UPDATE 1-Provisioning halves Zenith Bank's nine-month profit

(Adds further details, comment from executive)

LAGOS, July 28 (Reuters) - Nigeria's Zenith Bank ZETH.LG reported on Tuesday a more than 50 percent drop in its net profit to 10.62 billion naira ($72 million) for the first nine months of the fiscal year, due to higher provisioning for margin loans.

Nigeria's third largest bank by assets said in a filing to the Nigerian Stock Exchange (NSE) it had made total provisions of 18.54 billion naira for exceptional items in the nine months to end-June. A senior executive said the provisioning was to cover stock market exposures.

"We have just taken a big hit on our profit due to provisioning and we want to move ahead," the executive said, asking not to be named. He added that if the stock market continued to recover the bank would write back the provisions.

Zenith's total loans stood at around 680 billion naira as of June compared with 470 billion a year earlier, while margin loans amounted to 23 billion naira.

Nigeria's stock market .LAGLG fell 70 percent by the end of March 2009 from its peak a year earlier. It has since made a recovery, but remains 60 percent below peak levels.

Zenith, which has 294 branches and 100 cash offices, said turnover rose 32 percent to 166.61 billion naira in the period, implying its net profit margin fell to 6 percent from around 20 percent a year earlier.

"Profit margins dropped because of increased cost of funds. The cost of deposit mobilisation rose to around 18 percent from 13," the executive said, adding operating costs had also risen.

He said he expected pre-tax profit in the fourth quarter to rise to around 12 billion naira from 11.2 billion last year. ($1=148.41 naira) (Reporting by Chijioke Ohuocha and Oludare Mayowa; Editing by Nick Tattersall, Greg Mahlich)