Capitec lifted headline earnings 15% to R9.7 billion in its 2023 financial year and raised the dividend by the same percentage to R42 a share as the digital bank crossed the 20 million client mark for the first time, or nearly a third of the local population.
Despite good earnings growth, the share price fell 5.39% to R1654.72 on the JSE by early yesterday afternoon.
ThePassiveIncomeGuy (@hazelwood_dave) commented on Twitter: “Capitec.Their non-performing loans has shown a worrying increase. Capitec management says this is worse than they expected. Bear in mind the full effects of higher interest rates, inflation and load shedding will only show this year.”
Wayne McCurrie (@wayneMcCurrie) tweeted: “Capitec results. Earnings up 15%. Disappointing at a 22 P/E ratio. Share down 5%.”
Operating profit before tax increased 12% to R12.2bn and headline earnings a share rose 15% to 8 420 cents. The number of clients increased 11% to 20.1 million, with 11.4 million digital clients.
CEO Gerrie Fourie said in a telephone interview yesterday that while reaching more than 20 million clients was an achievement in itself in a population of 58 million, with the number rising at some 180 000 per month, the bank’s aim was how best to add value to those clients.
The bank’s data showed its clients, on average, spent 8% more on groceries and 16% more on fuel in the 2023 financial year compared to the previous year.
The increase in spending on groceries was tempered by the effect of clients trading down to buy less or to buy more affordable brands.
The average monthly spend on a home loan increased 20% and on vehicle finance by 15% while income only grew by an average 4% as compared to 10% for the comparative period, leaving people strapped for cash.
Capitec’s retail bank and insurance business's profit increased by 12% to R9.3bn. Although from a smaller base, the business bank's profits surged by 124% to R389m.
“South Africa has over 2.5 million SMEs that contribute around 40% to the GDP (gross domestic product). We believe these are often underserved and burdened with expensive and complex banking solutions. Offering simple, transparent and more affordable banking to these businesses can unlock economic potential,” Fourie said.
Operating expenses fell 5%, taking into account higher than normal bonuses and an empowerment scheme the previous financial year, including additional costs of R200m for load shedding-related expenses, said Fourie.
He said their branches were operating through load shedding on generators and lithium batteries, but a decision had been taken to end the use of generators in favour of lithium batteries for hygienic and other reasons.
He said the bank suffered a three-day app and branch system outage in August due to “database structural problems, but we are in a much better space now”. He said their data systems process some 4000 to 5000 transactions per second.
Fourie said they spent R1.4bn on projects, including the building and launching of Capitec Business, the formation of an insurance business, Capitec Connect’s launch, expanding value-added services, and improvement of the data and technology infrastructure and cloud services. The bank gave more than R800m to clients in fee savings and Live Better rewards, said Fourie.
During the year integrations were launched with several digital payment solutions such as Apple Pay, Samsung Pay and Google Pay with zero transaction fees for local card purchases. Capitec also introduced its own secure online payment solution tool, Capitec Pay, which protects users from screen scraping.
Net transaction and commission income grew to R11.5bn in the year, while funeral plan income increased 58% to R1.4bn. An increase in operations income to R30.3bn was offset by an increase of 80% in the credit impairment charge, due mainly to the deteriorating economy and the impact of higher inflation on its clients.
Net lending, investment, and insurance income increased by 14% to R17.2bn, driven by growth in net loans and advances, interest income and credit life insurance income, and the impact of repo rate increases on interest income and expenses.
“Our long-term strategy is to move clients away from cash transacting. The Live Better programme... motivates positive banking behaviour and provides rich data based on which we can offer our clients better solutions and more value. We also bring clients value-added services and world-class digital payment solutions,” said Fourie.
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