* H1 net profit grows 1.8 percent y/y to 71.3 million euros
* NPL ratio drops to 7.0 from 7.3 percent in H1 2008
* Bank expects credit growth above 10 percent this year
ATHENS, Aug 26 (Reuters) - Greece's sixth-largest lender ATEbank said on Wednesday first-half group net profit rose 1.8 percent to 71.3 million euros ($101 million), despite increased provisions.
Net interest income at the state-controlled bank grew 8.4 percent to 339 million euros, with net interest margin improving to 2.69 from 2.61 percent in the first quarter, the result of wider deposit spreads.
The bank said net fee and commission income rose 10.8 percent to 38.6 million euros.
Credit to households -- mortgages and consumer loans -- rose 19.1 percent, well above the market's 6.2 percent growth rate, to reach 8.2 billion euros.
Lending to small businesses grew 61.6 percent to 2.5 billion euros, also above the market's performance, partly due to ATEbank's involvement in working capital loans launched by the Small Businesses Guarantee Fund, part of government measures to boost lending to SMEs.
ATEbank's non-performing loans ratio improved to 7.0 from 7.3 percent in the first half of 2008.
"The bank expects to exceed its initial target for 2009 credit expansion of at least 10 percent and is implementing policies to minimise the negative impact of a worsening external environment on the quality of its balance sheet," Chairman Dimitris Miliakos said in a statement. (Reporting by George Georgiopoulos; Editing by Rupert Winchester)