NLB — Investor Presentation 2017

Mar 14, 2017

NLB Group Investor Presentation

FY'16 results

Disclaimer

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The presentation has not been independently verified and no representation or warranty, express or implied, is made or given by or on behalf of NLB or any of their respective parent or subsidiary undertakings or associated companies, or any of such person's respective directors, officers, employees, agents, affiliates or advisers, as to, and no reliance should be placed for any purpose whatsoever on the truth, fullness, accuracy, completeness or fairness of the information or opinions contained in this presentation or any other information relating to NLB, its subsidiary undertakings or, associated companies or affiliates, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available and no responsibility or liability whatsoever is assumed by any such persons for any such information or opinions or for any errors or omissions or for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection therewith. The information in this presentation is in draft form and has not been verified. All information presented or contained in this presentation is subject to verification, correction, completion and change without notice. This presentation does not purport to contain all information that may be required to evaluate NLB. In giving this presentation, none of NLB or any of their respective parent or subsidiary undertakings or associated companies, or any of such person's respective directors, officers, employees, agents, affiliates or advisers, or any other party undertakes or is under any obligation to amend, correct or update this presentation or to provide the recipient with access to any additional information that may arise in connection with it. None of the foregoing persons accepts any responsibility whatsoever for the contents of this presentation, and no representation or warranty, express or implied, is made by any such person in relation to the contents of this presentation. To the fullest extent permissible by law, such persons disclaim all and any responsibility or liability, whether arising in tort, contract or otherwise, which they might otherwise have in respect of this presentation. Recipients should not construe the contents of this presentation as legal, tax, regulatory, financial or accounting advice and are urged to consult with their own advisers in relation to such matters.

Certain information in this presentation is based on public data obtained from sources believed by NLB to be reliable and in good faith, but no representations, guarantees or warranties are made by NLB with regard to accuracy, completeness or suitability of such data. NLB has not performed any independent review or due diligence of publicly available information regarding an unaffiliated reference asset or index. The opinions and estimates contained herein reflect the current judgment of the author(s) on the date of this presentation and are subject to change without notice. NLB does not have an obligation to update, modify or amend this presentation or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

This presentation has not been approved by any regulatory authority. This presentation does not, and is not intended to, constitute or form part of, and should not be construed as, any offer, invitation, solicitation or recommendation to purchase, sell, subscribe for or otherwise acquire, any securities of NLB in any jurisdiction and neither the issue of the information nor anything contained herein shall form the basis of or be relied upon in connection with, or act as any inducement to enter into, any investment activity. This presentation should not be considered as a recommendation that any recipient of this presentation should purchase or sell any of the NLB financial instruments or groups of financial instruments or assets. This presentation does not include all necessary information, which should be considered by the recipient of this presentation when making a decision on purchasing any of the NLB financial instruments or assets. Each recipient of this presentation contemplating purchasing any of the NLB financial instruments or assets should make its own independent investigation of the financial condition and affairs, and its own appraisal of the NLB creditworthiness. Any purchase of securities in NLB should be made solely on the basis of the information contained in a prospectus relating to such securities. If published, any such prospectus would be available at the registered address of NLB and on its website. NLB has not finally decided whether to proceed with any transaction. Any corporate body or natural person interested in investing into NLB's financial instruments or assets should consult well-qualified professional financial experts and thus obtain additional information.

This presentation is for the use of the addressees only and may not be reproduced, redistributed or passed on to any other person or published, in whole or in part, for any purpose, without the prior, written consent of NLB. The manner of distributing this presentation may be restricted by law or regulation in certain countries, including (but not limited to) the United States. Persons into whose possession this presentation may come are required to inform themselves about and to observe such restrictions. By accepting this presentation, a recipient hereof agrees to be bound by the foregoing limitations. NLB is regulated by The Bank of Slovenia i.e. "Banka Slovenije, Slovenska 35, 1505 Ljubljana, Slovenia" and by The Securities Market Agency i.e. "Agencija za trg vrednostnih papirjev, Poljanski nasip 6,

1000 Ljubljana, Slovenia.

Team

Nova Ljubljanska Banka (NLB)

Blaž Brodnjak

Chief Executive Officer (CEO) Chief Marketing Officer (CMO)

• Responsible for Corporate and Retail Banking since December 2012; CEO since February 2016
• Supervisory Board experience at 11 banking, 3 insurance, 1 asset management and 1 manufacturing companies
• MBA from IEDC Bled School of Management (Slovenia)

Archibald Kremser

Chief Financial Officer (CFO)

• Chief Financial Officer of NLB since July 2013
• Previously held senior management positions at Dexia Kommunalkredit Group (CEE)
• Previous consulting experience at Bain & Company and EY
• MBA from INSEAD (France), MSc in Engineering from Vienna University of Technology (Austria)

Andreas Burkhardt

Chief Risk Officer (CRO)

• Chief Risk Officer of NLB since September 2013
• Previously held senior managerial position at Volksbank, including among others CRO at Volksbank Bosnia and CFO at Volksbank Romania
• Supervisory Board experience at 3 banks
• MBA from University of Dayton (USA), MSc in Economics from University of Augsburg (Germany)

László Pelle

Chief Operating Officer (COO)

• Chief Operating Officer of NLB since October 2016
• Previously COO at Erste Bank in Budapest, COO at HSBC CEE and Operations and Technology Director at Citibank Hungary
• Supervisory Board experience at 1 pension fund
• Master's Degree from Technical University of Budapest (Hungary)

X Represents years of experience

3

Overview of NLB Group

Investment highlights

• The largest banking and financial institution in Slovenia by total assets
  • 100% owned by the Republic of Slovenia
  • Leading bank for retail and corporate clients in Slovenia, with ~701k active clients and ~24% market share by total assets
• Active in 6 attractive markets in South-Eastern Europe
  • 4 of the NLB Group banks are Top-3 banks in their respective markets (by total assets)
• Underwent substantial transformation since 2013, achieving turnaround in operational profitability and asset quality
  • ~21% reduction in operating costs (FY'12-FY'16), an equivalent of -6% CAGR
  • NPL ratio reduced from Dec-12 peak of 28.2% to 13.8% in Dec-16
  • 12 consecutive quarters of stable and positive performance
• Extensive distribution network of 355 branches
  • 113 branches in Slovenia (Dec-16)
• Attractive dividend payout ratio
  • 48% of 2015 NLB Group net profit paid out in August 2016
  • 58% of 2016 NLB Group net profit to be paid out in April 2017(3)

Key figures

Balance sheet (EURm)	Dec-15	Dec-16
Total assets	11,822	12,039
Loans to customers (gross)	8,351	7,901
Loans to customers (net)	7,088	6,997
Customer deposits	9,026	9,439
Attributable equity	1,423	1,495(4)
P&L (EURm)	FY'15	FY'16
Net interest income	340	317
Pre provision income	186	186
Profit after tax	92	110
Key ratios (%)	Dec-15 / FY'15	Dec-16 / FY'16
CET1 ratio	16.2%	17.0%(5)
NPL ratio	19.3%	13.8%
NPL coverage ratio	72.2%	76.1%
NPE ratio (EBA)	14.3%	10.0%
NPE coverage ratio (EBA)	69.9%	72.2%
RoE after tax	6.6%	7.4%

Gross loans by customer (Dec-16)

Note: (1) Government departments, municipalities and agencies; (2) Geographical analysis based on location of assets of the NLB Group; (3) Represents proposed dividend of EUR63.8m, subject to approval by Supervisory Board and General Meeting of Shareholders; (4) Pre EUR63.8m proposed dividend payment distribution to existing shareholders; (5) Post EUR63.8m proposed dividend payment distribution

Background to 2013 recapitalisation

• Severe economic contraction in Slovenia during 2009 – 2013 drove NLB's NPLs to unprecedented levels
• An independent Asset Quality Review (AQR) and stress tests undertaken in 2013 by international consultants under the auspices of the Bank of Slovenia identified EUR1.7bn(1) capital shortfall for NLB
• To address that, a number of measures were taken for the recapitalisation of the bank

2013 recapitalisation Journey so far

Source: Company information, Slovenian Statistical Office

Note: (1) Capital shortfalls of EUR1,464m under baseline scenario and EUR1,668m under adverse scenario, including new DTAs effect; (2) EUR258m including accrued interest; (3) Gross book value of assets: EUR2,169m; Transfer price: EUR610m; (4) Represents exposures to 279 customers including NPLs and claims against non-strategic clients; (5) EUR1,070m of provisions and impairments; (6) Includes 2013 Other comprehensive income and transactions with non-controlling interests

Journey so far

Transformation into a sustainably profitable client-oriented group, focused on core markets

Key initiatives implemented				Overview	Going forward
• 1	Focus on core businesses and markets and divestment of several		Retail banking	• Largest retail banking group by loans, deposits and number of branches • #1 in private banking and asset management		Ongoing initiatives to transform operations
non-core subsidiaries and participations		Core Slovenia	Corporate banking	• •	Market leader in corporate banking with the largest client base in the country Strong trade finance operations and other fee-based	Capitalise on attractive growth prospects of fee-generating
• Balance sheet reduction 2	Core				businesses	businesses
• 6% annual cost reduction 3 achieved(4)			Financial markets(1)	• •	Largest brokerage network providing the best access to securities markets for clients #1 lead organiser for syndicated loans in Slovenia	Implementation of differentiated risk adjusted pricing
• 4 policy and corporate governance	Improved risk management	Core members	Foreign strategic markets	• •	Leading franchise in the SEE with 6 independent, well capitalised and self-funded subsidiaries The only international banking group with exclusive focus on the SEE region	Increasing contribution to Group profits
• Focus on improved 5 business selection and pricing with clear minimum client RoE targets	Non-core	Non-core Slovenia (part of NLB d.d.)	Corporate lending Equity investments Real estate(2)	• •	Assets booked under NLB d.d. or non-core subsidiaries funded via NLB d.d. Investments in listed and private Slovenian companies	Targeted exit by 2020 from selected ancillary businesses
• 6 and improving asset quality	Emphasis on NPL recovery	Non-core members	Leasing, factoring and other(3)	• •	Various run-off businesses including leasing and factoring in the sale or liquidation processes Real estate SPVs consolidating investments in SEE	and lending to certain sectors

2013 recapitalisation Journey so far

Note: (1) Segment includes investment banking, custody services, ALM, trading and treasury

(2) GREAM; (3) NLB Leasing Ljubljana, NLB Interfinanz, Other Leasing, REAM and other Non-core members; (4) CAGR 2012 to 2016

Journey so far (continued)

Transformation into a sustainably profitable client-oriented group, focused on core markets

RoE • Focus on core businesses and markets and divestment of several non-core subsidiaries and participations • Balance sheet reduction • 6% annual cost reduction achieved(1) • Improved risk management policy and corporate governance • Focus on improved business selection and pricing with clear minimum client RoE targets • Emphasis on NPL recovery and improving asset quality 1 2 3 4 5 6 13,329 1,006 -274

Key initiatives implemented

Smaller and stronger balance sheet (EURm)

Return to profitability(2) (EURm)

21% cost base reduction from 2012 (EURm)

65% reduction of NPLs (NPL stock, EURm)

2013 recapitalisation Journey so far

Note: NPL ratio and NPL stock based on credit portfolio, including balances and obligatory reserves with central banks and demand deposits at banks and different scope of consolidation; (1) CAGR 2012 to 2016; (2) Profit after tax attributable to the shareholders

Investment highlights

Investment highlights of NLB Group

Largest bank in Slovenia and among top players in selected SEE markets

Dominant player in the Slovenian banking sector 1

Market leader across products in Slovenia

Note: (1) Net loans to customers (excl. DARS bonds) as of Sep-16; Customer deposits as of Sep-16; Branches: NLB d.d., Nova KBM as of Dec-16; Abanka as of Jun-16; SKB and UniCredit as of Dec-15; (2) Includes PBS and KBS Bank; (3) Customer deposits without structured deposits (EUR2m)

Dominant player in the Slovenian banking sector Retail banking 1

Market	 Retail lending has been steadily growing since 2014, primarily driven by mortgages; household indebtedness remains low vs. Eurozone (22% of GDP as of 2015)	Retail net loans (EURm)	Retail deposits (EURm)
evolution	 Housing transactions increasing, while prices stabilised in 2015  Significant growth of retail deposits	24.2% 23.9% 23.7% 6.6%	30.2% 30.2% 30.4% 15,956 14,997 14,627
NLB positioning	Market shares(1) resilient across market segments  (As of Dec-16: Retail net loans: 23.7%, Retail deposits: 30.4%)	8,295 7,898 7,781
	 Increasing share of new loan production in growing consumer segment, driven by wide distribution network, strong sales force and large customer base	Dec-14 Dec-15 Dec-16 Total sector loans / deposits	Dec-14 Dec-15 Dec-16 NLB mkt share %
Distribution	 Network of 113 branches offers nationwide coverage, with presence in all key cities of Slovenia	Branch network (#)	NLB Klik(2) users (000s)
network	 Key initiatives implemented in branches, including rollout of e-signature and branch refurbishment	121 121 113	219 214 208
Digital banking	 Ongoing enhancement of online and mobile banking platform with the introduction of new functionalities, including ability to initiate loan applications online and full online availability of all transaction banking services
	 First bank to introduce contactless debit and credit cards in Slovenia	Dec-14 Dec-15 Dec-16	Dec-14 Dec-15 Dec-16
	Private banking:  #1 market position, with growing customer base through conversion of existing NLB	Private banking 1,077 1,009	GWP (EURm) 62 62
Upside from fee generating products	customers and limited competition  Strong cross-selling capabilities with bancassurance and asset management Bancassurance:  Profitable and growing business segment, with ca 11.1% market share in life by GWP(3), with upside potential from underpenetrated customer base (13% penetration)	858 554 474 377	54 1.5 1.9 1.0 60 60 53
	Asset management: # 1 player by AuM in Slovenian asset management exceeding EUR1.0bn in AuM(4) 	Dec-14 Dec-15 Dec-16	FY'14 FY'15 FY'16
		AuM (EURm) Clients (k)	Life Non-life

Source: Bank of Slovenia, Company information

Note: All figures refer to full year ending 31-Dec; (1) Excluding the NPL sale effect of EUR27m net; (2) NLB Klik refers to NLB's online banking application; (3) Slovenian Insurance Association; (4) Including investments in mutual funds and discretionary portfolios. Source: Slovenian Fund Management Association

54 1.5 1.9 62 62

15,956

Dominant player in the Slovenian banking sector Corporate banking 1

Market evolution	 Corporate deleveraging post-crisis, volumes decreasing 8% on average during 2014-16  Corporate credit demand demonstrated pick-up in 2016 as economic growth continues  Substantial progress in corporate NPL resolution
NLB positioning	NLB is clear sector leader with 22.3% net loans market share(1); stable market  share despite NPL resolution and repayments  Loan balances in key business(2) grew on average 10% per year despite the sector falling by 8% on average since 2014  Market leader across deposit product lines: 20% market share for sight deposits, 13% for term deposits
Competitive advantage	 Largest bank in the country with the highest capacity to lend and best capability to service large clients  Strong pricing power, driven by largest customer base – NLB is positioned in upper third of market  International desk to leverage on network of subsidiaries in the region
Strong fee business	 Leader in merchant acquiring with 12k POS terminals, 6k merchants and 35% market share  Solid performance in Investment banking, Treasury solutions and Custody, with income from these activities growing 15% between 2014 and 2016  Assets under custody exceeded EUR12bn in Dec-16 (+EUR2.7bn vs 2015)
Opportunity in small and mid business	 Mid-corporate: with wide physical presence NLB has advantage in a strongly contested market  Attractive fee business potential as relevant advisory and treasury services can be offered at smaller scale

Statistics per key client segment(2) (EURm, Dec-16)

	Clients	Gross loans (EURm)	Deposits (EURm)
Large	686	1,742	237
Mid	2,580	442	423
SE(3)	13,449	97	447

Source: Bank of Slovenia, Company information

Note: (1) Market share of NLB d.d. excluding DARS bonds and the NPL sale effect of EUR54m net; (2) Key business excludes workout and restructuring; (3) Small enterprises, excluding Standard segment clients

in Distribution Network; (4) Non-interest income per larger scale corporate clients (includes large corporate, mid corporate and small enterprises premium plus); (5) Excluding restructuring and workout

NLB's countries of presence outside Slovenia represent attractive markets, with significant growth potential 2

• NLB's SEE footprint outside of Slovenia covers 5 countries with EUR65.6bn GDP and 15.4m population
• Attractive growth markets, with 2.6% real GDP growth, EUR4k GDP/capita and 21% household indebtedness as % of GDP(5)

	Slovenia	Macedonia		Bosnia(1) Montenegro	Kosovo	Serbia	Total / Average(5)
Population (Dec-15, m)	2.1	2.1	3.8	0.6	1.8	7.1	15.4
GDP(3) (2015, EURbn)	38.5	9.0	14.4	3.6	5.8	32.9	65.6
GDP/Capita(3) (2015, EURk)	18.7	4.3	3.8	5.8	3.1	4.6	4.3
Real GDP growth (9M'16)	2.6%	2.7%	1.8%	2.1%	3.6%	2.7%	2.6%
Inflation(4) (2016)	-0.1%	-0.2%	-1.1%	-0.3%	0.3%	1.2%	-0.1%
Government debt/GDP (2015)	83%	38%	31%	67%	13%	75%	45%
Household debt /GDP (2015)	22%	22%	27%	25%	12%	19%	21%
Currency	EUR	MKD	EUR(2)	EUR	EUR	RSD	n/a
Credit rating (Moody's, S&P)	Baa3 / A	n/a / BB-	B3 / B	B1 / B+	n/a / n/a	B1 / BB-	n/a

Source: IMF, World Bank, Central banks data, Bloomberg

Note: (1) Bosnia and Herzegovina is comprised of 2 entities, The Federation of Bosnia and Herzegovina and Republika Srpska; (2) Official currency is BAM – Bosnia-Herzegovina Convertible Mark, pegged to EUR; (3) Converted at average FX rate for 2015; (4) Average inflation for 2016; (5) Aggregate average excluding Slovenia

Top position across target SEE countries 2

Unified brand across 6 markets since 2015

• Leading franchise in the region based on total assets, compared to other banks present in the same countries, with network of 242 branches and 1.1m active clients(1) in SEE
• The only international banking group with exclusive focus on the region
• Independent, well capitalised and profitable subsidiaries

	Macedonia		Bosnia	Montenegro	Kosovo	Serbia
	NLB Banka Skopje	NLB Banka Banja Luka	NLB Banka Sarajevo	NLB Banka Podgorica	NLB Banka Prishtina	NLB Banka Beograd
NLB ownership (%)	87%	100%	97%	99%	81%	100%
No. of branches (#)	51	60	37	18	45	31
Market(2) share %	15.9%	19.6%(3)	5.3%(4)	13.3%	14.6%	1.0%
Net interest margin %	4.7%	2.9%	3.4%	4.3%	5.0%	6.0%
Cost/ income %	38.0%	47.2%	57.1%	58.7%	40.1%	97.8%
Loans/ Deposits %	79.2%	66.1%	76.7%	70.8%	74.6%	83.6%
NPL ratio %	5.7%	5.1%	9.9%	14.7%	3.6%	10.3%
RoE	20.8%	20.0%	9.1%	7.3%	18.9%	4.7%
Total assets (EURm)	1,153	635	498	473	516	276

(1) Excluding NLB d.d.; (2) Market share based on total assets, as of Sep-16; except for Kosovo, as of Jun-16; (3) Market share in the Republika Srpska; (4) Market share in the Federation of BiH

Consistent volume and revenue growth in International resulting in 14% RoE 2

Net retail loans to customers (EURm)

Net corp. loans to customers (EURm)

Montenegro Kosovo Serbia

Deposits from customers (EURm)

Source: Company disclosure

Note: Figures represent simple sum of individual financials from core foreign banks only (SPV in Serbia and Montenegro are excluded) excluding consolidation adjustments; (1) Republika Srpska; (2) Federation of BiH

Investment highlights of NLB Group

Largest bank in Slovenia and among top players in selected SEE markets

Strong revenue performance driven by stable NIM and resilient fee income 3

…but NIM remains stable despite monetary easing in Eurozone (Group, %)

Resilient fee income (Group, EURm) International supporting revenue in the Core operations (Group, EURm)(1)

Source: Company information Note: (1) The sum of net revenues and costs of the segments is greater than items from the consolidated income statement of the NLB Group, difference results from the activities between the segments which are netted on the Group level. Consolidation adjustment amounts to EUR4.0m in 2016, EUR3.9m in 2015 and EUR5.6m in 2014

17

Profitability improvement in all key business segments, with reduction of non-core losses 3

Profitable, client-oriented group, focused on core markets Core segments consistently profitable, retail and

Key metrics (FYE Dec-16, EURm)		PBT	Gross loans	Assets	% of assets
	Core Slovenia	Retail banking	31.5	1,992	2,118
		Corporate banking	29.5	2,511	2,339	94%
Core		Financial markets(1)	38.1	255	3,376
	Core members	Foreign strategic markets	67.6	2,457	3,540
	Non-core Slovenia (part of NLB d.d.)	Corporate lending Equity Investments Real estate(2)		364	158
Non-core	Non-core members	Leasing, factoring other(3) and	-18.9	312	345	4%
		Other segment Group total	-17.2 (4) 131	10 7,901	164 12,039	~2%

Source: Company information

international increasingly profitable (PBT, EURm)

• Profit before tax of key business activities decreased by EUR6m primarily as a result of lower interest income and EUR23m negative impact by NPL sale
• Foreign strategic markets continued positive trend showing an EUR23m increase y-o-y vs 2015
• Non-strategic markets and other activities drag on profitability considerably lower y-o-y

Note: (1) Segment includes investment banking, custody services, ALM, trading and treasury; (2) GREAM; (3) NLB Leasing Ljubljana, NLB Interfinanz, Other Leasing, REAM and other Non-core members; (4) Other activities includes the categories in Bank whose operating results cannot be allocated to individual segments, costs of restructuring, HR provisions, DGS and SRF payment, expenses from the vacant business premises and on non-recurring effect of Visa EU share transaction; (5) Includes workout and restructuring unit

Successful business transformation results in sustainable profitability with 20% profit growth in 2016 3

Evolution of group profitability since 2014 (EURm)

All Core foreign banks profitable (EURm)

Source: Company information

Positive performance continued in 2016

• Continued trend of stable and profitable Group operations
• In 2016, NLB Group generated EUR110.0m of profit after tax (20% increase YoY)
• All Core foreign banks profitable in 2016 with significant increase YoY

6% annualised cost reduction driven by network optimisation, HQ personnel and non-personnel reductions and Non-Core 3

Impressive cost reduction across the board (Group, EURm)

Effective rationalisation of headcount and network (#)

Source: Company information

• Strong management commitment to strict cost containment and optimisation measures
• Headcount dropped by 14.3% over 2012 – 2016 driven primarily by Slovenia Core and Non-Core
• Closure of unprofitable branches already took place across NLB Group, with high retention rate by transferring clients' business to nearest branches

Note: (1) The sum of costs of the segments is greater than items from the consolidated income statement of the NLB Group, difference results from the activities between the segments which are netted on the Group level. Consolidation adjustment amounts to EUR4.0m in 2016

³ Double-digit increase in profit before tax since 2014

69 107 131 37 117 162 2014 2015 2016 ³⁰ Project Pine

	2014	2015	2016
Profit before tax	69.2	106.8	130.6
Project Pine – net interest income Project Pine – loan loss provisions Total Pine impact	- -	- -	(4.1) (25.8) (29.9)
Profit before tax (adjusted for Project Pine)	69.2	106.8	160.5
Exceptional items Other provisions Restructuring expenses Total one-off items	35.5 5.0 (8.1) 32.4	(7.1) - (3.5) (10.6)	13.2 (10.6) (3.8) (1.2)
Profit before tax - normalised	36.8	117.3	161.8

• Exceptional items:

2016:

• EUR7.8m gain on sale of Visa Europe to Visa Inc.
• EUR5.5m success fee and gain on sale of equity investments 2015:
  • EUR(10.6)m exchange difference on CHF
  • EUR5.2m gain on sale of Republic on Slovenia bonds
  • EUR(1.7)m other items

2014:

• EUR22.8m gain on sale of equity investments
• EUR11.9m gain on sale of Republic of Slovenia bonds
• EUR0.8m other items

• Other provisions:

2016

• EUR(10.6)m restructuring provisions

2014

• EUR2.9m provisions related to transfer to BAMC
• EUR2.1m annuity payment

• Restructuring expenses:

• Expenses related to fulfillment of commitments towards EC (noncore disposal, compliance, EC procedures, NPL wind-down, cost reduction program)
• Project Pine:
  • Reduction of net interest income and additional loan loss provisions following the NPL portfolio sale

Normalising NLB Group profit before tax (Group, EURm) One-off items

Funding structure driven by deposits and complemented by established wholesale markets access 4

Source: Company information

Strong retail franchise provides stable and price insensitive deposits base (EURm)

Decreasing deposit yields (%)

Well capitalised franchise 4

Solid capital position with large and stable deposit base

• Highest quality capital (CET1) at Group and NLB d.d.(1)
• Immaterial dependency on net recognised DTAs

RWAs expansion in 2015 driven by one-off increase in SEE sovereign risk weighting (Group, EURm)

requirement

CET1 ratio

Source: Company information Note: (1) NLB d.d. CET1 ratio amounted to 23.4% as of Dec-16; (2) Dec-16 CET1 capital and CET1 ratio calculation includes 2016 result reduced for proposed dividend; (3) NLB d.d. recognised DTAs accrued on the basis of temporary differences in an amount that is expected to be reversed in the foreseeable future (i.e. within five years based on future profit projections); Out of EUR291m Dec-16 deferred tax assets, EUR209 m are generated from tax losses which can be used to reduce annual tax base of NLB by 50%

Core foreign banks represent a self-funded source of profits, with solid capital adequacy 4

International contributes >50% of Group profit (FY-16)

Core foreign banks self-funded by design (L/D ratio(1), Dec-16)

Strong profitability of core foreign banks in 2016 (RoE) Capital adequacy comfortably above local requirements

Source: Company information Note: Geographical analysis based on location of assets of the NLB Group; (1) Calculation based on net loans

Investment highlights of NLB Group

Largest bank in Slovenia and among top players in selected SEE markets

Diversified loan portfolio 5

Dominated by Slovenian assets, focused on core markets and cautious risk taking

Credit portfolio by currency and rate type (Group, Dec-16)

Source: Company information

• No large concentration in any specific industry or client segment
• NLB's lending strategy focuses on its core markets of retail, SME and selected corporate business activities
• Credit business restricted for certain business sectors as part of DG Comp commitments (construction, transport and financial holdings)
• Great emphasis is also placed on further improvement of credit portfolio
  • Intensive and proactive handling of problematic customers
  • Changes in the credit process
  • Early warning system for detecting increased credit risk

Improving structure of credit portfolio by client credit ratings (Group)

NLB has driven a turnaround in asset quality 5

Further improvements driven by active NPL management and economic recovery

Low NPL formation drove normalisation of loan provisions (Group, EURm)(2)

Reduction of NPLs remains a key focus

• Gross NPLs at Group level reduced by EUR596m in FY'16
• Positive momentum expected through active portfolio management and macro recovery

High coverage of NPLs

• Coverage ratio reached 76% in Dec-16 due to NPL reduction, repayments and cashed collateral

Active approach to NPL management

• Strong emphasis on restructuring (over 64% of NPLs in restructuring process)
• Other NPL management tools include: debt collection, foreclosure of collateral, sale of claims, active marketing and sale of pledged assets

Note: NPL was defined until December 2014 as loan exposure to D and E clients/claims and delays over 90 days from loans to A, B and C classified clients. Since customers with loans (in arrears over) with 90 days past due should be classified in non-performing grade (D or E), NPL definition changed and from 31.12.2014 include only D and E exposures; NPLs, NPL ratio and NPL cash coverage based on Credit portfolio;

(1) Refers to corporate loans issued since 2014 and retail loans issued since 2015; EUR19m refers to cumulative NPLs 2014-16; (2) Represents credit impairments and provisions; (3) Group NPLs cash coverage calculated including both individual and pool provisions

Project Pine: Disposal of ca EUR500m of non-performing exposures 5

	Slovenia Corporate	Slovenia Retail
Perimeter	• Corporate NPL loans of gross book value of EUR396m • ~80% of portfolio exceeded 360dpd	• Total consumer NPL loans of gross book value of EUR104m • ~73% of portfolio exceeded 360dpd	Transaction overview and rationale  Competitive tender process, run by international financial consultant, based on international standards
Status	• Announced on 30 June 2016 • Transaction closed in Q3'16	• Announced on 19 July 2016 • Transaction closed in Q3'16	 Substantial de-risking of balance sheet with immediate reduction of NPL stock  Acceptable P&L impact for
Buyer	• International investor	• International investor	substantial NPL reduction
NPL reduction	• Gross NPLs reduced by EUR233m by 2 percentage points, from 17.9% to 15.9%(2))	(NPL ratio improved	 Significant release of workout resources and collection cost savings (direct costs & headcount optimisation)
NPL coverage	• Minor increase in NPL coverage in 2016 after loans transfer		 Frees up senior management's time
P&L impact	One-off P&L impact of EUR29.9m(1) • FY'16 results	was reflected in	from the legacy cases

Note: (1) Represents EUR25.8m loss from sale below book value, EUR4.1m reduction of previously recognised interest income

(2) Calculated based on Jun-16 static figures

NPLs adequately covered by provisions and collateral, with limited off balance sheet non-performing exposures 5

Total coverage exceeds 100% across segments

Source: Company information

Limited non-performing exposures from off-balance sheet items (~EUR130m)

Group NPL structure (Dec-16, EURm)

Group NPL to NPE bridge (Dec-16, EURm)

Note: (1) Cash coverage calculated including both individual and pool provisions; (2) Calculated based on collateral capped at NPL exposure

Investment highlights of NLB Group

Largest bank in Slovenia and among top players in selected SEE markets

We have a clear strategy to address current challenges 6

Key trends and challenges

Sector and regulation	Macro
• Regulatory interventions • Further complexity through new regulations (TLAC, Basel IV, IFRS9) • Market consolidation	• Low interest rate environment • Heightening political and geopolitical risks • Subdued credit demand
Social and consumer	Products and technology
• More demanding and knowledgeable clients • Preference for digital channels	• Product competition from new, lower-cost entrants • Enhanced customer insights through sophisticated data management • Impact of social media

Key priorities

Focus on customer experience Omni-channel product distribution

• Partnership programmes
• End-to-end customer solutions

Optimised product offering

• Pricing optimisation
• Simplified product offering
• Further focus on fee-based products

Simplicity champion

• Operational optimisation
• Right sizing workforce
• IT transformation

Enhanced distribution

• Migration to digital channels
• Sales process optimisation
• Improved customer insight

Improved risk management

• Optimised risk processes
• Improved risk modelling
• Streamlined risk governance

Regional specialist

• Exclusive strategic interest in and unique understanding of the region
• Consistent strategy across markets

Medium-term objectives 6

Delivering growth, sustainable returns and attractive payout to shareholders

Source: Company information Note: (1) Target set by NLB management as a part of their 5-year plan for 2017-2021; (2) Calculated as credit impairments and provisions over average net loans to NBS; (3) Cost of risk amounts to c.0bps when adjusted for provisions for Project Pine, as of Dec-16; (4) % of consolidated group profit; (5) Based on EBA definition

Investment highlights of NLB Group

Largest bank in Slovenia and among top players in selected SEE markets

Appendix A

Slovenia macro and banking backdrop

Slovenia: Fully integrated into European institutions

• Member of the EU and the Eurozone
• Export-driven economy with valueadded export goods
• Well educated labour force
• Solid Parliamentary support for coalition Government (in place until Sep-18)

EUR 38.5bn nominal GDP

83.1%

EUR 19k GDP/capita vs EUR 11k CEE average(1)

2.6% real GDP growth(2)

7.3% unemployment rate(2)

Govt debt/GDP

A/BBB+/Baa3 Sovereign rating (S&P/Fitch/Moody's) 0.8% of GDP primary surplus

Recent milestones

Source: Republic of Slovenia, IMF WEO, Statistical Office of the Republic of Slovenia

Note: Macroeconomic data refer to FYE 31-Dec-15 unless otherwise stated

(1) CEE countries include Poland, Romania, Czech Republic, Slovakia, Hungary; (2) Survey unemployment rate as of Sep-16; 9M'16 GDP growth

Slovenian economy growing at 2.9% compared to 2.0% Eurozone growth, driven by exports and private consumption

Real GDP growth

Recovery driving lower unemployment and higher consumer confidence(1)

Source: Statistical Office of the Republic of Slovenia, IMF, Global Insight, Press, OECD, National Bank of Slovenia

Macro update

• Slovenian economy grew by 2.9% in 2015 stronger than Eurozone average of 2.0%
• Drivers included 4.4% exports growth and continued increase in private consumption (1% in 2015)
• Economic recovery drove unemployment rate down by 1.2% since 2013
• Consumer confidence increased by 34 points since its 2012(2) lows, driving household consumption growth
• Relatively low household indebtedness providing sufficient room for lending growth

GDP by source and activities (EURbn)

Note: (1) Consumer confidence indicator represents score average from surveys about expected household financial situation, general economic situation, unemployment, and savings over next 12 months; Scale of -100 to +100;; (2) -45 as of November 2012; (3) Survey unemployment rate

Strong progress with structural reforms

Key reforms implemented

	Measures
Fiscal	 Adoption of the fiscal rule requiring balanced budget over the medium term(1)
	 Demonstrated progress in tax collection, with further measures implemented to fight tax evasion (e.g. on-line system of cash registers)
	 Labour market reform implemented in 2013 has effected numerous improvements:
Labour	 Relaxation of employment and dismissal procedures
	 Reduced labour costs, through limiting notice periods and severance payments
Pensions	 Pension reform implemented in 2012 has improved system sustainability through:
	 Increased statutory and minimum retirement age 
	Introduction of penalties for early retirement
	 In 2013 Parliament approved 15 firms to be privatised
	 As of Jul-16, 9 companies were successfully privatised
Privatisations	 Strategy and management plan including performance criteria for the management of state assets have been adopted
	 Established Bank Asset Management Company managing assets and orderly deleveraging companies
Banking	 Banking sector CET1 ratio increased to all time high (20.0% in Q4'15)

Privatisations attracted foreign investment

Asset	Sector	Investor	Date	EURm
	Airlines	4K Invest	Jan-16	n/a
	Infrastructure	Linetech	Nov-15	n/a
	Consumer	VR Global	Jul-15	n/a
	Financial	Apollo Global	Jun-15	250
	Consumer	Podravka	Apr-15	79
	Infrastructure	Fraport	Sep-14	234
	Industrials	Mahle Holding	Jun-14	108
	Industrials	Gores Group	Jan-14	18
	Chemicals	Ring International	Oct-13	254
			Total	>943

FDI (EURm)

Slovenian banking sector turnaround with vastly improved funding, asset quality and capital position

Sector NPE ratio evolution(1)

Sector CET1 and L/D ratio evolution

Overview of 2013 extraordinary measures

• Significant contraction of economic activity since 2009 paired with high indebtedness of corporate sector drove NPEs to unprecedented levels
• Asset Quality Review (AQR) undertaken in 2013 identified EUR 3.3bn(2) capital shortfall at systemic banks

• Extraordinary measures included:

  • write-off of existing shareholders and holders of subordinated instruments
  • capital increase by RoS 100% state ownership of banks (NLB, NKBM, Banka Celje and Abanka)
  • transfer of EUR 3.3bn non-performing claims(3) to State-owned BAMC(4) leading to substantial losses for local banks

• Profitability of Slovenian banking sector returned to positive levels in 2015

• NPE ratio (according to the harmonised definition of EBA) decreased to 9.1%, as a consequence of active NPE management by local banks
• L/D ratio decreased by ~65p.p. since 2010 to 81% as a result of stricter loan policies, low demand for loans and "cash-rich" retail and corporate sector
• Sale of NKBM completed while Abanka and Banka Celje completed merger

Source: Bank of Slovenia, European Commission, Press, BAMC

Note: (1) EBA definition applied on Dec-15; (2) Assuming negative scenario with Core Tier 1 ratio at 6%; (3) EUR3.3bn exposure included equity claims and performing assets; (4) Bank Asset Management Company

Appendix B

Additional information

Successfully managing EC restructuring plan commitments

Restructuring period to end on 31 December 2017, subject to successful completion of restructuring commitments

	Commitment	Status
	 Reduction of balance sheet	Ongoing
g n uri	 Reduction of operating expenses	
ct u	 Divestment of several subsidiaries and participations	Ongoing
str e R	 Reduction of credit business in several sectors	
	 Restrictions on business with foreign clients, risk management and credit policies	
al ur o	 NLB must pay dividends at the lower of :  100% (in 2018) of the excess capital above the minimum capital requirement(1) plus a capital 50% (until 2017) or buffer of 100bps; or  Profit after tax for the relevant year	
vi a h e B	 Acquisition ban	
	 Republic of Slovenia to reduce stake in NLB to 25%+ 1 share by YE'17  Failure to complete would result to NLB appointing a Divestiture Trustee with the mandate to sell its 6 Core Foreign Subsidiary Banks for a minimum price no lower than a fixed proportion of such subsidiaries' book value	Ongoing

Note: (1) Applicable minimum capital requirement on the consolidated level (including Pillar 1 and 2) All commitments are in force until end 2017 except dividend commitment (until 2018 payout) and reduction of RoS shareholding in NLB

NLB IT highlights

Infrastructure supports business requirements with an integrated architectural approach, providing robust operations and high availability, with rigorous cost control

Appendix C

Asset quality

Comprehensive Group Strategy towards NPE reduction

Solid underlying Group capabilities

Dedicated units

• Restructuring Task Force for complex cases
• Specialised restructuring teams mainly in Slovenia, with capabilities in foreign banks
• Separated Non-Core Unit

Implementation and execution

• Organised collection effort
• Group real estate capabilities to facilitate foreclosure and liquidation

Group synergies

• Transfer of know-how to subsidiary banks
• Group Governance and oversight

Key strategies

A Liquidation of collateral

• Corporation collaboration with specialised real estate team (GREAM) to evaluate optimal strategy for repossession and liquidation
• Repossession of real estate

B Collections / cured clients

• Proactive role as leading creditor in corporate restructurings of major Corporates
• Consensual and court collection (alternative collection measures)

C Portfolio and asset sales

Specialised internal team focused on arranging portfolio and asset sales

D Write-offs

Write-off of fully provisioned NPLs based on strict rules

Demonstrated impact to asset quality

Impact on NPL ratio (Dec-13 to Dec-16, Group, EURm)

Minimised new NPL formation and high quality of new production

Total NPL formation (Group, EURm)

• To come Comments

• NPL formation for existing portfolio normalised across segments since 2014
• NPL formation for new production (2014 2016) below 1.0% of new loans at Group level (EUR19m)(1)

Source: Company information Note: (1) Refers to Corporate loans disbursed since 2014 and Retail loans disbursed since 2015

NPL cash and total coverage increased to 76% and 134%, respectively, in Dec-16

Coverage for the Group (%)

Comments

• NPL coverage increasing since Dec-14 across key business segments of NLB Group, reaching 76% in Dec-16 (Group), with total coverage exceeding 134% when including collateral
• NPLs of Core foreign banks fully covered with provisions
• Total coverage well above 100% in all key segments

Note: Cash coverage calculated including both individual and pool provisions; Collateral coverage calculated based on collateral capped at NPL exposure

Appendix D

Financial statements

Key financial data and performance NLB Group (1/2)

	FY'14	FY'15	FY'16
Net interest income	330	340	317
Net fee and commission income	148	147	146
Income from financial operations	38	4	20
Other Income	(5)	(8)	(7)
Operating Income	511	483	476
Staff costs	(163)	(163)	(165)
General expenses	(105)	(103)	(96)
Depreciation and amortization expenses	(36)	(32)	(28)
Operating expenses	(304)	(298)	(290)
Pre Provision Income	208	185	186
Extraordinary measures	0	0	0
Impairment losses on credit risk	(120)	(51)	(26)
Other(1)	(22)	(32)	(35)
Gains/Losses on associates and JVs	3	4	5
Profit / (Loss) before income tax	69	107	131
Income Tax	(4)	(11)	(15)
Profit/ (Loss) after income tax	65	95	116
Profit / (Loss) attributable to shareholders	62	92	110

Key financial data and performance NLB Group (2/2)

	Dec-14	Dec-15	Dec-16
ASSETS
Cash and balances with Central Banks	1,128	1,162	1,299
Financial instruments(1)	2,529	2,578	2,778
Loans and advances to banks (net)	271	432	436
Loans and advances to customers	7,415	7,088	6,997
Investments in associates and JV	38	40	43
Intangible assets	43	39	34
PP&E	215	208	197
Other assets	270	275	255
Total Assets	11,909	11,822	12,039
LIABILITIES & EQUITY
Deposits from banks	62	58	42
Deposits from customers	8,949	9,026	9,439
Borrowings	731	551	455
ECB funding	120	120	0
Securities and other liabilities	678	616	576
Total Liabilities	10,540	10,371	10,513
Shareholders' funds	1,343	1,423	1,495
Non Controlling Interests	26	28	30
Total Equity	1,369	1,450	1,526
Total Liabilities & Equity	11,909	11,822	12,039

Key financial data and performance NLB d.d. (1/2)

	FY'14	FY'15	FY'16
Net interest income	227	208	175
Net fee and commission income	101	98	95
Income from financial operations	34	9	13
Other Income	3	(2)	0
Operating Income	364	313	284
Staff costs	(102)	(102)	(103)
General expenses	(67)	(64)	(59)
Depreciation and amortization expenses	(24)	(21)	(19)
Operating expenses	(193)	(187)	(181)
Pre Provision Income	171	126	103
Extraordinary measures	0	0	0
Impairment losses on credit risk	(84)	(28)	(15)
Other(1)	(9)	(60)	(49)
Gains/Losses on associates and JVs	5	14	29
Profit / (Loss) before income tax	83	52	68
Income Tax	(1)	(8)	(4)
Profit/ (Loss) after income tax	82	44	64
Profit / (Loss) attributable to shareholders	82	44	64

Key financial data and performance NLB d.d (2/2)

	Dec-14	Dec-15	Dec-16
ASSETS
Cash and balances with Central Banks	434	497	617
Financial instruments(1)	2,038	2,087	2,295
Loans and advances to banks (net)	159	345	408
Loans and advances to customers	5,700	5,221	4,929
Investments in associates and JV	353	353	347
Intangible assets	34	30	23
PP&E	97	95	90
Other assets	70	80	68
Total Assets	8,886	8,707	8,778
LIABILITIES & EQUITY
Deposits from banks	91	97	75
Deposits from customers	6,300	6,298	6,617
Borrowings	557	416	343
ECB funding	120	120	0
Securities and other liabilities	613	534	478
Total Liabilities	7,681	7,465	7,513
Shareholders' funds	1,205	1,242	1,265
Non Controlling Interests	0	0	0
Total Equity	1,205	1,242	1,265
Total Liabilities & Equity	8,886	8,707	8,778

Structure of NLB Group

Note: Organisational structure of operating activities only. Support functions (eg. controlling, global risk, IT, HR, etc) are omitted; (1) Micro corporate clients are included in retail; (2) Includes entity Kreditni Biro Sisbon (in liquidation), 28% minority stake in Skupna pokojninska družba and 39% stake in Bankart respectively; (3) 50% equity stake, under equity consolidation; (4) Pension fund; (5) Main objective is NPL management; (6) Real-estate SPVs

Segment profitability

67.6 166.7

Core markets and activities

189.6

Foreign Strategic markets

Contribution to NLB Group Net Banking Income 2016

Contribution to Core NBI

Contribution to NLB Group PBT 2016

Contribution to Core PBT

29.5

42.9

Corporate banking in Slovenia 38.1

Financial Markets in Slovenia

31.5

41.0

Retail banking in Slovenia

Pro-forma for NPL sale impact (Project Pine)

-17.2

Non-Core Other NLB Group

130.6

160.5

Note: (1) Incl. EUR4m intersegment adjustment. The sum of net revenues and costs of the segments is greater than items from the consolidated income statement of the NLB Group, difference results from the activities between the segments which are netted on the Group level

-18.9

-11.9

Key segment financials

	Core markets and activities
FY 2016, EURm	Retail banking in Slovenia	Corporate banking in Slovenia	Financial markets in Slovenia	Foreign Strategic markets	Total	Non-Core	Other(3)	NLB Group
P&L
Net interest income	71.2	45.9	48.5	136.9	302.6	15.4	(0.7)	317.3
Net non-interest income	66.5	30.9	1.6	42.5	141.5	10.9	10.1	162.5(1)
Net banking income	137.8	76.8	50.2	179.4	444.1	26.3	9.4	479.8(1)
Total costs	(101.1)	(44.6)	(12.2)	(95.5)	(253.3)	(24.2)	(16.0)	(293.5) (1)
Result before impairments and provisions	36.6	32.2	38.0	83.9	190.7	2.1	(6.6)	186.2
Impairments and provisions	(10.2)	(2.7)	0.1	(16.3)	(29.2)	(20.9)	(10.6)	(60.6)
Other(2)	5.2	-	-	-	5.2	(0.2)	-	5.0
Result before tax	31.5	29.5	38.1	67.6	166.7	(18.9)	(17.2)	130.6
Result before tax (adj. for proj. Pine)	41.0	42.9	38.1	67.6	189.6	(11.9)	(17.2)	160.5
Balance sheet
Gross loans	1,992	2,511	255	2,457	7,215	676	10	7,901
Assets	2,118	2,339	3,376	3,540	11,373	503	164	12,039
Deposits	5,224	1,152	212	2,824	9,412	26	0	9,439
Liabilities	5,230	1,198	907	3,039	10,374	58	82	10,513

Note: (1) Incl. EUR4m intersegment consolidation adjustment. The sum of net revenues and costs of the segments is greater than items from the consolidated income statement of the NLB Group, difference results from the activities between the segments which are netted on the Group level; (2) Includes contribution to the NLB Group profit from joint venture NLB Vita and associates Skupna pokojninska družba, Bankart and Kreditni biro Sisbon (in liquidation); (3) Other activities includes the categories in Bank whose operating results cannot be allocated to individual segments, costs of restructuring, HR provisions, DGS and SRF payment, expenses from the vacant business premises and on non-recurring effect of Visa EU share transaction