JOHANNESBURG, March 14 (Reuters) – Africa’s biggest lender by assets Standard Bank SBKJ.J said on Thursday its annual profit jumped by 27% as high interest rates helped offset rising bad loans.

The lender posted headline earnings of 42.9 billion rand ($2.31 billion) for the year ended Dec. 31, while total net income grew by 20% to 177.6 billion rand, driven by net interest income growth of 25% and non-interest revenue growth of 13%.

The top five private South African banks, including Standard Bank – among the continent’s biggest – are generally known to have well-capitalised balance sheets and conservative lending practices.

But inflationary pressures, high interest rates, regular power blackouts and logistical bottlenecks are taking a toll on their most sensitive retail and small business customers, leading to defaults.

Standard Bank said credit impairment charges increased by 22% to 16.3 billion rand, which pushed the lender’s credit loss ratio- a measure of bad loans as a percentage of total loans- up to 98 basis points (bps) from 83 bps and close to the upper range of its target of 100 bps.

As a result, total provisions increased by 15% to 64 billion rand.

The lender’s loans and advances grew by 7% to 1.7 trillion rand as strong growth in corporate and sovereign lending offset subdued retail lending growth together with a decline in business lending.

“Our clients are likely to remain constrained until interest rates start to decline,” the bank said. It said credit impairment charges were expected to peak in the first half of 2024, driven primarily by ongoing strain in personal and private banking.

Meanwhile the credit loss ratio is expected to remain within the target but near the top of its range.

($1 = 18.6104 rand)

(Reporting by Nqobile Dludla; Editing by Muralikumar Anantharaman and Tomasz Janowski)