Capitec earnings warning spooks investors

Capitec Bank said Friday (3 July), that it incurred a loss of R404 million for the quarter ended May 2020, after the Covid-19 national lockdown resulted in increased credit impairment charges and lower loan sales and transaction volumes.

The group’s share price fell 7.5% in trade on Monday, to R786.28, having surrendered 3% late on Friday.

Capitec warned that its headline earnings per share and earnings per share will decline by more than 70%, or more than R17.82 and R17.84, respectively, compared to the six months ended August 2019.

“We do, however, believe that the results for the second half of the 2021 financial year could return to normal levels,” it said.

Capitec said that banking client behaviour shifted to fewer, higher value transactions during the quarter and was most severely impacted during level 5 of the lockdown.

Subsequent to level 5 lockdown, volumes improved but have not yet recovered to pre-lockdown levels.

The bank said that stricter credit granting criteria were implemented at the start of the lockdown.

“As the economic fallout of the lockdown is assessed, credit granting criteria will be adjusted to reflect market conditions. We anticipate reaching pre-lockdown credit sales at the start of the next financial year.

“We are currently focused on credit pricing and client experience to stabilise our credit market share.”

Th bank said it will continue to focus on digital innovation. “As the country exits the lockdown we expect transaction volume and revenue to increase, supported by growth in quality banking clients in both the business and retail banks.

“We will continue to launch new products to meet the needs of our clients. We see an opportunity to grow our business banking footprint and there is still a focus on building our future business bank.”

Read: Capitec launches new ‘flexible’ credit option – here’s how it works

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Capitec earnings warning spooks investors