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LJUBLJANA, Dec 2 (Reuters) - Slovenia's largest bank Nova Ljubljanska Banka (NLB), which is due to be privatised next year, reported a group net profit of 91.5 million euros ($97.45 million) in the first nine months of 2016, up 18 percent on the same period in the previous year.
The state-owned bank also said on Friday bad loans fell to 14.5 percent of all loans, down from 19.3 percent at the end of 2015.
The bank said the profit increase was mainly the result of its improved loan portfolio which helped to compensate for lower interest rate margins.
"High competition in the Slovenian banking sector is causing further lowering of interest rates ... which influences profitability and stresses the need for further consolidation of the banking system," NLB said.
The bank, which was rescued by the state in 2013 and has to be sold by the end of 2017 to meet European Commission requirements, said its balance sheet assets had risen by 1 percent since the end of 2015.
In September, Slovenia's privatisation coordinator, the Slovenian Sovereign Holding (SDH), said the decision to start the sale of NLB will be made after its full year results are published, which is expected in March.
The government plans to keep a stake of 25 percent in the bank in order to have a say in major business decisions while the rest is expected to be sold in an initial public offering (IPO).
Although the government controls more than 40 percent of the country's banking sector, a number of foreign banks also operate in Slovenia, including France's Societe Generale, Italy's UniCredit and Intesa Sanpaolo, Russia's Sberbank and Austria's Sparkasse and Addiko Bank. ($1 = 0.9390 euros) (Reporting By Marja Novak. Editing by Jane Merriman)