Nedbank Group Ltd. (NED.JO), one of South Africa's largest lenders, Monday said it expects as much as a 34% fall in first-half earnings as the country's economy struggles with its first recession in 17 years.

The Johannesburg-based lender, which is majority owned by Old Mutual PLC (OML.LN), said its profitability has been dented by increasing impairments, slower asset growth and reduced endowment as interest rates have been cut. There are, however, early signs lower interest rates are slowing the pace of increase in impairments for the bank, it said.

Nedbank in a statement to the Johannesburg stock exchange said its earnings for the first six months of the year are expected to be 29%-34% lower than the 879 cents ($1.11) a share in the same period of 2008.

Its credit-loss ratio for the first six months of 2009 is expected to be at levels similar to or slightly below the 1.67% reported for the quarter to March 31, it said.

The forecast weighed on Nedbank's shares, which at 0938 GMT were unchanged at ZAR107 while other banking stocks were modestly higher.

"In this challenging environment, the group continued to focus on the strength of its balance sheet and grew its net asset value, maintained sound liquidity and strengthened its capital adequacy," Nedbank said, adding it has remained "solidly profitable."

Several of the bank's rivals have already cautioned investors to expect lower earnings.

FirstRand Ltd. (FSR.JO) in late June said its full-year earnings to June 30 were expected to have fallen by 39%-44% from 218.2 cents a share a year earlier. Absa Group Ltd. (ASA.JO), which is majority owned by U.K. lender Barclays PLC (BCS), at the same time said its half-year earnings per share was likely to be 25%-35% lower than a year earlier.

Nedbank is scheduled to release its half-year earnings Aug. 5. FirstRand's earnings are due out Sept. 15, and Absa's Aug. 3.

Company Web site: www.nedbankgroup.co.za

-By Robb M. Stewart, Dow Jones Newswires; +27 11 783 7848; robb.stewart@dowjones.com