Absa Group Ltd. (ASA.JO) Friday said its earnings fell 39% in the first half of the year, more than it had forecast last month because of an impairment of assets bought from clients that defaulted on futures contracts.

The Johannesburg-based lender, majority owned by the U.K.'s Barclays PLC (BCS), said its earnings per share fell 39% compared with guidance given in June for a decline of 25%-35%. EPS at its core Absa Bank Ltd. (ABSP.JO) dropped by 50%, more than the 35%-45% forecast previously.

South African banks are struggling with rising bad debts as clients, primarily in the retail segment, default on home and car loans. The economy slipped into its first recession in 17 years in the first quarter and is expected to remain subdued for the remainder of the year as demand remains weak in key export markets.

Absa additional bought stakes in four listed companies after its clients defaulted on single stock futures transactions. It Friday said it would recognize an impairment of almost 1.1 billion rand ($141 million) before tax, reducing the carrying value of the investments to ZAR445 million from ZAR1.54 billion.

Absa will be the first of South Africa's four largest banks to report full earnings when it posts results Monday.

Standard Bank Group Ltd. (SBK.JO), Africa's largest lender by assets, Thursday said its first-half earnings per share were likely to be down by 30%-35% on an international accounting basis. Headline normalized EPS, which it said reflects its local black ownership scheme and other items, will be down 20%-25%.

It is scheduled to report its six-month earnings Aug. 13.

South Africa's economy contracted an annualized 6.4% in the first three months of the year - the most since 1984 - after shrinking 1.8% in the final quarter of 2008.

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