* Piraeus posts 579 mln euro loss in Jan-Sept period
* Rival Eurobank's losses widen in Q3 (Includes Eurobank results)
ATHENS Nov 29 Greece's second-biggest lender Piraeus Bank posted a smaller loss in the first nine months of the year excluding a one-off gain, helped by lower funding costs and cost-cutting.
Cuts in deposit rates and reduced borrowing from the Greek central bank's liquidity facility (ELA), which is costlier than European Central Bank funds, have pushed funding costs down for Piraeus and other Greek lenders.
But the banks continue to be hit by austerity-hit Greeks defaulting on their debt and Piraeus's smaller rival Eurobank reported a wider third-quarter loss on Friday, hurt by higher provisions for non-performing loans.
Piraeus posted a 579 million euro loss in the first nine months of the year, compared to a loss of 629 million euros in the same period last year.
Including a 3.81 billion euro one-off gain from taking over Cypriot bank units, it posted a 3.23 billion euro profit in the first nine months of the year. Its provisions for bad loans rose to 1.54 billion euros in the nine month period from 1.35 billion euros in the same period last year.
This year's results were not directly comparable to those of last year because they now include the operations of recent acquisitions of the healthy part of ATEbank, Geniki Bank, Cypriot bank operations and Millennium Bank.
Piraeus's "immediate priority" is to better manage its non-performing loans portfolio after integrating the acquired banks, Chairman Michalis Sallas said.
The inability of austerity-hit Greeks to repay their debt continues to pound Greek bank loan books as the economy remains mired in its sixth consecutive year of recession with unemployment at record levels above 27 percent.
Unpaid loans are a major headache for banks in Greece, where the economy, now its sixth-year of recession, has shrunk 25 percent. The banks are still recovering from 27 billion euros ($36.69 billion) of losses brought about by the country's unprecedented sovereign debt restructuring in 2012.
Eurobank, the only one of Greece's four major lenders that has fallen under the control of the Greece's bank bailout fund, posted a 285 million euro loss in the third quarter compared to a 223 million euro loss in the same period last year.
The bank booked 1.26 billion euros in bad loan provisions in the first nine months of the year, up slightly from 1.21 billion euros in the same period last year.
($1 = 0.7353 euros) (Reporting by Lefteris Papadimas; Editing by Elaine Hardcastle)