Capitec Bank announced that credit impairments, the amount set aside for loans that may not be repaid, increased by just over R1 billion in the first half of its 2027 financial year, a 21% rise on the same period a year earlier. The bank’s credit loss ratio, which measures expected losses as a share of the loan book, was adjusted upwards to 8.4% from 7.9%.
CEO Graham Lee told investors that the jump “could be cause for concern when viewed out of context”, but argued the figures are “sensible numbers that indicate that we’re executing our business plan”. He outlined four drivers behind the higher impairments.
Four drivers of the increase
First, Capitec deliberately raised its forward-looking macroeconomic provisions, a reserve for expected future losses, because it expects the economy to become tougher over the next 12 to 18 months. The forward-looking impact (FLI) added 70 percentage points to the personal banking credit loss ratio, pushing it to 9.2% from 8.1% in August 2025.
Second, the bank’s loan book grew sharply. Personal loans topped R101.7 billion, the first time the book exceeded R100 billion. The larger book means a larger provision is required up-front, Lee said, and that is “just successfully executing our strategy”. The product mix also shifted: term loans fell from 76% of the book in August 2021 to 56% in August 2026, while access-facility loans rose to 21% and credit-card balances to 18%.
Third, Capitec introduced scored unsecured loans to its business-banking arm in December 2025. Previously, business loans were “intuitive”, assessed by an experienced banker on a case-by-case basis. The new model uses the same scoring engine as personal loans and collects repayments daily rather than monthly. Executive Karl Kumbier acknowledged these loans are higher-risk but carry a higher yield. The credit loss ratio for this segment rose by 80 percentage points, to 3.4% from 2.1% a year earlier.
Fourth, the bank is targeting the emerging economy, one-person enterprises such as salons, spaza shops and vehicle-repair outfits, with those unsecured products. Lee said the bank is “providing prudently whilst we grow and learn”, noting that the businesses and entrepreneurs segment more than doubled to 686 000 customers.
Despite the higher impairments, Capitec reported a 19% increase in headline earnings to R9.5 billion, a 21% rise in non-interest income to R16.1 billion and a 7% increase in net interest income to R12.7 billion. Operating expenses grew only 5% to R10.5 billion.
For small-business owners and entrepreneurs, the key question is whether the new unsecured products will remain affordable. Higher provisions could translate into tighter credit standards or higher pricing, especially if the macro outlook worsens. However, the bank’s higher yields on those loans suggest it is trying to offset the added risk.
Capitec’s move mirrors a broader trend in South African banking, where lenders are building larger loan books while also setting aside bigger buffers for potential defaults. The Reserve Bank has warned that inflationary pressure and elevated unemployment could strain borrowers’ repayment capacity, prompting banks to be more cautious.
Investors will be watching the next set of results to see if the higher provisions stabilize the credit loss ratio or if further adjustments become necessary.
Read more about the impact of loan-book growth on South African banks in our Markets & Finance coverage.
Capitec’s provisioning framework requires a charge on each new loan, and the bank noted a 10-basis-point rise in the upfront charge to 60 percentage points as the loan book expanded faster than before. This increase reflects the larger volume of credit being originated, meaning a higher immediate provision is booked against each loan. The practice of booking a provision at loan inception is intended to match expected losses with the timing of credit growth, and the higher charge signals that the bank is aligning its reserves with the accelerated expansion of its portfolio.
The forward-looking macroeconomic provision, or FLI, is applied as an overlay to the credit loss ratio to anticipate tougher conditions twelve to eighteen months ahead. In the personal banking segment the FLI added 70 percentage points, lifting the CLR to 9.2 percent from 8.1 percent in August 2025, while in business banking a 50-point overlay pushed the CLR to 3.4 percent from 2.1 percent a year earlier. These adjustments are calculated based on the bank’s macro outlook and are incorporated into the overall impairment allowance before the financial results are finalised.
Capitec’s customer base now stands at 26.6 million active accounts, a 7 percent rise since August 2025. Fully banked customers have grown to 10.4 million, outpacing the overall increase with an 11 percent growth rate. The businesses and entrepreneurs segment, targeting one-person enterprises, more than doubled to 686 000 customers during the year. This expansion of the customer base underpins the larger loan book and the need for proportionally higher provisions to safeguard against potential defaults.
The shift to scored unsecured loans in the business bank required a scalable credit-scoring engine, replacing the previous “intuitive” approach that relied on individual bankers’ judgments. By using the same algorithm as personal loans and collecting repayments daily rather than monthly, Capitec can process a far greater number of applications while maintaining risk oversight. This model, described as “pay-as-you-trade”, allows the bank to extend credit to a broader set of small enterprises while managing the higher risk profile through higher yields and daily cash-flow monitoring.
