Capitec Ltd. is bracing for a tougher operating environment as the Iran war stokes inflationary pressures and weighs on client confidence at South Africa’s biggest lender by customers. The bank slowed loan growth and raised provisions for expected credit losses by 7% to 29.1 billion rand ($1.8 billion) in the first half through August. Chief Executive Officer Graham Lee stated they deliberately raised forward-looking macroeconomic provisions early, anticipating a tougher macro environment over the next 12 to 18 months.

Credit impairments climbed 21% to 5.75 billion rand. The war in the Middle East has disrupted seaborne traffic through the Strait of Hormuz, lifting energy and fertilizer costs, resulting in South African annual inflation accelerating to 5% in June, the fastest pace in two years. The South African Reserve Bank has raised its benchmark rate twice this year, citing geopolitical shocks.

Capitec's stock retreated 1.2%, paring its year-to-date gain to 5.2%. The gross loan book at Capitec’s personal-banking unit exceeded 100 billion rand for the first time, but growth will be slower than previously guided. Headline earnings climbed 19% to a record 9.5 billion rand, with an interim payout of 31.10 rand per share.

Lee, who took the role in July last year, is steering the company through intensifying competition. Its business bank reported a 52% increase in headline earnings, targeting small- and medium-sized companies. Founded by Michiel le Roux, the lender has transformed into a financial-services behemoth with more than 26.6 million clients.