* 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, theSouth African bank majority owned by British lender Barclays Plc, posted a worse-than- expected 9 percent drop infull-year earnings on Tuesday after bad debts spiked.
Absa, the first of South Africa's top four banks to reportearnings this season, said diluted headline earnings per sharetotalled 1,224.6 cents in the year to end-December, from 1,350cents a year earlier.
That was worse than the 6.3 percent decline to 1,265 centsforecast by StarMine's SmartEstimate, which gives more weight toforecasts from top-ranked analysts.
Headline EPS, which excludes certain items, is the mainmeasure of profit in South Africa.
Net-interest income, or profit made from lending, fell 1percent to 24.11 billion rand ($2.7 billion). Non-interestrevenue, 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 0.3percent decline to 682 cents.
Barclays is expected to raise its stake in Absa to 62.3percent from 55.5 percent this year, in a $2 billion deal thatwill see the British lender hand over most of its Africanoperations to the South African bank.
Absa's focus has been slashing costs in the near term butanalysts expect the merger with Barclays will create growthopportunities on mainland Africa, where it previously did notoperate.
The bank acquired the store credit card business of Edcon,an unlisted domestic retailer last year, hoping to boost itssingle-digit loan growth with high margin unsecured lending.
Absa shares are up 0.5 percent this year, lagging behind a 4percent rise by the Top-40 index.