Headline earnings up 17% to R2.0 billion despite stricter granting strategy

Capitec Bank – grew headline earnings to R2.05 billion (August 2016: R1.75 billion) for the current six month period despite applying a stricter granting strategy. By the end of August 2017, Capitec had 9.2 million active clients and increased their number of branches to 811. This represents client growth of 106 000 per month over the last 12 months.

This was revealed in a strong set of interim results to 31 August 2017. Capitec Bank CEO Gerrie Fourie says: “We have evolved our product solutions towards more personalised offerings for clients. In line with this, we’ve changed our credit offering by lowering both interest rates and credit card fees to bring the cost of unsecured credit more in line with that of secured credit.”

He said the continued brand acceptance resulted in a 29% increase in retail deposits and transactional growth for the current period.  “Our service has become more accessible via self-service banking options such as cellphone banking app, internet banking, self-service terminals and dual note recyclers. During this period, we increased our number of self-service transactions by 43%. Additionally, 95% of our clients wait less than 15 minutes for service in branch with the average waiting period only 1 minute, 46 seconds.

“The value we generate for our clients through personal service and delivery of affordable, accessible financial solutions, drives the growth of our company. Investing in our people and infrastructure supports this growth and allows us the opportunity to create jobs, stimulate the economy and ultimately transform the country in which we live.”

At the end of the trading period, the bank employed 13 532 people (August 2016: 12 479) and had created 1 053 new jobs.”

Turning to the numbers, Fourie said as well as the strong headline earnings, the return on shareholders’ equity for the current period was 26%. Loan revenue, in-line with loan book growth increased by 10%. Loans and advances in an arrears and rescheduled status decreased by 14% while the net loan impairment expense increased by 8%. Net transaction income increased by 29% in the current six month period and operating expenses increased by 20% in support of the bank’s growth initiatives.

Capitec unveiled a new credit solution in June 2017. “We were able to use our processes and systems to achieve better interest rate options from as low as 12.9% per annum for our clients on our fixed term credit products. The interest rates in this solution are competitive with secured credit market rates.” Said Fourie. The bank also reduced the monthly fee on its credit card to R35 per month.

Also noteworthy:

• Retained a strong capital adequacy ratio of 35%.

• Resilient credit rating – Capitec’s global long term credit ratings of BB+ was not downgraded along with the sovereign and other South African banks earlier this year. This means that Capitec is now rated the same as the sovereign and the other South African banks. S&P Global recalibrated Capitec’s national scale ratings after the sovereign was downgraded, resulting in the national scale long-term ratings increasing with three notches from the beginning of the year to zaAA.

• Net transaction fee income covered 76% of operating expenses (August 2016: 70%) and contributed 40% to net income (August 2016: 37%).

• Capitec was placed first in the overall mobile banking category by the SITEisfaction® 2017 survey. The simplicity and great user experience of their internet and mobile banking app resulted in Capitec being voted best digital bank of 2017.

• Capitec was recognised as the fastest growing brand in South Africa and best bank in the world by Laferty Group for the second consecutive time during the period.