* H1 net profit 169 million euros, in line with forecasts
* H1 net interest income down 1.9 percent to 1.134 bln euros
* Shares down 1.4 percent (Adds bank comment, details)
ATHENS, Aug 27 (Reuters) - EFG Eurobank, Greece's second-largest lender, said on Thursday first-half group net profit fell 61 percent, hit by a rise in loan loss provisions and slower volume growth at home and in southeast Europe.
Eurobank said net earnings fell to 169 million euros ($240 million), in line with market expectations.
Analysts polled by Reuters had forecast net earnings of 169.5 million on average, with estimates ranging from 162 to 182 million euros.
Quarter-on-quarter, the bank said earnings grew 9 percent to 88 million euros, also in line with forecasts.
An economic downturn at home and in southeast Europe, where Greek banks including EFG have expanded, weighed on volume growth while a deposit war in the first quarter a squeeze on net interest income.
Competition for deposits eased in the second quarter with cheap funding by the European Central Bank taking some pressure off net interest margins.
EFG, with operations in Romania, Bulgaria, Serbia, Turkey, Poland and Ukraine, said net interest income dropped 1.9 percent year-on-year in the first half to 1.134 billion euros.
"The gradual de-escalation of the high cost of deposits is expected to contribute further to the positive evolution of net interest income in the following quarters," EFG said, as its net interest margin improved to 2.8 from 2.7 percent in the first quarter.
Provisions for bad loans in the three months to June grew 9.4 percent to 287 million euros quarter-on-quarter. Non-performing loans rose to 4.1 percent of gross loans from 3.2 percent in the first quarter and were 66 percent covered by reserves or 120 percent if collaterals are taken into account, it said.
"Group loans in the second quarter remained almost flat at Q1 levels, up 4.9 percent year-on-year, as a result of the overall reduction in credit demand in Greece and New Europe due to the global economic recession," the bank said. (Reporting by George Georgiopoulos; Editing by Erica Billingham)