* Portugal's top index rises 0.9 pct after Thursday's slump
* FTSEurofirst 300 up flat, posts steepest weekly loss since March
* BES down 3.9 pct after update but not seen affecting other banks
* FTSEurofirst set for worst weekly fall since April
By Francesco Canepa
LONDON, July 11 (Reuters) - Portuguese shares bounced on Friday, outperforming skittish European markets, as investors decided concern over Portugal's biggest listed bank were unlikely to disrupt the country's financial system and affect lenders across the euro zone.
Banco Espirito Santo said late on Thursday losses associated with the founding family and its holding company would not affect the bank. That calmed investor worries about a chain reaction hitting other banks, especially in the euro zone's periphery.
Lisbon's PSI 20 index was up 0.9 percent by 1430 GMT. The pan-European FTSEurofirst 300 index was flat at 1,350.06 points, down 3.1 percent on the week, its steepest weekly loss since March.
Doubts about the financial health of the family who controls BES had pulled Portugal's PSI share index to a nine-month low on Thursday and rocked bourses across Europe.
"While the bank has some exposure to the holding company, over a billion euros, it's very clear that they have enough excess capital, over 2 billion euros," said Veronika Pechlaner, who helps manage $13 billion of assets at Ashburton Investments.
"So the systemic risk to the Portuguese banking system is limited, and that's what the market is telling you."
The fall in the previous session came after shares and bonds of Espirito Santo Financial Group (ESFG), the chief shareholder in BES, were suspended over "material difficulties" at parent firm ESI.
Shares in BES opened for trading late on Friday morning and were down 3.9 percent lower in volatile trade, as investors factored in the bank's newly released estimates about its exposure to ESFG.
"(The announcement is) negative, as the overall direct and indirect exposure (including guarantees) is circa 850 million higher than the numbers mentioned before," analysts at Portugal's BPI wrote in a note.
"Still, we welcome the additional visibility provided with yesterday's release on the group's exposures which should help, though there was no clarification on whether there are provisions made on these exposures."
An initial bounce in equity indexes across Europe fizzled out in the afternoon as recent, weak industrial output data earlier this week and the lingering uncertainty regarding Portugal made investors reluctant to dip back into the market.
"After what we've seen this week, with the Espirito Santo situation and the industrial production data, we're taking a cautious approach here," Mike Harris, a partner at TJM Partners, said.
"The question here is whether we're shifting from a buy-dips mentality to sell the rally."
Trading volume on the FTSEurofirst 300 was thin at less than 60 percent of its full-day average for the past three months.
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up (Additional Reporting By Andrew Winterbottom and Lionel Laurent)