* NBG Q1 net loss shrinks to 159 mln euros vs 1.1 bln in Q4
* Alpha Bank narrows loss to 115.8 mln euros vs 440.2 mln (Adds National Bank, Alpha CEO comment, details)
By George Georgiopoulos
ATHENS, May 28 (Reuters) - Two major Greek lenders, National (NBG) and Alpha Bank, reported narrower losses in the first quarter but provisions for bad loans continued to hammer their bottom lines as the economy dipped back into recession.
Hit hard by the country's debt crisis, banks have faced more troubles in the past few months as Greece's protracted talks with its creditors on a cash-for-reforms deal have triggered deposit outflows.
The banks, largely cut off from tapping the European Central Bank's main funding operations, survive on a drip feed of emergency liquidity from the domestic central bank, costlier funding that eats into their net interest margins.
They are still burdened with large problem loan portfolios and continue to make bad debt provisions as high unemployment rates make it hard for borrowers to service their debts.
Greece's largest lender NBG saw its loss shrinking to 159 million euros ($173 million) in January to March after losing 1.1 billion in the fourth quarter, as bad debt provisions offset profit at its Turkish unit Finansbank.
NBG, 57.2 percent owned by the HFSF bank rescue fund, said Finansbank contributed 114 million euros to group earnings in the first quarter.
Alpha Bank, Greece's fourth-largest lender by assets and about 66 percent owned by HFSF, also narrowed its loss to 115.8 million euros from 440.2 million in the fourth quarter.
"The macro (economic) situation has led to a higher Eurosystem funding reliance and a reversal of the improving asset quality trends we experienced last year," Alpha's Chief Executive Dimitris Mantzounis said in a statement.
Alpha's non-performing credit, loans past due for more than 90 days, rose to 33.8 percent of its loan book at end-March from 33 percent at end-December.
Similarly, NBG's bad loans ratio edged up to 24.3 percent from 24 percent in the fourth quarter.
Both lenders reported a drop in deposits in the first three months, a trend that has afflicted the sector as uncertainty persists over a deal with the country's lenders.
Alpha said its deposits fell 13.9 percent year-on-year to 36 billion euros, with funding from the Greek central bank's emergency liquidity window at 20.6 billion in May.
At NBG, deposits fell by 4.8 billion euros in Greece in the first quarter and by another 1.9 billion in the second quarter to May. (1 US dollar = 0.9165 euro) (Additional reporting by Lefteris Papadimas; Editing by David Holmes)