Capitec reports strong second-half recovery amid customer growth

Financial services group Capitec on Tuesday (13 April) reported an increase in headline earnings of 18% to R3.9 billion during the last six months of its annual period up to end February 2021, however, as a result of the first six months of Covid impact on operations, its annualised basis headline earnings declined 27% to R4.6 billion.

The group declared a final dividend of 1,600 cents per ordinary share (Feb 2020: 755 cents per share).

Capitec, which claims to be the largest digital bank in the country, said it increased digital adoption by its clients of 28% with digital clients climbing to over 8.6 million. The bank reported a 35% increase in the number of digital transactions to 1.1 billion.  

Clients performed 526 million banking app transactions (2020: 327 million) and 536 million USSD transactions (2020: 454 million) during the 2021 financial year.

Although card machine transaction volumes decreased by 6% for the six months ended August 2020 due to the lockdown, a recovery occurred during the six months ended February 2021.

Gerrie Fourie, CEO of Capitec Bank, said the bank’s agility and tech focus came to the fore during the Covid-19 pandemic as it acted swiftly to counter the impact on its clients and its business operations.

“We embraced innovation and digitalisation and so did our clients, and the permanent benefits and cost savings are expected to flow in the coming years. Clients are now more than ever before motivated to use digital channels such as our new banking app as they set to benefit from the lower transaction fees and zero-rated data charges.”

During the past year it continued to grow its active client base by an average of 160,000 clients per month – a 14% increase to 15.8 million customers.

“It is a privilege to be able to help nearly 16 million South Africans simplify their banking so that they can live better. We believe the strong client growth we’ve seen over the last year is testament to the fact that our offering of simplified, affordable banking delivered through personalised service is more relevant than ever,” Fourie said.

Its net transaction fee income increased by 17% over the past year despite the pandemic. Net transaction fee and funeral plan income now cover 99% of operating expenses. 

Additional highlights for the retail bank:

  • Transacting: Total net transaction fee was 9% higher to R8.1 billion;
  • Saving: Retail deposits increased by 18% to R107.1 billion, and Capitec paid R4.1 billion back to clients as interest on deposits, fixed deposits and credit cards;
  • Funeral Plan: Its funeral plan income increased by 57% to R650 million with 1.2 million active policies;
  • Credit Life insurance: Net insurance income decreased slightly (2%) to R965 million;
  • Credit: Credit granting criteria were tightened during lockdown and only 40% of total loan sales and disbursements were made during the first six months;
  • Gross loan book: Decreased by 2% to R64 billion;
  • Gross credit card book: Grew by 17% to R6.8 billion.

Capitec Business Bank, previously Mercantile, made a loss of R1.5 million as the focus remains on integration and consolidation, the bank said. The business bank client base increased by 33% to 90,534.

Commenting on the focus for the year ahead, Fourie says the bank will be upgrading branches to assist clients with shifting towards a digital banking platform, underpinned by self-service.  “We just launched the ability to open an account and join Capitec on our app by simply taking a selfie and scanning your ID, and the option to order your card for home delivery will launch in the near future.”

He said he was excited about the Business bank and progress is being made to develop it into a digitally enabled, scalable solution.

Read: Capitec warns of earnings drop, with caveats

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Capitec reports strong second-half recovery amid customer growth