Johannesburg - South Africa's Capitec Bank Holdings surprised investors on Friday with news its first-half earnings likely rose by as much as 22 percent, 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 in Africa's top economy, where household debt averages more than 75 percent of disposable income and consumers are increasingly under strain from rising fuel and food prices.
African Bank Investments, 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 percent at 194.40 rand at 13:53 SA time.
Shares of the Stellenbosch-based bank are up more than 4 percent so far this year, beating a 2 percent decline by the banking index.
During the same period Abil has shed 50 percent of its value. - Reuters