UPDATE 1-Slovenia central bank sees first bad loan transfer in Oct-report

Wed Aug 28, 2013 3:00pm BST

(Adds quotes, details, background)

LJUBLJANA Aug 28 (Reuters) - Slovenia's central bank expects a first transfer of non-performing loans to a 'bad bank' in October, it said on Wednesday, an essential step in the country's efforts to avert an international bailout.

The government had planned the first transfer in June but has been forced to wait for an external audit prompted by EU fears that the small euro zone country has underestimated the size of the problem.

Analysts say the external stress tests may yet push the transfers back to 2014, rattling investor confidence that Slovenia can avoid following Cyprus in requiring a bailout from the EU and International Monetary Fund because of its bank troubles.

"In line with estimates coordinated with international institutions at all times, particularly with the European Central Bank and the European Commission, the first transfer of bad loans from NLB (Nova Ljubljanska Banka) could take place in October," Central Bank Governor Bostjan Jazbec told the state news agency STA.

State-owned NLB is Slovenia's biggest bank. The country's state-owned lenders hold the lion's share of an estimated 7.5 billion euros ($10 billion) in bad loans, equivalent to 21.5 percent of gross domestic product.

Slovenia's EU partners fear the problem may be even bigger, after the country's export-driven economy hit a wall with the onset of the global crisis in 2008 and fell into recession.

Jazbec said he believed Slovenia was capable of solving its financial problems itself, though conceded it might be less costly to seek outside help.

"We have a rational dilemma that we are dealing with every day - whether we are ready to seek a solution independently at a higher price or whether there is a possibility to find a solution at a lower price with outside help," he told STA. ($1 = 0.7466 euros) (Reporting by Marja Novak; Editing by Matt Robinson/Ruth Pitchford)