Capitec Bank Sustains Record Growth

Capitec Bank today announced its interim results which recorded headline earnings per share up 53% and headline earnings up 72% from R284-million to R489-million. Shares in issue increased from 84,1-million in August 2010 to 94,6-million in this period due to a rights issue in January 2011. The bank attributed its increase in profits to significant sustained growth in client numbers and the resultant increase in transaction income and income from credit.

 

CEO Riaan Stassen said that the bank was now acquiring in excess of 90 000 new clients per month due to its simplified, low-cost solution to money management. “Our easy-to-use, transparently priced offer is attracting clients of all income brackets and the benefit of internet and cell access has accelerated the acquisition of higher nett-worth clients”.  

 

The bank has over 3,2-million active clients and Stassen was upbeat that this growth rate would be sustained for the foreseeable future. “We see a continued growth of new clients in the credit market although competition from the traditional banks has increased. We also see significant growth of new bank clients as greater insight is gained in the market of the unique benefits of our offer.”

 

Net transaction fee income grew by 54% to R361-million and loan revenue increased by 50% to R2,6-billion on the same period in 2010. Expenses increased by 36% which was primarily due to the on-going expansion of the branch platform. Stassen said, “We are on track to meet our objective of 55 new branches by year-end. We have rolled out 19 to date and plan a further 36 by end February 2012”.

Net loans and advances grew significantly by 85% to R13,4-billion. Stassen stated that the bank’s growth in credit advances was in line with what was generally happening in the market. “The growth in unsecured lending is what we expected after the implementation of the National Credit Act. The Act has formalised the industry and attracted the four traditional banks into the unsecured segment of the market. It further provided for lower pricing, higher loan values and extended terms for clients. All this has made unsecured credit far more accessible and attractive to clients across the income spectrum.”

 

Since the inception of the Act in 2007, the local credit landscape has changed and today unsecured lending is gaining traction by as much as 55% year-on-year (NCR Consumer Credit Report; March 2011). This is one of the fundamental reasons behind the growth of South Africa’s youngest bank.

 

Stassen remarked, “Rapid urbanisation combined with the changes in South Africa’s credit regulation mean that more consumers, including those of a higher income, are attracted to Capitec’s competitively priced unsecured loans offer. Capitec Bank currently represents a 5,3% share of the country’s unsecured and short-term credit book, and only 1,2% of the country’s total credit book. This presents significant opportunity for us to continue to grow.”

 

Stassen stresses however, that while unsecured lending is on the rise, its risk must be managed prudently. “We have not seen a change in the level of debt repayment to income of the clients we have given loans to over the past three years. This is because we analyse the risk profile of every applicant and have a stringent affordability evaluation to minimise over exposure of clients.”

 

Capitec Bank introduced 48-month and 60-month loan products in late 2009 and 2010. “This has contributed significantly to the on-going growth in our loan book. At the same time, we have focused intensely on refining our credit models and are pleased that even though our book has extended significantly, arrears as a percentage of gross loans and advances are down to 4,5% from 6,2% in February 2010. The 86% year-on-year growth in our gross loan book to R14,5-billion was achieved while maintaining the quality of the book.”

 

To date, branch numbers have increased to 474 and employee numbers have increased by 1 625 to  6 351. “The majority of our employees were not previously skilled in any banking operations and often came from the retail sector. We pride ourselves on creating newly skilled bank employees with a retail, service mindset in the finance industry,” Stassen said.

 

He concluded by saying “Capitec’s approach to growth is straightforward: offer a simplified, transparent service that benefits our clients, retain our position as market leader in terms of price for both transaction fees and credit and maintain prudent risk-management practices.”