LJUBLJANA, May 30 (Reuters) - State-owned Slovenian bank Nova KBM (NKBM) forecast a sharp reduction in losses this year thanks to reduced provisions against bad loans as it prepares for privatisation.
The country's second-largest bank, which was bailed out by the government in December, said it expects to make a group net loss of 0.9 million euros ($1.2 million) in 2014, compared with a loss of 648.4 million last year.
It made the forecast after reporting first-quarter group profit of 16.4 million euros - a marked improvement from the same period last year when it made a loss of 8.5 million euros - thanks to cost cuts and a rise net interest income.
New net provisions for bad loans amounted to 4.2 million euros in the first three months of the year, down from 20 million euros a year ago, it said in a statement on Friday.
The bank said such provisions would be the main reason for its 2014 loss, but added: "We expect to have significantly less provisions in 2014 than in 2013."
Last week Slovenia, which narrowly avoided an international bailout in December by pumping about 3.3 billion euros in local banks, called for expressions of interest in the purchase of NKBM. The government wants to privatise the bank by 2015.
On Wednesday, the Bank of Slovenia said local lenders had almost 6 billion euros of bad loans in March which represented 14.5 percent of all loans.
$1 = 0.7345 Euros Reporting By Marja Novak; Editing by Pravin Char