JOHANNESBURG, April 23 (Reuters) – South African lender Capitec Bank CPIJ.J said on Tuesday its loan losses in retail banking will likely shrink to within its target range in 2025, as its full-year profit rose by 16%, sending its share up 7.43%.
Capitec Bank is one of the fastest-growing South African lenders, targeting low-income earners who were largely ignored by the country’s bigger, established banks.
But this exposure has meant higher impairments, with its customers under pressure from 10 successive interest rate hikes and higher food inflation.
The lender, South Africa’s biggest retail bank by customer numbers, has seen a slower migration of retail credit into underperforming loans from performing loans in the second half of its 2024 year ended Feb.29, CEO Gerrie Fourie told investors.
Client cash flow strain, however, has improved over the last six months, with customer insufficient fund transactions coming down, he added.
But estimated credit loss increased in the full-year period, and as a result, the credit loss ratio – a measure of bad loans as a percentage of total loans – in retail banking increased to 101 basis points (bps) from 80 bps in 2023.
“The credit loss ratio is expected to return to through-the-cycle target of 8.5% (or 85 bps) by February 2025,” Fourie said.
The company, with 22 million retail clients, said overall credit impairment charges rose by 38% to 8.7 billion rand ($453.21 million). At group level, its credit loss ratio rose to 87 bps from 70 bps.
Capitec said it continued to tighten its credit-granting criteria.
The group’s headline earnings per share – the main profit measure in South Africa – rose to 9,171 cents as its net transaction and commission income grew by 29% to 14.8 billion rand.
After terminating its funeral product co-operation arrangement with insurer Sanlam SLMJ.J, Capitec said it will start adding life cover as it continues building its insurance business.
($1 = 19.1966 rand)
(Reporting by Nqobile Dludla; Editing by Tom Hogue and Savio D’Souza and Miral Fahmy)
