Standard Bank Group Ltd. (SBK.JO), Africa's largest lender by assets, Thursday said it expects a decline in earnings this year after its first-half profit was hit by rising impairments amid the global economic recession.

The Johannesburg-based company said it wouldn't provide specific guidance for the year, but that current trends suggest so-called normalized earnings will be lower than in 2008.

South Africa's banks have proved relatively resilient to the global economic crisis. Still, the economy is feeling the lagging effect of last year's high inflation and interest rates that has been compounded by the country's first post-apartheid recession. This has knocked investments and given rise to a rise in bad debts.

Standard Bank said its first-half earnings fell 24% to 5.41 billion rand ($674.3 million), excluding one-time items and adjusting for shares used to fund ownership by black South Africans and stock held for policyholders of its insurance unit Liberty Holdings Ltd. (LBH.JO). Liberty was pushed to a loss of ZAR1.21 billion in part by a rise in lapses of insurance policies.

Net profit was down 31% at ZAR5.11 billion, or 343.5 cents a share, from ZAR7.4 billion, or 521.2 cents, a year earlier.

Credit impairments for the half-year were 58% higher at ZAR7.12 billion, which resulted in a credit loss ratio of 1.84% against 1.31% a year earlier.

"High consumer indebtedness and the lagged effect of previously high interest rates, together with high food and fuel prices in South Africa, continued to impact on customers' ability to service debt," the company said.

Still, net interest income was 15% higher on the year at ZAR16.52 billion and non-interest revenue was up 6% at ZAR15.28 billion. And Standard Bank said it would pay an interim dividend of 141 cents a share, albeit 27% less than last year.

At 1155 GMT, Standard Bank's shares were up 0.7% at ZAR96.40 in a broadly positive market. Its stock has risen about 15% since the start of the year, matching a rise in Johannesburg's blue chip Top 40 index.

Finance Director Simon Ridley in a presentation to analysts said the company hadn't seen any improvement in credit impairments, with the benefit of lower interest rates only likely to come through in coming periods. Impairments in corporate and investment banking in Africa are likely to rise in the second half of the year, said Rob Leith, head of the division.

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. The country's largest banks, however, are profitable and have said they remain well capitalized.

Absa Group Ltd. (ASA.JO), South Africa's biggest retail lender, earlier this month said it expects to remain under pressure for the rest of the year due to rising arrears and non-performing loans. The bank, majority owned by the U.K.'s Barclays PLC (BCS), posted a 39% drop in its first-half net profit after impairments rose and business volumes fell.

Standard Bank, which is 20% owned by Industrial & Commercial Bank of China (0349.HK), operates in 17 African countries and 16 other mainly emerging market nations.

Company Web site: www.standardbank.com

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