June 24, 2014 / 2:42 PM / 4 years ago

Slovenian banks return from bad loans crisis with profits

LJUBLJANA, June 24 (Reuters) - Slovenian banks, rescued by the government from crumbling under bad loans last December, returned to profit in the first four months of the year thanks mainly to higher interest rate income, the Bank of Slovenia said on Tuesday.

The four-month pre-tax profit of 88 million euros compares to a pre-tax loss of 41.5 million euros in the same period last year.

“This year the net interest rate income rose significantly due to lower passive interest rates and lower indebtedness of banks,” the central bank said in a statement after its board meeting on Tuesday.

Slovenia narrowly avoided an international bailout in December by pumping some 3.3 billion euros in to local lenders, most of them state-owned, to prevent them from sinking under bad loans piled up through years of reckless lending.

Bank of Slovenia Governor Bostjan Jazbec said on Monday local banks have enough capital at least until the start of 2016. But he warned that the government which will be formed after the July 13 snap election will have to act fast to ensure further financial stability.

“Favourable economic developments and public finance stabilisation will be endangered in the case of prolonged political uncertaintly and a failure to fulfil fiscal consolidation obligations,” the central bank said.

Slovenia hopes to cut the budget deficit to some 4.2 percent of GDP this year from 14.7 percent last year, when the deficit soared because of the bank recapitalisation.

Slovenia will hold an early election on July 13 after the centre-left Prime Minister Alenka Bratusek resigned in May because she lost the battle for the leadership of her Positive Slovenia party.

Opinion polls suggest that the new centre-left SMC party, led by law professor and political newcomer Miro Cerar, is likely to win the most votes.

Reporting By Marja Novak; Editing by Zoran Radosavljevic and William Hardy

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