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To start: it’s based in Slovenia (EU) and operates in Balkans region - a region that most investors automatically shun. But for anyone still reading, and looking for some US exposure diversification, NLB - and this region in general - offers genuinely strong businesses at relatively attractive valuations. Hear me out:
NLB is the domestic banking group in the former Yugoslav markets. It operates in Slovenia (33% market share, #1 position - its home market), Serbia, Bosnia, Montenegro, North Macedonia, Kosovo. As of 2025 it has EUR 31bn in assets and has as run-rate profit rate of EUR 500m, which, while small for international standards, makes it a systemic institution in the region - and it ranks as the company with the highest annual profits in Slovenia. It’s listed in Ljubljana and London stock exchanges (via GDRs).
**The thesis:**
\- Long and structural organic growth runway: NLB’s markets have loan-to-GDP ratios of 35-60% vs 80%+ in Western Europe, growing at \~5% nominal GDP - all the while having strong and mostly pegged currencies. Financial deepening, as the loan-to-GDP ratios continue converging towards Western European standards, adds a \~1.5x multiplier on top of GDP growth, which banks’ growth rates are else mirroring. Together with growth in net fee income, this gives a \~8.2% organic earnings balance sheet growth runway - without needing to take market share or make acquisitions.
\- Extraordinary deposit pricing power: During the 2022-2024 ECB rate hiking cycle, NLB’s deposit beta stood only at \~12% - meaning for every 100bps of rate increase, deposit costs only rose 12bps. Western European peers saw 40-70%. This is structural - SEE depositors are less sophisticated, don’t shop rates, and have few alternatives. This means the bank has genuine pricing power, and provides a “levered” inflation hedge to the portfolio
\- Relatively low valuation. At EUR 230/share (EUR 4.6bn market cap), it trades at 9.1x 2025 earnings and 1.2x book. Using the simplest possible return framework - dividend yield + earnings growth = expected annual return ; you get 5.6% + 8.2% = 13.8% gross annual long term return
**Key risks:**
\- Serbia (\~30% of group profits) carries political and FX risk - and currently, the EU accession for Serbia is frozen. If this remains the case, the financial deepening core of the thesis can slow down severely. Revolut is also growing across the region, which is a long-term threat to the low deposit beta story as younger depositors replace older ones.
\- The current Addiko Bank bid (EUR 566m, April 2026) is worth watching - Addiko’s main asset is Croatia, which NLB can’t enter organically due to historical depositor disputes from Yugoslavia’s breakup. Standalone the price is optically full at 12x earnings, but cheap on PB terms (0.6x) and the strategic logic is sound
**Why it’s cheap:**
Typical Slovenian stock exchange reasons: Illiquidity discount, no real analyst coverage, CEE/Balkan risk perception. It also has a very complicated history (28% NPLs in 2012, EUR 1.9bn state bailout etc.). While all of this is real, it’s also 12 years in the past; and the company and the management have proven their execution track record, and have by now set the company firmly on new path. To this end, the bank that exists today has 2% NPLs, a 47% cost-to-income ratio, BBB+/A2 credit ratings, and a management team that has quietly compounded earnings at 18% CAGR since 2016.
Happy to discuss the thesis or poke holes in it - I believe 14% long term organic compounding under relatively conservative assumptions is a good as anyone can ask for. I’ve also written a full deep dive if anyone wants the complete picture including the DDM model assumptions and peer comp table.