UPDATE 1-Bank of Queensland cuts dividend, sees better margin

* Cuts dividend by 26 percent

* Core profit slightly above analysts' forecast

* Expects net interest margin to rise in second-half

(Adds details)

SYDNEY, April 9 (Reuters) - Australian regional lender Bank of Queensland Ltd (BOQ.AX) (BOQ) cut its first-half dividend on Thursday, joining the nation's bigger banks in trimming payouts as companies preserve capital due to global financial crisis.

But the bank struck a note of optimism, saying it expects to see a pick up in its net interest margin in the second-half helped by lower cost of funds.

"Signs of this recovery have already become evident in recent weeks," Managing Director David Liddy said in a statement.

Bank of Queensland kicks off what is expected to be a challenging reporting period for banks with analysts expecting a further increase in bad debt charges.

Australia and New Zealand Banking Group Ltd (ANZ.AX), which is scheduled to release first-half profits on April 23, has said it would cut its year dividend by 25 percent, while Commonwealth Bank of Australia Ltd (CBA.AX) also flagged a possible cut.

Bank of Queensland, Australia's seventh-biggest lender, reported a 29 percent rise in normalised cash profit to A$84.2 million ($60 million) for the six months ended Feb. 28, helped by a 13 percent rise in demand for loans.

That compared with an average profit of A$82.7 million average forecast by five analysts. BOQ had flagged at least a 25 percent rise in cash net profit in February.

It cut its dividend per share to A$0.26 from A$0.35.

A slowing domestic economy and rising unemployment have pushed up Australian banks' bad debt charges, but overall they have fared better than global peers because they are not heavily exposed to subprime mortgages.

BOQ, with a market value of A$1.5 billion, launched a strategic review in mid-December to find a partner and improve its growth prospects, after having informal discussions with a number of parties, including overseas banks.

"We continue to talk to a range of people in the market about various ideas and concepts, and we have put processes in place to examine opportunities if they arise and to move quickly to capitalise on them," the company said.

In January, the bank raised A$108 million in a share placement, and Liddy told Reuters in an interview it would consider the sale of the entire company, but was not in any talks at that time with potential merger partners.

Last month BOQ said it was cutting 150 positions, or about 10 percent of its staff, by the end of March. (Reporting by Mette Fraende and Denny Thomas)