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Johannesburg - Capitec Bank Holdings [JSE:CPI] surprised investors on Friday with news that its first-half earnings likely rose by as much as 22%, sending its shares sharply higher.
Capitec and other South African lenders have zeroed in on the lucrative mass-market, writing high-margin loans to lower income borrowers.
But bad debts have been souring, with household debt averaging more than 75% of disposable income and consumers are increasingly under strain from rising fuel and food prices.
African Bank Investments [JSE:ABI], Capitec's main rival in unsecured lending - loans not backed by collateral - said last month it would raise money through a rights issue and sell a unit to strengthen its balance sheet.
"It's definitely a good result when compared to peers like Abil," said Willem Pienaar, a trader at Cratos Wealth.
Abil, as African Bank is widely known, does not take deposits, thereby foregoing the transaction income that has boosted Capitec.
Capitec's shares were up 4.9% at R194.40 at 13:53. Shares of the Stellenbosch-based bank are up more than 4% so far this year, beating a 2% decline by the banking index.
During the same period Abil has shed 50% of its value.
Capitec and other South African lenders have zeroed in on the lucrative mass-market, writing high-margin loans to lower income borrowers.
But bad debts have been souring, with household debt averaging more than 75% of disposable income and consumers are increasingly under strain from rising fuel and food prices.
African Bank Investments [JSE:ABI], Capitec's main rival in unsecured lending - loans not backed by collateral - said last month it would raise money through a rights issue and sell a unit to strengthen its balance sheet.
"It's definitely a good result when compared to peers like Abil," said Willem Pienaar, a trader at Cratos Wealth.
Abil, as African Bank is widely known, does not take deposits, thereby foregoing the transaction income that has boosted Capitec.
Capitec's shares were up 4.9% at R194.40 at 13:53. Shares of the Stellenbosch-based bank are up more than 4% so far this year, beating a 2% decline by the banking index.
During the same period Abil has shed 50% of its value.
