European shares fall further, Greek banks and auto stocks weigh

* FTSEurofirst 300 down 0.2 pct after losing 0.7 pct on Tuesday

* Greek banks, auto stocks among top decliners

* Markets await Fed's policy statement, due at 1800 GMT

By Atul Prakash

LONDON, March 18 (Reuters) - European shares fell for a second day on Wednesday, with BMW (Swiss: BMW.SW - news) leading carmakers lower after toning down its profit expectations and Greek banks falling on concern about the country's debt situation.

The Greek banking index fell 8.4 percent, dragged down by a 12 percent fall in National Bank (NYSE: NBHC - news) of Greece and an 8.9 percent slide in Alpha Bank (Other OTC: ALBWF - news) .

The European commissioner for economics, Pierre Moscovici, said Greece must stay in the euro zone, but only on the conditions agreed with euro zone finance ministers last month when it asked for an extension of its bailout in exchange for reforms.

"The awareness about the Greek debt situation has changed somewhat in the past two days," said Gerhard Schwarz, head of equity strategy at Baader Bank (Xetra: 508810 - news) in Munich. "A Greek exit (from the euro zone) would certainly undermine the ECB's statement that the euro is irreversible."

The FTSEurofirst 300 index of top European shares was down 0.2 percent at 1,580.10 points by 1115 GMT, led lower by auto stocks. Germany's DAX, down 1.1 percent, underperformed after several German carmakers fell sharply.

The European auto index dropped 3.3 percent, dragged down by a 4.6 percent fall in BMW. The German carmaker said it expects 2015 sales volumes and group profit before tax to rise by mid to high single-digit percentages. That was more subdued than its guidance a year ago, amid higher investment costs for new technologies.

Some analysts said that investors were also taking profits after a 30 percent rally witnessed by the sector this year.

On the positive side, Standard Chartered Bank rose 6.6 percent after Bernstein double upgraded its stance on the stock to "outperform" and Barclays (LSE: BARC.L - news) upgraded to "overweight" from "equalweight".

Investors were preparing to pore over the Federal Reserve's policy statement, due after the end of the European session, for clues about when U.S. interest rates will rise.

Recent expectations of a first rate hike in mid-2015, coupled with the start of the European Central Bank's asset-buying scheme last week, has pushed the euro currency lower against the dollar and fuelled a rally in European stocks. The FTSEurofirst 300 is up 16 percent so far this year and Germany's DAX up 22 percent.

"European stocks' strong outperformance since the start of the year is coming from this divergence in monetary policies, as well as from the divergence in the earnings trends. European profits are starting to recover while U.S. profits are losing steam," said Patrick Moonen, senior strategist at ING IM.

The Federal Reserve is expected on Wednesday to lay the groundwork for its first interest rate hike in nearly a decade, as it continues to weigh whether the U.S. recovery can hold up against collapsing oil prices and a soaring dollar.

(Additional reporting by Blaise Robinson in Paris; Editing by Larry King)