Capitec is booming

Capitec is confident that it will see a substantial boost in earnings, with the group benefitting from an improvement in credit losses.

In a trading statement for the period ended 31 August 2024 (H1 25), Capitec’s board advised that a reasonable degree of certainty exists that:

• Group Headline Earnings Per Share will increase by 5,497 cents and 5,579 cents per share, representing an increase of between 35% and 37% compared to the 4,072 cents per share for the comparative six months ended 31 August 2023.

• Group earnings per share will be between 5,492 cents and 5,573 cents per share, representing an increase of between 35% and 37% compared to the 4,068 cents per share for the comparative six months ended 31 August 2023.

The group said that the major drivers of the increases were consistent with those mentioned in a trading statement issued on 12 July 2024.

In the previous update, the group said that high credit impairment was a main feature in H1 2023 due to elevated inflation, interest rates, a challenging economic climate, and load shedding, which led to weak single-digit earnings growth for the period.

However, in the six months ended 29 February 2024 (H2 24), the credit impairment charge and credit loss ratios (CLRs) improved after the bank tightened its lending criteria.

This was a primary factor in the 22% year-on-year growth in earnings and headline earnings for the second half of H2 2024.

Thus, the earnings and headline earnings during the second half of FY25 will be compared against a far higher base.

“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,” said Capitec in its previous update.

Moreover, since 1 May 2024, Capitec increased its shareholding in international consumer lending group Avafin to 97.075%, and Avafin’s profit for H1 25 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 said its interim results for the six months ending 31 August 2024 will be published on roughly 1 October 2024.

Business Plan

Capitec believes it is no longer simply a bank but a fully-fledged financial powerhouse in South Africa, with it set to bring its “disruptive” business model seen in the retail banking sector to the business banking and insurance industries.

For Capitec Business, the group aims to bring the same simplicity and low-fee banking services it has offered retail clients for years to the business sector.

When it comes to insurance, the group said that it has the huge advantage of having a ‘captive audience’ of roughly 23 million potential clients and a plethora of data on how they transact, which gives the group insights into how to structure its products.

Capitec offers life and credit cover, with the former launching in June and having a better-than-expected take-up.

That said, the group’s expansion is not limited to business banking and insurance, as it sees huge potential in the value-add segment.

This includes partnerships with Cell C to launch Capitec Connect and a recently launched tie-up with Showmax, with a similar partnership with DStv on the way.

Read: How much you would have if you invested R1,000 in Absa, Nedbank, Standard Bank and more at the start of 2024