UPDATE 1-Portugal's BPI profit falls 38 pct, bad loans rise
* Profit down at 72.7 million euros, above 67 mln forecast
* Share of bad loans up at 3.7 pct of total loans
* To repay large part of pricey state recapitalisation funds (Adds bad loans, credit portfolio, overseas unit)
LISBON, Oct 30 (Reuters) - Portugal's third-largest listed bank BPI posted a 38 percent fall in nine-month profit as net interest income dropped, hurt by a weak economy that also pushed up bad loans.
The bank also said on Wednesday it would repay early an additional 588 million euros from the 920 million euros it still holds in state loans in the form of contingent convertible bonds carrying high interest payments.
Net profit, that mostly came from BPI's Angolan unit, fell to 72.7 million euros ($100.1 million), but beat analysts' average forecast of 67 million euros in a Reuters poll.
BPI's net interest income - the difference between interest charged on loans and interest paid on clients' deposits - fell 19 percent in the January-September period to 355 million euros from a year earlier, in line with expectations.
The bank said bad loans more than 90 days overdue stood at 3.7 percent of total loans, or 1.01 billion euros, up from 3 percent a year ago.
Total cumulative impairments for bad loans rose to 947 million euros in September from 823 million euros a year ago.
Still, new provisions and impairments for bad loans set aside between January and September fell almost 15 percent from the same period a year ago to 182.5 million euros, helped by Portugal's fledgling economic recovery that began in the second quarter.
The economy is still expected to shrink for the whole of this year under the weight of austerity measures applied under an international bailout.
The bank's credit portfolio shrank by 2.5 percent from a year earlier to 27.5 billion euros.
Profit at BPI's main overseas unit - Angola's BFA - rose about 4 percent to 59 million euros.
BPI, like its peers, was badly hit by Portugal's downturn, with more of its loans turning sour, but it still churns out profits while its rivals BES and Millennium bcp have been posting heavy losses.
($1 = 0.7262 euros) (Reporting by Andrei Khalip; Editing by Mark Potter)