* Provisions for bad loans double, profits fall 18 pct
* Follows No.2 bank VTB which reported slide in profit
* May consider capital boost plan, following VTB (Recasts with comments from conference call on capital plan, adds comments throughout)
By Megan Davies
MOSCOW, May 29 (Reuters) - Russia's biggest bank Sberbank said it may consider a government plan to boost banks' capital and lending, as it showed the impact of the Ukraine crisis on its bottom line with an 18 percent slide in profits and rising loan-loss provisions.
Once feted for its fast-growing economy, Russia is now forecast to achieve growth of just 0.5 percent this year, hurt by Western sanctions and instability brought by the stand-off with Kiev and wider emerging market uncertainty.
President Vladimir Putin promised at an investment forum on Friday the government would help systemically-important banks by allowing them to convert subordinated loans to shares. That would boost their capital positions and free them up to lend more in support of economic growth. [ID nL6N0O932B]
"We will take into account all components of this proposal when formulated and we see all the details," Deputy Chairman of the board Alexander Morozov told a conference call. "We should understand that it should create value for us and shareholders."
Morozov said if it makes "good economic sense to make a conversion without negatively affecting our shareholders, we may consider that option".
Russia's second largest bank VTB said on Tuesday it was working with the government on such a plan and could convert subordinated debt by the end of 2014. [ID nL6N0OD1LG]
Both banks reported a sharp fall in profits which missed analysts' forecasts. State-owned Sberbank reported that net profit dropped to 72.9 billion roubles ($2.1 billion) from 88.5 billion a year ago. It also fell short of analysts' consensus forecast in a Reuters poll of 78.2 billion.
"The political situation around Ukraine ... affects markets and the Russian economy," said Morozov.
Provisions for possible bad loans jumped to 77.1 billion roubles from 31.8 billion a year ago. The bulk of this was for commercial loans, followed by those to individuals.
"Ukraine, devaluation of the rouble and the worsening economic situation played a role in the additional reserves in the corporate and retail segment," said Andrey Klapko, analyst at Gazprombank.
Sberbank said the growth rate in retail loans slowed, reflecting high debt burdens of individuals and tighter conditions for issuing new loans. Non performing loans rose to 3.2 percent of the portfolio from 2.9 percent at end 2013.
"We see a worsening quality of new customers applying for new loans on the retail side," said Morozov. "We believe that unfortunately the quality of unsecured lending on the retail side under the existing macroeconomic environment ... will continue to worsen for some time."
Shares in Sberbank were up 0.82 percent on Thursday, lagging the wider market. Russia's MICEX index was up 1.5 percent on Thursday on hopes of a diplomatic resolution to the Ukraine crisis after Moscow and Western countries reacted with restraint to violence in eastern Ukraine earlier this week.
Gazprombank said Sberbank's results showed it was controlling costs and had good commission income, which partly outweighed the bad news.
Sberbank has exposure of 130 billion roubles ($4 billion) to Ukraine, less than 1 percent of its balance sheet, and has said it has no plans to leave. ($1 = 34.5882 Russian Roubles) (Additional reporting by Oksana Kobzeva; Editing by Peter Graff)