ATHENS - Alpha Bank, Greece's third-largest lender, on Tuesday reported a 58.2 percent year-on-year drop in first-quarter net profit to 85.7 million euros ($119.7 million) on slower loan growth and higher provisions.

Net earnings were above market expectations. Analysts polled by Reuters were forecasting net profit of 75.7 million euros on average, with estimates ranging from 64 to 92 million euros.

This decline was a function of the sharp drop in the deposit spread, which could not be compensated within the quarter by the increase of the loan book spread, and the significant decline in loan growth, the bank said in a statement.

A weak macroeconomic backdrop at home and in the Balkans, where Greek banks have expanded, slowed loan volumes while a deposit war during the first quarter put interest income under pressure, compressing spreads.

Alpha Bank, also present in Bulgaria, Romania, Cyprus, Serbia and Albania, said net interest income declined by 9 percent to 402.6 million euros.

Alpha's loan portfolio grew by 15.3 percent to 52.2 billion euros. Balances decreased by 125 million euros quarter-on-quarter.

The bank reported loan-loss provisions of 157.3 million euros, up 132.7 percent from the same period a year earlier.

Alpha shares are up 19.5 percent year-to-date, underperforming a 28 percent increase in the Greek equities market .ATG.

(Reporting by Lefteris Papadimas, Ingrid Melander and George Georgiopoulos; Editing by David Cowell)