UPDATE 2-Greek National Bank net up 15 pct, beats forecasts

(Adds details, CEO comment)

By George Georgiopoulos

ATHENS, Aug 28 (Reuters) - Brisk lending growth at home and in southeast Europe helped Greece's National Bank beat market expectations with a 15 percent rise in first-half earnings despite higher funding costs and tense competition for deposits.

Greece's largest lender, National Bank (NBGr.AT) said on Thursday first-half net profit grew to 835 million euros ($1.2 billion). Analysts in a Reuters poll expected net profit of 808 million on average, with estimates ranging from 783 to 825 million.

Greek bank stocks .FTATBNK, star performers in 2007, have shed 35 percent of their market value so far this year, hurt by the global market rout, funding concerns and fears of a hard landing in southeast Europe where they have expanded to tap growth.

"The unique structure of our funding base shields us from the current turmoil and allows us to continue with our expansion plans," National Bank Chief Executive Takis Arapoglou said in a statement released after the Athens stock market close.

"The results of the first two quarters reinforce our conviction that prudent profitable growth, combined with ample liquidity and a strong capital position, is the only way forward in order to realise our strategic objectives."

The group's net interest income grew by 20 percent, in line with expectations, to 1.73 billion euros. Despite stiff competition for deposits and increased funding costs, net interest margin held at around 4.30 percent for a fourth straight quarter since the credit crisis erupted, it said.

TURKISH MARKET KEY

NBG -- also present in Bulgaria, Romania, Serbia, Albania and Egypt -- said Turkish subsidiary Finansbank generated 29 percent of group net earnings.

"The large contribution of its Balkan franchise and particularly Finansbank led to the strong rise in earnings," said analyst Manos Hatzidakis at Pegasus Securities. "On the other hand, trading income was off due to weak international markets."

Group loans expanded by 25 percent year-on-year to 61.4 billion euros. Despite the rapid growth, asset quality was not adversely affected. The ratio of non-performing loans was 3.2 percent, down 50 basis points from the year-earlier period.

At home, the pace of retail lending remained strong -- up 20 percent year-on-year. Consumer loans and credit card balances grew 27 percent with mortgages up 17 percent. Loans to small business and professionals rose 22 percent.

Overall, the group's loans-to-deposits ratio rose by 800 basis points to 94 percent. NBG said the comparatively low ratio gave it a competitive edge in the current liquidity crisis in international markets.

Customer deposits grew 15.5 percent to 63.9 billion euros.

Looking at costs, National Bank said its cost-to-income ratio dropped to 47 percent from 49.1 even after its network's expansion by 193 branches in Turkey and southeast Europe.

NBG shares are down 35 percent so far this year versus a 38 percent fall in the Athens bourse general index .ATG. They trade around 8 times estimated 2008 earnings versus a multiple of 9 for European peers according to Reuters Estimates.

Also on Thursday, Cyprus's Marfin Popular Bank (MRBr.AT) reported that second-quarter profit rose 11 percent quarter on quarter to 115.9 million euros, citing an improvement in its operating performance. (Additional reporting by Lefteris Papadimas; Editing by Daniel Flynn and Quentin Bryar)