Only one week after Moody’s Investors Service downgraded the ratings of Factor Banka, the Slovenian bank decided to officially merge with its entirely-owned local KD Banka company. In the first week of August, the rating of Slovakian bonds fell down to Baa2 — just two slots above junk rating — and the debt rating of Factor Banka (along with competitor Abanka Vipa) fell from A2 to Baa2. Six days later, Slovenia’s Factor Banka Announces Merger With KD Bank, a company that it owns 100% of all shares of, a business move made earlier in the year. Right now the only holdup on the deal will be the license needed from the national Bank of Slovenia to ensure the deal’s completion. The process should be completed in the 4th quarter of the 2012 fiscal year.
Factor Banka had a consolidated net profit that rose some seventy percent on the year, jumping from 1.7 million Euros in the first half of 2011 to 2.9 million Euros in the first half of 2012. This relative fiscal health includes a pre-tax profit of 3.8 million Euros subtracted from net interest income of 8.3 million Euros, an overall decrease from the 12 million Euros net interest income of 2011. The greater profit of the first half of fiscal year 2012 has come despite the taxation on the bank having been doubled, rising from 2.1 million Euros to 3.8. Factor Banka has total assets of slightly over one billion Euros, posting losses just under over one percent from the end of last year to the first half of the current fiscal year.
This merger could have large ramifications for the Slovenian economy. One of the major criticisms in the downgrade of Slovenian debt was the lack of available capital to banks; while Factor Banka already owns KD Bank wholesale, the merger will allow both companies to eliminate redundancies and have fewer expenses for their lending operations. While it will not be able to restore the nation’s credit on its own, it represents a step towards Slovenian banking offering some sort of surety to investors who have little reason at this time to consider placing their money in the nation’s coffers. The bank itself does not have ratings on par with government bonds itself as it is privately owned, while Slovenian nationalized banks like SID Banka suffer from downgrades that have come along with the national credit slide downwards, like many of its neighbors in the struggling Eurozone.