Big four bank Absa expects to report an increase in credit impairment charges for the first half of the year to the end of June, as consumers faced mounting pressure from a rapid rise in interest rates. Absa is the latest among its banking peers to flag the dire credit cycle South African consumers find themselves in, which is forcing lenders to up their provisions to cushion against bad debt.
Since the South African Reserve Bank launched its combative fight against stubborn inflation, the repo rate has increased by a cumulative 475 basis points, pushing up the cost of financing debt for consumers. Read:Nedbank impairments increase as consumers come under strain While rising interest rates have put pressure on consumers, banks have benefitted, evidenced in healthy income earned from interest.