Capitec closes the taps – and the profits still flow
Capitec’s earnings jumped massively in the six months ending 31 August 2024, and the group’s credit impairments decreased substantially thanks to its credit-tightening strategy.
For the interim period (1H25), Capitec’s headline earnings increased by 36% to R6.4 billion.
“Our strong results demonstrate the strength of our diversified business model. We have continued to invest significantly since 2020, despite the tough economy, and have developed solutions that meet the needs of our clients,” said Capitec CEO Gerrie Fourie.
“Political stability, including positive sentiment about the Government of National Unity, normalised inflation and reduced interest rates, promote economic confidence and sets the scene for future growth.”
“We will continue to invest and leverage our scale to enhance our solutions and unlock value for our clients beyond banking.”
The bank now has 23 million clients and said that its strategic focus and continued investment in digital transformation, product diversification, and client-centric solutions have yielded good results since 2020.
Net transition and commission income rose 19% to R6.9 billion (August 2023: R5.8 billion), while value-added services and Capitec Connect revenue grew by 79% to R2.0 billion (August 2023: R1.1 billion).
Banking app clients increased by 21% to 12.4 million (August 2023: 10.3 million)
The group’s return on shareholder equity also increased to 29% (August 2023: 24%).
The group added that its insurance business has continued to see robust growth, with the net insurance result increasing by 14% to R727 million, adding 11% to group headline earnings.
The bank’s funeral book also grew by 20% to 3 million active policies, covering 13.6 million lives.
“We launched our affordable and transparent life cover solution in June 2024. By 31 August, the product had already accumulated 38,526 active policies with a sum assured of R22 billion, contributing R8 million to the insurance results,” added Fourie.
A troubled spot on the balance sheet, Capitec Business’s headline earnings decreased by 12% to R214 million. Capitec said this was due to strategic decisions, such as deliberate fee reductions and changes to the merchant e-commerce strategy.
Capitec Business saw strong growth in its client base, with its active clients jumping by 30% and active merchants by 31%.
“Our business banking strategy is focused on long-term growth and market expansion. By aligning our fees with retail banking and adjusting our merchant services pricing, we’re positioning ourselves to serve SMEs and tap into the underbanked emerging market,” said Fourie.
Inb line with its earnings growth, the group boosted its interim dividend by 36% to 2,085 cents per share. The key financial results can be found below:
| Financials | H1 2025 | H1 2025 | % Change |
| Headline Earnings | R4.7 billion | R6.4 billion | +36% |
| VAS and Capitec Connect | R1.1 billion | R2.0 billion | +79% |
| ROE | 24% | 29% | – |
| Annualised credit loss ratio | 9.6% | 7.6% | – |
| Basic headline earnings per share (cents) | 4 072 cents | 5 544 cents | +36% |
| Interim dividend per ordinary share | 1 530 cents | 2 085 cents | +36% |
Credit improvement
The group noted that its focus on responsible lending has yielded positive results. Following tough economic conditions and pressure on households in the 2023 and 2024 financial years, the group tightened its lending criteria and closed the taps on credit.
Thanks to this strategy, when excluding AvaFin (an international online consumer lending group), the group’s credit impairments decreased by 22% (R1.0 billion) over the 1H25.
The group’s annualised credit loss ratio (excluding AvaFin) was also reduced from 9.6% to 7.0%. (including AvaFin: 7.6%).
Capitec said the improvement is linked to the following:
- The tightening of credit granting criteria during the 2023 and 2024 financial years, which led to a decrease in loan disbursements.
- An improvement in arrears on the loan tranches granted following the tightening of credit granting criteria, which reduced the charge.
- The migration of older tranches of business through the loan book to default (more than three months in arrears, legal statuses, and applications for debt review less than six months ago) increases the charge.
- Refinements to the estimation of the write-off point and a move to through-the-cycle provision models.
- A reduction in the forward-looking macroeconomic provision due to an improved outlook on the economy.
“We’re now well-positioned to continue building a high-quality loan book while carefully and sustainably easing credit granting criteria,” said Capitec.
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