1	NLB Group Interim Report September 2017

NLB Group Interim Report September 2017

3 NLB Group Interim Report September 2017

113

Number of branches

693,232 Number of active clients

8,610.4

Total assets (in EUR million)

23.1 Market share by total assets (in %)

145.3

Result after tax (in EUR million)

NLB Skladi, Ljubljana

1,157.2

Assets under management (in EUR million)

29.05 (mutual funds) Market share

(in %)*

2.8

Result after tax (in EUR million)

* Market share of assets under management in mutual funds, as at 30 September 2017

NLB Vita, Ljubljana

430.4

Assets of covered funds without own resources (in EUR million)

13.7 Market share

(in %)*

4.8

Result after tax (in EUR million)

* Market share in traditional life insurance, as at 31 August 2017

Slovenia Bosnia and Herzegovina

NLB, Ljubljana NLB Banka, Banja Luka

Number of branches

674

Total assets (in EUR million)

20.1

Result after tax (in EUR million)

* Market share in Republic of Srpska, as at 30 June 2017

NLB Banka, Sarajevo

Number of branches

525.5

Total assets (in EUR million)

5.3

Result after tax (in EUR million)

* Market share in the Federation of Bosnia and Herzegovina, as at 30 June 2017

220,444

Number of active clients

18.6

Market share by total assets (in %)*

136,963 Number of active clients

5.4

total assets (in %)*

Market share by

Macedonia

NLB Banka, Skopje

Number of branches

1,166.9 Total assets (in EUR million)

15.8 Market share by total assets (in %)*

347,754 Number of active

clients

38.0 Result after tax (in EUR million) * As at 30 June 2017

Kosovo

3 NLB Group Interim Report September 2017

NLB Banka, Prishtina

45 Number of branches

552.7 Total assets (in EUR million)

11.0 Result after tax (in EUR million) * As at 30 June 2017

Serbia

NLB Banka, Beograd

Number of branches

342.5

Total assets (in EUR million)

4.1

Result after tax

131,197

Number of active clients

1.3

Market share by total assets (in %)*

(in EUR million) * As at 30 June 2017

Montenegro

NLB Banka, Podgorica

18 Number of branches

486

Total assets (in EUR million)

Result after tax (in EUR million)

4.2

59,347

Number of active clients

11.9

Market share by total assets (in %)

197,424 Number of active

clients

15.0

Market share by total assets (in %)*

Note: The result after tax data in the above figure show NLB Group members' standalone and not their contribution to the consolidated result after tax.

Business Report	4
Key financial and operating data	5
Macroeconomic environment	7
Business operations	9
Retail banking in Slovenia	9
Corporate and Investment banking in Slovenia	12
Strategic foreign markets	13
Wind down of non-core operations	14
Efficient and proactive risk management of operations	15
Strong liquidity and capital position	15
Overview of NLB Group's financial performance	17
Key developments	17
Income statement	18
Statement of financial position	32
Risk management	39
Condensed Interim Financial Statements of NLB Group and NLB	44

Business Report

4 NLB Group Interim Report September 2017

Key financial and operating data

Table 1: Key financial captions for NLB Group (the Group)

		NLB Group
	1-9 2017	1-9 2016	Change YoY	Q3 17	Q2 17	Change QoQ
Key Income statement data (in EUR million)
Net operating income1	366.2	357.6	2 %	125.1	110.1	14%
Net interest income	228.7	238.8	-4%	80.1	73.2	9 %
Net non-interest income	137.5	118.8	16%	45.0	36.9	22%
Costs	-207.8	-214.2	-3%	-68.8	-71.6	-4%
Result before impairments and provisions 1	158.4	143.5	10%	56.3	38.5	46%
Impairments and provisions	37.3	-37.5	-200%	11.7	1.1	-957%
Result after tax	184.0	91.5	101%	66.1	36.4	82%
Key financial indicators
Interest margin (on interest bearing assets)2	2.54%	2.61%	-0.1 p.p.	2.68%	2.43%	0.3 p.p.
Interest margin (on total assets - BoS ratio)	2.54%	2.68%	-0.1 p.p.	2.67%	2.43%	0.2 p.p.
Costs to income ratio (CIR)	56.8%	59.9%	-3.1 p.p.	55.0%	65.0%	-10.0 p.p.
Costs to income ratio (CIR) normalised 3	58.5%	61.4%	-2.9 p.p.	56.1%	64.0%	-7.9 p.p.
Return on equity after tax (ROE a.t.)	15.9%	8.2%	7.6 p.p.
Return on assets after tax (ROA a.t.)	2.0%	1.0%	1.0 p.p.
RORAC a.t.4	21.0%	10.7%	10.3 p.p.
Cost of Risk Net (bps)5	-70	4 3	-113 b.p.
Cost of Risk Net (excluding release of pool provisions) (bps)	-30	7 1	-102 b.p.

	NLB Group
	30 Sep 2017	30 Jun 2017	31 Dec 2016	Change YtD	Change QoQ
Key financial position statement data (in EUR million)
Total assets	12,008	12,070	12,039	0 %	-1%
Loans to customers (net)	6,989	6,974	6,997	0 %	0 %
o/w Key business activities	6,386	6,346	6,314	1 %	1 %
Deposits from customers	9,672	9,491	9,439	2 %	2 %
Total equity	1,611	1,538	1,495	8 %	5 %
Other key financial indicators
Loans to customers/deposits from customers (L/D)6	72.3%	73.5%	74.1%	-1.9 p.p.	-1.2 p.p.
Common Equity Tier 1 Ratio	16.3%	16.5%	17.0%	-0.7 p.p.	-0.2 p.p.
Total capital ratio	16.3%	16.5%	17.0%	-0.7 p.p.	-0.2 p.p.
Total risk exposure amount (RWA)	8,128	8,007	7,862	3 %	2 %
NPL- Gross (in EUR million)	1,089	1,181	1,299	-16%	-8%
NPL coverage ratio7	65.6%	65.4%	64.6%	1.0 p.p.	0.2 p.p.
NPL coverage ratio8	77.5%	76.1%	76.1%	1.4 p.p.	1.3 p.p.
Share of non-performing loans (NPL) in all loans	11.9%	12.6%	13.8%	-1.9 p.p.	-0.7 p.p.
NPL ratio - Net9	4.5%	4.8%	5.4%	-0.9 p.p.	-0.3 p.p.
NPE ratio10	8.3%	9.0%	10.0%	-1.7 p.p.	-0.7 p.p.
Employees
Number of employees	6,090	6,142	6,175	-1.4%	-0.8%

¹NLB includes dividends from subsidiaries, associates and joint ventures

²Further analyses of interest margins are based on interest bearing assets

3 Without non-recurring revenues and restructuring costs

⁴RORAC a.t. = profit a.t. / average capital requirement normalized at 14.75% RWA ⁵Cost of risk NET = Credit impairments and provisions (annualised level) /average net loans

to non-banking sector

⁶Net loans to customers /Deposits from customers

⁷NPL Coverage ratio = Coverage of gross non-performing loans w ith impairments for non-performing loans ⁸NPL Coverage ratio = Coverage of gross non-performing loans w ith impairments for all loans

⁹NPL ratio - Net = Net non performing loans / Net loan portfolio

¹⁰EBA definition

International credit ratings NLB	30 Sept 2017	31 Dec 2016	Outlook
Standard & Poor's	BB	BB-	Positive
Fitch	BB	BB-	Stable

Key highlights for the Group:

EUR 184.0 million

Profit after tax

In the nine months of 2017 the Group realised profit after tax in the amount of EUR 184.0 million, an increase of 101% YoY.

15.9%

ROE

The ROE for the nine months of 2017 stood at 15.9% (on a CET 1 ratio of 16.3%), supported by non-recurring effects and negative cost of risk; RORAC a.t.¹ stood at 21.0%.

2%

Total Net operating income and net operating income sterilised for one-off effects increased by 2% YoY, based on improved fee income and other regular non-interest income.

56.8%

CIR

Continued YoY cost improvements (-3%) leading to further reduced CIR ratio of 56.8%.

10%

Recurring profit before impairments and provisions up by solid 10% (EUR 13.5 million) based on continued cost improvements and increased recurring revenues, especially on net non-interest income.

Note:

¹ RORAC a.t. = profit a.t./average capital requirement normalized at 14.75% RWA

8.3%

NPE

Further improvement of loan portfolio quality was shown in the reduction of NPL volumes by 16.2% in the nine months of 2017. The NPL ratio thus decreased to 11.9%, while the non-performing exposure (NPE) ratio to 8.3%.

5%

The healthy loan demand in Slovenia was reflected in the growth of 5% YtD in retail loan balances. Strategic foreign markets continued to perform well with loan growth YtD at 6% across all segments. Overall key business volumes² were stable.

16.3%

Total capital ratio At 16.3% was comfortably above regulatory thresholds.

2 key/mid/small corporates in Slovenia, retail banking in Slovenia, strategic foreign markets

Macroeconomic environment

Political risks remained at the forefront of financial markets in the first three quarters of 2017, transitioning from among others electoral risk in Europe to geopolitical tensions between the United States (US) and North Korea towards the end of the period. The reactions of financial markets to the aforementioned turmoil continued to be muted, which has led to questions of possible market complacency in these transitional times. The global macroeconomic recovery gained further traction in the period, with the majority of the global economy exceeding expectations. Based on the latest projections by the International Monetary Fund (IMF), global economic growth is expected to accelerate to 3.6% in 2017 and accelerate further in subsequent years - a notable increase from the 3.2% growth that occurred in 2016. The Eurozone was among the world's regions that surpassed projections, domestic demand remains a central driver of the economic recovery, assisted by strong exports dynamics, which were bolstered by an improvement of global trade. The beneficial effects of expansionary monetary policy continued to positively impact the real economy and credit growth in the region, while the recent slight shift towards a more accommodative fiscal policy is a welcome development and is set to pick up the slack as quantitative easing eventually tapers off. Inflationary pressures remained subdued when excluding the volatile components of energy and food. However, core inflation has shown some signs of improvement, it has risen to 2013 levels and is set to become even stronger in the mid-term driven by diminishing slack. Sustained growth of core inflation remains a key milestone of the economic recovery and will have profound impact on the path of monetary policy in the region.

The positive economic trends in the Eurozone are set to continue, with IMF projections for the current year pointing to the strongest economic growth in over a decade, at 2.2%. Due to the considerable improvement of regional economy, the primary downside risks to the economic prospects stem from external or from political risk. Geopolitical issues are on the rise, the key issues being of the United Kingdom's (UK) exit from the European Union (EU) remain unresolved; in Italy a Populist Party currently leads in the polling, with elections set for the spring of 2018; and as was seen in the Catalan independence crisis, numerous regional issues remain outstanding. In coming years, a slow transition away from an accommodative monetary policy is expected to occur through a tapering in the Eurozone and further rate hikes in the United States (US), where the next likely rate increase will occur in December of this year, a transition which carries with it certain event risks that could negatively impact financial markets and the current economic progress. In spite of the aforementioned, the regional economy has proven itself resilient in the face of numerous shocks since the crisis, a continued recovery of the regional economy thus remains the base case scenario.

Supported by the improved economic picture abroad, Slovenia's economy maintained its accelerated pace of growth. As in prior years it was supported by positive trends with export dynamics and improved domestic demand, which together with a significant resurgence investment dynamics resulted in considerable economic growth in the period. Key macroeconomic metrics continue to point to a strengthening economy. Industrial production continues to grow at a strong pace, averaging 6.8% growth on an annual level, and is supported by external demand. The recovery of the housing market bodes well for real-estate investment and for the construction industry, which have lagged behind other sectors of the economy in the nascent recovery. Continued improvement of the labor market will continue to support private consumption, while further growth of investment dynamics is projected. The outlook for the economy continues to improve, government finances remain stable, while economic growth is expected to surpass four percent in 2017 and to exceed three percent in coming years.

Slovenia's banking system recorded a profit of EUR 340.8 million in the first eight months of 2017, a decrease of 2.9% when compared to the same period in 2016, and corresponding to a return on equity of 11.35%. The improving macroeconomic picture and performance of the real economy continued to positively impact credit growth dynamics, where household loans and the corporate loan portfolio both grew by 7.5% annually. The credit growth dynamics of the corporate portfolio have surprised on the upside and have greatly exceeded June projections from the Bank of Slovenia. Despite strong growth of the credit portfolio, the banking systems loan- to-deposit ratio continues to contract, with deposit growth outpacing credit growth, measuring 76.9% at the end of the period, down from 78.6% at the start of the year. The quality of the credit portfolio continued to improve, with non-performing loans (NPL) decreasing to 4.8%, down from 5.5% at the start of the year. A high degree of competition is expected to continue to impart downward pressure on interest rates and by proxy net interest income. In the period net interest income had decreased by 4.0% on an annual level. As local competitive pressures are not likely to decrease substantially in the midterm, the path of Eurozone inflation and European Central Bank (ECB) policy will be the key determinant of interest rate movement. As the pass-through of interest rate pressure from the aforementioned factors will likely be delayed, the low rate environment will continue to impact interest income for some time, imparting significant earning pressure on the banking system. Despite projections of a high degree of competition and pressure on interest income in the midterm, it is important to note the significant progress and stability the banking system has achieved in just the few years since the economic crisis.

Business operations

A continued positive trend of economic growth and, consequently, domestic consumption, resulted in higher lending activity of the Group. The Bank is the leader in private banking in Slovenia and in September celebrated 15 years of operations. The Bank also continues to improve clients' experience throughout the Group. Further development of digitalisation is underway on the Group level to tailor the offer and client service.

Retail banking in Slovenia

The Bank maintained its leading position with a market share in retail lending of 23.4% and 30.4% in deposit taking. Volume of new approved loans in the nine months of 2017 increased by 19% compared to the same period in 2016, and gross loans increased to EUR 2,093 million (YtD +5%).

Figure 1: Gross NLB loans (in EUR million)

Increase in housing loans portfolio continues, reaching EUR 86.4 million YtD. In this period 38% more new loans were approved compared to the same period in 2016, while the portfolio grew 9.5% YoY.

NLB Assets Management continued to grow with net-inflows of EUR 67.5 million into mutual funds. At the end of Q3 2017, total assets under management amounted to EUR 1.16 billion. NLB Assets Management is the leader in terms of market share which further increased to 29.05%.
In 15 years of operations private banking continued to increase its client-based offering tailored services to 1,146 clients at the end of Q3 2017 and had EUR 658 million in assets under management. The Bank offered also new tax favourable investment life insurance NLB Vita Privatno product.

Figure 3: Private Banking

NLB Vita charged EUR 53.1 million gross premiums YtD, and the total balance sheet exceeded EUR 452 million at the end of Q3 2017. The market share of life insurance products was 13.7%.
Half of payment cards which are used by clients are contactless; from July 2017 this also included Visa cards. To enhance client experience, a new mobile app for simplified management of NLB Prepaid Mastercard cards was made available to clients.
After introduction in May 2017, 2,600 video chat conversations and 500 video calls were carried out, showing a well-received new option of communication with clients.
The popularisation of the usage of digitalised solutions improving client's experience continues. The number of new users of digital solutions (Klik and Klikin) increased by 55,289 YtD, while the penetration of the mobile app ꞌNLB Klikinꞌ reached 14.4% of the clients, an increase of 167.4% YtD.

Figure 4: NLB Klikin penetration (month end in %)

Corporate and Investment banking in Slovenia

The Bank's market share in corporate loans decreased by 1.0 percentage point YtD to 21.5%. Gross loan balances for key business activities have been decreasing (YtD -8.4%, at the end of Q3 2017: EUR 2,089.3 million), mostly due to some larger exposures expiring. Stronger growth was noted in the sub-segment of small enterprises and entrepreneurs (+18.4% YtD). Interest income remained stable QoQ – the YoY decline reflects the volume evolution and strong pressure on pricing.
Investment banking/Securities services revenues show strong revenue growth of 35% YoY (1-9 2017: EUR 7.1 million), based on generally higher economic activities with clients and continued demand for hedging against interest risk. At the end of Q3 2017, the total asset value under custody exceeded the EUR 15 billion limit for the first time in the history of NLB custody business, an increase of 43% compared to the YoY and 4% QoQ.
Continuous updates of mobile bank NLB Klikpro in 2017 contributed to a significant increase in the number of users with penetration of 20.5% of clients, an increase of 277.0% YtD.

Figure 5: NLB Klikpro penetration (month end in %)

The investment product NLB Naložbeni par for legal persons (presenting a combination of parallel investment in long-term deposit and selected product of NLB Assets Management) was introduced in Q3 2017.

Strategic foreign markets

Segment contribution to the Group profit in the nine months of 2017 was EUR 88.3 million, an increase of 53.4% YoY (EUR 57.6 million in 1-9 2016) on the basis of: continued revenue growth, both in net interest and in net fees and commissions income and the negative cost of risk given a release of pool provisions in Q1 2017, which are based on generally improved risk performance.
In the first three quarters of 2017, the banks further intensified lending activities, with gross loans growing by 5.5% YtD (at the end of Q3 2017: EUR 2,591.3 million) – where strong growth was especially achieved in banks in Serbia (36.0% YtD) and Kosovo (13.7% YtD).

Figure 6: Profit after tax of the strategic NLB Group banks (on a stand-alone basis) - evolution YoY (in EUR million)

Wind down of non-core operations

The Group continued its wind-down of non-core operations. Non-core segment assets were reduced by 12% YtD to EUR 444.7 million (2016 year-end: EUR 502.6 million). In the same period impairments and provisions were released in the amount of EUR 13.0 million, confirming efforts to strengthen collection capabilities in previous years.
The non-core pre-tax result for the nine months of 2017 is EUR 30.7 million a significant improvement on the nine months of 2016 (1-9 2016: EUR - 18.7 million), and is based on significantly improved cost of risk and non-recurring income³ in the total amount of EUR 12.3 million.
The non-core costs base was reduced by 9% YoY to EUR 16.3 million (1-9 2016: EUR 17.9 million).

Note:

³ Non-recurring income from the sale of Petrol shares in the amount of EUR 9.5 million, a court settlement with Zavarovalnica Triglav in the amount of EUR 1.2 million, and sale of noncore subsidiary NLB Factoring Brno a.s. "v likvidaci" in the amount of EUR 1.6 million.

Efficient and proactive risk management of operations

The quality of the credit portfolio has additionally improved in Q3 2017, arising from the ameliorated credit standards since 2014 onwards, and evidenced by the cumulatively very low new NPL formation. Preserving high credit portfolio quality represents one of the Group's key objectives. Besides that, the Group continues with a strong commitment to further reduce the NPE legacy, as well as its decisive exit from all non-core exposures.
Following a regular review of risk parameters in Q1 2017, the Group released pool provisions in the amount of approximately EUR 21 million given the much better risk performance in the corporate segment in recent years. In addition, at the end of Q3 2017 the cost of risk was negative, mostly due to active management of NPL portfolio.
Activities related to IFRS 9 requirements, which will enter into force at the beginning of 2018 and including methodological adaptations and anticipated quantitative impacts, are in the final phase of implementation. Due to positive macroeconomic trends no negative effects on cumulative basis are foreseen.
The NPL ratio dropped to 11.9% (2016 year-end: 13.8%), while the internationally more comparable NPE ratio (based on EBA guidelines) is already at 8.3% (2016 year-end: 10.0%). The coverage ratio, which remains high (at 77.5%), represents an important strength for the Group. The Group's direct NPL coverage ratio equals 65.6%, which is well above the EU average published by the EBA (45.0% at the end of H1 2017). This enables further focus on NPL reduction without significantly influencing the cost of risk in the years ahead.
The Group's exposure to interest rate risk, foreign exchange risk, and other market risks is within the targeted, low-risk appetite profile. Operational risk remains on a low to moderate level.

Strong liquidity and capital position

At the end of the nine months of 2017, the capital ratios (CET 1 and total capital ratio) of the Group remained very strong, reaching 16.3% (not including the nine months profit) and were well above regulatory thresholds.
The Group liquidity remains exceptionally strong, with very significant amounts of liquidity reserves in cash (EUR 252 million)⁴ , securities (EUR 2,918 million), and ECB eligible loans

Note:

⁴Excluding obligatory reserve with the central bank.

(EUR 778 million). The Group holds a strong liquidity position at both, the Group and subsidiary bank levels, standing well above the targeted risk appetite profile.

Overview of NLB Group's financial performance

Key developments

Net profit after tax in the nine months of 2017 amounted to EUR 184.0 million, a YoY increase of EUR 92.5 million or 101%.
Based on the strong performance in all segments return on equity (ROE after tax) increased to 15.9% (1-9 2016: 8.2%). RORAC a.t. stood at 21.0% (1-9 2016: 10.7%). Total capital ratio and common equity tier 1 capital ratio (CET 1) amounted to 16.3%, which comfortably exceeds all regulatory requirements.
Profit before impairments and provisions totaled EUR 158.4 million, and was 10% or EUR 14.9 million higher YoY. Positive non-recurring effects from divestments, higher regular non-interest income and lower costs more than offset the decrease in net interest income as a result of the still very low interest rate environment in the Eurozone.
Net interest income is stable in key business activities (+3% YoY), with growth in strategic foreign markets (+6% YoY) compensating for the decline in the parent bank mostly due to repricing of the securities portfolio (from liquidity reserve management) and lower interest margin on loans. The net interest margin of the Group decreased by 0.07 percentage points YoY to 2.54%, mainly due to expiry of some higher yielding securities at the end of 2016 in the Bank, with margins in strategic foreign subsidiaries stable at around 4%.
Costs decreased by 3% YoY, mostly due to further reduction in administrative and labour costs. Cost-to-income ratio (CIR) improved by 3.1 percentage points YoY to 56.8%.
Impairments and provisions for credit risk in the nine months of 2017 were released in the amount of EUR 36.9 million. In 2016 the cost of risk was negatively impacted by additional impairments related to the sale of part of the non-performing portfolio (non-performing portfolio sale) in the amount of EUR 25.5 million. The nine months of 2017 were positively impacted by: the release of credit impairments and provisions as a consequence of some successful collections, improved quality of the credit portfolio, and positive trends in the economic environment resulted in the release of pool provisions in the amount of approximately EUR 21 million in the corporate client segment in March 2017.
Gross loans amounted to EUR 7,787.8 million, a decrease of EUR 113.0 million YtD, nevertheless key business activities grew by 1% YtD (7% YoY). Retail banking in Slovenia grew 5% YtD to a volume of EUR 2,092.9 million (+8% YoY), strategic foreign markets grew 5% YtD to a volume of EUR 2,591.3 million (+8% YoY) compensating for decline in the corporate banking in Slovenia standing at EUR 2,287.2 million (-9% YtD, +3% YoY).

Income statement

Table 2: Income statement of NLB Group

	NLB Group
in EUR million	1-9 2017	1-9 2016	Change YoY	Q3 17	Q2 17	Change QoQ
Net interest income	228.7	238.8	-4%	80.1	73.2	9 %
Net fee and commission income	115.2	107.8	7 %	39.5	38.4	3 %
Dividend income	0.2	1.2	-87%	0.0	0.1	-
Net income from financial transactions	22.5	18.2	23%	5.3	3.0	80%
Net other income	-0.4	-8.4	96%	0.2	-4.6	104%
Net non-interest income	137.5	118.8	16%	45.0	36.9	22%
Total net operating income	366.2	357.6	2 %	125.1	110.1	14%
Employee costs	-120.6	-122.9	-2%	-40.1	-40.8	-2%
Other general and administrative expenses	-66.5	-69.9	-5%	-21.6	-23.9	-9%
Depreciation and amortisation	-20.8	-21.4	-3%	-7.0	-6.9	2 %
Total costs	-207.8	-214.2	-3%	-68.8	-71.6	-4%
Result before impairments and provisions	158.4	143.5	10%	56.3	38.5	46%
Impairments of AFS and HTM financial assets	0.0	-0.1	-	0.0	0.0	-
Credit impairments and provisions	36.9	-21.8	-269%	8.9	2.6	-241%
Impairments of investments in subsidiaries, associates and joint venture	0.0	0.0	-	0.0	0.0	-
Other impairments and provisions	0.4	-15.5	-102%	2.7	-1.5	-283%
Impairments and provisions	37.3	-37.5	-200%	11.7	1.1	-957%
Gains less losses from capital investments in subsidiaries, associates and joint ventures 1	2.8	4.0	-29%	0.1	1.6	-95%
Profit before income tax	198.4	110.0	80%	68.1	41.3	65%
Income tax	-7.2	-14.4	-50%	0.9	-3.3	-128%
Result of non-controlling interests	7.3	4.2	75%	2.9	1.6	79%
Profit for the period	184.0	91.5	101%	66.1	36.4	82%

¹NLB includes dividends from subsidiaries, associates and joint ventures

Profit

Figure 7: Profit after tax of NLB Group – evolution YoY (in EUR million)

* Gains less losses from capital investments in subsidiaries, associates and joint ventures.

In the nine months of 2017, the Group generated EUR 184.0 million of profit after tax, 101% higher YoY.

Key drivers of the increase were:

Solid performance in key business activities with positive profit evolution, especially in strategic foreign subsidiaries that resulted in 6% YoY growth in regular income;
Non-recurring income from the sale of Petrol shares in the amount of EUR 9.5 million, a court settlement with Zavarovalnica Triglav in the amount of EUR 1.2 million, and the sale of non-core subsidiary NLB Factoring Brno a.s. "v likvidaci" in the net amount of EUR 1.6 million;
Higher fees and commissions (EUR 7.4 million YoY);
Higher other net non-interest income (lower payment to European Single Resolution Fund (SRF) by EUR 1.2 million YoY and positive effects related to real estate activities);
Continued improvement in costs which were reduced by 3% YoY, and substantial savings achieved in general and administrative expenses (-5% YoY) and employee costs (-2% YoY);

Realised cost of risk in the nine months of 2017 was low due to substantial release of pool provisions as part of the regular annual model time-series updates and active management of the NPLs.

Lower net interest income (EUR -10.1 million YoY), mainly as a result of continued repricing on the securities portfolio, maturity of same high yield assets, and lower interest rates on loans.

By excluding non-recurring effects in the nine months of both 2016⁵ and 2017⁶ , the result before impairments and provisions increased by 10% YoY.

Profit before impairments and provisions of the Group in Q3 2017 amounted to EUR 56.3 million, and was 46% higher QoQ due to higher regular net interest income and non-interest income, namely in Q2 2017 expenses for SRF and Slovenian Deposit Guarantee Scheme (DGS) were recognised in the amount of EUR 7.4 million (SRF EUR 2.7 million and DGS EUR 4.7 million).

Note:

⁵ The one-off events in nine months of 2016 related to positive effect of the sale and advisory services in relation to the sale of an equity investment of Trimo d.o.o. (in total amount of EUR 5.5 million) and the transaction of Visa EU share (in the amount of EUR 7.8 million).

⁶ In nine months of 2017 results were also related to the positive effect of a court settlement with Zavarovalnica Triglav (in the amount of EUR 1.2 million), the sale of Petrol shares (in the amount EUR 9.5 million) and sale of non-core subsidiary NLB Factoring Brno a.s. "v likvidaci" (in the amount of EUR 1.6 million).

102.8 70.1 32.7

46.6%

22.4 24 1.6 7.1%

Profit before tax – segment results

Figure 8: Profit before tax of NLB Group by segments (in EUR million)

Core markets and activities: 7 improvement of operations, especially in strategic foreign markets

Key business activities⁸ recorded an increase in profit before tax in the amount of EUR 42.6 million in the nine months of 2017 to a level of EUR 147.2 million (1-9 2016: EUR 104.7 million), on the

Note:

⁷ Corporate banking in Slovenia, retail banking in Slovenia, financial markets in Slovenia, strategic foreign markets

⁸ Corporate banking in Slovenia, retail banking in Slovenia, strategic foreign markets

basis of higher business volumes in retail and strategic foreign markets, stable margins in South Eastern Europe (SEE) markets, improvement in cost efficiency, and continued low cost of risk.

Corporate banking in Slovenia (key/mid/small corporates) contributed EUR 26.4 million in profit before tax, showing the decrease of EUR 2.8 million or 10% YoY based on lower release of impairments and recorded a decrease in costs by 4%.
Retail banking in Slovenia recorded EUR 32.5 million in profit before tax, with an increase of EUR 14.6 million or 82% YoY, mostly due to lower cost of risk, cost optimisation, and higher net fees and commissions. Net interest income remained stable YoY because of increased retail loans regardless of the lower net interest income due to lower interest rates. Net interest income increased by 4% QoQ, as well as net fees and commission income, which increased 3% QoQ. Costs were reduced by 4% or EUR 3.2 million YoY, while the cost of risk in the nine months of 2017 remained low.
Strategic foreign markets continued a positive trend, showing a profit of EUR 88.3 million (increase of EUR 30.7 million or 53% YoY). Positive developments were recorded both in interest and non-interest income, in addition also cost of risk was negative.
Financial markets in Slovenia generated EUR 19.8 million of profit before tax, meaning EUR 7.0 million or a 26% decrease YoY mostly due to the expiry of some high yielding Slovenian bonds, and despite positive one-off effects from divestments of debt securities (portfolio of French bonds in net effect of EUR 1.8 million). Higher net non-interest income compared to the nine months of 2016 increased due to strong growth in the investment banking business.

Non-core markets and activities: positive results of operations and continuing divestments

The non-core markets and activities in the nine months of 2017 recorded a profit before tax of EUR 30.7 million, while in the nine months of 2016 recorded a loss of EUR 18.7 million. This increase was due to non-recurring income in a total amount of EUR 12.3 million from the sale of nonstrategic equity investments as a one-off capital gain, the sale of non-core subsidiaries NLB Factoring Brno a.s. "v likvidaci", and the settlement with Zavarovalnica Triglav. Also, active management of NPLs, which was reflected in the release of impairments and provisions in the amount of EUR 13.0 million (1-9 2016: formation of EUR 19.7 million), contributed to the positive segment result.

Net interest income

Figure 9: Net interest income of NLB Group (in EUR million)

The share of net interest income in the Group's total income decreased during the nine months of 2017 to 63% from 67% in the same period of 2016. Net interest income totaled EUR 228.7 million, which is 4% less YoY, mostly due to decreasing yields on the securities portfolio and the maturity of a high yielding Bank Asset Management Company (BAMC; the Slovenian "bad bank") bond in December 2016. Contribution of other banks to the Group's interest income increased, reaching 48% (increase of 4.6 percentage points YoY). The Group continued with the active management of its interest expenses, repaying or repricing some funding lines, and continuously adjusting deposit pricing in line with the prevailing low interest rate environment, thereby substantially reducing interest expenses (24% YoY).

Net interest margin (NIM) of the Group decreased by 0.07 percentage points YoY to 2.54%. The margin of core banks on SEE markets remains above the level recorded in the nine months of 2016, and in Q3 2017 the Bank's interest margin also increased due maturity of NLB bond in July (bond issued in July 2014).

Figure 10: Net interest margin (in %)

1 jan. - 30 sep. 2016 2016 1 jan.- 31 mar. 2017 1 jan.- 30 jun. 2017 1 jan.- 30 sep. 2017

Net interest income – segment results

Figure 11: Net interest income of NLB Group by segments (in EUR million)

Figure 12: Net interest income of NLB Group by segments (in EUR million) – quarterly comparison

Net interest income in key/mid/small corporates in Slovenia decreased by EUR 0.3 million, or 1% YoY as a result of the decreasing interest margin due to intense competition and a loan volume decrease of 8% YtD in regular corporate clients' business.

Interest income in retail banking in Slovenia remained stable YoY as a result of overall slightly lower margins despite loan volume growth by 5% YtD. Net interest income grew by 4% QoQ.

Strategic foreign markets improved net interest income by EUR 6.2 million or 6%, due to higher interest margins in the SEE region (0.06 of a percentage point increase YoY); and increased loan volumes of 6%, or EUR 134.1 million YtD. Net interest income grew QoQ by 7%.

Net interest income in financial markets in Slovenia decreased by EUR 11.3 million YoY due to maturity of BAMC bond in December 2016 and decreasing yields in the securities portfolio.

Net non-interest income

Figure 13: Net non-interest income of NLB Group (in EUR million)

The Group recorded a net non-interest income of EUR 137.5 million in the nine months of 2017, EUR 18.7 million, or 16% higher YoY. Regular net non-interest income (excluding one-off effects⁹ ) increased by 18%, or EUR 18.7 million YoY, and was impacted by the following factors:

EUR 8.0 million higher net fees and commissions, of which EUR 5.3 million mainly derive from an increase in transactional activities such as credit cards and ATMs, payments, and

Note:

⁹For the one-off effects please refer to notes 5 and 6.

transactional accounts; and EUR 3.1 million derives from ancillary banking services, i.e. bank-assurance and investment funds;

EUR 4.9 million higher net profit from financial operations, of which EUR 1.8 million was attributed to the sale of a French bond portfolio;
EUR 6.9 million higher net other income which was in 2016 affected by higher payments to SRF (EUR 1.2 million) and impairments of investment property (EUR 5.5 million).

Non-interest income was 22% higher QoQ, mainly due to higher net fees and commission income, and the positive effects from the sale of non-core subsidiary NLB Factoring Brno a.s. "v likvidaci" (EUR 2.5 million) in Q3 2017, while in the Q2 2017 the negative effects related to payment in SRF and DGS affected net non-interest income in a total amount of EUR 7.4 million.

Net non-interest income – segment results

Figure 14: Net non-interest income by segments of NLB Group (in EUR million)

Figure 15: Fee and commission income by segments of NLB Group (in EUR million) – quarterly comparison

Net non-interest income of key business activities increased, especially in fee and commission income.

Retail banking in Slovenia recorded an increase in net non-interest income of EUR 4.3 million, or 9% due to stable growth of net fees and commission in recent quarters, and only in Q3 2017 by 3% mostly from bank-assurance and investment funds services.
Net non-interest income in key/mid/small corporates in Slovenia grew by 8% YoY mainly due to increase of fee and commissions income. In Q3 2017 segment realised decrease of fee and commission income of 5%.
Strategic foreign markets increased in net non-interest income by EUR 2.2 million or 7% YoY, and of which fees and commission by EUR 3.9 million or 12% YoY. Growth is practically evident in all SEE banks. Fee and commissions income increased by 4% QoQ.
Financial markets in Slovenia realised EUR 5.0 million net non-interest income in the nine months of 2017, compared to EUR 0.6 million in nine months of 2016, mainly because of strong revenue growth of investment banking/securities services.
Non-core markets and activities contributed significantly (EUR 22.3 million) to the Group's net non-interest income, most of which were related to the non-recurring events. Significant

progress was realised in contributing to non-interest income from real estate management, which amounted to EUR 4.5 million.

Net non-interest income in the segment of other activities was lower by EUR 9.7 million because of a one-off effect in H1 2016 related to the transaction of Visa EU shares in the amount of EUR 7.8 million.

Total costs

Figure 16: Total costs of NLB Group – evolution YoY (in EUR million)

Total costs amounted to EUR 207.8 million (of which EUR 1.5 million comprised of non-recurring costs related to restructuring and the privatisation process), which were 3% lower YoY. A major decrease was recorded in general and administrative costs (-5% YoY) as a result of successful cost-optimisation efforts. Depreciation costs and labour costs also decreased by 3% and 2% YoY, respectively.

CIR decreased by 3.1 percentage points to 56.8%. CIR (normalised) decreased by 2.9 percentage points to 58.5%.

Net impairments and provisions

The Group released impairments and provisions for credit losses in the amount of EUR 36.9 million in the nine months of 2017, which was the result of some successful collections, improved quality credit of the portfolio, and the release of pool provisions in H1 2017. Namely, the Group recalculates the probability of default (PD's) for pool provisions once a year, and the full impact was already recognised in the results for H1 2017. Positive trends in the economic environment and consequently a lower transition of performing customers into default in years 2016 and 2015 contributed positively to lower percentages of PD's, and consequently to lower pool provisions mainly in the segment of corporate clients. The effect of the release of impairments on the Group level in the segment of corporate clients amounts to approximately EUR 21 million. On the other hand, in 2016 additional impairments related to the non-performing portfolio sale in the amount of EUR 25.5 million were formed.

Statement of financial position

Table 3: Statement of the financial position of NLB Group

	NLB Group
in EUR million	30 Sep 2017	30 June 2017	31 Dec 2016	Change YtD	Change QoQ
ASSETS Cash, cash balances at central banks and other demand deposits at banks	1,094.2	1,288.7	1,299.0	-16%	-15%
Loans to banks	483.0	450.8	435.5	11%	7 %
Loans to customers	6,989.1	6,974.2	6,997.4	0 %	0 %
Gross loans	7,787.8	7,826.0	7,900.8	-1%	0 %
- corporate	3,834.5	3,911.0	3,917.4	-2%	-2%
- individuals	3,408.8	3,327.6	3,190.7	7 %	2 %
- state	544.5	587.4	792.7	-31%	-7%
Impairments	-798.7	-851.9	-903.4	-12%	-6%
Financial assets	2,911.2	2,828.1	2,778.0	5 %	3 %
- Held for trading	110.2	120.4	87.7	26%	-8%
- Available-for-sale, held to maturity and designated at fair value through income statement	2,801.1	2,707.7	2,690.3	4 %	3 %
Investments in subsidiaries, associates and joint ventures	42.5	40.9	43.2	-2%	4 %
Property and equipment, investment property	271.0	275.0	280.5	-3%	-1%
Intangible assets	35.1	36.8	34.0	3 %	-4%
Other assets	181.7	175.1	171.4	6 %	4 %
Total assets	12,007.9	12,069.6	12,039.0	0 %	-1%
LIABILITIES Deposits from customers	9,672.2	9,491.2	9,439.2	2 %	2 %
- corporate	2,191.7	2,102.1	2,182.6	0 %	4 %
- individuals	7,123.1	7,044.9	6,905.1	3 %	1 %
- state	357.3	344.3	351.5	2 %	4 %
Deposits from banks and central banks	48.8	62.8	42.3	15%	-22%
Debt securities in issue	0.0	282.0	277.7	-100%	-100%
Borrowings	370.4	390.7	455.4	-19%	-5%
Other liabilities	244.4	246.5	271.6	-10%	-1%
Subordinated liabilities	27.5	27.3	27.1	1 %	1 %
Equity	1,610.9	1,538.0	1,495.3	8 %	5 %
Non-controlling interests	33.7	31.1	30.3	11%	9 %
TOTAL LIABILITIES AND EQUITY	12,007.9	12,069.6	12,039.0	0 %	-1%

Total assets of the Group at the end of Q3 2017 remained almost at the same level YtD, and totaled EUR 12,007.9 million. A slight decrease of EUR 31.1 million was driven mainly by lower debt securities and borrowings, and the continued inflow of deposits.

Assets

Figure 17: Total assets of NLB Group – structure (in EUR million)

Gross loans in key business activities slightly increased YtD. An 8% YtD decrease in the gross loans in key corporate segment in Slovenia was neutralised by the increase of gross loans in the retail segment in Slovenia (5% YtD). High growth in gross loans was recorded in strategic foreign markets (EUR 134.1 million or 6% YtD), with record growth in Kosovo and Serbia.

Liabilities

Balance sheet movements were mainly driven by increasing deposits from retail customers, both in Slovenia and strategic foreign markets.

The structural share of customers' deposits continued to increase, and accounted for 81% of the total funding of the Group at the end of Q3 2017. This increase derives from retail deposits exclusively, while corporate and state deposits were stable. The structural share of sight deposits continues to increase.

The loan-to-deposit ratio (LTD) (net) decreased by 1.8 percentage points YtD as a result of growing, but still moderate corporate demand for loans and the increasingly "cash-rich" retail sector.

Figure 19: Total liabilities of NLB Group – structure (in EUR million)

Figure 20: Deposits from customers by core segment (in EUR million)

Deposits from customers in key business activities increased by 2.4% YtD. A decrease of deposits in the key corporate segment in Slovenia of EUR 76.4 million, or 7% YtD was neutralised by the increase of EUR 167.3 million or 3% YtD of deposits in the retail segment in Slovenia.

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

Capital adequacy

0.0 20.0 40.0 60.0 80.0 100.0 120.0 140.0 160.0 180.0 200.0 220.0 240.0 260.0 280.0 300.0 320.0 340.0 360.0 380.0 400.0 420.0 440.0 460.0 480.0 500.0 520.0 540.0 560.0 580.0 600.0 620.0 640.0 660.0 680.0 700.0 720.0 740.0 760.0 780.0 800.0 820.0 840.0 860.0 880.0 900.0 920.0 940.0 960.0 980.0 1000.0 1020.0 1040.0 1060.0 1080.0 1100.0 1120.0 1140.0 1160.0 1180.0 1200.0 1220.0 1240.0 1260.0 1280.0 1300.0 1320.0 1340.0 1360.0 1380.0 1400.0 1420.0 1440.0 1460.0 1480.0 1500.0 1520.0 1540.0 1560.0 1580.0 1600.0

Figure 21: NLB Group CET 1 capital (in EUR million) and CET 1 ratio (in %)

The total capital ratio of the Group was 16.3%, which is 0.7 of a percentage point lower YtD, due to increased risk weighted assets (RWA) and a slight decrease in capital (lower capital revaluation adjustments). The capital of the Group consists exclusively of CET 1, so the total capital ratio is the same as CET 1 ratio.

Table 4: Total risk exposure (in EUR million) for NLB Group

	30 Sep 2017	30 June 2017	31 Dec 2016	Change YtD
Total risk exposure amount (RWA)	8,128	8,007	7,862	3.4%
RWA for credit risk	7,102	6,956	6,865	3.5%
RWA for market risks + CVA1	76	101	105	-27.3%
RWA for operational risk	949	949	893	6.4%
1Credit value adjustment

In the nine months of 2017, RWA increased by EUR 265.9 million, of which EUR 237.7 million was on credit risks. RWA on the corporate segment increased by EUR 148.2 million mainly due to the different use of the small and medium enterprise (SME) supporting factor for performing exposures to SMEs. The RWA for retail exposures increased by EUR 141.1 million due to housing and consumer loans growth. Lower RWA for exposures to commercial banks by EUR 70.2 million is the result of liquidity management, while RWA for equity exposures decreased by EUR 25.8 million mainly as a result of the sale of Petrol shares. RWA on market risks decreased by EUR 28.6 million, mainly (EUR -19.1 million) due to lower stock and shorter maturity of debt securities in trading book. RWA on operating risks increased by EUR 56.7 million due to higher three-year average income, which represents the basis for the calculation.

Risk management

The key goal of Risk Management is to assess, monitor, and manage risks within the Group in line with the Group's Risk Appetite and Risk Strategy, which are its fundamental risk management documents. Moreover, the Group is constantly enhancing its risk management system in order to support business decision-making, comprehensive steering, and mitigation processes by incorporating ICAAP, ILAAP, Recovery plan, and other internal stress-testing capabilities.

One of the key aims of Risk Management is to ensure that the Group's capital adequacy is managed prudently. The Group monitors its capital adequacy at both the Group and subsidiary bank levels within the framework of the established ICAAP process under normal conditions (regulatory capital adequacy) and stressed conditions. As at 30 September 2017, the Group had a strong level of capital adequacy (CET 1) of 16.3%, which is well within the stated risk appetite limit, and above the EU average published by the EBA. In line with the Supervisory Review and Evaluation Process (SREP), CET 1, the total capital requirement for the Group in 2017 is currently fulfilled in the current and fully loaded requirement.

The second key aim is to maintain a solid liquidity level and structure. The Group holds a strong liquidity position at both the Group and subsidiary bank levels, well above the risk appetite, with the liquidity coverage ratio (LCR) (according to the delegated act) of 332% and unencumbered eligible reserves in the amount of EUR 4,844 million. Even if the stress scenario was to occur, the Group has sufficiently high liquidity reserves in place in the form of placements at the ECB, prime debt securities, and money market placements. The main funding base of the Group at the Group and individual subsidiary bank levels predominately entails customer deposits with a comfortable level of LTD in the amount of 72.3%, giving the Group the potential for further customer loan placements.

Improving the quality of the credit portfolio represents the third and most important key aim, with a focus on the quality of new placements leading to a diversified portfolio of customers. The Group has an active presence on the market, financing existing and new creditworthy clients. The lower indebtedness of companies and positive trends in industry have had a positive influence on the approval of new loans. In the retail segment, positive trends have been recorded throughout the region in terms of clients putting greater trust in economic developments, alongside the related recovery in consumption and the real estate market.

The current structure of gross exposures (on- and off-balance sheet) consists of retail clients (37%), large corporate clients (20%), SMEs, and micro companies (26%), with the remainder of the portfolio made up of other liquid assets.

Gross exposures also include reserves at central banks and demand deposits at banks.

Figure 23: Structure of NLB Group credit portfolio by client credit ratings (in %)

The Group's primary objective is to provide comprehensive services to clients by utilising prudent risk management principles. The Group is constantly improving its internal rating and scoring models in order to ensure that newly approved loans are of high quality, closely following the sustainability of credit risk volatility, and the sustainable development of the subsidiary banking members. In Q3 2017, efforts continued with the low formation of new NPLs and sustainable risk costs, which were also related to the positive macroeconomic conditions at the time.

The legacy of NPE continues to have an important impact on the restructuring and work-out capacities and approaches built in the past, although there is an increasing focus on actively resolving new cases through adopting a faster and more active approach to restructuring and workout. The Group's strong commitment to reducing the NPE legacy is maintained by precisely set targets and constantly monitoring progress. The existing non-performing credit portfolio stock in the Group was reduced in 2017 by the end of Q3 from EUR 1,299 million to EUR 1,089 million. The share of NPLs decreased from 13.8% to 11.9% YtD, while the share of NPE by the EBA methodology fell from 10.0% to already below 8.3% YtD.

The coverage ratio, which remains high at 77.5%, represents an important strength for the Group. The Group's direct NPL coverage ratio equals 65.6%, which is well above the EU average published by the EBA (45.0% as at the end of H1 2017). As such, this means a further reduction in NPLs can be made without significantly influencing the cost of risk in the years ahead.

Figure 24: NLB Group NPE (NPE % by the EBA) and NPL ratio

Coverage ratio (Coverage of gross non-performing loans with impairments for all loans) NPL coverage ratio (Coverage of gross non-performing loans with impairments for non-performing loans)

When considering market risks, the Group takes the view that such risks should not significantly affect a single Group subsidiary or the whole Group's operations. The Group's net open FX position arising from transaction risk is very low and amounts to 1.6% of the total capital.

Note:

¹⁰ The coverage of the gross NPL portfolio with impairments on the entire loan portfolio

¹¹ The coverage of the gross NPL portfolio with impairments on the NPL portfolio

The exposure to interest rate risk on the Group level is relatively low, but has increased moderately in the recent period. The Bank's net interest income sensitivity in the case of a Euribor increase of 50 bps would amount to EUR 8.1 million, whereas a decrease in exposure would be lower due to the zero floor clauses in place. Moreover, the basis point value (BPV) sensitivity (with inclusion of sight deposit allocation) of 200 bps equals 6.3% of capital.

In the area of operational risks, additional efforts were made regarding proactive prevention and the minimisation of potential damage in the future.

Condensed

NLB

Interim Financial

Statements of

NLB Group and

44 NLB Group Interim Report September 2017

	Condensed income statement	47
	Condensed income statement – by quarter for NLB Group	48
	Condensed income statement – by quarter for NLB	49
	Condensed statement of comprehensive income	50
	Condensed statement of comprehensive income – by quarter for NLB Group	51
	Condensed statement of comprehensive income – by quarter for NLB	51
	Condensed statement of financial position	52
	Condensed statement of changes in equity	53
	Condensed statement of cash flows	54
	Statement of management's responsibility	56
	Notes to the condensed interim financial statements	57
1.	General information	57
2.	Summary of significant accounting policies	57
2.1.	Statement of compliance	57
2.2.	Accounting policies	57
3.	Changes in NLB Group	59
4.	Notes to the condensed income statement	60
4.1.	Interest income and expenses	60
4.2.	Fee and commission income and expenses	61
4.3.	Gains less losses from financial assets and liabilities not classified as at fair value through profit or loss	61
4.4.	Gains less losses from financial assets and liabilities held for trading	62
4.5.	Other operating income	62
4.6.	Other operating expenses	62
4.7.	Administrative expenses	62
4.8.	Provisions for other liabilities and charges	63
4.9.	Impairment charge	63
4.10.	Gains less losses from investments in subsidiaries, associates and joint ventures	64
4.11.	Income tax	64
5.	Notes to the condensed statement of financial position	64
5.1.	Cash, cash balances at central banks and other demand deposits at banks	64
5.2.	Financial instruments held for trading	64
5.3.	Available-for-sale financial assets	65
5.4.	Loans and advances	65
5.4.1.	Debt securities	65
5.4.2.	Loans and advances to banks	66
5.4.3.	Loans and advances to customers	66
5.4.4.	Other financial assets	66
5.4.5.	Movements in allowance for the impairment of loans and advances to banks, loans and advances to
	customers and other financial assets	67
5.5.	Held-to-maturity financial assets	67
5.6.	Investment property	67
5.7.	Other assets	68
5.8.	Deferred tax	68
5.9.	Financial liabilities measured at amortised cost	69

0

5.9.1.	Debt securities in issue	69
5.9.2.	Subordinated liabilities	69
5.9.3.	Other financial liabilities	70
5.10.	Provisions	70
5.11.	Income tax relating to components of other comprehensive income	72
5.12.	Other liabilities	72
5.13.	Book value per share	72
5.14.	Capital adequacy ratio	73
5.15.	Off-balance sheet liabilities	73
5.16.	Fair value hierarchy of financial and non-financial assets and liabilities	73
6.	Related-party transactions	83
7.	Analysis by segment for NLB Group	86
8.	Subsidiaries	88
9.	Events after the end of the reporting period	89

Condensed income statement

		NLB Group		NLB
		nine months ended		nine months ended
	Notes	September 2017	September 2016	September 2017	September 2016
Interest and similar income	4.1.	270,914	294,059	139,775	164,290
Interest and similar expenses	4.1.	(42,221)	(55,243)	(23,412)	(31,815)
Net interest income		228,693	238,816	116,363	132,475
Dividend income		153	1,194	28	1,108
Fee and commission income	4.2.	153,890	143,173	94,736	91,097
Fee and commission expenses	4.2.	(38,681)	(35,377)	(21,317)	(19,894)
Net fee and commission income		115,209	107,796	73,419	71,203
Gains less losses from financial assets and liabilities not classified as at fair value through profit or loss	4.3.	11,834	14,261	11,440	14,111
Gains less losses from financial assets and liabilities held for trading	4.4.	9,392	3,689	5,088	(1,015)
Gains less losses from financial assets and liabilities designated at fair value
through profit or loss		49	123	-	-
Fair value adjustments in hedge accounting		(1,148)	(912)	(1,148)	(110)
Foreign exchange translation gains less losses		2,377	1,088	(517)	1,079
Gains less losses on derecognition of assets other than held for sale		1,611	712	247	236
Other operating income	4.5.	18,740	18,863	9,508	9,637
Other operating expenses	4.6.	(19,579)	(27,825)	(10,421)	(11,790)
Administrative expenses	4.7.	(187,016)	(192,807)	(114,853)	(120,799)
Depreciation and amortisation		(20,827)	(21,362)	(13,515)	(14,315)
Provisions for other liabilities and charges	4.8.	8,361	2,519	5,469	6,427
Impairment charge	4.9.	28,911	(39,970)	15,430	(56,340)
Gains less losses from investments in subsidiaries, associates and joint ventures	4.10.	2,816	3,987	48,188	28,819
Net gain/(loss) from non-current assets held for sale		(1,129)	(176)	418	(259)
Profit before income tax		198,447	109,996	145,144	60,467
Income tax	4.11.	(7,170)	(14,353)	124	(6,527)
Profit for the period		191,277	95,643	145,268	53,940
Attributable to owners of the parent		183,991	91,470	145,268	53,940
Attributable to non-controlling interests		7,286	4,173	-	-
Earnings per share/diluted earnings per share (in EUR per share)		9.20	4.57	7.26	2.70

Condensed income statement – by quarter for NLB Group

	NLB Group
	three months ended			three months ended
	September	June	March	September	June	March
Interest and similar income	2017 92,168	2017 88,389	2017 90,357	2016 99,422	2016 94,366	2016 100,271
Interest and similar expenses	(12,042)	(15,153)	(15,026)	(17,290)	(18,130)	(19,823)
Net interest income	80,126	73,236	75,331	82,132	76,236	80,448
Dividend income	11	133	9	230	956	8
Fee and commission income	53,260	51,819	48,811	49,734	48,289	45,150
Fee and commission expenses	(13,804)	(13,467)	(11,410)	(13,123)	(11,715)	(10,539)
Net fee and commission income	39,456	38,352	37,401	36,611	36,574	34,611
Gains less losses from financial assets and liabilities not classified as at fair value through profit or loss	20	120	11,694	1,244	8,100	4,917
Gains less losses from financial assets and liabilities held for trading	3,712	3,164	2,516	1,173	1,483	1,033
Gains less losses from financial assets and liabilities designated at fair value through profit or loss	31	(62)	80	80	55	(12)
Fair value adjustments in hedge accounting	226	(451)	(923)	(678)	(167)	(67)
Foreign exchange translation gains less losses	1,355	193	829	151	344	593
Gains less losses on derecognition of assets other than held for sale	141	1,172	298	33	324	355
Other operating income	5,850	5,490	7,400	6,233	6,535	6,095
Other operating expenses	(4,478)	(11,340)	(3,761)	(12,631)	(11,591)	(3,603)
Administrative expenses	(61,748)	(64,643)	(60,625)	(64,417)	(64,604)	(63,786)
Depreciation and amortisation	(7,040)	(6,913)	(6,874)	(6,998)	(7,107)	(7,257)
Provisions for liabilities and charges	3,132	2,928	2,301	(1,958)	4,935	(458)
Impairment charge	8,520	(1,826)	22,217	(14,500)	(29,724)	4,254
Gains less losses from investments in subsidiaries, associates and joint ventures	82	1,640	1,094	1,531	1,209	1,247
Net gain/(loss) from non-current assets held for sale	(1,333)	81	123	(4)	(181)	9
Profit before income tax	68,063	41,274	89,110	28,232	23,377	58,387
Income tax	923	(3,286)	(4,807)	(4,712)	(5,045)	(4,596)
Profit for the period	68,986	37,988	84,303	23,520	18,332	53,791
Attributable to owners of the parent	66,072	36,364	81,555	21,979	17,356	52,135
Attributable to non-controlling interests	2,914	1,624	2,748	1,541	976	1,656

Condensed income statement – by quarter for NLB

	NLB
		three months ended		three months ended
	September June March			September	June	March
	2017	2017	2017	2016	2016	2016
Interest and similar income	46,467	45,495	47,813	55,013	51,651	57,626
Interest and similar expenses	(6,034)	(8,902)	(8,476)	(9,909)	(10,473)	(11,433)
Net interest income	40,433	36,593	39,337	45,104	41,178	46,193
Dividend income	4	19	5	223	885	-
Fee and commission income	32,277	32,019	30,440	31,001	31,256	28,840
Fee and commission expenses	(7,412)	(7,665)	(6,240)	(7,112)	(6,784)	(5,998)
Net fee and commission income	24,865	24,354	24,200	23,889	24,472	22,842
Gains less losses from financial assets and liabilities not classified as at fair value	20	128	11,292	1,229	7,982	4,900
through profit or loss
Gains less losses from financial assets and liabilities held for trading	2,027	1,792	1,269	(627)	(68)	(320)
Fair value adjustments in hedge accounting	226	(451)	(923)	124	(167)	(67)
Foreign exchange translation gains less losses	(687)	(429)	599	56	692	331
Gains less losses on derecognition of assets other than held for sale	67	(37)	217	114	55	67
Other operating income	2,476	2,732	4,300	3,141	3,319	3,177
Other operating expenses	(1,591)	(8,126)	(704)	(5,784)	(5,313)	(693)
Administrative expenses	(37,819)	(39,670)	(37,364)	(40,011)	(40,343)	(40,445)
Depreciation and amortisation	(4,579)	(4,497)	(4,439)	(4,706)	(4,774)	(4,835)
Provisions for liabilities and charges	1,087	3,259	1,123	(383)	7,425	(615)
Impairment charge	3,913	561	10,956	(39,298)	(20,553)	3,511
Gains less losses from investments in subsidiaries, associates and joint ventures	5,971	31,020	11,197	133	18,004	10,682
Net gain/(loss) from non-current assets held for sale	232	63	123	(87)	(181)	9
Profit before income tax	36,645	47,311	61,188	(16,883)	32,613	44,737
Income tax	3,305	(919)	(2,262)	(378)	(3,705)	(2,444)
Profit for the period	39,950	46,392	58,926	(17,261)	28,908	42,293

Condensed statement of comprehensive income

		NLB Group		NLB nine months ended
		nine months ended
	Note	September 2017	September 2016	September 2017	September 2016
Net profit for the period after tax		191,277	95,643	145,268	53,940
Other comprehensive income/(loss) after tax		(4,711)	16,758	(9,276)	8,243
Items that will not be reclassified to income statement
Actuarial gains/(losses) on defined benefit pension plans		(846)	1,475	(950)	1,466
Share of other comprehensive income/(losses) of entities accounted for using the equity method		(2)	-	-	-
Income tax relating to components of other comprehensive income	5.11.	90	(125)	90	(125)
Items that may be reclassified subsequently to income statement
Foreign currency translation		3,168	(352)	-	-
Translation gains/(losses) taken to equity		3,168	(352)	-	-
Cash flow hedges (effective portion)		-	(78)	-	(78)
Valuation gains/(losses) taken to equity		-	(515)	-	(515)
Transferred to income statement		-	437	-	437
Available-for-sale financial assets		(8,922)	12,711	(10,390)	8,394
Valuation gains/(losses) taken to equity		2,912	26,983	1,050	22,516
Transferred to income statement	4.3. and 4.9.	(11,834)	(14,272)	(11,440)	(14,122)
Share of other comprehensive income of entities accounted for using the equity method		(74)	5,861	-	-
Income tax relating to components of other comprehensive income	5.11.	1,875	(2,734)	1,974	(1,414)
Total comprehensive income for the period after tax		186,566	112,401	135,992	62,183
Attributable to owners of the parent		179,091	108,112	135,992	62,183
Attributable to non-controlling interests		7,475	4,289	-	-

Condensed statement of comprehensive income – by quarter for NLB Group

in EUR thousand

	NLB Group
		three months ended		three months ended
	September 2017	June 2017	March 2017	September 2016	June 2016	March 2016
Net profit for the period after tax	68,986	37,988	84,303	23,520	18,332	53,791
Other comprehensive income/(loss) after tax	6,678	827	(12,216)	11,898	(1,890)	6,750
Items that will not be reclassified to income statement
Actuarial gains/(losses) on defined benefit pension plans	(846)	-	-	1,475	-	-
Share of other comprehensive income/(losses) of entities accounted for using the equity method	-	-	(2)	-	-	-
Income tax relating to components of other comprehensive income	90	-	-	(125)	-

Items that may be reclassified subsequently to income statement
Foreign currency translation	1,466	1,142	560	725	397	(1,474)
Translation gains/(losses) taken to equity	1,466	1,142	560	725	397	(1,474)
Cash flow hedges (effective portion)	-	-	-	87	(4)	(161)
Valuation gains/(losses) taken to equity	-	-	-	(59)	(151)	(305)
Transferred to income statement	-	-	-	146	147	144
Available-for-sale financial assets	6,542	430	(15,894)	8,715	(4,315)	8,311
Valuation gains/(losses) taken to equity	6,573	539	(4,200)	9,951	3,785	13,247
Transferred to income statement	(31)	(109)	(11,694)	(1,236)	(8,100)	(4,936)
Share of other comprehensive income/(loss) of entities accounted for using the equity method	727	(864)	63	2,496	1,583	1,782
Income tax relating to components of other comprehensive income	(1,301)	119	3,057	(1,475)	449	(1,708)
Total comprehensive income for the period after tax	75,664	38,815	72,087	35,418	16,442	60,541
Attributable to owners of the parent	72,641	37,194	69,256	33,751	15,440	58,921
Attributable to non-controlling interests	3,023	1,621	2,831	1,667	1,002	1,620

Condensed statement of comprehensive income – by quarter for NLB

	NLB
	three months ended			three months ended
	September 2017	June 2017	March 2017	September 2016	June 2016	March 2016
Net profit for the period after tax	39,950	46,392	58,926	(17,261)	28,908	42,293
Other comprehensive income/(loss) after tax	3,725	186	(13,187)	5,430	(3,752)	6,565
Items that will not be reclassified to income statement
Actuarial gains/(losses) on defined benefit pensions plans	(950)	-	-	1,466	-	-
Income tax relating to components of other comprehensive income	90	-	-	(125)	-	-
Items that may be reclassified subsequently to income statement
Cash flow hedges (effective portion)	-	-	-	87	(4)	(161)
Valuation gains/(losses) taken to equity	-	-	-	(59)	(151)	(305)
Transferred to income statement	-	-	-	146	147	144
Available-for-sale financial assets	5,660	230	(16,280)	4,840	(4,517)	8,071
Valuation gains/(losses) taken to equity	5,680	358	(4,988)	6,061	3,465	12,990
Transferred to income statement	(20)	(128)	(11,292)	(1,221)	(7,982)	(4,919)
Income tax relating to components of other comprehensive income	(1,075)	(44)	3,093	(838)	769	(1,345)
Total comprehensive income for the period after tax	43,675	46,578	45,739	(11,831)	25,156	48,858

Condensed statement of financial position

Notes 30.9.2017 31.12.2016 30.9.2017 31.12.2016 Cash, cash balances at central banks and other demand deposits at banks 5.1. 1,094,218 1,299,014 431,412 617,039 Trading assets 5.2. 110,169 87,699 110,163 87,693 Financial assets designated at fair value through profit or loss 5,694 6,694 1,431 2,011 Available-for-sale financial assets 5.3. 2,195,972 2,072,153 1,707,952 1,594,094 Derivatives - hedge accounting 2,030 217 2,030 217 Loans and advances - debt securities 5.4.1. 82,012 85,315 82,012 85,315 - loans and advances to banks 5.4.2. 482,969 435,537 433,151 408,056 - loans and advances to customers 5.4.3. 6,907,087 6,912,067 4,694,793 4,843,594 - other financial assets 5.4.4. 53,879 61,014 44,475 36,151 Held-to-maturity investments 5.5. 599,396 611,449 599,396 611,449 Fair value changes of the hedged items in portfolio hedge of interest rate risk 414 678 414 678 Non-current assets classified as held for sale 4,936 4,263 1,651 1,788 Property and equipment 189,700 196,849 86,864 90,496 Investment property 5.6. 81,340 83,663 8,628 8,151 Intangible assets 35,149 33,970 24,233 23,345 Investments in subsidiaries - - 351,463 339,693 Investments in associates and joint ventures 42,468 43,248 6,952 7,031 Current income tax assets 3,317 2,888 2,734 2,124 Deferred income tax assets 5.8. 10,445 7,735 12,902 10,622 Other assets 5.7. 106,726 94,558 7,733 8,419 TOTAL ASSETS 12,007,921 12,039,011 8,610,389 8,777,966 Trading liabilities 5.2. 12,593 18,791 12,594 18,787 Financial liabilities designated at fair value through profit or loss 1,431 2,011 1,431 2,011 Derivatives - hedge accounting 24,938 29,024 24,938 29,024 Financial liabilities measured at amortised cost - deposits from banks and central banks 5.9. 48,826 42,334 97,783 74,977 - borrowings from banks and central banks 5.9. 293,229 371,769 271,184 338,467 - due to customers 5.9. 9,670,751 9,437,147 6,722,876 6,615,390 - borrowings from other customers 5.9. 77,171 83,619 6,677 4,274 - debt securities in issue 5.9.1. - 277,726 - 277,726 - subordinated liabilities 5.9.2. 27,479 27,145 - - - other financial liabilities 5.9.3. 110,658 110,295 72,412 68,784 Provisions 5.10. 76,302 100,914 59,112 79,546 Current income tax liabilities 2,477 3,146 - - Deferred income tax liabilities 5.8. 1,411 727 - - Other liabilities 5.12. 16,061 8,703 4,376 4,186 TOTAL LIABILITIES 10,363,327 10,513,351 7,273,383 7,513,172 EQUITY AND RESERVES ATTRIBUTABLE TO OWNERS OF THE PARENT Share capital 200,000 200,000 200,000 200,000 Share premium 871,378 871,378 871,378 871,378 Accumulated other comprehensive income 25,068 29,969 25,305 34,581 Profit reserves 13,522 13,522 13,522 13,522 Retained earnings 500,877 380,444 226,801 145,313 1,610,845 1,495,313 1,337,006 1,264,794 Non-controlling interests 33,749 30,347 - - TOTAL EQUITY 1,644,594 1,525,660 1,337,006 1,264,794 TOTAL LIABILITIES AND EQUITY 12,007,921 12,039,011 8,610,389 8,777,966		NLB Group		NLB

Condensed statement of changes in equity

in EUR thousand

NLB Group	Share capital	Share premium	Accumulated other comprehensive income	Profit reserves	Retained earnings	Equity attributable to owners of the parent	Equity attributable to non controlling interests	Total equity
Balance as at 1 January 2017	200,000	871,378	29,968	13,522	380,444	1,495,312	30,347	1,525,659
- Net profit for the period	-	-	-	-	183,991	183,991	7,286	191,277
- Other comprehensive income	-	-	(4,900)	-	-	(4,900)	188	(4,712)
Total comprehensive income after tax	-	-	(4,900)	-	183,991	179,091	7,474	186,565
Dividends paid	-	-	-	-	(63,780)	(63,780)	(3,725)	(67,505)
Other*	-	-	-	-	222	222	(347)	(125)
Balance as at 30 September 2017	200,000	871,378	25,068	13,522	500,877	1,610,845	33,749	1,644,594

in EUR thousand

						Equity	Equity
			Accumulated			attributable	attributable
			other			to owners	to non
	Share	Share	comprehensive	Profit	Retained	of the	controlling
NLB Group	capital	premium	income	reserves	earnings	parent	interests	Total equity
Balance as at 1 January 2016	200,000	871,378	23,603	13,522	314,307	1,422,810	27,573	1,450,383
- Net profit for the period	-	-	-	-	93,289	93,289	4,173	97,462
- Other comprehensive income	-	-	16,642	-	-	16,642	116	16,758
Total comprehensive income after tax	-	-	16,642	-	93,289	109,931	4,289	114,220
Dividends paid	-	-	-	-	(43,880)	(43,880)	(2,799)	(46,679)
Other*	-	-	-	-	18	18	-	18
Balance as at 30 September 2016	200,000	871,378	40,245	13,522	363,734	1,488,879	29,063	1,517,942
							in EUR thousand
NLB			Share capital	Share premium	Accumulated other comprehensive income	Profit reserves	Retained earnings	Total equity

in EUR thousand

			Accumulated
			other
		Share	comprehensive	Profit	Retained
		premium	income	reserves	earnings	Total equity
Balance as at 1 January 2017	200,000	871,378	34,581	13,522	145,313	1,264,794
- Net profit for the period	-	-	-	-	145,268	145,268
- Other comprehensive income	-	-	(9,276)	-	-	(9,276)
Total comprehensive income after tax	-	-	(9,276)	-	145,268	135,992
Dividends paid	-	-	-	-	(63,780)	(63,780)
Balance as at 30 September 2017	200,000	871,378	25,305	13,522	226,801	1,337,006

in EUR thousand

			Accumulated
			other
		Share	comprehensive	Profit	Retained
NLB	Share capital	premium	income	reserves	earnings	Total equity
Balance as at 1 January 2016	200,000	871,378	31,841	13,522	125,410	1,242,151
- Net profit for the period	-	-	-	-	53,940	53,940
- Other comprehensive income	-	-	8,243	-	-	8,243
Total comprehensive income after tax	-	-	8,243	-	53,940	62,183
Dividends paid	-	-	-	-	(43,880)	(43,880)
Balance as at 30 September 2016	200,000	871,378	40,084	13,522	135,470	1,260,454

*In 2017 and 2016, the item 'Other' relates to transactions with a non-controlling interest.

Condensed statement of cash flows

	NLB Group		NLB
		nine months ended		nine months ended
	September 2017	September 2016	September 2017	September 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received	294,844	311,857	166,603	180,899
Interest paid	(47,196)	(63,342)	(28,366)	(37,565)
Dividends received	153	1,168	28	1,082
Fee and commission receipts	154,318	141,936	93,911	88,516
Fee and commission payments	(40,581)	(35,209)	(21,605)	(19,918)
Realised gains from financial assets and financial liabilities not at fair value through profit or loss	11,996	12,741	11,594	12,591
Realised losses from financial assets and financial liabilities not at fair value through profit or loss	-	(39)	-	(39)
Net gains/(losses) from financial assets and liabilities held for trading	6,265	2,744	2,216	(989)
Payments to employees and suppliers	(187,998)	(190,224)	(119,360)	(120,384)
Other income	20,996	21,620	9,718	11,148
Other expenses	(19,100)	(24,022)	(10,387)	(13,945)
Income tax paid	(7,061)	(16,304)	786	(12,871)
Cash flows from operating activities before changes in operating assets	186,636	162,926	105,138	88,525
and liabilities
(Increases)/decreases in operating assets	(142,989)	11,137	(50,781)	70,759
Net (increase)/decrease in trading assets	(26,218)	20,797	(26,218)	20,797
Net (increase)/decrease in financial assets designated at fair value through profit or loss	1,106	672	686	2,055
Net (increase)/decrease in available-for-sale financial assets	(144,790)	(67,740)	(146,420)	(104,733)
Net (increase)/decrease in loans and advances	22,462	61,332	120,028	155,196
Net (increase)/decrease in other assets	4,451	(3,924)	1,143	(2,556)
Increases/(decreases) in operating liabilities	(92,894)	54,601	(177,894)	43,683
Net increase/(decrease) in financial liabilities designated at fair value through profit or loss	(686)	(2,061)	(686)	(2,061)
Net increase/(decrease) in deposits and borrowings measured at amortised cost	176,216	83,831	96,929	72,032
Net increase/(decrease) in securities measured at amortised cost	(274,200)	(26,913)	(274,200)	(26,913)
Net increase/(decrease) in other liabilities	5,776	(256)	63	625
Net cash from operating activities	(49,247)	228,664	(123,537)	202,967
CASH FLOWS FROM INVESTING ACTIVITIES
Receipts from investing activities	74,446	74,325	108,222	97,955
Proceeds from sale of property and equipment and investment property	4,093	1,992	10	390
Proceeds from dividends from subsidiaries, associates and joint ventures	4,215	3,587	42,074	28,819
Proceeds from liquidation of subsidiaries and associates	276	-	276	-
Proceeds from sale of non-current assets held for sale	459	94	459	94
Proceeds from disposals of held-to-maturity financial assets	65,403	68,652	65,403	68,652
Payments from investing activities	(79,276)	(86,167)	(84,437)	(96,794)
Purchase of property and equipment and investment property	(7,872)	(12,672)	(4,093)	(7,904)
Purchase of intangible assets	(8,411)	(4,903)	(6,567)	(3,631)
Purchase of subsidiaries and increase in subsidiaries' equity	(1,596)	-	(12,380)	(16,667)
Purchase of held-to-maturity financial assets	(61,397)	(68,592)	(61,397)	(68,592)
Net cash from investing activities	(4,830)	(11,842)	23,785	1,161
CASH FLOWS FROM FINANCING ACTIVITIES
Payments from financing activities	(67,454)	(46,647)	(63,780)	(43,880)
Dividends paid	(67,454)	(46,647)	(63,780)	(43,880)
Net cash from financing activities	(67,454)	(46,647)	(63,780)	(43,880)
Effects of exchange rate changes on cash and cash equivalents	(6,858)	(1,161)	(11,267)	(1,994)
Net increase/(decrease) in cash and cash equivalents	(121,531)	170,175	(163,532)	160,248
Cash and cash equivalents at beginning of period	1,449,275	1,302,003	670,682	525,831
Cash and cash equivalents at end of period	1,320,886	1,471,017	495,883	684,085

			NLB Group	NLB
	Notes	30.9.2017	31.12.2016	30.9.2017	31.12.2016
Cash and cash equivalents comprise:
Cash, cash balances at central banks and other demand deposits at
banks	5.1.	1,094,218	1,299,014	431,412	617,039
Loans and advances to banks with original maturity up to 3 months		154,638	85,103	64,471	53,643
Available for sale financial assets with original maturity up to 3 months		72,030	65,158	-	-
Total		1,320,886	1,449,275	495,883	670,682

Statement of management's responsibility

The Management Board hereby confirms the condensed interim financial statements of NLB Group and NLB for the nine months ending 30 September 2017, and for the accompanying accounting policies and notes to the financial statements.

The Management Board is responsible for the preparation and presentation of these condensed interim financial statements in accordance with IAS 34 "Interim financial reporting" as adopted by the European Union in order to give a true and fair view of the financial position of NLB Group and NLB d.d. as at 30 September 2017, and their financial results and cash flows for the period then ended.

The Management Board also confirms that appropriate accounting policies were consistently applied, and that the accounting estimates were prepared in accordance with the principles of prudence and good management. The Management Board further confirms that the condensed interim financial statements of NLB Group and NLB have been prepared on a going-concern basis for NLB Group and NLB, and are in line with valid legislation and IAS 34 "Interim financial reporting."

The Management Board is also responsible for appropriate accounting practices, the adoption of appropriate measures for the safeguarding of assets, and the prevention and identification of fraud and other irregularities or illegal acts.

Notes to the condensed interim financial statements

1. General information

Nova Ljubljanska banka d.d. Ljubljana (hereinafter: NLB) is a joint-stock entity providing universal banking services. NLB Group consists of NLB and its subsidiaries located in 10 countries.

NLB is incorporated and domiciled in Slovenia. The address of its registered office is Trg Republike 2, Ljubljana. NLB's shares are not listed on the stock exchange.

The ultimate controlling party of NLB is the Republic of Slovenia, which was the sole shareholder as at 30 September 2017 and 31 December 2016.

All amounts in the condensed interim financial statements and in the notes to the condensed interim financial statements are expressed in thousands of euros unless otherwise stated.

2. Summary of significant accounting policies

2.1. Statement of compliance

These condensed interim financial statements have been prepared in accordance with IAS 34 "Interim Financial Reporting," and should be read in conjunction with the annual financial statements of NLB Group and NLB for the year ended 31 December 2016, which have been prepared in accordance with the International Financial Reporting Standards (hereinafter: IFRS) as adopted by the European Union (EU).

2.2. Accounting policies

The same accounting policies and methods of computation were followed in the preparation of these consolidated condensed interim financial statements as for the year ended 31 December 2016, except for accounting standards and other amendments effective for annual periods beginning on 1 January 2017 that were endorsed by the EU.

Accounting standards and amendments to existing standards that were endorsed by the EU, but not adopted early by NLB Group

IFRS 9 (new standard) – Financial instruments (effective for annual periods beginning on or after 1 January 2018).

IFRS 15 (new standard) – Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018).

Accounting standards and amendments to existing standards issued, but not endorsed by the EU

IFRS 14 (new standard) Regulatory Deferral Accounts (effective for annual periods beginning on or after 1 January 2016). The European Commission has decided not to launch the endorsement process of this interim standard and will wait for the final standard.
IFRS 16 (new standard) Leases (effective for annual periods beginning on or after 1 January 2019).
IFRS 17 (new standard) Insurance Contracts (effective for annual periods beginning on or after 1 January 2021).
IFRS 10 and IAS 28 (amendment) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (The IASB has deferred the effective date of amendments indefinitely).
IAS 12 (amendment) Recognition of Deferred Tax Assets for Unrealised Losses (effective for annual periods beginning on or after 1 January 2017).
IAS 7 (amendment) Disclosure Initiative (effective for annual periods beginning on or after 1 January 2017).
IFRS 15 (clarification) Revenue from Contracts with Customers (effective for annual periods beginning on or after 1 January 2018).
IFRS 2 (amendment) Classification and Measurement of share based Payment Transactions (effective for annual periods beginning on or after 1 January 2018).
IFRS 4 (amendment) Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts (effective for annual periods beginning on or after 1 January 2018).
Annual Improvements to IFRSs 2014–2016 Cycle. The improvements comprise a mixture of substantive changes and clarifications, and are effective for annual periods beginning on or after 1 January 2017 or 1 January 2018.
IFRIC Interpretation 22 Foreign Currency Transactions and Advance Consideration (effective for annual periods beginning on or after 1 January 2018).
IAS 40 (amendment) Investment Property (effective for annual periods beginning on or after 1 January 2018).

IFRIC 23 Uncertainty over Income Tax Treatments (effective for annual periods beginning on or after 1 January 2019).

3. Changes in NLB Group

Nine months ending on 30 September 2017

Capital changes:

An increase in share capital in the form of a cash contribution in the amount of EUR 10,709 thousand in NLB Banka Beograd and REAM d.o.o. Zagreb to ensure an increase in business operations.
An increase in share capital in the form of cash contributions in the amount of EUR 75 thousand CBS Invest, Sarajevo to ensure capital adequacy until the end of liquidation.
NLB acquired shares of NLB Banka, Podgorica and thereby increased its ownership from 99.36% to 99.83%. The increase in the capital investment was recognised in the amount of EUR 125 thousand.
An increase in share capital in the form of a cash contribution in the amount of EUR 212 thousand in Prvi Faktor d.o.o., Beograd – u likvidaciji to ensure capital adequacy until the end of liquidation. Now NLB has directly 5 % ownership in the company.

Other changes:

Kreditni biro SISBON was liquidated. In accordance with a court order, the company was removed from the court register.
SPV 2 d.o.o., Novi Sad was established and will manage certain real estate in NLB Group. NLB's ownership is 100%. In August 2017 headquarters of the company was moved to Beograd and therefore the company is now called SPV 2 d.o.o., Beograd.
In July 2017, NLB sold its non-core subsidiary NLB Factoring "v likvidaci," Brno.

Changes in 2016

Capital changes:

An increase in share capital in the form of cash contributions in the amount of EUR 2,503 thousand in SR-RE d.o.o., Beograd; REAM d.o.o., Podgorica; and REAM d.o.o., Beograd due to an increase in business operations.
An increase in share capital in the form of cash contributions in the amount of EUR 13,050 thousand in NLB Leasing Podgorica, Podgorica; NLB Lizing, Skopje; and Prvi Faktor, Ljubljana to ensure capital adequacy until the end of liquidation.
An increase in share capital in the form of a loan conversion in the amount of EUR 1,719 thousand in NLB Leasing Beograd to ensure capital adequacy until the end of liquidation.
An increase in share capital in the form of cash contributions in the amount of EUR 7,004 thousand in NLB Leasing, Ljubljana to cover the loss from selling the portfolio of non-performing loans ("Project Pine"), and in the amount of EUR 7,000 thousand to ensure capital adequacy until the end of liquidation in Optima Leasing, Zagreb.

Other changes:

FIN-DO d.o.o., Domžale and PRO-Avenija d.o.o., Ljubljana are merged with PRO-REM d.o.o., Ljubljana. The merger was formally registered on 1 July 2016, with the accounting date of merger as at 31 December 2015.
BH-RE d.o.o., Sarajevo was established and will manage certain real estate in NLB Group. PRO-REM d.o.o., Ljubljana's ownership is 100%.
Kreditni biro SISBON d.o.o., Ljubljana; Optima Leasing, Zagreb; NLB Leasing, Beograd; NLB Lizing, Skopje; PRO-REM d.o.o., Ljubljana; OL Nekretnine, Zagreb; NLB Leasing Podgorica, Podgorica; and NLB Interfinanz Zürich are formally in liquidation; and also NLB Propria, Ljubljana from 1 January 2017.
Prvi faktor, Skopje and NLB Leasing Sofia were liquidated. In accordance with a court order, the companies were removed from the court register.

4. Notes to the condensed income statement

4.1. Interest income and expenses

			in EUR thousand
	NLB Group			NLB
	nine months ended			nine months ended
	September 2017	September 2016	change	September 2017	September 2016	change
Interest and similar income
Loans and advances to customers	231,441	247,113	-6%	109,403	126,788	-14%
Available-for-sale financial assets	20,095	23,764	-15%	10,696	13,557	-21%
Held-to-maturity investments	12,339	13,381	-8%	12,339	13,381	-8%
Financial assets held for trading	5,261	7,431	-29%	5,261	7,516	-30%
Loans and advances to banks and central banks	1,165	921	26%	1,787	1,831	-2%
Deposits with central banks and banks	613	618	-1%	289	386	-25%
Derivatives - hedge accounting	-	831	-100%	-	831	-100%
Total	270,914	294,059	-8%	139,775	164,290	-15%
Interest and similar expenses
Due to customers	22,453	31,800	-29%	6,961	12,149	-43%
Debt securities in issue	4,357	7,212	-40%	4,357	7,212	-40%
Financial liabilities held for trading	4,562	4,694	-3%	4,562	4,694	-3%
Derivatives - hedge accounting	4,366	4,448	-2%	4,366	4,448	-2%
Borrowings from banks and central banks	1,861	2,934	-37%	1,367	2,165	-37%
Borrowings from other customers	1,264	1,414	-11%	-	10	-100%
Subordinated liabilities	1,194	1,416	-16%	-	-	-
Deposits from banks and central banks	142	52	173%	113	51	122%
Other financial liabilities	2,022	1,273	59%	1,686	1,086	55%
Total	42,221	55,243	-24%	23,412	31,815	-26%
Net interest income	228,693	238,816	-4%	116,363	132,475	-12%

4.2. Fee and commission income and expenses

		in EUR thousand
	NLB Group nine months ended			NLB nine months ended

	September September			September	September
	2017	2016	change	2017	2016	change
Fee and commission income
Credit cards and ATMs	45,296	41,586	9%	29,317	28,101	4%
Payments	42,127	40,416	4%	21,105	20,907	1%
Customer transaction accounts	32,286	29,640	9%	24,364	23,235	5%
Investment funds	12,591	10,074	25%	3,606	2,610	38%
Guarantees	8,299	9,218	-10%	5,459	6,225	-12%
Investment banking	5,814	5,068	15%	4,768	3,984	20%
Agency of insurance products	3,074	2,478	24%	3,063	2,465	24%
Other services	4,403	4,693	-6%	3,054	3,570	-14%
Total	153,890	143,173	7%	94,736	91,097	4%
Fee and commission expenses
Credit cards and ATMs	28,155	25,772	9%	16,814	15,988	5%
Payments	4,193	3,926	7%	593	599	-1%
Investment banking	2,827	2,133	33%	2,024	1,518	33%
Insurance for holders of personal accounts and golden cards	1,274	1,593	-20%	878	1,053	-17%
Guarantees	166	236	-30%	119	194	-39%
Other services	2,066	1,717	20%	889	542	64%
Total	38,681	35,377	9%	21,317	19,894	7%
Net fee and commission income	115,209	107,796	7%	73,419	71,203	3%

4.3. Gains less losses from financial assets and liabilities not classified as at fair value through profit or loss

in EUR thousand

	NLB Group		NLB nine months ended
	September 2017	nine months ended September 2016	September 2017	September 2016
Available-for-sale financial assets	11,834	14,300	11,440	14,150
Financial liabilities measured at amortised cost	-	(39)	-	(39)
Total	11,834	14,261	11,440	14,111

In February 2017, NLB Group successfully concluded a sale transaction of its major non-core equity participation and realised a gain in the amount of EUR 9,534 thousand.

4.4. Gains less losses from financial assets and liabilities held for trading

in EUR thousand

		NLB Group	NLB nine months ended
		nine months ended
	September	September	September	September
	2017	2016	2017	2016
Foreign exchange trading	7,945	7,025	3,272	2,402
Derivatives	1,472	(1,302)	1,841	(1,383)
Debt instruments	(25)	(2,034)	(25)	(2,034)
Total	9,392	3,689	5,088	(1,015)

4.5. Other operating income

in EUR thousand

		NLB Group		NLB
	nine months ended			nine months ended
	September	September		September	September
	2017	2016	change	2017	2016	change
Income from non-banking services	9,099	11,578	-21%	6,166	7,764	-21%
Rental income from investment property	4,358	4,221	3%	294	183	61%
Other operating income	5,283	3,064	72%	3,048	1,690	80%
Total	18,740	18,863	-1%	9,508	9,637	-1%

4.6. Other operating expenses

September September September September 2017 2016 change 2017 2016 change Deposit guarantee 11,394 11,004 4% 4,731 4,567 4% Single Resolution Fund 2,590 3,894 -33% 2,590 3,894 -33% Other taxes and compulsory public levies 2,160 2,208 -2% 843 764 10% Membership fees and similar fees 801 651 23% 492 248 98% Expenses related to issued service guarantees 281 851 -67% 281 851 -67% Revaluation of investment property to fair value 798 7,383 -89% 750 484 55% Other operating expenses 1,555 1,834 -15% 734 982 -25% Total 19,579 27,825 -30% 10,421 11,790 -12% nine months ended nine months ended NLB Group NLB

4.7. Administrative expenses

	NLB Group			NLB
	nine months ended			nine months ended
	September	September		September	September
	2017	2016	change	2017	2016	change
Employee costs	120,557	122,875	-2%	75,662	77,627	-3%
Other general and administrative expenses	66,459	69,932	-5%	39,191	43,172	-9%
Total	187,016	192,807	-3%	114,853	120,799	-5%

4.8. Provisions for other liabilities and charges

in EUR thousand

	NLB Group		NLB nine months ended
	nine months ended
	September	September	September	September
	2017	2016	2017	2016
Guarantees and commitments	(5,830)	(13,276)	(5,003)	(12,521)
Provisions for legal issues	(2,043)	4,396	65	39
Provisions for restructuring	17	6,361	-	6,055
Other provisions	(505)	-	(531)	-
Total	(8,361)	(2,519)	(5,469)	(6,427)

4.9. Impairment charge

		NLB Group	NLB
	nine months ended		nine months ended
	September 2017	September 2016	September 2017	September 2016
Impairment of financial assets
Loans and advances to customers (note 5.4.5.)	(31,752)	35,720	(16,028)	31,427
Loans and advances to banks (note 5.4.5.)	257	(144)	-	(197)
Held-to-maturity financial assets	(10)	83	(10)	83
Available-for-sale financial assets	(3)	28	(3)	28
Other financial assets (note 5.4.5.)	440	(459)	491	(234)
Impairment of investments in subsidiaries, associates and joint ventures
Investments in subsidiaries	-	-	37	25,001
Impairment of other assets
Property and equipment	-	2,180	-	-
Other assets	2,157	2,562	83	232
Total	(28,911)	39,970	(15,430)	56,340

The bank recalculates probability of defaults (PD) for collective provisions once a year in the first quarter of the year, and the full impact is recognised in the first quarter accounts. Positive trends in the economic environment and consequently a lower transition of performing customers into default in years 2016 and 2015 positively contributed to lower percentages of PD's, and consequently lower pool provisions mainly in the segment of corporate clients. In Q1 2017, the effect of release of impairments on NLB Group level in the segment of corporate clients amounts to approximately EUR 21 million (in Q1 2016 approximately EUR 14 million) and in NLB approximately EUR 9 million (in Q1 2016 approximately EUR 6 million). There were no significant changes in provisions for retail clients.

4.10. Gains less losses from investments in subsidiaries, associates, and joint ventures

			in EUR thousand
	NLB Group		NLB nine months ended
	nine months ended
	September	September	September	September
	2017	2016	2017	2016
Dividends from investments in subsidiaries, associates and joint ventures	-	-	48,029	28,819
Gains less losses on derecognition of subsidiaries	(922)	-	159	-
Share of net gains less losses of associates and joint ventures accounted for using the equity
method	3,738	3,987	-	-
Total	2,816	3,987	48,188	28,819

4.11. Income tax

		NLB Group nine months ended			NLB nine months ended

	September	September change		September	September change
	2017	2016		2017	2016
Current income tax	7,209	12,374	-42%	92	7,108	-99%
Deferred tax (note 5.8.)	(39)	1,979	-102%	(216)	(581)	-63%
Total	7,170	14,353	-50%	(124)	6,527	-102%

5. Notes to the condensed statement of financial position

5.1. Cash, cash balances at central banks, and other demand deposits at banks

	NLB Group			NLB
	30.9.2017	31.12.2016	Change	30.9.2017	31.12.2016	Change
Balances and obligatory reserves with central banks	596,404	776,648	-23%	202,572	375,561	-46%
Cash	252,379	260,612	-3%	124,678	128,519	-3%
Demand deposits at banks	245,435	261,754	-6%	104,162	112,959	-8%
Total	1,094,218	1,299,014	-16%	431,412	617,039	-30%

5.2. Financial instruments held for trading

a) Trading assets

	NLB Group			NLB
	30.9.2017	31.12.2016	Change	30.9.2017	31.12.2016	Change
Derivatives, excluding hedging instruments
Swap contracts	12,405	15,185	-18%	12,405	15,179	-18%
Forward contracts	2,581	3,352	-23%	2,575	3,352	-23%
Options	677	405	67%	677	405	67%
Total derivatives	15,663	18,942	-17%	15,657	18,936	-17%
Securities
Treasury bills	85,077	30,012	183%	85,077	30,012	183%
Commercial papers	-	19,010	-100%	-	19,010	-100%
Bonds	9,429	19,735	-52%	9,429	19,735	-52%
Total securities	94,506	68,757	37%	94,506	68,757	37%
Total	110,169	87,699	26%	110,163	87,693	26%

in EUR thousand

b) Trading liabilities

in EUR thousand

	NLB Group			NLB
	30.9.2017	31.12.2016	Change	30.9.2017	31.12.2016	Change
Derivatives, excluding hedging instruments
Swap contracts	9,847	15,555	-37%	9,848	15,552	-37%
Forward contracts	2,479	3,236	-23%	2,479	3,235	-23%
Options	267	-	-	267	-	-
Total	12,593	18,791	-33%	12,594	18,787	-33%

5.3. Available-for-sale financial assets

in EUR thousand

	NLB Group			NLB
	30.9.2017	31.12.2016	Change	30.9.2017	31.12.2016	Change
Bonds	1,706,613	1,619,228	5%	1,453,159	1,262,363	15%
Commercial bills	283,737	274,489	3%	146,616	209,331	-30%
Treasury bills	152,002	104,617	45%	61,106	55,093	11%
National Resolution Fund	44,549	44,570	0%	44,549	44,570	0%
Shares	9,040	29,050	-69%	2,522	22,737	-89%
Cash certificates	31	199	-84%	-	-	-
Total	2,195,972	2,072,153	6%	1,707,952	1,594,094	7%

5.4. Loans and advances

Analysis by type of loans and advances

in EUR thousand

	NLB Group			NLB
	30.9.2017	31.12.2016 Change		30.9.2017	31.12.2016 Change
Loans and advances to customers	6,907,087	6,912,067	0%	4,694,793	4,843,594	-3%
Loans and advances to banks	482,969	435,537	11%	433,151	408,056	6%
Debt securities	82,012	85,315	-4%	82,012	85,315	-4%
Other financial assets	53,879	61,014	-12%	44,475	36,151	23%
Total	7,525,947	7,493,933	0%	5,254,431	5,373,116	-2%

5.4.1. Debt securities

	NLB Group and NLB
	30.9.2017	31.12.2016	Change
Companies	82,012	85,315	-4%
Total	82,012	85,315	-4%

5.4.2. Loans and advances to banks

in EUR thousand

	NLB Group			NLB
	30.9.2017	31.12.2016	Change	30.9.2017	31.12.2016	Change
Time deposits	478,680	433,883	10%	406,090	387,599	5%
Purchased receivables	1,389	1,058	31%	1,389	1,058	31%
Loans	3,548	945	275%	25,672	19,399	32%
	483,617	435,886	11%	433,151	408,056	6%
Allowance for impairment (note 5.4.5.)	(648)	(349)	86%	-	-	-
Total	482,969	435,537	11%	433,151	408,056	6%

5.4.3. Loans and advances to customers

in EUR thousand

		NLB Group			NLB
	30.9.2017	31.12.2016	Change	30.9.2017	31.12.2016	Change
Loans	7,088,065	7,198,486	-2%	4,897,320	5,098,336	-4%
Overdrafts	315,627	298,351	6%	182,304	178,899	2%
Finance lease receivables	178,788	192,923	-7%	-	-	-
Credit card business	110,698	112,106	-1%	56,105	60,338	-7%
Called guarantees	12,630	13,577	-7%	10,252	10,744	-5%
Reverse sale and repurchase agreement	-	25	-100%	-	25	-100%
	7,705,808	7,815,468	-1%	5,145,981	5,348,342	-4%
Allowance for impairment (note 5.4.5.)	(798,721)	(903,401)	-12%	(451,188)	(504,748)	-11%
Total	6,907,087	6,912,067	0%	4,694,793	4,843,594	-3%

5.4.4. Other financial assets

	NLB Group			NLB
	30.9.2017	31.12.2016	Change	30.9.2017	31.12.2016	Change
Receivables in the course of collection	15,166	13,235	15%	12,545	11,481	9%
Credit card receivables	19,202	21,961	-13%	16,000	17,375	-8%
Debtors	8,426	11,934	-29%	932	929	0%
Fees and commissions	6,018	7,311	-18%	4,040	5,699	-29%
Receivables to brokerage firms and others for sell of securities and custody
services	3,872	612	533%	3,862	610	533%
Prepayments	2,131	2,217	-4%	-	-	-
Accrued income	1,627	365	346%	1,802	206	775%
Receivables from purchase agreements for equity securities	163	164	-1%	163	164	-1%
Dividends	44	49	-10%	5,999	49	-
Other financial assets	9,044	18,619	-51%	2,843	3,409	-17%
	65,693	76,467	-14%	48,186	39,922	21%
Allowance for impairment (note 5.4.5.)	(11,814)	(15,453)	-24%	(3,711)	(3,771)	-2%
Total	53,879	61,014	-12%	44,475	36,151	23%

5.4.5. Movements in allowance for the impairment of loans, and advances to banks, loans and advances to customers and other financial assets

	NLB Group
	Banks		Customers		Other financial assets
	2017	2016	2017	2016	2017	2016
Balance as at 1 January	349	242	903,401	1,262,835	15,453	27,078
Exchange differences on opening balance	7	1	220	(680)	46	80
Impairment (note 4.9.)	257	(144)	(31,752)	35,720	440	(459)
Write offs	-	-	(75,323)	(310,130)	(4,198)	(8,064)
Repayment of write offs	35	35	10,359	8,771	85	358
Exhange differences	-	-	2,190	(2)	(12)	(4)
Other	-	-	584	(120)	-	-
Balance as at 30 September	648	134	809,679	996,394	11,814	18,989

in EUR thousand

	NLB
	Banks		Customers		Other financial assets
	2017	2016	2017	2016	2017	2016
Balance as at 1 January	-	197	504,748	694,718	3,771	5,123
Impairment (note 4.9.)	-	(197)	(16,028)	31,427	491	(234)
Write offs	-	-	(40,390)	(194,743)	(562)	(1,347)
Repayment of write offs	-	-	2,277	1,852	11	286
Exhange differences	-	-	(210)	(63)	-	(1)
Other	-	-	791	-	-	-
Balance as at 30 September	-	-	451,188	533,191	3,711	3,827

5.5. Held-to-maturity financial assets

in EUR thousand

	NLB Group and NLB
	30.9.2017	31.12.2016	Change
Bonds	599,469	611,532	-2%
	599,469	611,532	-2%
Allowance for impairment	(73)	(83)	-12%
Total	599,396	611,449	-2%

5.6. Investment property

NLB Group			NLB
30.9.2017	31.12.2016	Change	30.9.2017	31.12.2016	Change
76,220	78,529	-3%	8,030	7,553	6%
5,120	5,134	0%	598	598	0%
81,340	83,663	-3%	8,628	8,151	6%

5.7. Other assets

in EUR thousand

	NLB Group			NLB
	30.9.2017	31.12.2016 Change		30.9.2017	31.12.2016 Change
Assets, received as collateral	88,589	79,059	12%	3,342	4,263	-22%
Inventories	9,744	8,913	9%	402	460	-13%
Deferred expenses	5,842	4,597	27%	3,625	3,096	17%
Prepayments	1,023	684	50%	133	211	-37%
Claim for taxes and other dues	1,528	1,305	17%	231	389	-41%
Total	106,726	94,558	13%	7,733	8,419	-8%

5.8. Deferred tax

in EUR thousand

		NLB Group			NLB
	30.9.2017	31.12.2016	Change	30.9.2017	31.12.2016	Change
Deferred income tax assets
Valuation of financial instruments and capital investments	58,907	75,917	-22%	58,881	75,895	-22%
Impairment provisions	3,657	3,956	-8%	3,571	3,571	0%
Employee benefit provisions	3,154	3,208	-2%	2,729	2,736	0%
Depreciation and valuation of non-financial assets	1,118	1,113	0%	164	175	-6%
Tax losses	207,810	206,866	0%	209,247	208,678	0%
Reduction of deferred tax assets	(250,933)	(267,051)	-6%	(252,255)	(268,718)	-6%
Total deferred income tax assets	23,713	24,009	-1%	22,337	22,337	0%
Deferred income tax liabilities
Valuation of financial instruments	10,078	12,233	-18%	9,187	11,463	-20%
Depreciation and valuation of non-financial assets	1,658	1,278	30%	248	252	-2%
Impairment provisions	2,924	3,471	-16%	-	-	-
Other	19	19	0%	-	-	-
Total deferred income tax liabilities	14,679	17,001	-14%	9,435	11,715	-19%
Net deferred income tax assets	10,445	7,735	35%	12,902	10,622	21%
Net deferred income tax liabilities	(1,411)	(727)	94%	-	-	-

in EUR thousand

	NLB Group		NLB
		nine months ended
	September 2017	September 2016	September 2017	September 2016
Included in the income statement for the current year	39	(1,979)	216	581
- valuation of financial instruments and capital investments	(16,712)	8,097	(16,712)	8,095
- impairment provisions	209	(2,638)	-	(102)
- employee benefit provisions	(145)	303	(97)	309
- depreciation and valuation of non-financial assets	(375)	(96)	(7)	(13)
- tax losses	944	(4,651)	569	(5,552)
- adjustment of deferred income tax assets	16,118	(2,994)	16,463	(2,156)
Included in other comprehensive income for the current period	1,953	(1,826)	2,064	(1,539)
- valuation of available-for-sale financial assets	1,863	(1,715)	1,974	(1,428)
- cash flow hedges	-	14	-	14
- actuarial assumptions and experience	90	(125)	90	(125)

As at 30 September 2017, NLB recognised EUR 22,337 thousand deferred tax assets (31 December 2016: EUR 22,337 thousand). Unrecognised deferred tax assets amount to EUR 252,255 thousand (31 December 2016: EUR 268,718 thousand), of which the majority relates to unrecognised deferred tax assets from tax losses and unrecognised deferred tax assets from impairments of capital investments.

5.9. Financial liabilities measured at amortised cost

Analysis by type of financial liabilities, measured at amortised cost

		NLB Group			NLB
	30.9.2017	31.12.2016	Change	30.9.2017	31.12.2016	Change
Deposits from banks and central banks	48,826	42,334	15%	97,783	74,977	30%
- Deposits on demand	44,684	34,828	28%	97,072	74,434	30%
- Other deposits	4,142	7,506	-45%	711	543	31%
Borrowings from banks and central banks	293,229	371,769	-21%	271,184	338,467	-20%
Due to customers	9,670,751	9,437,147	2%	6,722,876	6,615,390	2%
- Deposits on demand	7,004,119	6,415,927	9%	5,221,359	4,781,616	9%
- Other deposits	2,666,632	3,021,220	-12%	1,501,517	1,833,774	-18%
Borrowings from other customers	77,171	83,619	-8%	6,677	4,274	56%
Debt securities in issue	-	277,726	-100%	-	277,726	-100%
Subordinated liabilities	27,479	27,145	1%	-	-	-
Other financial liabilities	110,658	110,295	0%	72,412	68,784	5%
Total	10,228,114	10,350,035	-1%	7,170,932	7,379,618	-3%

5.9.1. Debt securities in issue

in EUR thousand

	NLB Group and NLB
	30.9.2017	31.12.2016	Change
Carrying amount of issued securities
- traded on active markets	-	277,726	-100%
Total	-	277,726	-100%
Bonds (in %)
- fixed rated	-	100.00

5.9.2. Subordinated liabilities

NLB Group					30.9.2017	31.12.2016
	Currency	Due date	Interest rate	Carrying amount	Nominal value	Carrying amount	Nominal value
Subordinated loans
	EUR		30.6.2018 6-month EURIBOR + 5 % p. a. with zero floor clause	12,086	12,000	12,103	12,000
	EUR		30.6.2020 6-month EURIBOR + 7.7% p. a.	5,230	5,000	5,151	5,000
	EUR		26.6.2025 6-month EURIBOR + 6.25% p. a.	10,163	10,000	9,891	10,000
Total				27,479	27,000	27,145	27,000

5.9.3. Other financial liabilities

in EUR thousand

	NLB Group			NLB
	30.9.2017	31.12.2016	Change	30.9.2017	31.12.2016	Change
Items in the course of payment	30,134	28,671	5%	15,006	8,499	77%
Debit or credit card payables	28,206	32,704	-14%	26,149	29,350	-11%
Accrued expenses	14,852	13,382	11%	7,645	5,593	37%
Accrued salaries	11,632	8,537	36%	6,504	6,583	-1%
Liabilities to brokerage firms and others for securities purchase and custody services	5,931	1,038	471%	4,850	181	-
Suppliers	5,187	11,781	-56%	2,500	8,393	-70%
Fees and commissions due	146	1,440	-90%	94	1,398	-93%
Other financial liabilities	14,570	12,742	14%	9,664	8,787	10%
Total	110,658	110,295	0%	72,412	68,784	5%

5.10. Provisions

in EUR thousand

		NLB Group		NLB
	30.9.2017	31.12.2016	Change	30.9.2017	31.12.2016	Change
Provisions for non-financial guarantees	20,763	22,745	-9%	20,040	21,777	-8%
Employee benefit provisions	20,465	19,758	4%	16,748	15,384	9%
Provision for legal issues	13,069	15,194	-14%	3,192	3,282	-3%
Restructuring provisions	7,932	10,014	-21%	7,350	8,750	-16%
Provisions for financial guarantees	8,799	25,327	-65%	7,059	23,131	-69%
Provisions for other credit commitments	4,999	5,609	-11%	4,460	4,957	-10%
Other provisions	275	2,267	-88%	263	2,265	-88%
Total	76,302	100,914	-24%	59,112	79,546	-26%

In connection to legal issues the biggest amount within material monetary claims relates to civil claims filed by Privredna banka Zagreb (the PBZ) and Zagrebačka banka (the ZaBa) against NLB, referring to the old savings of LB Branch Zagreb savers, which were transferred to these two banks in the principal amount of approximately EUR 172.2 million. Due to the fact the proceedings have been pending for such a long time, the penalty interest already exceeds the principal amount. As NLB is not liable for the old foreign currency savings, based on numerous process and content-related reasons, NLB has all along objected to these claims. Two key reasons NLB is no longer liable for the old foreign currency savings are that it was only founded on the basis of the Constitutional Act on 27 July 1994 (at the time the savings were deposited with LB Branch Zagreb, NLB did not yet exist), and NLB did not assume any of such obligations. Moreover, this is a former Yugoslavia succession matter as the governments of the Republic of Slovenia and the Republic of Croatia agreed in a Memorandum of Understanding signed in 2013 to find a solution to the transferred foreign currency savings of Ljubljanska banka in Croatia (LB) on the basis of the Agreement on Succession Issues and that the Republic of Croatia would stay all the proceedings commenced by the PBZ and the ZaBa in relation to the transferred foreign currency savings until the issue is finally resolved.

Despite the agreement in the Memorandum of Understanding (Memorandum) to stay all the proceedings commenced, in May 2015 the Court of Appeal, the County Court of Zagreb, ruled in one claim to reject the complaints raised by the LB and NLB. NLB then filed a constitutional appeal against the aforementioned final judgement. In this case the ruled claim was enforced in the enforcement proceeding from the account of NLB with the Croatian bank. In the other cases, with respect to the court procedures described above, are still pending, and final judgments have not yet been issued.

Conversely, in another case, a claim filed by the PBZ became final in favor of NLB.

In the one of the cases on 29 March 2016, the court of second instance allowed the appeal and returned the case to the Court of first instance, which initially decided in favour of the ZaBa. The appeal court explained in its decree that the Court of first instance will have to assess what the position of the Memorandum is in the hierarchy of legal acts of the Republic of Croatia, and if it notices that the Memorandum in the specific case takes precedence, it will have to determine what the intentions were of the parties in concluding the Memorandum. The Court of first instance has in repeated proceedings decided about the request of NLB for stay of the proceeding according to Memorandum and has rejected the request of NLB. The position of the Court of first instance was unchanged that Memorandum is not international agreement binding upon the courts of Croatia. Such a position is contrary to the opinions of reputable professors of International Law from Croatia and Germany, which were filed by NLB in the proceeding and therefore NLB has filed the appeal against this decision.

On 16 November 2017 NLB received the judgement of Županijski sud in Zagreb which as a Court of second instance changed the judgment of the Court of first instance, with which the claim against NLB was refused, in such a way that the defendants NLB and LB are jointly and severally obliged to pay to the plaintiff ZaBa the principal in the amount of EUR 492 thousand plus interest, which exceeds the principal amount and litigation costs in the amount of approximately EUR 99 thousand with penalty interest. LB and NLB are in accordance with the judgment obliged to pay all relevant amounts jointly and severally. The judgment is final and enforceable. In accordance with the judgment the payment must be completed up to and including 1 December 2017. NLB will challenge the judgment with the extraordinary legal measures with the Supreme Court of the Republic of Croatia and later, if necessary, also with all other available remedies, as the obligations of the old foreign currency savings in accordance with Slovenian Constitutional Law are not the liabilities of the NLB. The effect in financial statements will be recognised in Q4 2017.

Provisions for these claims are not formed since NLB believes there are no legal grounds for them.

5.11. Income tax relating to components of other comprehensive income

in EUR thousand

	NLB Group
		30.9.2017		30.9.2016
				Before
	Before tax	Tax	Net of tax	tax	Tax	Net of tax
Hedge of a net investment in a foreign operation	amount -	expense -	amount -	amount -	expense -	amount -
Available-for-sale financial assets	(8,922)	1,863	(7,059)	12,711	(1,715)	10,996
Cash flow hedge	-	-	-	(78)	14	(64)
Share of associates and joint ventures	(74)	12	(62)	5,861	(1,033)	4,828
Actuarial gains and losses	(846)	90	(756)	1,475	(125)	1,350
Total	(9,842)	1,965	(7,877)	19,969	(2,859)	17,110

in EUR thousand

	NLB
		30.9.2017		30.9.2016
				Before
	Before tax			Tax	Net of tax	tax	Tax	Net of tax
	amount	expense	amount	amount	expense	amount
Available-for-sale financial assets	(10,390)	1,974	(8,416)	8,394	(1,428)	6,966
Cash flow hedge	-	-	-	(78)	14	(64)
Actuarial gains and losses	(950)	90	(860)	1,466	(125)	1,341
Total	(11,340)	2,064	(9,276)	9,782	(1,539)	8,243

5.12. Other liabilities

in EUR thousand

		NLB Group		NLB
	30.9.2017	31.12.2016	Change	30.9.2017	31.12.2016	Change
Taxes payable	3,544	3,699	-4%	3,127	3,049	3%
Deferred income	3,777	2,964	27%	668	661	1%
Payments received in advance	8,740	2,040	328%	581	476	22%
Total	16,061	8,703	85%	4,376	4,186	5%

5.13. Book value per share

The book value of a NLB share on a consolidated level as at 30 September 2017 was EUR 80.5 (31 December 2016: EUR 74.8), and on NLB's level it was EUR 66.9 (31 December 2016: EUR 63.2). It is calculated as the ratio of net assets' book value without other equity instruments issued and the number of shares. NLB Group and NLB do not have any other equity instruments issued or treasury shares.

in EUR thousand

5.14. Capital adequacy ratio

	NLB Group		NLB
	30.9.2017	31.12.2016	30.9.2017	31.12.2016
Paid up capital instruments	200,000	200,000	200,000	200,000
Share premium	871,378	871,378	871,378	871,378
Retained earnings - from previous years	296,827	246,656	81,533	81,530
Profit or loss eligible - from current year	-	49,890	-	-
Accumulated other comprehensive income	(11,337)	(6,053)	117	5,205
Other reserves	13,522	13,522	13,522	13,522
Minority interest	-	-	-	-
Prudential filters: Cash flow hedge reserve	-	-	-	-
Prudential filters: Value adjustments due to the requirements for prudent valuation	(2,347)	(2,213)	(1,859)	(1,734)
(-) Goodwill	(3,529)	(3,529)	-	-
(-) Other intangible assets	(31,576)	(30,397)	(24,233)	(23,345)
(-) Deferred tax assets that rely on future profitability and do not arise from temporary differences net of
associated tax liabilities	(6,100)	(3,013)	(7,969)	(4,626)
(-) Investments in CET1 instruments of financial sector - significant share	-	-	-	-
COMMON EQUITY TIER 1 CAPITAL (CET1)	1,326,838	1,336,241	1,132,489	1,141,930
Additional Tier 1 capital	-	-	-	-
TIER 1 CAPITAL	1,326,838	1,336,241	1,132,489	1,141,930
Tier 2 capital	-	-	-	-
TOTAL CAPITAL (OWN FUNDS)	1,326,838	1,336,241	1,132,489	1,141,930
RWA for credit risk	7,102,468	6,864,737	4,476,788	4,292,262
RWA for market risks	75,138	104,175	8,800	27,975
RWA for credit valuation adjustment risk	888	463	888	463
RWA for operational risk	949,493	892,753	593,750	561,091
TOTAL RISK EXPOSURE AMOUNT (RWA)	8,127,987	7,862,128	5,080,226	4,881,791
Common Equity Tier 1 Ratio	16.3%	17.0%	22.3%	23.4%
Tier 1 Ratio	16.3%	17.0%	22.3%	23.4%
Total Capital Ratio	16.3%	17.0%	22.3%	23.4%

5.15. Off-balance sheet liabilities

30.9.2017 31.12.2016 Change 30.9.2017 31.12.2016 Change Commitments to extend credit 1,116,086 1,075,940 4% 887,500 881,198 1% Non-financial guarantees 407,911 417,149 -2% 322,090 345,440 -7% Financial guarantees 317,422 332,281 -4% 178,460 189,642 -6% Letters of credit 14,223 17,485 -19% 375 3,761 -90% Other 4,177 917 356% 69 118 -42% 1,859,819 1,843,772 1% 1,388,494 1,420,159 -2% Provisions (note 5.10.) (34,561) (53,681) -36% (31,559) (49,865) -37% Total 1,825,258 1,790,091 2% 1,356,935 1,370,294 -1% NLB Group NLB

5.16. Fair value hierarchy of financial and non-financial assets and liabilities

Fair value is the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. NLB Group uses various valuation techniques to determine fair value. IFRS 13 specifies a fair value hierarchy with respect to the

inputs and assumptions used to measure financial and non-financial assets and liabilities at fair value. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the assumptions of NLB Group and NLB. This hierarchy gives the highest priority to observable market data when available, and the lowest priority to unobservable market data. NLB Group considers relevant and observable market prices in its valuations where possible. The fair value hierarchy comprises the following levels:

Level 1 Quoted prices (unadjusted) on active markets. This level includes listed equities, debt instruments, derivatives, units of investment funds and other unadjusted market prices of assets and liabilities. When an asset or liability may be exchanged on multiple active markets, the principal market for the asset or liability must be determined. In the absence of a principal market, the most advantageous market for the asset or liability must be determined.
Level 2 A valuation technique where inputs are observable, either directly (i.e. prices) or indirectly (i.e. derived from prices). Level 2 includes quoted prices for similar assets or liabilities on active markets and quoted prices for identical or similar assets and liabilities on markets that are not active. The sources of input parameters for financial instruments, such as yield curves, credit spreads, foreign exchange rates, and the volatility of interest rates and foreign exchange rates, are Reuters and Bloomberg.
Level 3 A valuation technique where inputs are not based on observable market data. Unobservable inputs are used to the extent that relevant observable inputs are not available. Unobservable inputs must reflect the assumptions that market participants would use when pricing an asset or liability. This level includes non-tradable shares and bonds and derivatives associated with these investments and other assets and liabilities, for which fair value cannot be determined with observable market inputs.

Where possible, fair value is determined as an observable market price on an active market for an identical asset or liability. An active market is a market on which transactions for an asset or liability are executed with sufficient frequency and volume to provide pricing information on an ongoing basis. Assets and liabilities measured at fair value on active markets are determined as the market price of a unit (e.g. a share) at the measurement date, multiplied by the quantity of units owned by NLB Group. The fair value of assets and liabilities whose market is not active is determined using valuation techniques. Valuation techniques bear a different intensity level of estimates and assumptions, depending on the availability of observable market inputs associated with the asset or liability that is the subject of valuation. Unobservable inputs shall reflect the estimates and assumptions that other market participants would use when pricing the asset or liability.

For non-financial assets measured at fair value and not classified on Level 1, fair value is determined based on valuation reports provided by certified valuators. Valuations are prepared in accordance with the International Valuation Standards (IVS).

a) Financial and non-financial assets and liabilities, measured at fair value in the financial statements

							in EUR thousand
		NLB
30.9.2017	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Financial assets
Financial instruments held for trading	94,506	15,253	410	110,169	94,506	15,247	410	110,163
Debt instruments	94,506	-	-	94,506	94,506	-	-	94,506
Derivatives	-	15,253	410	15,663	-	15,247	410	15,657
Derivatives - hedge accounting	-	2,030	-	2,030	-	2,030	-	2,030
Financial assets designated at fair value through profit or loss	5,694	-	-	5,694	1,431	-	-	1,431
Debt instruments	103	-	-	103	-	-	-	-
Equity instruments	5,591	-	-	5,591	1,431	-	-	1,431
Financial assets available-for-sale	1,833,820	356,274	5,878	2,195,972	1,506,687	199,274	1,991	1,707,952
Debt instruments	1,833,100	309,282	-	2,142,382	1,506,156	154,725	-	1,660,881
Equity instruments	720	46,992	5,878	53,590	531	44,549	1,991	47,071
Financial liabilities								-
Financial instruments held for trading	-	12,593	-	12,593	-	12,594	-	12,594
Derivatives	-	12,593	-	12,593	-	12,594	-	12,594
Derivatives - hedge accounting	-	24,938	-	24,938	-	24,938	-	24,938
Financial liabilities designated at fair value through profit or loss	-	1,431	-	1,431	-	1,431	-	1,431
Non-financial assets
Investment properties	-	81,340	-	81,340	-	8,628	-	8,628
Non-current assets classified as held for sale	-	4,936	-	4,936	-	1,651	-	1,651

31.12.2016 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Financial assets Financial instruments held for trading 49,747 37,547 405 87,699 49,747 37,541 405 87,693 Debt instruments 49,747 19,010 - 68,757 49,747 19,010 - 68,757 Derivatives - 18,537 405 18,942 - 18,531 405 18,936 Derivatives - hedge accounting - 217 - 217 - 217 - 217 Financial assets designated at fair value through profit or loss 6,694 - - 6,694 2,011 - - 2,011 Debt instruments 734 - - 734 - - - - Equity instruments 5,960 - - 5,960 2,011 - - 2,011 Financial assets available-for-sale 1,648,721 417,529 5,903 2,072,153 1,330,150 262,134 1,810 1,594,094 Debt instruments 1,627,608 370,925 - 1,998,533 1,309,223 217,564 - 1,526,787 Equity instruments 21,113 46,604 5,903 73,620 20,927 44,570 1,810 67,307 Financial liabilities Financial instruments held for trading - 18,791 - 18,791 - 18,787 - 18,787 Derivatives - 18,791 - 18,791 - 18,787 - 18,787 Derivatives - hedge accounting - 29,024 - 29,024 - 29,024 - 29,024 Financial liabilities designated at fair value through profit or loss - 2,011 - 2,011 - 2,011 - 2,011 Non-financial assets Investment properties - 83,663 - 83,663 - 8,151 - 8,151 Non-current assets classified as held for sale - 4,263 - 4,263 - 1,788 - 1,788 NLB Group NLB

in EUR thousand

b) Significant transfers of financial instruments between levels of valuation

NLB Group's policy of transfers of financial instruments between levels of valuation is illustrated in the table below.

Fair value						Derivatives
hierarchy	Equities	Equity stake	Funds	Debt securities	Equities	Currency
1	market value from exchange market		regular valuation by fund management company	market value from exchange market
2				valuation model	valuation model (underlying instrument on level 1)	valuation model
3	valuation model	valuation model	valuation model	valuation model	valuation model (underlying instrument on level 3)
Transfers	from level 1 to 3 equity excluded from exchange market		from level 1 to 3 fund management stops publishing regular valuation	from level 1 to 2 fixed income excluded from exchange market	from level 2 to 3 underlying excluded from exchange market
	from level 1 to 3 companies in insolvency proceedings		from level 3 to 1 fund management starts publishing regular valuation	from level 1 to 2 fixed income not liquid (not trading for 6 months)	from level 3 to 2 underlying included in exchange market
	from level 3 to 1 equity included in exchange market			from level 1 to 3 and from 2 to 3 companies in insolvency proceedings
				from level 2 to 1 and from 3 to 1 start trading with fixed income on exchange market
				from level 3 to 2 until valuation parameters are confirmed on ALCO (at least on a quarterly basis)

For the nine months ending 30 September 2017 and 30 September 2016, NLB Group nor NLB had no significant transfers of financial instruments between the levels of valuation.

c) Financial and non-financial assets and liabilities at Level 2 regarding the fair value hierarchy

Financial instruments on Level 2 of the fair value hierarchy at NLB Group and NLB include:

debt securities: bonds not quoted on active markets and valuated by valuation model;
equities;
derivatives: derivatives except forward derivatives and options on equity instruments that are not quoted on active markets;
the National Resolution Fund and
structured deposits.

When valuing bonds classified on Level 2, NLB Group primarily uses the income approach based on an estimation of future cash flows discounted to the present value. The input parameters used in the income approach are the risk-free yield curve and the spread over the yield curve (credit, liquidity, country).

Fair values for derivatives are determined using a discounted cash flow model based on the risk-free yield curve. Fair values for options are determined using valuation models for options (Garman and Kohlhagen model, binomial model and Black-Scholes model).

At least three valuation methods are used for the valuation of investment property. The majority of investment property is valued using the income approach, where the present value of future expected returns is assessed. When valuing an investment property, average rents at similar locations and capitalisation ratios, such as the risk-free yield, risk premium, liquidity premium, risk premium to account for the management of the investment, and risk premium to account for capital preservation are used. Rents at similar locations are generated from various sources, like data from lessors and lessees, web databases, and own databases. NLB Group has observable data for all investment property at its disposal. If observable data for similar locations are not available, NLB Group uses data from wider locations and appropriately adjusts such data.

Non-current assets held for sale represent property, plant, and equipment that are measured at fair value less costs to sell, because this is lower than the previous carrying amount of those assets.

d) Financial and non-financial assets and liabilities at Level 3 of the fair value hierarchy

Financial instruments on Level 3 of the fair value hierarchy in NLB Group and NLB include:

debt securities: structured debt securities from inactive emerging markets;
equities: corporate and financial equities that are not quoted on active markets; and
derivative financial instruments: forward derivatives and options on equity instruments that are not quoted on an active, organised market. Fair values for forward derivatives are determined using the discounted cash flow model. Fair values for equity options are determined using valuation models for options (Garman and Kohlhagen model, binomial model, and the Black-Scholes model). Unobservable inputs include the fair values of underlying instruments determined using valuation models. The source of observable market inputs is the Reuters information system.

NLB Group uses three valuation methods for the valuation of equity financial assets: the income approach, market approach, and cost approach.

The most commonly used valuation technique is the income approach. The income approach is based on an estimation of future cash flows discounted to the present value. One of the key elements of the valuation is the projection of the cash flows that the company is able to generate in the future. Based on that, the projection of the future cash flow is generated. The key variables that affect the amount of cash flows, and thus the estimated fair value of the financial asset, also include an assumption regarding the long-term EBITDA margin. A discount rate that is appropriate for the risks associated with the realisation of these benefits is used to discount cash flows. The discount rate is determined as the weighted average cost of capital. A forecast of future cash flows and a calculation of the weighted average cost of capital is prepared for an accurate forecasting period (usually 10 years from the date of the prediction value), and for a period following the period of accurate forecasting. Assumptions of long-term stable growth in the amount of 2.5% are used for the period following the period of accurate forecasting. NLB Group can select values of unobservable input data within a reasonable possible range, but uses those input data that other market participants would use.

Movements of financial assets and liabilities on Level 3

in EUR thousand

Equity Derivatives instruments NLB Group Balance as at 1 January 2017 405 5,903 Effects of translation of foreign operations to presentation currency - (204) Valuation: - through profit or loss 5 -		Trading assets	Available-for sale financial assets	Total financial assets


				6,308
				(204)

				5
	- recognised in other comprehensive income	-	244	244
Decreases - (65)				(65)
Balance as at 30 September 2017 410 5,878				6,288

in EUR thousand

			Available-for sale financial	Total financial assets
	Trading assets		assets
NLB Group	Debt instruments	Derivatives	Equity instruments
Balance as at 1 January 2016	993	114	9,960	11,067
Effects of translation of foreign operations to presentation currency	-	-	(6)	(6)
Valuation:				-
- through profit or loss	-	171	(9)	162
- recognised in other comprehensive income	-	-	1,313	1,313
Exchange differences	(37)	-	-	(37)
Increases	-	-	1,066	1,066
Decreases	(956)	-	(5,859)	(6,815)
Balance as at 30 September 2016	-	285	6,465	6,750

	Trading assets	Available-for sale financial assets	Total financial assets
NLB	Derivatives	Equity instruments
Balance as at 1 January 2017	405	1,810	2,215
Valuation:
- through profit or loss	5	-	5
- recognised in other comprehensive income	-	246	246
Decreases	-	(65)	(65)
Balance as at 30 September 2017	410	1,991	2,401

in EUR thousand

			Available-for sale financial	Total financial
	Trading assets Debt		assets	assets
			Equity
NLB	instruments	Derivatives	instruments
Balance as at 1 January 2016	993	114	6,874	7,981
Valuation:
- through profit or loss		171	(9)	162
- recognised in other comprehensive income		-	338	338
Exchange differences	(37)	-	-	(37)
Increases	-	-	1,066	1,066
Decreases	(956)	-	(5,859)	(6,815)
Balance as at 30 September 2016	-	285	2,410	2,695

e) Fair value of financial instruments not measured at fair value in financial statements

in EUR thousand

	NLB Group				NLB
	30.9.2017		31.12.2016		30.9.2017		31.12.2016
	Carrying		Carrying		Carrying		Carrying
	value	Fair value	value	Fair value	value	Fair value	value	Fair value
Loans and advances
- debt securities	82,012	78,777	85,315	78,953	82,012	78,777	85,315	78,953
- loans and advances to banks	482,969	483,591	435,537	434,958	433,151	439,610	408,056	415,771
- loans and advances to customers	6,907,087	6,924,080	6,912,067	6,962,419	4,694,793	4,694,084	4,843,594	4,884,828
- other financial assets	53,879	53,879	61,014	61,014	44,475	44,475	36,151	36,151
Held-to-maturity investments	599,396	649,571	611,449	671,344	599,396	649,571	611,449	671,344
Financial liabilities measured at amortised cost
- deposits from banks and central banks	48,826	48,821	42,334	42,314	97,783	97,784	74,977	74,977
- borrowings from banks and central banks	293,229	299,932	371,769	377,037	271,184	277,182	338,467	348,331
- due to customers	9,670,751	9,690,107	9,437,147	9,461,925	6,722,876	6,730,177	6,615,390	6,626,851
- borrowings from other customers	77,171	77,785	83,619	83,851	6,677	6,647	4,274	4,258
- debt securities in issue	-	-	277,726	280,278	-	-	277,726	280,278
- subordinated liabilities	27,479	27,193	27,145	28,777	-	-	-	-
- other financial liabilities	110,658	110,658	110,295	110,295	72,412	72,412	68,784	68,784

Loans and advances to banks

The estimated fair value of deposits is based on discounted cash flows using prevailing money market interest rates for debts with similar credit risk and residual maturities. The fair value of overnight deposits equals their carrying value.

Loans and advances to customers

Loans and advances are net of the allowance for impairment. The estimated fair value of loans and advances represents the discounted amount of estimated future cash flows expected to be received. Expected cash flows are discounted at current market rates for debts with similar credit risk and residual maturities to determine their fair value.

Deposits and borrowings

The fair value of sight deposits and overnight deposits equals to their carrying value. However, their actual value for NLB Group depends on the timing and amounts of cash flows, current market rates, and the credit risk of the depository institution itself. A portion of sight deposits is stable, similar to term deposits. Therefore, their economic value for NLB Group differs from the carrying amount.

The estimated fair value of other deposits and borrowings from customers is based on discounted cash flows using interest rates for new deposits with similar residual maturities.

Held-to-maturity financial assets and issued debt securities

The fair value of held-to-maturity financial assets and issued debt securities is based on their quoted market price or value calculated by using a discounted cash flow method and prevailing money market interest rates.

Loan commitments

For credit facilities that are drawn soon after NLB Group grants loans (drawn at market rates) and loan commitments to those clients that are not impaired, the fair value is close to zero. For loan commitments to clients that are impaired, the fair value represents the amount of the created provisions.

Other financial assets and liabilities

The carrying amount of other financial assets and liabilities is a reasonable approximation of their fair value, as they mainly relate to short-term receivables and payables.

Fair value hierarchy of financial instruments not measured at fair value in financial statements

	NLB Group				NLB
30.9.2017	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Loans and advances
- debt securities	-	78,777	-	78,777	-	78,777	-	78,777
- loans and advances to banks	-	483,591	-	483,591	-	439,610	-	439,610
- loans and advances to customers	-	6,924,080	-	6,924,080	-	4,694,084	-	4,694,084
- other financial assets	-	53,879	-	53,879	-	44,475	-	44,475
Held-to-maturity investments	649,571	-	-	649,571	649,571	-	-	649,571
Financial liabilities measured at amortised
cost
- deposits from banks and central banks	-	48,821	-	48,821	-	97,784	-	97,784
- borrowings from banks and central banks	-	299,932	-	299,932	-	277,182	-	277,182
- due to customers	-	9,690,107	-	9,690,107	-	6,730,177	-	6,730,177
- borrowings from other customers	-	77,785	-	77,785	-	6,647	-	6,647
- debt securities in issue	-	-	-	-	-	-	-	-
- subordinated liabilities	-	27,193	-	27,193	-	-	-	-
- other financial liabilities	-	110,658	-	110,658	-	72,412	-	72,412

	NLB Group				NLB
31.12.2016	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Loans and advances
- debt securities	-	78,953	-	78,953	-	78,953	-	78,953
- loans and advances to banks	-	434,958	-	434,958	-	415,771	-	415,771
- loans and advances to customers	-	6,962,419	-	6,962,419	-	4,884,828	-	4,884,828
- other financial assets	-	61,014	-	61,014	-	36,151	-	36,151
Held-to-maturity investments	671,344	-	-	671,344	671,344	-	-	671,344
Financial liabilities measured at amortised
cost
- deposits from banks and central banks	-	42,314	-	42,314	-	74,977	-	74,977
- borrowings from banks and central banks	-	377,037	-	377,037	-	348,331	-	348,331
- due to customers	-	9,461,925	-	9,461,925	-	6,626,851	-	6,626,851
- borrowings from other customers	-	83,851	-	83,851	-	4,258	-	4,258
- debt securities in issue	280,278	-	-	280,278	280,278	-	-	280,278
- subordinated liabilities	-	28,777	-	28,777	-	-	-	-
- other financial liabilities	-	110,295	-	110,295	-	68,784	-	68,784

in EUR thousand

6. Related-party transactions

The volumes of related party transactions and the outstanding balances:

							in EUR thousand
	Management Board and other Key management personnel		Family members of the Management Board and other key management personnel		Companies in which members of the Management Board, key management personnel or their family members have control, joint control or a significant influence		Supervisory Board
NLB Group and NLB	30.9.2017	31.12.2016	30.9.2017	31.12.2016	30.9.2017	31.12.2016	30.9.2017	31.12.2016
Loans and deposits issued	2,063	2,110	416	492	347	371	443	-
Loans and deposits received	1,972	2,079	725	697	538	480	218	130
Other financial assets	2	-	-	-	-	-	-	-
Other financial liabilities	2,407	1,536	-	-	5	2	-	-
Guarantees issued and commitments to extend credit	226	248	80	83	109	147	26	3
		nine months ended		nine months ended		nine months ended		nine months ended
	September 2017	September 2016	September 2017	September 2016	September 2017	September 2016	September 2017	September 2016
Interest income	27	32	6	7	5	7	8	-
Interest expenses	(6)	(10)	(3)	(3)	-	-	-	(1)
Fee income	7	8	3	4	7	6	1	-
Other income	-	2	-	-	-	-	-	-
Other expenses	(3)	-	-	-	(57)	-	-	-

in EUR thousand

	NLB Group Ultimate parent			NLB
			Ultimate parent
	30.9.2017	31.12.2016	30.9.2017	31.12.2016
Loans and deposits issued	151,417	178,589	146,964	173,160
Loans and deposits received	70,010	70,005	70,010	70,005
Investments in securities	951,749	934,336	878,482	869,941
Other financial assets	160	153	8	1
Other financial liabilities	3	6	3	6
Guarantees issued and commitments to extend credit	881	849	881	849

	nine months ended		nine months ended
	September	September	September	September
	2017	2016	2017	2016
Interest income	19,271	25,840	18,943	25,116
Interest expenses	(5)	(4)	(5)	(4)
Fee income	128	96	128	96
Fee expenses	(28)	(28)	(28)	(28)
Other income	8	3	8	3
Other expenses	(19)	-	(19)	-

NLB Group discloses all transactions with the ultimate controlling party. For transactions with other government-related entities, NLB Group discloses individually significant transactions.

in EUR thousand

	Amount of significant transactions concluded during the period	Number of significant transactions concluded during the period
NLB Group and NLB	1.1. - 30.9.2017	1. 1. - 31.12.2016	1.1. - 30.9.2017	1. 1. - 31.12.2016
Loans	-	158,136	-	1
Commitments to extend credit	-	140,000	-	2
	Balance of all significant transactions at end of the period		Number of significant transactions at end of the period
	30.9.2017	31.12.2016	30.9.2017	31.12.2016
Loans	629,365	770,407	5	5
Debt securities classified as loans and advances	82,013	85,315	1	1
Borrowings, deposits and business accounts	135,006	135,020	2	3
Commitments to extend credit	-	140,000	-	2
		Effects in income statement during the period
		nine months ended
	September 2017	September 2016
Interest income from loans	3,853	2,502
Effects from net interest income and net valuation from debt securities classified as loans and receivables	528	15,372
Interest expense from borrowings, deposits and business accounts	(83)	(194)
Interest income from commitments to extend credit	-	758

in EUR thousand

	NLB Group
	Associates Joint ventures
	30.9.2017	31.12.2016	30.9.2017	31.12.2016
Loans and deposits issued	1,326	1,418	4,854	19,857
Loans and deposits received	3,326	5,838	6,394	5,198
Other financial assets	-	30	167	141
Other financial liabilities	158	927	80	92
Guarantees issued and
commitments to extend credit	36	40	26	28

	nine months ended			nine months ended
	September	September	September	September
	2017	2016	2017	2016
Interest income	32	36	47	788
Interest expenses	-	(17)	(50)	(26)
Fee income	100	88	2,922	2,603
Fee expenses	(7,823)	(7,683)	(1,544)	(1,500)
Other income	161	167	92	319
Other expenses	(741)	(778)	(13)	(89)

in EUR thousand

		NLB
		Subsidiaries		Associates		Joint ventures
	30.9.2017	31.12.2016	30.9.2017	31.12.2016	30.9.2017	31.12.2016
Loans and deposits issued	371,498	349,155	1,326	1,418	4,829	19,822
Loans and deposits received	79,229	54,556	3,326	5,838	4,315	4,443
Derivatives
Fair value	(1)	-	-	-	-	-
Contractual amount	191	-	-	-	-	-
Other financial assets	381	723	-	30	167	140
Other financial liabilities	57	296	39	849	1	1
Guarantees issued and
commitments to extend credit	27,603	26,729	36	40	25	27
Received loan commitments
and financial guarantees	1,200	500	-	-	-	-

	nine months ended			nine months ended		nine months ended
	September	September	September	September	September	September
	2017	2016	2017	2016	2017	2016
Interest income	4,942	5,734	32	36	46	787
Interest expenses	(60)	(19)	-	(17)	(43)	(4)
Fee income	4,107	3,098	100	88	2,838	2,410
Fee expenses	(30)	(55)	(6,708)	(6,907)	(878)	(1,053)
Other income	362	352	161	167	92	289
Other expenses	(1,062)	(2,112)	(531)	(585)	(13)	(89)

Key management compensation

		Management Board	Other key management personnel
		nine months ended
	September	September	September	September
NLB Group and NLB	2017	2016	2017	2016
Short-term benefits	474	372	3,451	3,666
Cost refunds	4	3	81	83
Long-term bonuses
- severance pay	-	-	34	-
- other benefits	4	3	56	57
Variable part of payments	63	39	673	279
Total	545	417	4,295	4,085

Short-term benefits include:

monetary benefits (gross salaries, supplementary insurance, holiday bonus, other bonus); and
non-monetary benefits (company cars, health care, apartments, etc.).

The reimbursement of costs is comprised of food allowances and travel expenses, other long-term bonuses include supplementary voluntary pension insurance and jubilee bonuses and variable part of payments is paid in accordance with the Remuneration Policy for employees with a special nature of work.

7. Analysis by segment for NLB Group

a) Segments

The nine months ending 30 September 2017.

in EUR thousand

			Financial
	Corporate	Retail	markets and investment	Foreign	Non-strategic
	banking in	banking in	banking in	strategic	markets and	Other
NLB Group	Slovenia	Slovenia	Slovenia	markets	activities	activities	Unallocated	Total

Total net income	53,056	104,083	28,976	141,999	34,872	5,151		368,136
Net income from external customers	56,561	104,240	22,170	143,293	34,665	5,274	-	366,202
Intersegment net income	(3,506)	(157)	6,806	(1,294)	207	(116)	-	1,940
Net interest income	30,290	53,832	24,000	108,187	12,566	(181)	-	228,693
Net interest income from external customers	33,796	54,204	17,128	109,720	13,913	(68)	-	228,693
Intersegment net interest income	(3,506)	(373)	6,872	(1,533)	(1,347)	(113)	-	(0)
Administrative expenses	(29,053)	(66,146)	(8,491)	(63,616)	(15,309)	(6,334)	-	(188,950)
Depreciation and amortisation	(3,304)	(7,778)	(768)	(6,945)	(977)	(1,056)	-	(20,827)
Reportable segment profit/(loss) before impairment
and provision charge	20,699	30,158	19,716	71,438	18,586	(2,238)	-	158,359
Gains less losses from capital investment in subsidiaries,
associates and joint ventures	-	3,577	159	-	(920)	-		2,816
Impairment and provisions charge	8,193	(1,210)	(55)	16,851	13,002	491	-	37,272
Profit/(loss) before income tax	28,892	32,525	19,820	88,289	30,669	(1,747)	-	198,447
Owners of the parent	28,892	32,525	19,820	81,003	30,669	(1,747)	-	191,161
Non-controlling interests	-	-	-	7,286	-	-	-	7,286
Income tax					-		(7,170)	(7,170)
Profit for the period								183,991
30.9.2017
Reportable segment assets	2,135,211	2,170,735	3,327,913	3,729,501	444,741	157,352		11,965,453
Investments in associates and joint ventures	-	42,468	-	-	-	-		42,468
Reportable segment liabilities	1,109,286	5,397,588	574,948	3,149,053	56,755	75,696	-	10,363,327

The nine months ending 30 September 2016.

	Corporate	Retail	Financial markets and investment	Foreign	Non-strategic
NLB Group	banking in Slovenia	banking in Slovenia	banking in Slovenia	strategic markets	markets and activities	Other activities	Unallocated	Total
Total net income	57,577	100,224	35,863	133,522	18,879	14,501		360,566
Net income from external customers	63,030	93,104	33,269	134,455	19,010	14,761	-	357,629
Intersegment net income	(5,453)	7,120	2,594	(933)	(131)	(260)	-	2,937
Net interest income	35,984	54,319	35,252	101,944	11,852	(535)	-	238,816
Net interest income from external customers	41,438	47,420	32,615	103,743	13,875	(275)	-	238,816
Intersegment net interest income	(5,453)	6,898	2,637	(1,799)	(2,023)	(260)	-	-
Administrative expenses	(30,596)	(69,031)	(8,312)	(63,278)	(16,190)	(8,337)	-	(195,744)
Depreciation and amortisation	(3,427)	(8,097)	(788)	(5,929)	(1,723)	(1,398)	-	(21,362)
Reportable segment profit/(loss) before impairment
and provision charge	23,553	23,097	26,763	64,315	966	4,766	-	143,460
Gains less losses from capital investment in subsidiaries,
associates and joint ventures	-	3,987	-	-	-	-	-	3,987
Impairment and provisions charge	4,489	(9,197)	42	(6,752)	(19,696)	(6,338)	-	(37,451)
Profit/(loss) before income tax	28,042	17,887	26,806	57,563	(18,730)	(1,572)	-	109,996
Owners of the parent	28,042	17,887	26,806	53,390	(18,730)	(1,572)	-	105,823
Non-controlling interests	-	-	-	4,173	-	-	-	4,173
Income tax					-		(14,353)	(14,353)
Profit for the period								91,470
31.12.2016
Reportable segment assets	2,338,698	2,074,736	3,375,667	3,540,474	502,610	163,578	-	11,995,763
Investments in associates and joint ventures	-	43,248	-	-	-	-	-	43,248
Reportable segment liabilities	1,198,058	5,229,761	907,159	3,038,921	57,935	81,517	-	10,513,351
Additions to non-current assets	2,305	7,286	363	7,882	2,928	463	-	21,227

b) Geographical information

in EUR thousand

	Revenues		Net income		Non-current assets		Total assets
	nine months ended		nine months ended
	September	September	September	September
NLB Group	2017	2016	2017	2016	30.9.2017	31.12.2016	30.9.2017	31.12.2016
Slovenia	243,559	263,093	218,765	226,249	219,593	225,643	8,174,514	8,393,754
South East Europe	181,035	174,108	144,900	129,736	127,898	130,949	3,793,372	3,602,358
Macedonia	64,944	61,873	50,174	45,910	32,735	33,448	1,162,880	1,147,375
Serbia	18,450	15,691	15,588	13,784	22,762	24,822	378,038	316,023
Montenegro	21,530	23,164	16,416	11,628	29,416	29,476	480,396	478,682
Croatia	171	30	331	(196)	2,476	2,568	32,070	27,164
Bosnia and Herzegovina	50,180	48,906	40,818	38,214	26,583	27,222	1,186,261	1,116,169
Kosovo	25,760	24,444	21,573	20,396	13,926	13,413	553,727	516,945
Western Europe	359	1,225	(98)	1,645	239	247	39,103	39,742
Germany	11	5	88	381	219	222	5,628	2,782
Switzerland	348	1,220	(186)	1,264	20	25	33,475	36,960
Czech Republic	4	-	2,635	(1)	927	891	932	3,157
Total	424,957	438,426	366,202	357,629	348,657	357,730	12,007,921	12,039,011

The geographical analysis includes a breakdown of items with respect to the country in which individual NLB Group entities are located.

8. Subsidiaries

NLB Group's subsidiaries as at 30 September 2017 were:

	Nature of Business	Country of Incorporation	NLB Group's shareholding %	NLB's shareholding %
Core members
NLB Banka a.d., Skopje	Banking	Republic of Macedonia	86.97	86.97
NLB Banka a.d., Podgorica	Banking	Republic of Montenegro	99.83	99.83
NLB Banka a.d., Banja Luka	Banking	Republic of Bosnia and Herzegovina	99.85	99.85
NLB Banka sh.a., Prishtina	Banking	Republic of Kosovo	81.21	81.21
NLB Banka d.d., Sarajevo	Banking	Republic of Bosnia and Herzegovina	97.34	97.34
NLB Banka a.d., Beograd	Banking	Republic of Serbia	99.998	99.998
NLB Srbija d.o.o., Beograd	Real estate	Republic of Serbia	100	100
NLB Skladi d.o.o., Ljubljana	Finance	Republic of Slovenia	100	100
NLB Nov penziski fond a.d., Skopje	Insurance	Republic of Macedonia	100	51
NLB Crna Gora d.o.o., Podgorica	Real estate	Republic of Montenegro	100	100
Non-core members
NLB Leasing d.o.o., Ljubljana	Finance	Republic of Slovenia	100	100
Optima Leasing d.o.o., Zagreb - "u likvidaciji"	Finance	Republic of Croatia	100	-
NLB Leasing Podgorica d.o.o., Podgorica - "u likvidaciji"	Finance	Republic of Montenegro	100	100
NLB Leasing d.o.o., Beograd - u likvidaciji	Finance	Republic of Serbia	100	100
NLB Leasing d.o.o., Sarajevo	Finance	Republic of Bosnia and Herzegovina	100	100
NLB Lizing d.o.o.e.l., Skopje - vo likvidacija	Finance	Republic of Macedonia	100	100
Tara Hotel d.o.o., Budva	Real estate	Republic of Montenegro	100	12.71
PRO-REM d.o.o., Ljubljana - v likvidaciji	Real estate	Republic of Slovenia	100	100
OL Nekretnine d.o.o., Zagreb - u likvidaciji	Real estate	Republic of Croatia	100	-
BH-RE d.o.o., Sarajevo	Real estate	Republic of Bosnia and Herzegovina	100	-
REAM d.o.o., Zagreb	Real estate	Republic of Croatia	100	100
REAM d.o.o., Podgorica	Real estate	Republic of Montenegro	100	100
REAM d.o.o., Beograd	Real estate	Republic of Serbia	100	100
SR-RE d.o.o., Beograd	Real estate	Republic of Serbia	100	100
SPV 2 d.o.o., Beograd	Real estate	Republic of Serbia	100	100
NLB Propria d.o.o., Ljubljana - v likvidaciji	Real estate	Republic of Slovenia	100	100
CBS Invest d.o.o., Sarajevo	Real estate	Republic of Bosnia and Herzegovina	100	100
NLB InterFinanz AG, Zürich in Liquidation	Finance	Sw itzerland	100	100
NLB InterFinanz Praha s.r.o., Prague	Finance	Czech Republic	100	-
NLB InterFinanz d.o.o., Beograd	Finance	Republic of Serbia	100	-
Prospera plus d.o.o., Ljubljana	Tourist and catering trade	Republic of Slovenia	100	100
LHB AG, Frankfurt	Finance	Republic of Germany	100	100

NLB Group's subsidiaries as at 31 December 2016 were:

Nature of Business Country of Incorporation % % Core members NLB Banka a.d., Skopje Banking Republic of Macedonia 86.97 86.97 NLB Banka a.d., Podgorica Banking Republic of Montenegro 99.36 99.36 NLB Banka a.d., Banja Luka Banking Republic of Bosnia and Herzegovina 99.85 99.85 NLB Banka sh.a., Prishtina Banking Republic of Kosovo 81.21 81.21 NLB Banka d.d., Sarajevo Banking Republic of Bosnia and Herzegovina 97.34 97.34 NLB Banka a.d., Beograd Banking Republic of Serbia 99.997 99.997 NLB Srbija d.o.o., Beograd Real estate Republic of Serbia 100 100 NLB Skladi d.o.o., Ljubljana Finance Republic of Slovenia 100 100 NLB Nov penziski fond a.d., Skopje Insurance Republic of Macedonia 100 51 NLB Crna Gora d.o.o., Podgorica Real estate Republic of Montenegro 100 100 Non-core members NLB Leasing d.o.o., Ljubljana Finance Republic of Slovenia 100 100 Optima Leasing d.o.o., Zagreb - "u likvidaciji" Finance Republic of Croatia 100 - NLB Leasing Podgorica d.o.o., Podgorica - "u likvidaciji" Finance Republic of Montenegro 100 100 NLB Leasing d.o.o., Beograd - u likvidaciji Finance Republic of Serbia 100 100 NLB Leasing d.o.o., Sarajevo Finance Republic of Bosnia and Herzegovina 100 100 NLB Lizing d.o.o.e.l., Skopje - vo likvidacija Finance Republic of Macedonia 100 100 Tara Hotel d.o.o., Budva Real estate Republic of Montenegro 100 12.71 PRO-REM d.o.o., Ljubljana - v likvidaciji Real estate Republic of Slovenia 100 100 OL Nekretnine d.o.o., Zagreb - u likvidaciji Real estate Republic of Croatia 100 - BH-RE d.o.o., Sarajevo Real estate Republic of Bosnia and Herzegovina 100 - REAM d.o.o., Zagreb Real estate Republic of Croatia 100 100 REAM d.o.o., Podgorica Real estate Republic of Montenegro 100 100 REAM d.o.o., Beograd Real estate Republic of Serbia 100 100 SR-RE d.o.o., Beograd Real estate Republic of Serbia 100 100 NLB Propria d.o.o., Ljubljana - v likvidaciji Real estate Republic of Slovenia 100 100 CBS Invest d.o.o., Sarajevo Real estate Republic of Bosnia and Herzegovina 100 100 NLB InterFinanz AG, Zürich in Liquidation Finance Sw itzerland 100 100 NLB InterFinanz Praha s.r.o., Prague Finance Czech Republic 100 - NLB InterFinanz d.o.o., Beograd Finance Republic of Serbia 100 - Prospera plus d.o.o., Ljubljana Tourist and catering trade Republic of Slovenia 100 100 LHB AG, Frankfurt Finance Republic of Germany 100 100 NLB Factoring a.s. - "v likvidaci", Brno Finance Czech Republic 100 100		NLB Group's shareholding	NLB's shareholding

9. Events after the end of the reporting period

On 16 November 2017, NLB received the judgement of Županijski sud in Zagreb in connection to the claim related to the old foreign currency savings, which was in accordance with Croatian regulations passed to ZaBa (for detailed information refer to note 5.10).

		90						NLB Group Interim Report September 2017

91	NLB Group Interim Report September 2017

AI Terminal

NLB

1985_rns_2017-11-30_675e899a-0f0f-4d6c-bf66-c5e1bc3d76aa.pdf

693,232 Number of active clients

8,610.4

Result after tax (in EUR million)

NLB Vita, Ljubljana

4.8

Slovenia Bosnia and Herzegovina

NLB Banka, Sarajevo

18.6

Macedonia

Kosovo

342.5

Contents

Key financial and operating data

EUR 184.0 million

Profit after tax

15.9%

ROE

2%

56.8%

10%

Note:

8.3%

NPE

5%

16.3%

Macroeconomic environment

Business operations

Retail banking in Slovenia

Figure 1: Gross NLB loans (in EUR million)

Figure 3: Private Banking

Figure 4: NLB Klikin penetration (month end in %)

Corporate and Investment banking in Slovenia

Figure 5: NLB Klikpro penetration (month end in %)

Strategic foreign markets

Wind down of non-core operations

Efficient and proactive risk management of operations

Strong liquidity and capital position

Overview of NLB Group's financial performance

Key developments

Income statement

Profit

Figure 7: Profit after tax of NLB Group – evolution YoY (in EUR million)

In the nine months of 2017, the Group generated EUR 184.0 million of profit after tax, 101% higher YoY.

Note:

Profit before tax – segment results

Core markets and activities: 7 improvement of operations, especially in strategic foreign markets

Non-core markets and activities: positive results of operations and continuing divestments

Net interest income

Figure 10: Net interest margin (in %)

Net interest income – segment results

Net non-interest income

Net non-interest income – segment results

Figure 14: Net non-interest income by segments of NLB Group (in EUR million)

Total costs

Net impairments and provisions

Statement of financial position

Assets

Liabilities

Figure 19: Total liabilities of NLB Group – structure (in EUR million)

Figure 20: Deposits from customers by core segment (in EUR million)

Capital adequacy

Risk management

Figure 23: Structure of NLB Group credit portfolio by client credit ratings (in %)

Figure 24: NLB Group NPE (NPE % by the EBA) and NPL ratio

Note:

Contents

Condensed income statement

Condensed income statement – by quarter for NLB Group

Condensed income statement – by quarter for NLB

Condensed statement of comprehensive income

Condensed statement of comprehensive income – by quarter for NLB Group

Condensed statement of comprehensive income – by quarter for NLB

Condensed statement of financial position

Condensed statement of changes in equity

in EUR thousand

in EUR thousand

in EUR thousand