Justifying the upgrade, S&P said that industry risks in Slovenia's banking system had decreased because of the state's reduced ownership of banks, and stronger banking supervision.

"We believe Slovenia's regulatory framework has materially strengthened and converged with the European standard, supported by the transfer of supervisory oversight of roughly 75% of the banking system to the Single Supervisory Mechanism (SSM) in 2014."

In addition, the agency pointed out that NLB's financial profile remained sound and the key performance indicators in 2018 were largely in line with their expectations, while asset quality metrics improved faster than expected.

"NLB's funding and liquidity profile remains solid. The bank benefits from a diversified and stable retail deposit base, and strong liquidity reserves," according to S&P.

Archibald Kremser, NLB's chief financial officer, said the upgrade was "another milestone in our strategic effort to position NLB as the main regional bank in our countries of operation."

"This is confirmation of our substantial progress on both very solid business performance and return to normality on asset quality and non-performing loan levels," he was quoted as saying by NLB.