CORRECTED-UPDATE 2-S.Africa's Nedbank lifted by higherrisk lending (corrects seventh paragraph, Nedbank S.Africa's No.4 bank, not No.2) * Non-interest revenue up 14 pct * Net interest income up 9 pct * Shares flat By David Dolan JOHANNESBURG, Oct 29 (Reuters) - Nedbank Group announced on Monday that it is on track for double-digit earnings growth this year, the latest South African bank to benefit from a rise in higherrisk lending. Hampered by weak corporate demand for credit, the country's big banks have ramped up unsecured lending - the profitable but riskier practice of giving loans that are not backed by collateral. Unsecured loans in Africa's top economy surged 21 percent in the year to June and now total a $43 billion, the central bank said last week, as Nedbank and its rivals continue to push profitable credit cards and personal loans. "It's probably the key risk facing South African banks," Johann Scholtz, banking analyst at Afrifocus Securities in Cape Town, said of unsecured lending. "We've seen this movie before. Everyone is saying, 'No, it's not as problematic as the media is making it out to be.' I still feel that somewhere along the line somebody is going to get burnt." Unsecured lending has helped South African banks to overcome relatively lacklustre economic growth and book double-digit profit increases. Investors have noticed. Shares of FirstRand, South Africa's second-largest lender, have climbed 43 percent in the past 12 months. Nedbank, the country's No.4 bank and majority owned by insurer Old Mutual , has jumped 30 percent. South African banks are now trading at lofty multiples. Nedbank's forward 12-month price-to-book ratio of 1.46 makes it more expensive than Wells Fargo & Co, Goldman Sachs Group and HSBC Holdings. WOBBLY FINANCES But the growth may not be sustainable, given the Loans in Cape Town wobbly state of household finances. Household debt totals 76 percent of disposable income, according to government statistics, while the unemployment rate is stuck at about 25 percent. One positive for Nedbank has been its focus on writing shorter-term unsecured loans, said Afrifocus's Scholtz. That lowers the risk of bad loans staying on the book for a longer time and
allows the bank to react quickly to changes in the market, he said. Nedbank said in a trading statement that it expects to meet its full-year target for earnings growth about 13 percent, according to Reuters calculations. The bank derives its earnings target by adding 5 percent to the sum of the growth in gross domestic product and the consumer prices index. Net interest income, the measure of earnings from lending, increased 9 percent to 14.5 billion rand ($1.7 billion) in the nine months to September 30, the bank said. Non-interest revenue, which includes fees and commissions, rose 14 percent to 12.4 billion rand. Total loans were up by 7 percent, while the ratio of bad debt charges decreased. Shares in the bank were little changed at 182.40 rand at 1408 GMT. ($1 = 8.6517 South African rand) (Editing by David Goodman)