* Headline earnings up 13 pct
* Non-interest revenue up 15 pct
* Net interest income up 6.9 pct
* Shares down 4 pct this year
JOHANNESBURG, Aug 6 (Reuters) - Nedbank on Tuesday became the latest South African lender to strike a note of caution about the worsening financial health of consumers in Africa's largest economy, after its debt costs jumped 22 percent in the first half of the year.
Nedbank, majority owned by insurer Old Mutual, is battling with a tepid economy where borrowers are beset by rising costs, high unemployment and household debt levels equal to three quarters of disposable incomes.
South Africa's fourth-largest bank, which also reported a 13 percent rise in headline profit, said its impairments - or bad debt costs - totalled 3.3 billion rand ($335 million) in the six months to the end of June.
Earnings at its retail banking business slid 12 percent, as customers struggled to make payments on their personal loans. The bank said it had become more conservative in setting aside funds to cover bad loans, leading to 165 million rand in new provisions in the first half.
"It shows that retail is definitely tougher than what we all thought. The consumer is under extreme pressure. That is one message that is coming out clearly," said Patrice Rassou, Cape Town-based head of equities at Sanlam Investment Management.
"The theme is very prevalent across all those reporting - a very cautious view of the consumer which is coming through in terms of higher bad debts, higher provisions from all those involved."
Nedbank's bigger rival, Absa Group, now named Barclays Africa, said last week that earnings from personal loans fell by more than 40 percent.
Niche lender African Bank on Monday flagged that earnings from its main banking unit were likely to worsen in the second half due to slow demand and souring loans.
"We have taken a lot of preventative measures by tightening credit granting criteria, working on our collection sales force, but the reality is that you are seeing consumer stress," Chief Operating Officer Graham Dempster told Reuters.
"That is something we have to watch very carefully in the balance of the year."
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As demand for credit in South Africa remains weak, Nedbank has focused on building up its transaction business to make more money from fees and commissions.
Non-interest revenue, which includes fees and commissions, climbed by 15 percent to 9.5 billion rand. By contrast, income from lending increased at about half that pace.
"They are getting good top-line growth," Sanlam's Rassou said, adding that non-interest revenue was stronger than he had expected.
Nedbank also said it had entered an alliance with Bank of China to target trade and investment between Africa and the world's second-largest economy.
While focused on southern Africa, Nedbank is also in a strategic partnership with pan-African lender Ecobank Transnational that exposes it to dozens of other African countries.
It is expected to exercise its right to take a 20 percent stake in Ecobank as early as November, under the terms of a $285 million loan to the Togo-based lender.
Nedbank said diluted headline earnings per share (EPS) rose to 831 cents, up from 738 cents a year earlier. Headline EPS, which exclude certain one-time items, is the main gauge of profit in South Africa.
It declared an interim dividend of 390 cents, up nearly 15 percent from the previous year.
Nedbank's shares were down 0.6 percent at 180.32 rand at 1220 GMT. Its shares are down 4 percent this year, outperforming a 5.5 percent decline in Johannesburg's banks index.