a high 25% of total lending (58% covered by reserves) at end-1997 and three loans each exceeded 25% of Koper's capital. Repayment plans for these loans have been submitted to the Bank of Slovenia for its approval. The bank's funding comes almost entirely from customer deposits and its liquidity is relatively healthy by Slovenian standards.

Our ratings reflect Koper's capital adequacy and improving profitability, whilst recognising its weak asset quality, the regional nature of its franchise and its relatively small size in an economy, which is still recovering from a period of turmoil.

Contact: Alison Leveridge; Claudia Nelson, London Tel: +44 (0)171 417 4222

EDITORS: FITCH IBCA'S SUPPORT AND INDIVIDUAL RATINGS FOR BANKS -- Support ratings deal with the question of whether a bank would receive support from its owners or from the state if it were to get into difficulty. Individual ratings assess how a bank would be viewed if it were entirely independent and could not rely on external support. The resulting assessment of risk for the bank amounts to the agency's view of the likelihood that it might run into significant difficulties such that it would require support - so that the Individual rating leads logically into the Support rating. The two forms of rating are separate but complementary.

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