* May return to profitability in Q2 2010

* Provisions to peak at 10-12 pct in H1 2010

* May start reducing provisions in H2 2010

(Releads after conference call; adds details, quotes)

MOSCOW, Dec 17 - Loss-making bank VTB (VTBR.MM) expects to return to the black next year, with full-year 2010 net profit seen at around 50 billion roubles ($1.66 billion), Chief Financial Officer Herbert Moos said on Thursday.

Russia's second-biggest bank may see profit return in the second quarter as growth in provisions for bad loans slows, Moos told Reuters in an interview.

We expect the bank to generate about 50 billion roubles in net profit next year, he added in a conference call later in the day.

State-controlled VTB has remained in the red for five consecutive quarters, with a net loss of 45.5 billion roubles ($1.5 billion) in January-September 2009.

Shares in VTB lost 2.6 percent on Thursday, slightly underperforming the broad market index which was down 2 percent.

Russian banks were hit badly as the country suffered its first recession in a decade, and growing bad loans force banks to increase provisions that consume profits and capital.

VTB expects provisions for bad loans to peak at 10-12 percent level in the first half of 2010 and may start reducing the total volume of provisions in the second half of next year.

I see provisions to peak in the first or second quarter of 2010 and than we could start releasing provisions, Moos told Reuters.

Russia's biggest lender Sberbank (SBER03.MM) has earlier said its provisions may peak at 12-14 percent of its loan portfolio in 2010 and than begin to fade. [ID:nGEE5B71B4]

Moos said fourth quarter provision charges will be fewer in comparison with the third quarter and may rise to 8-9 percent of loan portfolio by year-end from 7.9 percent on Sept. 30.

I stick to conservative approach and we will create proper provisions (in the fourth quarter)... We will keep a provisions coverage ratio at the current level for corporate loans and will increase it for retail loans, Moos said.

The share of rescheduled loans may rise to 11.3 percent of the bank's total loan portfolio by the year-end from 8.3 percent at Sept. 30 if the loan portfolio remains flat.

Analysts said recovering net interest margin that rose to 4.4 percent in the third quarter from 4.3 percent in the second quarter, is paving the way for VTB to return to profitability should the slowdown in provision charges continue.

Although provisions have adversely affected results in the first nine months, we are increasingly confident that our focus on loan quality and cost efficiency has positioned the bank well for economic recovery in 2010, VTB Chief Executive Andrei Kostin said in a statement earlier on Thursday. (Writing by Dmitry Sergeyev; Editing by Hans Peters) ($1=30.1978 Rouble)

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