* Sentiment highest since August 2008 * Banks increase first-half net profit * Bad loans at 11.6 pct of all loans (Updates with Bank of Slovenia statement, bank profit figures from paragraph 2) By Marja Novak LJUBLJANA, Aug 25 (Reuters) - Business sentiment in Slovenia rose to a seven-year high in August, reflecting a surge in confidence among manufacturers, retailers and consumers less than two years after the country narrowly avoided an international bailout. The statistics office said its business sentiment index reached 6.9 points, up 3.4 points from July and its highest since August 2008. The Bank of Slovenia said later on Tuesday the risks to economic growth in export-oriented Slovenia have increased recently as economic conditions worsened in Russia, China and Brazil. It also said that local banks managed to increase their joint net profit to 119.9 million euros in the first six months of 2015, up from 76.6 million in the same period of 2014. It added the banks managed to reduce bad loans to 4.1 billion euros in June from 4.2 billion a month before. Bad loans now represent 11.6 percent of all loans, it said. The government had to pour more than 3 billion euros into mostly state-owned local banks in 2013 to prevent them from collapsing under their bad loans and avoid asking for international aid. "The improvement of business sentiment reflects the fact that consumers are taking on more loans amid low interest rates," said Marko Rozman, head of investment in the treasury department of Dezelna Banka. But he warned that the impact of China's wavering economy could lead to sentiment stagnating in coming months, although GDP growth this year should still be in line with the government's forecast of 2.4 percent. Slovenia, which joined the euro zone in 2007, emerged from two years of recession in 2014 when it had economic growth of 2.6 percent.

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