Huge jump in profit for Capitec – which counts over a third of South Africans as customers
Capitec has recorded an increase in its profits, despite being the latest bank to see an increase in credit impairments.
In its financial results for the year ended 29 February 2024 (FY24), Capitec said it was able to grow its active client base to 22.0 million (2023: 19.9 million).
The active client base comprised 36% of South Africa’s total population (FY23:33%)
However, when only considering fully banked clients, who perform more transactions and thus contribute more to income, this number increased from 6.9 million in FY23 to 7.8 million in FY24.
Looking at the group’s financials, it said that its strategy to diversify its income streams and grow quality clients produced double-digit growth.
Non-interest income made a major contribution to the 16% growth in headline earnings (R10.5 billion) in FY24 and increased to 72% of income from operations after credit impairments (2023: 66%).
Net interest income grew by 13% to R14.9 billion.
The growth is attributable to the 425 basis points increase in the repo rate in the 2023 and 2024 financial years, an increase in the proportion of the gross loan book that comprised variable interest rate-linked balances, and the growth in the cash and financial investment portfolio.
However, the net credit impairment charge on gross loans and advances increased by 37% to R8.4 billion (2023: R6.1 billion).
Like many other banks in South Africa, Capitec saw an annualised increase in its credit loss rate from 8.0% in FY23 to 10.1% in FY24.
However, the H1 2024 annualised credit loss ratio of 11.0% improved to 9.2% in H2 2024.
“For the past two years, we have been building a higher-quality loan book that will perform better than the older tranches of businesses that have migrated through stages 2 and 3 and into default during the 2023 and 2024 financial years,” said Capitec.
“In November 2021, we relaxed credit granting criteria for certain pockets of clients that had begun showing recovery after the COVID-19 pandemic. This led to book growth, particularly in the access facility book.
“Due to the impact of the negative economic conditions after February 2022, when the war in Ukraine began, we started tightening credit granting criteria in June 2022 and continued to do so for the remainder of the 2023 financial year.”
The group’s credit granting criteria for all retail products were tightened further during FY24, with income-to-instalment criteria made much stricter and the average term offered decreased.
Despite the rise in credit impairments, headline earnings grew to R10.6 billion from R9.2 billion, the restated figure.
Headline earnings for the six months ended H2 2024 grew by 25% to R5.9 billion, compared to R4.7 billion for the six months ended H1 2024.
Net transaction and commission income grew 29% year-on-year to R14.8 billion (2023: R11.5 billion) and contributed R675 million after tax to the R1.2 billion increase in headline earnings for H2 2024 compared to H1 2024.
Income from Value-Added-Services added 52% of the increase in group increase in group transaction and commission income after tax from H1 2024 to H2 2024 as these services were rapidly adopted by our clients.
“Digital and POS transactions grew by 27% due to client behaviour that continued to shift away from branch and cash transacting to the digital and card-based payment channels,” said the group.
The net insurance result grew 18% to R3.2 billion from R2.7 billion in FY23.
The board approved a final gross dividend of 3,345 cents per ordinary share (2023: 2,800 cents), bringing the total dividend for the 2024 financial year to 4,875 cents per share (2023: 4,200 cents).
The group’s key financials can be found below:
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