Russia's VTB sees lending growth from mid-Q3

MOSCOW, March 5 (Reuters) - Russia's VTB (VTBR.MM), the country's second-biggest lender, expects its loan portfolio to start growing in the third or fourth quarter after provision charges peak in June, the bank's head said on Friday.

Loss-making VTB hopes to return to the black in 2010 [ID:nLDE5BG1YZ] as provisions for bad loans are likely to stop rising, easing the pressure on the bank's core income.

"Unfortunately, the loan market shows no growth so far. We expect (the) loan portfolio to start growing again in the middle of the third or in the fourth quarter," state-controlled VTB's Chief Executive Officer Andrei Kostin told reporters.

The Russian banking sector still faces the threat of a crisis as returns fell substantially last year and January brought additional declines in banking assets, the central bank said earlier this week. [ID:nLDE6201S6]

The share of provisions that VTB creates against bad loans will peak in June, Kostin said, reiterating the bank's previous forecast.

VTB has expected provisions to peak at the 10 percent-12 percent level in the first half of 2010 and may start reducing the total volume then. [ID:nLDE5BG1YZ]

Russian banks' lending portfolios may grow by 20 percent in 2010, the central bank forecasts, but growth prospects are still seen as fragile and look modest compared with the economic boom years, when the sector used to increase assets by more than 50 percent a year. [ID:nLDE60J1S1]

VTB has earlier said it will focus on improving efficiency, cutting costs and also pins its hopes on the investment banking it thoroughly cultivates. (Reporting by Oksana Kobzeva, writing by Dmitry Sergeyev; Editing by Rupert Winchester)