February 12, 2013 / 6:01 AM / 5 years ago

UPDATE 1-Bad debts hit S.Africa's Absa FY earnings

* FY EPS 1,224.6 cents vs 1,265 cents consensus

* Hit by 63 pct spike in bad debt costs

* Shares flat so far this year

JOHANNESBURG, Feb 12 (Reuters) - Absa Group, the South African bank majority owned by British lender Barclays Plc , posted a worse-than- expected 9 percent drop in full-year earnings on Tuesday after bad debts spiked.

Absa, the first of South Africa’s top four banks to report earnings this season, said diluted headline earnings per share totalled 1,224.6 cents in the year to end-December, from 1,350 cents a year earlier.

That was worse than the 6.3 percent decline to 1,265 cents forecast by StarMine’s SmartEstimate, which gives more weight to forecasts from top-ranked analysts.

Headline EPS, which excludes certain items, is the main measure of profit in South Africa.

Net-interest income, or profit made from lending, fell 1 percent to 24.11 billion rand ($2.7 billion). Non-interest revenue, or income from charges such as fees and commissions, grew 6 percent to 22.7 billion rand.

Credit impairments rose 63 percent to 8.29 billion rand.

Absa beat expectations with a 684 cents per share dividend, unchanged from the previous year. Analysts had expected a 0.3 percent decline to 682 cents.

Barclays is expected to raise its stake in Absa to 62.3 percent from 55.5 percent this year, in a $2 billion deal that will see the British lender hand over most of its African operations to the South African bank.

Absa’s focus has been slashing costs in the near term but analysts expect the merger with Barclays will create growth opportunities on mainland Africa, where it previously did not operate.

The bank acquired the store credit card business of Edcon, an unlisted domestic retailer last year, hoping to boost its single-digit loan growth with high margin unsecured lending.

Absa shares are up 0.5 percent this year, lagging behind a 4 percent rise by the Top-40 index.

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