Capitec Bank Holdings Ltd., South Africa’s second-largest provider of unsecured loans, said it’s setting aside more money for bad debt as a sluggish economy and mine strikes hurt borrowers.
“We see pressure in the consumer market and are providing more,” Gerrie Fourie, who became Capitec’s chief executive officer in January after Riaan Stassen retired, said in a phone interview from Johannesburg today. “We’re in for a difficult year economically.”
Capitec increased provisions for doubtful debts by more than a third to 3.64 billion rand ($339 million) in the year through February as loans in arrears grew 22 percent to 2.17 billion rand, the company said in a statement today. Mining-related clients, some of whom have been affected by the eight-week strike in the platinum industry, account for 7.5 percent of Capitec loans, according to Fourie.
“We’re working with management and unions to understand the issues,” Fourie said. “We’ve tightened up our lending in the mining industry quite a lot.”
Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc, the largest platinum producers, said yesterday that the strike by more than 70,000 members of the biggest union at their South African operations has started causing irreversible damage to the mines, with sales losses exceeding $925 million. Workers have lost more than 4.4 billion rand in wages, they said.
Capitec’s full-year profit climbed 28 percent to 2.04 billion rand after the bank added 711,000 new clients, the lender, based in Stellenbosch near Cape Town, said today. Earnings per share excluding one-time items rose 15 percent to 17.52 rand, beating the 16.95 rand median estimate of 12 analysts surveyed by Bloomberg.
Capitec advanced 1.3 percent to 189.51 rand as of 11.17 a.m. in Johannesburg trading, paring this year’s decline to 8.8 percent. The bank increased its total dividend by 16 percent to 6.63 rand per share.
Unsecured lending, which targets lower-income consumers with loans not backed by assets, may risk a political backlash as annual interest rates of as much as 31 percent mire borrowers in debt. The National Consumer Tribunal heard allegations that the bank contravened credit laws on March 13 and judgment was reserved, according to Capitec.
While the tribunal said it will hand down a judgment within 40 days, the bank expects it could take as long as six months, according to Fourie. The hearings centered on the technical functioning of one of Capitec’s products, he said, adding that it’s not yet possible to quantify the size of a potential fine.