Capitec leads the bank pack with stellar earnings and nearly 190,000 new clients per month
Capitec Bank posted stellar results for the year to February 2022, with an 84% growth in group headline earnings to R8.4-billion representing a compound annual growth rate of 23% since 2012.
Gerrie Fourie, Capitec’s chief executive officer, says management saw the challenges of the last year as an opportunity for adaptation.
“The bank’s digital solutions have been crucial in enabling this growth. In addition, our staff have been instrumental in this adoption and have excelled in this new, hybrid, digital world,” he says.
The bank’s job creation successes are a story in and of themselves, more so in a country which currently has an unemployment rate of 35.5%. Since 1 March 2001, just over 20 years ago when Capitec had 25,000 loan clients, 55 branches and 500 employees, this “original banking sector disruptor” has grown in leaps and bounds to boast of 18.1 million clients, 850 branches and almost 15,000 employees today.
In the last year alone, Capitec embarked on a strong recruitment drive for technology and data skills in a bid to accelerate its digital transformation even further.
During the past year, 1,367 new employees were hired with 26% of new hires fulfilling critical IT and data business development needs.
Despite the pandemic, the business has already started recruiting to fill 500 new positions this year. However, Fourie says this will largely be in the IT and data science spaces, while another 500 positions for consultants and call centre agents will need to be filled.
“When it comes to the skill set we are looking for, I would say candidates who are strong in maths, accounting and IT. We already have about 80 engineers and about 30 to 40 of the 1,000 new positions mentioned will be engineers with a focus on data science, technology and coding,” Fourie says.
The bank’s growth story translates to nearly 190,000 new clients per month. Active digital banking clients (app, internet banking and USSD) grew by 17% to 10.1 million, of which 6.6 million clients use the banking app, up 25% since 2021.
Mercantile Bank, a division of Capitec, also reported a growing client base, with its total active business clients increasing by 10% to 125,270.
As with other more recent disruptors such as TymeBank and Bank Zero, Capitec’s concentration on digital innovation has paid off with a 27% growth in digital transaction volumes. Clients’ transactional behaviour shifted away from cash towards digital channels, accelerated by the pandemic.
Capitec enhanced payment solutions such as Scan to Pay which allows clients to scan any major QR code in SA and pay from the app. It also introduced an innovation called Pay Me, which generates a personalised QR code for every client on their app or WhatsApp, allowing them to receive immediate payments from other Capitec clients at no cost.
The capability to join the bank remotely by downloading the app and taking a selfie was further enhanced with the free option to have a card delivered to your home.
“The online application for home loans was further simplified to a four-step digital, paperless process. Other client favourites included immediate payments at a cost of R7.50, compared with traditional banks charging up to R50,” Fourie says.
For the current year, lending income represented 53% of the total income from operations. Lower interest rates, the composition of loan sales and the annuity impact of lower loan sales during 2021, led to a slight decrease of 1% in interest income on loans. However, Fourie is upbeat on the lending market outlook, saying it needs to be viewed in perspective.
“First, pre-Covid 19, the South African Reserve Bank dropped rates by 2.75% and rates have now gone up by 0.5%. The expectation for the rest of the year is a maximum increase of 1% more, so then you have a 1.5% increase compared with a drop of 2.75%.
“Second, if you look at the different sectors, they are starting to perform at the same levels or even better than they did pre-Covid, so that means clients can handle these interest rates.
“It’s all about perspective on where we were and where we are now. If you look at credit, we take the affordability of a client in consideration and have certain buffers we build in to make certain clients can handle interest rate shocks of 2% to 4%, so that’s all part of our credit flexibility and assessments.
“Last year alone, we proved that our loans model can be quite agile, with 434 adjustments to our credit policy,” he says.
Total gross loans and advances increased by 12% to R84.1-billion from R75-billion last year and R75.8-billion in 2021. The business bank’s gross loan book increased to R12.9-billion from R11-billion in 2021.
Total retail loan sales and disbursements increased by 50% from R29.3-billion to R43.9-billion. This increase in loan sales and disbursements was facilitated by the careful monitoring of credit granting criteria. These criteria were adjusted at an industry and employer level, within credit risk appetite, as economic conditions changed during the year.
Shareholders are likely smiling all the way to the bank with the declaration of a final dividend of R24.40 and a special dividend of R15. If you add that to the interim dividend of R12 a share, shareholders received a total dividend payout of R51.40 per share.
To put that in perspective, if you held 500 Capitec shares this year, your dividend payout alone would have been R6,039.40. To say nothing of a share price that seems to have only gone upwards since the company launched, rocketing from an initial listing of R1.10 a share to a whopping R2,274.60 today.
Having entered the market as the first serious challenger to the big four banks, Capitec seems to have hit on a winning formula and is leading the game on both traditional and digital banking. BM/DM
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