Capitec closes in on 10 million customers


Capitec closes in on 10 million customers

Published Date: 2018-03-28 | Source: Stephen Gunnion | Author: Stephen Gunnion

Capitec closes in on 10 million customers

The bank plans to introduce funeral plans underwritten by Sanlam as it heads for 10 million active clients

Capitec made no mention of its nemesis Viceroy Research in its annual results announcement yesterday - but it will be hoping that its bad debts and provision for arrears will put to rest issues raised by Viceroy in a report earlier this year.

The banks share price fell 21% in two days following the release of Viceroy's report as it prepared its defence against the research firm's allegations. Viceroy also accused Capitec of overstating its loan book by R11 billion and converting existing unpaid loans into new loans, charging initiation fees in the process.

However, Capitec says it's taken a conservative approach to granting credit, which has resulted in a better-performing loan book. Loan revenue increased by 6% in the year to end February, in line with loan book growth. Arrears as a percentage of gross loans and advances decreased from 6.3% to 5.7%, including all loans that are not up to date. Arrears and up-to-date loans that were rescheduled from arrears decreased from 9.8% to 8.3%. Provisions for doubtful debts as a percentage of gross loans and advances fell from 13.1% to 12.2%. Some of the growth in its loan book came from its credit card, which has now been operating for just over a year and now represents 4.2% of the total book.

Customer numbers are also rising, resulting in more deposits. This has reduced its need to raise capital markets debt as it uses these deposits to help fund loans. Last year, the bank decreased wholesale funding form R7.5 billion to R6.2 billion due to strong retail fixed deposits and earnings growth, accompanied by moderate growth in its loan book. It grew its active client base to 9.9 million. Of those, only 1.4 million have loans with the bank.

For the year, interest income rose 4% over the year to R15.5 billion and net loan fee income was 179% higher at R1.38 billion. Net transaction fee income jumped 31% to R5.1 billion and now covers 81% of its operating costs. It plans to cover all operating costs with net transaction fees by 2022. It said its focus on self-service banking, which has experienced a big increase in transaction volumes, boosted fees. About 74% of all possible transactions were performed on self-service channels, compared to 62% last year. Over three million clients have activated its banking app, with the app facilitating more than 20-million transactions last month alone.

Headline earnings rose 18% to R4.46 billion, resulting in headline earnings per share of 3 858c, slightly below forecasts of 3 883c by Thomson Reuters' SmartEstimates. It's lifted its total dividend by 18% to 1 470c per share and has reported a return on equity of 27%.

Capitec plans to introduce a funeral plan from May, underwritten by Sanlam, as it expands its insurance offering to customers.

Its shares rose as much as 3.2% before closing 0.7% higher at R900 yesterday.

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