At the current share price, dividend yield is 11.5%. The company also invites investors to subscribe subordinated Tier 2 notes up to EUR 75m.

Nova Ljubljanska Banka published their 2018 annual report in which they proposed EUR 142.6m to be paid out as dividend to their shareholders, which would translate into a dividend of EUR 7.13 per share. The proposed dividend is in line with the company’s prospectus in which the company management has set a target of a dividend payout of around 70% for the years 2019 – 2023. At the current share price, dividend yield is 11.5%.

Note that this is the first time NLB proposed a dividend since the public offering in 2018.   

As a reminder, for 2017, NLB paid out a dividend of EUR 270.6m, which translates into EUR 13.53 dividend per share and a dividend yield of 22%. EUR 189m was paid out from the companies net income and EUR 82m was paid out from previous years’ retained earnings. This would make the dividend pay-out for 2017 amount to 84%. However, if we only took into consideration the part paid out from NLB’s 2017 net income, the dividend per share would amount to EUR 9.45, while the dividend yield would amount to 15%. Note that as dividend was paid out prior to the public offering, the Slovenian state was entitled to the full dividend.

Invitation to Subscribe Subordinated Tier 2 Notes

Besides that, the company also published a document in which they invite investors to subscribe subordinated Tier 2 notes. The nominal value of the subordinate Tier 2 notes issue is up to EUR 75m. The nominal principal amount of the notes will be paid out in full amount of 6 May 2029 (unless previously redeemed by the issuer).

The fixed coupon interest rate during the first five years will be 4.2% p.a. (based on the 5Y MS and the fixed margin); thereafter the fixed coupon interest rate shall be determined based on the sum of the then applicable reference interest rate (5Y MS) and the fixed margin as defined at the issuance date of the notes.

Note that the company’s management stated that the main reason for the Tier 2 issuance is the optimization of NLB’s capital structure. Currently the company’s capital adequacy ratio (CAR) amounts to 16.7%, which all comes from common equity Tier 1 (CET 1). Note that the overall capital requirement (OCR) is 14.75%. This would mean that the Tier 2 issuance could, potentially, lead to an additional dividend payout, which is yet to be seen.