Capitec reports continued recovery on expanded digital offerings and strong customer growth

Capitec Bank on Thursday (30 September), published its financial results for the six months ended August 2021, showing continued recovery amid expanded digital offerings and strong customer growth.

Operating profit before tax increased by 837% to R5.042 million, from R538 million in the prior period.

Headline earnings per share increased by 513% to 3,447 cents, from 562 cents in the prior period. Earnings per share increased by 531% to 3,387 cents, from 537 cents in the prior period.

An interim ordinary dividend of 1,200 cents per share was declared for the current period, with no interim ordinary dividend declared for the prior period.

“It is the directors’ intention to declare 50% of headline earnings for the 2022 financial year as dividends for the year,” the bank said.

The net asset value (total equity) increased by 22% to R31.956 billion, from around R26 billion in the prior period, it said.

Capitec pointed to a challenging past 18 months, but it said the period has also presented opportunities to enhance clients’ experience with new digital solutions.

Headline earnings increased to R3.987 billion for the six months ended August 2021 from R650 million for the comparative period (February 2021: R3.936 billion). “During the past 18 months, the drivers of the group’s results were impacted differently by socio-economic conditions during each 6-month period,” it said.

Headline earnings for the first half of the 2021 financial year were driven by the necessity to meet the challenges of the Covid-19 pandemic and the hard lockdowns in South Africa.

“The period was characterised by the assistance offered to clients impacted by the shutdown of some sectors of the economy, a change in clients’ transacting behaviour, the tightening of credit granting criteria and a focus on cost containment.”

Capitec said that the focus during the second half of the 2021 financial year was on ensuring that clients and the business reaped benefits from the opportunities for innovation that were presented by the lockdowns.

Transaction volumes recovered and as restrictions eased, lending criteria were managed proactively based on the socio-economic climate, Capitec said. “We exceeded our target of achieving headline earnings similar to the 6 months ended February 2020, by 18%.”

Other indicators highlighting the group’s diversified growth were:

  • Return on equity is 27%;
  • Net transaction income was 33% higher to R5.2 billion;
  • Net transaction and funeral plan income is 51% of net income and covers 97% of operating expenses;
  • Savings deposits increased by 16% to R127.9 billion, and Capitec paid R2.1 billion in interest on call deposits, fixed deposits and credit card balances back to clients;
  • Funeral plan income increased by 5% to R366.0 million with 1.5 million active clients;
  • Income from credit life policies increased by 15% to R571.2 million;
  • The gross loan book increased by 5% to R77.7 billion;
  • Credit impairments decreased by 66% as the full impact of the Covid-19 pandemic was accounted for in the first half of the 2021 financial year.

Customer growth

It said that throughout the past 18 months, the growth in active client numbers was consistent and contributed to the recovery in headline earnings after August 2020. As at the end of August 2021, Capitec’s active client base numbered 16.8 million (August 2020: 14.7 million; February 2021: 15.8 million).

Active digital users of the banking app, USSD channel, the internet or a combination of digital channels increased from 7.3 million at the end of August 2020 to 8.9 million at the end of August 2021, an increase of 22%.

As of the end of August 2021, the bank reported 6 million active banking app users (August 2020: 4.1 million; February 2021: 5.3 million). Clients performed 623 million digital transactions for the period (August 2020: 516 million; February 2021: 576 million).

Capitec said that the number of clients opting to transact using its Global One product offering continued to grow during the past six months and its digital channels were utilised by 1.6 million additional clients. Looking ahead, it said that it plans to enhance client experience in all areas of the business.

“Our innovation capability will be enhanced by the recruitment of approximately 300 employees in areas such as business science, artificial intelligence, data engineering and computer analysis during the next few months. Digitalisation is a key strategic objective,” the group said.

“Our aim is to become the number one digital bank for both retail bank and business bank clients. We have established a dedicated and focused team to provide a digital ecosystem of solutions that will enable efficient commerce between businesses and individuals. Growing our QR offering into the leading payment method is a focus area.”

“We bolstered our digital offering while staying true to our fundamentals of simplicity, affordability and personalised service. This combined with our continued commitment to our branch network and call centres, resonated with South Africans from all walks of life.

“We’re seeing rapid growth in South Africa’s digital economy as clients also adopt contactless card payments and online shopping,” said Gerrie Fourie, CEO of Capitec Bank.

“This period is also a testament to Capitec’s ability to adapt rapidly to prevailing circumstances. Following the civil unrest that resulted in some of our branches in KwaZulu-Natal and Gauteng being temporarily unavailable, the services offered by our call centres were bolstered by our multi-skilled employees from the affected branches. We strengthened the capacity of our online lending team and our clients can now apply for credit cards and access facilities without visiting a branch.”

Read: New features coming to Capitec’s banking app

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Capitec reports continued recovery on expanded digital offerings and strong customer growth