JOHANNESBURG (Reuters) – South African lender Capitec said on Tuesday it would not pay a dividend for its full year, although profits rose by 19%, in line with guidance from the country’s central bank to scrap payouts amid the coronavirus outbreak.

The South African Reserve Bank (SARB) asked lenders to skip dividends for 2020 earlier in April to preserve capital for lending. Capitec was one of only a few lenders to not have already declared a dividend at this time.

“After extensive deliberation, the board decided to support the guidance of the Reserve Bank and decided against the declaration of the final ordinary dividend,” Capitec, which normally pays out 40% of profits to shareholders, said in its results statement.

The banks’ main rivals – South Africa’s big four lenders including FirstRand and Absa – all reported their results and declared dividends in March. The SARB has said dividends already announced can be paid.

Capitec reported a full-year profit rise of 19%, at the bottom end of a forecast range of 18% to 21% it outlined in a trading statement last month. [L8N2BC6T4]

Its headline earnings per share – the main profit measure in South Africa – stood at 5,428 cents ($3.02), verses 4,557 cents a year earlier.

The lender grew to become South Africa’s sixth largest bank by assets via a strategy focused on unsecured lending to lower-income consumers, and is generally perceived to be more exposed to any economic downturn as a result. Unsecured lending relies solely on consumers’ promises to repay.

A fear of a spike in bad debts following the outbreak of the coronavirus and a prolonged lockdown to stem its spread have pummelled bank shares, with Capitec in particular suffering.

Its credit impairment charge rose by 14% over the year to February, in line with other banks which also saw impairments spike as the South African economy deteriorated.

($1 = 17.9976 rand)

(Reporting by Emma Rumney, Editing by Raju Gopalakrishnan)

This article was first published on Reuters Africa https://af.reuters.com/article/investingNews/idAFKCN21W0P2-OZABS and is republished with its permission.

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