JOHANNESBURG (Reuters) - Absa Group (>> Absa Group Limited), the South African bank majority owned by Britain's Barclays Plc (>> Barclays PLC), posted an 8 percent rise in half-year earnings on Tuesday after its bad loans shrunk.

Headline earnings per share rose to 649 cents in the six months to end-June, from a restated 599.6 cents a year earlier. Headline EPS, which exclude certain one-time items, is the main gauge of profit in South Africa.

Absa, South Africa's third-largest bank by market value, has remained wary of the higher-risk unsecured loans that have boosted margins at its rivals.

With interest rates at the lowest in decades, other South African banks have made an aggressive push into unsecured lending - loans not backed by collateral - raising concerns bad debts could sour as household debt levels rise.

Net interest income, a measure of earnings from lending, totalled 12.5 billion rand (847 million pounds), compared with 11.9 billion rand last year. Bad debt costs fell 14 percent to 3.5 billion rand.

It also declared a special dividend of 708 cents in addition to its interim dividend of 350 cents.

Absa is the first of the country's "Big Four" banks to post earnings. South Africa's No.4 bank Nedbank (>> Nedbank Group Ltd.) is scheduled to report on August 6 and industry leader Standard Bank (>> Standard Bank Group Ltd) a week later on August 15.

From August Absa will take over its parent's African businesses following a 18.2 billion rand deal comprising the issue of 129.5 million shares to Barclays.

Shares of Absa have fallen 7.9 percent this year, underperforming a 6.5 percent drop in Johannesburg's index of banks <.JBANK>.

(Reporting by Helen Nyambura-Mwaura; Editing by David Dolan)