Capitec closes the taps – and scores big
Capitec is expecting a massive jump in profits as it sees an improvement in credit impairments and its credit loss ratio.
In a trading statement for the six months ended 31 August 2024 (H1 2024), the group said that there is a reasonable chance that the group headline earnings will increase by between 25% and 35% to 5,090 cents and 5,497 cents per share (H1 2023: 4,072 cents)
Group earnings per share are also expected to increase between 25% and 35% to 5,085 cents and 5,492 cents per share (H1 2023: 4,068 cents per share.)
The group said that high credit impairment charges characterised H1 2023 due to elevated inflation, high interest rates, a challenging economic climate and load shedding, leading to a subdued single-digit growth in earnings for the period.
In the six months ended 29 February 2024, both the credit impairment charge and credit loss ratios (CLRs) improved, with the bank tightening its lending criteria.
This contributed to a 22% year-on-year growth in earnings and headline earnings for the second half of H2 2024.
“Earnings and headline earnings during the second half of the 2025 financial year will, therefore, be compared against a higher base,” said the group.
“The lower CLRs have persisted into the 2025 financial year, and the net transaction and commission income, including value-added services, has continued to contribute to strong growth in non-lending income.”
In addition, effective 1 May 2024, Capitec increased its shareholding in international consumer lending group Avafin to 97.075%, and its profit for the period was included in the group’s income statement.
Before 1 May 2024, 40.66% of Avafin’s profit was included as Capitec’s share of income from an associate.
Capitec noted that its results for the six months to 31 August 2024 will be published on roughly 1 October 2024.
Still opportunity
Following the release of the group’s results for 29 February 2024 (FY24), Capitec admitted to possibly being too aggressive in cutting back its lending.
The group said that it expected some relief for consumers as load shedding eases and food inflation cools but remained cautious about extending credit in its core unsecured retail segment.
Capitec has responded to the challenging economic environment in South Africa in 2023 by aggressively reducing its exposure to
Although data from the National Credit Regulator showed a 9% year-on-year cut in the quarterly unsecured credit sales in Q3 2023, Capitec responded with a 32% decrease.
Capitec utilised stricter affordably rules with its lending, including 141 behaviour risk changes.
That said, Capitec CEO Gerrie Fourie believes the group may have been too conservative with this move and is looking to open up “certain pockets” of lending, such as tourism.
The company had a strong performance in FY24, with its heading earnings increasing by 16% to R10.5 billion.
Amidst this strong performance, the group was the best-performing share on the JSE year-to-year in June, seeing close to 70% growth.
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