* H1 headline EPS up 10 pct, in line with forecasts
* Rest of Africa earnings up 34 pct
* Credit impairments down 7 pct
* Shares up nearly 30 pct this year (Recasts, adds details and quotes)
JOHANNESBURG, July 30 Barclays Africa Group is focusing on lending to companies in South Africa to counter a drop in retail credit as the financial health of households in its biggest market deteriorates.
The pan-African lender, majority owned by the eponymous British bank Barclays, is also looking to the eight new markets it acquired last year to boost profit but faces competition from rivals.
Barclays Africa Group posted a 10 percent increase in first-half earnings on Wednesday, driven mainly by revenue growth from its newly integrated African operations and a drop in bad debt charges in South Africa where it tightened lending criteria.
Barclays, South Africa's third-biggest lender by market value, is the first of the "big four" banks there to report first-half earnings.
Heavily indebted consumers in South Africa, the continent's most advanced economy, are under pressure from price increases, high unemployment and rising interest rates. The central bank has increased rates by 75 basis points this year to 5.75 percent, despite anaemic growth.
Barclays Africa Chief Executive Maria Ramos said the bank was taking a conservative approach to its retail business.
Retail mortgages fell by 2 percent and personal loans grew by a mere 2 percent in the first half. By comparison, corporate and investment bank lending rose by 19 percent.
"We're being cautious, being very mindful particularly in South Africa... where we are very conscious that consumers remain under significant pressure," she said.
Barclays said customers in South Africa fell 7 percent to 9.2 million in the first half and rose 2 percent elsewhere on the continent to 2.7 million.
Under a deal concluded last year, Britain's Barclays handed over ownership of all but two of its African subsidiaries to its South African unit in exchange for a 62.3 percent stake in the new combined entity.
Barclays Africa now owns operations in Ghana, Botswana , Kenya and Zambia and runs Egypt and Zimbabwe for its parent company.
"The acquisition of the Barclays Africa assets certainly was beneficial," said Reuben Beelders, a Cape Town-based portfolio manager at Gryphon Asset Management who does not own Barclays shares.
"A lot of the growth seems to be coming from that part of the business, but they also caution that the environment is becoming more competitive and there is more regulation impacting their operations in the rest of Africa."
Barclays said revenue from the continent rose 12 percent in the first half to end June, accounting for a fifth of total revenue and on track to hit targets set for 2016.
Headline earnings from the rest of Africa grew by 34 percent to 1 billion rand ($94.36 million), faster than the 6 percent growth in South Africa.
Overall headline earnings per share rose to 720.9 cents from a restated 655.7 cents a year ago, in line with forecasts.
Credit impairments fell 7 percent as it reined in bad loans, which spiked in the last two years following a surge of unsecured lending by South African banks.
Analysts' median long-term EPS growth estimate for Barclays is 7.6 percent, according to Thomson Reuters data, lagging 13.5 percent for peers.
Its shares have gained nearly 30 percent so far this year, beating an 18 percent rise in the South African banking index .
"There's not huge amounts of value in this share any more," said Beelders, who rates the stock "neutral."
($1 = 10.6020 South African Rand) (Editing by Erica Billingham)