The country’s leading retail bank has once again ensured a solid set of financial year end results, driven by its simplified and transparent banking solution delivered through innovative technologies.
The bank’s offer, built on its commitment to making banking affordable, easy to access and delivered through a personalised experience, continues to resonate with clients. Their client-centric approach remains instrumental in pioneering banking and building a strong, sustainable business. This is evident in the fact that 500 000 new clients joined Capitec in January and February combined.
Both headline earnings per share and total dividend per share were up by 19% respectively at 4 577 cents per share (2018: 3 858 cents per share) and 1 750 cents per share (2018: 1 470 cents per share).
Other key indicators highlighted the bank’s positive trajectory:
- Headline earnings up by 19% to R5.3 billion, driven by strong client growth, move to digital banking and solid credit performance
- Active client base grew by 15% to 11.4 million clients
- 2.2 million clients actively use the Capitec banking app (up by 47%)
- Net transaction fee income (non-lending) increased by 26% to R6.5 billion
- An average of 14 000 new credit card clients signed up every month
- R71 billion in retail deposits (up by 23%)
- Clients earned R3.9 billion in interest on retail call, fixed deposits and credit card accounts
Gerrie Fourie, CEO of Capitec Bank says that as the bank enters its 19th year of business, it remains committed to the 4 fundamentals on which the bank was built and which made Capitec so successful.
“Simplicity permeates the way we design our banking solutions, pricing and digital services, as this puts our clients in control of their money. We have also increased our focus on delivering solutions that continue to reduce the cost of banking. These savings are passed on to our clients to make their banking more affordable. By reducing our digital banking fees from 1 March, we’re giving back R360 million to our clients over the next year.”
“We also remain focussed on accessibility and now have 840 branches with extended trading hours (14 are new), more than 300 Sunday banking branches and over 5 000 ATMs across the country. Meanwhile, our digital channels experienced significant growth with more than 5.2 million of our clients now using our digital banking platforms for money management from anywhere, at any time. This probably makes us one of the biggest digital banks in terms of numbers in SA.”
“These fundamentals, combined with our ability to remain agile and adapt to new clients, new markets and new technology, will ensure that Capitec’s competitive advantage is retained today and in the future.”
The Capitec funeral plan
The Capitec Funeral Plan, underwritten by Centriq Life Insurance Company Limited, was launched to the market in May 2018, and at financial year end over 360 000 policies were active. The offer in this sector once again disrupted the market with a very simple and more affordable value proposition that clients can access and manage in their branch network and on their banking app.
Fourie added that their credit business performed very well against the background of a lacklustre economy and increased credit risk-taking in the unsecure credit market. Their credit optimisation strategies resulted in a decrease in shorter-term credit products and an increase in longer-term loans. The bank however grew and optimised its book through a focus on client quality, protecting the book from clients prone to go under debt review.
“We encourage our clients to take credit for the right reasons and to match the term of the loan that they take to the purpose for which they require the loan. Consequently, 56% of the value of loans were at shorter terms or lower values, compared to what the client qualified for.”
“It is our strategy to drive the price of unsecured lending lower. Those clients with positive credit behaviour receive better interest rates; on average 17.5% and in the best case as low as 12.9%. As a result we are saving clients R500 million.“
Fourie said Capitec’s credit card offer has been positively received by the market who responded well to its flat administration fee of R35 per month and interest rate as low as prime.
With an average of 14 000 new credit card clients per month, disbursements increased by 57% to R6.2 billion. At 28 February 2019, the gross credit card book was R3.6 billion and comprises approximately 3% of the total South African retail credit card market. Credit cards represent 26% of all new Capitec credit.
On questions about the impact of the economy on the business, Fourie responded with conviction: “We are serious about South Africa and believe in our collective growth potential. I believe it is time for private sector, regulators and government to adopt a radical change in perspective. We should focus on working together to remove obstacles for small businesses and entrepreneurs, to develop talent from the ground up, and to drive long-term radical economic growth.”
On new digital-only competitors, Fourie said that the South African market in general still needs and wants to interact with people, especially on more complex financial matters. Capitec believes in an omni-channel strategy that consists of a combination of digital banking, a strong branch network with superior service, and the ability to communicate with clients to help them manage their banking better. “We still have over 6 million clients visiting our branches every month.”
The year ahead
Commenting on the year ahead, Fourie concluded that Capitec remains steadfast and will focus on business efficiencies, and expanding its digital products and capabilities. He is also very positive about the prospective Mercantile acquisition that is currently awaiting regulatory approval, and which should be concluded in the next couple of months.