{"id":782332,"date":"2024-07-12T16:03:56","date_gmt":"2024-07-12T14:03:56","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=782332"},"modified":"2024-07-12T16:04:02","modified_gmt":"2024-07-12T14:04:02","slug":"capitec-closes-the-taps-and-scores-big","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/banking\/782332\/capitec-closes-the-taps-and-scores-big\/","title":{"rendered":"Capitec closes the taps – and scores big"},"content":{"rendered":"\n

Capitec is expecting a massive jump in profits as it sees an improvement in credit impairments and its credit loss ratio. <\/p>\n\n\n\n

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) <\/p>\n\n\n\n

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.) <\/p>\n\n\n\n

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. <\/p>\n\n\n\n

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. <\/p>\n\n\n\n

This contributed to a 22% year-on-year growth in earnings and headline earnings for the second half of H2 2024.<\/p>\n\n\n\n

“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.” <\/p>\n\n\n\n

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. <\/p>\n\n\n\n

Before 1 May 2024, 40.66% of Avafin’s profit was included as Capitec’s share of income from an associate. <\/p>\n\n\n\n

Capitec noted that its results for the six months to 31 August 2024 will be published on roughly 1 October 2024.<\/p>\n\n\n\n

Still opportunity <\/strong><\/p>\n\n\n\n

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. <\/p>\n\n\n\n

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.<\/p>\n\n\n\n

Capitec has responded to the challenging economic environment in South Africa in 2023 by aggressively reducing its exposure to<\/p>\n\n\n\n

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.<\/p>\n\n\n\n

Capitec utilised stricter affordably rules with its lending, including 141 behaviour risk changes.<\/p>\n\n\n\n

That said, Capitec CEO Gerrie Fourie believes the group may have been too conservative with this move and is looking to open up \u201ccertain pockets\u201d of lending, such as tourism. <\/p>\n\n\n

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Source: Capitec<\/figcaption><\/figure><\/div>\n\n\n

The company had a strong performance in FY24, with its heading earnings increasing by 16% to R10.5 billion. <\/p>\n\n\n\n

Amidst this strong performance, the group was the best-performing share on the JSE year-to-year in June, seeing close to 70% growth. <\/p>\n\n\n\n

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Capitec on top in South Africa<\/a><\/blockquote>