South Africa’s largest bank by customer numbers, Capitec, now boasts more than 20 million clients and is making strides with its Capitec Connect offering, but a tough economic environment has seen credit impairments soar by 80% to R6.3-billion. 

Chief executive Gerrie Fourie, says the increase in credit impairments is due mainly to the deteriorating economy and the impact of higher inflation on clients. Net loans and advances grew by 17% to R78.2-billion, while total deposits and wholesale funding stood at R146.5-billion for the year. 

“We are seeing consumers taking pressure with expenses going up and incomes coming down. I think what I want to say is, don’t keep up with the Joneses, live within your means,” he cautions.  

Over the last year, Capitec’s credit limit decreases increased from R1.3-billion to R3.5-billion. 

“So, if a client has a credit line of R100,000 and he’s not performing well, we will cut that limit to R80,000 or even right down to zero. Of that R3.5-billion decrease, R2.4-billion was cut down to zero, and that shows you how strict we have been. In March, we made a call to discontinue short-term access facilities and migrate to term loans,” he says.

The bank currently has an approval rate of 45% on loans, its lowest level ever. However, credit applications are soaring, with about four million applications compared to just over 2.8 million credit applications in February 2021. 

Fourie reports that 20% of clients exit debt review within a year, having paid R9,000 upfront to the debt counsellor and with no change in their indebted status. 

“Debt review has been positioned in the market as a solution to financial problems, and there is a certain portion of clients who need it because they are in a bad financial space. However, there’s another portion of clients who really should go to the bank to reschedule their debt,” he says.

There is some good news with the bank’s Live Better rewards programme, which has 13.4 million participants, putting more than R800-million back into consumer pockets in the form of fee savings and rewards. 

Capitec has invested R1.4-billion in strategic initiatives including Capitec Business, the formation of an insurance business after being granted a long-term insurance licence, the launch of Capitec Connect, expansion of value-added services, and the continuous improvement of its data and technology infrastructure and cloud services. Of the total investment, about 70% was accounted for as operating expenses.  

Capitec Connect is growing well, with more than 500,000 active SIM cards, and is disrupting the prepaid market with low-cost data that never expires. Capitec Business will offer new clients the ability to open an account in minutes and qualify for a scored overdraft immediately, or structured finance within a few days. Additional services include merchant solutions, rental finance options, payment services and forex.  

During the 2023 financial year, headline earnings grew by 15% to R9.7-billion, with the retail bank and insurance business’s profit not far behind, growing by 12% to R9.3-billion. 

Lending, investment, and insurance income increased by 14% to R17.2-billion, 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. DM/BM