Banking News South Africa

Capitec expects loan losses to be within target in 2025

Capitec Bank said on Tuesday, 23 April 2024 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%.
Source: Reuters.
Source: Reuters.

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 under-performing loans from performing loans in the second half of its 2024 year ended Thursday, 29 February 2024, chief executive officer, 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 80bps 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 R8.7bn ($453.21m). At group level, its credit loss ratio rose to 87bps from 70bps.

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 R14.8bn.

After terminating its funeral product co-operation arrangement with insurer Sanlam, Capitec said it will start adding life cover as it continues building its insurance business.

Source: Reuters

Reuters, the news and media division of Thomson Reuters, is the world's largest multimedia news provider, reaching billions of people worldwide every day.

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