South Africa’s bad economy is helping Capitec

Capitec plans to continue challenging South Africa’s big four banks, with the group remaining a popular choice for both customers and shareholders.

Speaking to Reuters, Capitec chief executive Gerrie Fourie said that the bank is currently attracting 100,000 to 150,000 new customers a month.

“Most of them we’ve taken from other banks,” said Fourie. “The economy is helping us – people have started questioning why they have to pay banking costs.”

The bank’s continued client acquisition saw it pass 9 million retail customers in June, surpassing Absa’s 8.6 million and rapidly approaching Standard Bank’s 12 million.

The bank has also seen its share price rise by over 300% since 2012, and with an estimated market value of R103 billion, it is quickly closing in on fourth-biggest lender, Nedbank, which is worth R110 billion.

Potential trouble ahead

However, Capitec’s low-cost model and growing market share could prove to be a potential risk for the bank, said industry experts speaking to Reuters.

Unlike its rivals, the bank offers only unsecured loans to low-income earners and cannot count on other lending areas to counter any losses.

This means that its aversion to mortgage lending and vehicle finance (which unlike other banks saw it insulated during the downturn) also cannot be relied on for alternative revenue streams.

The amount of Capitec’s loans in arrears at the end of December were up 24% compared with a year earlier, which at R2.86 billion, outstrips the 11% growth rate of its interest income.

Similar results are expected when the bank reports its half-year results at the end of September.

“The other banks might have a bit of a moat by having vehicle finance, housing loans and bonds and higher value loans,” said Momentum SP Reid banking analyst Brian Mugabe.

“Their biggest challenge comes as they move up the value chain.”

Nonetheless, Capitec has warned its bigger competitors that it plans to climb the income ladder – just not all the way up.

“We designed this bank to service 90 to 95% of South Africa’s banking public,” said Fourie. “The wealthiest 5% to 10% of the population we leave for the guys offering private banking services.”

Read: Do South Africa’s banking bosses really deserve their massive salaries?

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South Africa’s bad economy is helping Capitec