* FirstRand the first S. African lender to return to dividends * Reports decline of 20% in profit * Says economy showing signs of recovery * Increases bad debt provisions (Adds details, bullets, shares, quote) JOHANNESBURG, March 4 (Reuters) - FirstRand became on Thursday the first of South Africa’s big four lenders to declare a dividend since the pandemic struck, saying its performance had beaten expectations and there were some green shoots showing in the economy. FirstRand’s interim dividend of 110 cents per share was almost 25% lower than a year earlier, however, coming amid a 20% decline in profit - at the lower end of its forecast drop. The South African Reserve Bank had previously advised against dividends amid the COVID-19 crisis, but cautiously relaxed its stance last month, with investors expecting FirstRand to pay out as a result. The bank said in the last six months it had built up capital and strengthened its balance sheet, while the timing and extent of its performance rebound had surpassed expectations. “I’m certainly more upbeat than I was probably six months ago,” Chief Executive Alan Pullinger told Reuters, adding there were also positive signs for the South African economy, in areas such as reform implementation and infrastructure projects. He did warn that caution was required, however, with the bank expecting the COVID-19 vaccine rollout to take longer than planned - until mid-2022 - with a third wave of infections likely in the coming months. FirstRand said its absolute level of earnings would likely not repeat in the second half, due to lagged effects from restrictions imposed at the end of 2020. The lender, which runs the country’s largest retail bank, also opted to step up provisions further, resulting in a 9.4 billion rand impairment charge for the six months to Dec. 31. As well as hefty charges for bad debts, South Africa’s lenders have suffered amid interest rate cuts and as fees earned from activity like consumers tapping their cards at a shop or restaurant plummeted. FirstRand’s interim headline earnings per share, the main profit measure in South Africa, fell to 198.9 cents from 249.4 cents a year earlier. Its shares were up 3.6% by 0830 GMT. ($1=15.0729 rand) (Reporting by Emma Rumney; Editing by Ramakrishnan M. and Clarence Fernandez)