Capitec doubles dividend as earnings recover


Capitec doubles dividend as earnings recover


Published Date: 2021-04-14 | Source: Stephen Gunnion | Author: Stephen Gunnion

Capitec doubles dividend as earnings recover

After a tough first half, the bank says earnings recovered in the second six months as it grew customer numbers and its digital offering.

Capitec has more than doubled its full-year dividend following a strong recovery from the worst of last year's Covid-19 lockdown. The bank was aided by strong growth in digital banking as more customers went online to transact.

Releasing results for the year to end-February, the bank claimed to be SA's biggest digital bank after the number of customers using digital banking increased by 28% to 8.6 million. Digital transactions by its customers rose 35% over the year to 1.1 billion, which it said illustrated its ability to scale. In total, customer numbers rose 14% to 15.8 million as it added an average 160,000 new clients a month.

Net transaction fee income increased by 17% over the year despite the impact of the pandemic while retail deposits grew 18% to R107-billion. Income from its funeral plans rose 57% to R650-million as it grew the number of active policies to 1.2 million. Its gross loan book declined by 2% to R64-billion after it tightened credit granting criteria during the lockdown and offered some of its retail credit clients payment relief totalling R7.5-billion during the 3.5 month of hard lockdown. Its net credit impairment charge for the year rose 69% to R7.36-billion and its credit loss ratio, which measures the credit impairment charge to average gross loans and advances, increased to 10.4% from 6.3% a year earlier.

Operating profit before tax fell 31% to R5.59-billion. Earnings per share (EPS) came in 29% lower at R38.50. After tumbling 78% in the first six months of its financial year, headline earnings earnings improved 18% in the second half, reducing the full-year decline to 27% to R39.66. It declared a total dividend of R16 per share. It didn't pay a final dividend the previous year or an interim dividend this year due to the Reserve Bank's guidance for banks to preserve capital.

Capitec said it planned to upgrade branches in the year ahead to offer more self-service functions as customers shifted towards digital banking. It was also developing digital capabilities at Capitec Business Bank, previously Mercantile Bank, which made a small loss of R1.5-million for the year. The business bank client base grew by 33% to 90,534.

After rising 2.3% in early trade, Capitec's shares turned around to close 0.4% lower at R1,385 yesterday.


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