UPDATE 2-Popular H1 profit misses estimates, bad loans rise

* H1 net down 19.9 pct to 354.6 mln euros vs poll 358.4 mln

* Bad loans rise to 5.04 pct end-June vs 4.91 pct end-March

* Expects to beat market forecasts for full-year net profit

* Popular shares up 2.1 pct, lag banking sector .SX7P

(Adds details, analyst comment, share price)

MADRID, July 27 (Reuters) - Spanish bank Popular's (POP.MC) first-half met profit fell by a fifth due to the continued slowdown in its core bank business and lower one-time gains.

Bad loans as a percentage of the total loan book rose to 5.04 percent at end-June from 4.91 percent at end-March, while total provisions against bad loans declined 13.9 percent from a year earlier due to a 63.2 percent fall in new bad loan adds.

Popular said it expects new bad loans -- and consequently the amount it will need to set aside for provisions -- to continue to decline over the coming quarters.

"This should offset the ongoing pressure on margins and enable the bank to beat current market net profit forecasts for the full year," the bank said in a statement.

First-half net profit fell to 354.6 million euros ($457.8 million), missing forecasts for 358.4 million euros in a Reuters poll of banks and brokers.

"Revenues were weak and net profit below market consensus, but bad loan growth is showing some containment," Renta 4 bank analyst Nuria Alvarez said.

But any further comments on stress tests and the markets opening up again for Spanish banks as a result are the focus for the market now, not first-half results, she said.

The bank is expected to provide more details on its capital situation at a conference call at 0800 GMT.

Under the Committee of European Banking Supervisors (CEBS) most adverse scenario publised on July 23, Popular passed the stress test with a Tier 1 ratio of 7 percent. [ID:LDE66M1T3]

At 0824 GMT, Popular shares rose 2.1 percent to 4.92 euros, ccompared to a 3.6 percent increase in the STOXX 600 European banking sector index .SX7P.

Interest revenue fell 9.3 percent to 1.29 billion euros in the first half compared to a forecast for 1.30 billion, hit mainly by higher costs as a result of the deposit war waged by the leading Spanish banks since the beginning of this year.

For months, Spanish lenders have had problems in raising funds in international markets. The country's biggest bank, Santander (SAN.MC), in January embarked on an aggressive campaign to capture more client deposits, offering interest rates of 4 percent.

Other leading banks such as Popular followed suit.

(Reporting by Judy MacInnes; Editing by Michael Shields)