Banking group Capitec has recorded a significant jump in headline earnings for the year ended February 2023.
Headline earnings were up 15% to R9.7 billion from R8.4 billion the year before.
Income from operations grew 12% to R30.3 billion for the period, with net income up only marginally (2%) to R24 billion. The main contributor to the reduction in income came from credit impairments, which grew 80% to R6.3 billion.
Headline earnings per share were at 8,420 cents, compared to 7,300 cents in 2022.
The group declared a final dividend of 2,800 cents, taking the total dividend for the year to 4,200 – also up 15% in line with the group’s growth.
The bank also saw a significant jump in its client base, recording 20.1 million customers at the end of February 2023. This means that around one-third of the South African population (2022 est: 60.6 million) now banks with Capitec in some form.
Capitec noted that the 2023 financial year, which encompassed most of 2022, saw South Africa recover from the Covid-19 pandemic, but then subsequently suffer fallout from the global turmoil created by Russia’s invasion of Ukraine.
“The economy was boosted by higher commodity prices which contributed to an improvement in the country’s fiscal position, but overshadowed the underlying factors that continued to impede the country’s ability to reach its potential in terms of sustainable growth for the long term.
“The invasion resulted in significant increases in both energy and food prices and created supply chain disruptions. The economic stimulus packages implemented by many countries, as well as the lengthy Covid-19 lockdown in China during 2022, all contributed to high global inflation rates and the subsequent risk of increased interest rates and a global recession,” it said.
These geopolitical events resulted in high local inflation rates which, together with the continued uncertainty around load shedding and lower business confidence, led to greater financial constraints on consumers and businesses in South Africa.
The impact of these events was evident on both South African consumers and Capitec’s business operations, where the former pushed towards increased lending to help weather the storms of the rising cost of living.
As a result, credit impairments rose significantly as borrowers increasingly struggled to pay back these loans.
Capitec said that the growth of its credit impairment charge needs to be understood in the context of the last four years, where things went from ‘normal’ (2020) to heavily disrupted by the pandemic (2021), to some recovery (2022), to again being disrupted by the Russian war in Ukraine (2023).
The group’s CET1 ratio of 34% (2022: 35%) and CAR ratio of 34% (2022: 36%) are well above the group’s board-approved and regulatory requirements.
“As such, Capitec continues to be well-capitalised and positioned for future growth opportunities,” it said.
The group said that it will continue building its business banking capabilities in the coming year, rebranding its business division to Capitec Business, which will have five subdivisions.
“Existing clients are currently being migrated onto our new platform and portal in anticipation of the full relaunch in the next few months. We have spent a significant amount of time, energy and resources to ensure Capitec Business is fully integrated into the group,” it said.
It is also expanding it operations in financial services, with Capitec Life becoming a fully-licenced insurer in October 2022. The group is currently in the process of migrating clients, and expects this to be completed before the end of the 2024 financial year.
The group said it will also be expanding its value-added services and digital payment services.
“The availability of best-in-class technology is integral to our objective of providing our clients with an ecosystem of products and services that address their financial needs. Our migration to Amazon Web Services (AWS) is nearing completion. The data insights and efficiency that will be generated as a result of using AWS will enhance our understanding of our clients’ needs,” it said.
The bank is also partnering with technology firms such as Salesforce, Airship and nCino, which “will play a vital part in the execution of the group’s objectives for the future”.