Cape Town - 101011 - Banking Fees - CAPITEC Bank has been found to have the lowest fees. Photo: Matthew Jordaan

Johannesburg - South African lender Capitec Bank Holdings reported a 26 percent rise in full-year profit on Wednesday, in line with its forecast, as growth in client numbers boosted both interest and transaction fee income despite a feeble economy.

Capitec, which grants loans not supported by assets, said it gained 1 million active clients, to total 7.3 million customers, over the past year as growth of less than 2 percent in Africa's most advanced economy forced thrifty South Africans to shop around.

“This economy gives us a huge advantage,” Capitec CE Gerrie Fourie told Reuters, adding that the lender's business model had been successful at luring clients from more established banks such as Nedbank, Barclays Africa , Standard Bank and FirstRand.

Around 200 000 high income clients have flocked to Capitec over the last year alone, helping lift its transaction fee income by 16 percent to R3 billion ($199.3 million).

But interest income remains Capitec's largest source of revenue, increasing 16 percent to R12.5 billion.

Read also: Capitec banks on the economy

Fourie expects tough economic conditions to continue as the effects of a severe drought, the weaker rand exchange rate and rising inflation flow through to consumers.

“In the last three months we saw a weakening, and not necessarily from our clients, but from employers - especially small and medium size enterprises - who pay their employees a few days late,” said Fourie.

Despite weak economic growth the firm has no immediate plans to expand beyond South Africa's borders.

“We still see strong growth here and to take our focus away from it would be risky,” Fourie said.

Capitec posted diluted headline earnings per share of 2 781 cents for the fiscal year ended February 29, compared with 2 206 cents a year earlier. The lender had flagged earnings could rise by as much as 27 percent.

Shares in Capitec were up 2.1 percent at R574 , by 0937 GMT, having gained nearly 200 percent in the past two years.