The bank now serves a third of South Africa’s population

Capitec grows earnings by 15% and continues to invest in the future despite the tough economy.

2023_Financial Results - Website Article - Desktop@2x

Despite the tough economic climate that has placed consumers and businesses under financial pressure, Capitec, South Africa’s best digital bank according to the 2022 SITEisfaction report, demonstrated resilience with 15% growth in headline earnings, bringing the bank’s 2023 financial year earnings to R9.7 billion. The bank remained true to its client-centric focus by putting over R800 million back into the pockets of its clients in the form of fee savings and Live Better rewards while continuing with its strategy to invest R1.4 billion on strategic initiatives with strong prospects.

Gerrie Fourie, Chief Executive Officer at Capitec, says, “We’re motivated by the trust that our clients place in the brand, especially in these tough economic times. We remain focused on our fundamentals and continue to innovate to bring value to our clients and employees. We strongly believe that South Africa is a country of immense potential and growth opportunities and invest in initiatives that will allow us to unlock this potential. Companies should work together with Government and rise above the challenges, remain positive, seek opportunities, and take action.”


Understanding the impact of the economy on clients

With 20.1 million clients at the end of February 2023 (up 11% from the previous period), Capitec has financial data on approximately one-third of the South African population. This data allows the company to understand its clients and the impact that the deteriorating economic conditions are having on South Africans.  The bank reported that its clients, on average, spent 8% more on groceries and 16% more on fuel in the 2023 financial year compared to the previous year. The increase in spending on groceries was tempered by the effect of clients trading down to buy less or buy more affordable brands. The average monthly spend on a home loan increased by 20% and that of vehicle finance grew by 15% while income only grew by an average of 4% as compared to 10% for the comparative period, leaving people strapped for cash.


Relief for clients through fees, interest and rewards

Capitec saved clients over R510 million by reducing SMS fees, introducing free in-app notifications, and keeping digital banking fees the same for the year.  Qualifying Live Better rewards programme participants received cash back on debit and credit card purchases amounting to R256 million. They also received Spend Better cash back rewards in the amount of R106 million from its rewards partners.

The bank paid R1.8 billion in interest (4% on average) on daily balances in transactional accounts while other banks generally pay zero on these accounts.  It further supported communities through financial education, employee volunteerism, donations to partner organisations and enterprise development for small businesses to the value of R177 million.


Investing R1.4 billion in the future

The bank invested approximately R1.4 billion in strategic projects during the 2023 financial year which included the building and launching of 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 clouds services. Of the total investment, approximately 70% was accounted for as operating expenses.  

During the year it launched integrations with several digital payment solutions such as Apple Pay, Samsung Pay and Google Pay with zero transaction fees for local card purchases. Capitec further introduced its own secure online payment solution tool, Capitec Pay, which protects users from screen scraping. Client adoption of these digital solutions has exceeded expectations.

Capitec’s Live Better rewards programme, which encourages clients to Bank Better, Save Better and Spend Better, was awarded the best financial services loyalty programme of the year at the 2022 SA Loyalty Awards, reflecting its significant traction due to its simplicity and commitment to value. As of 28 February 2023, Capitec had 13.4 million Live Better participants.

“Our long-term strategy is to move clients away from cash transacting. The Live Better programme rewards clients for using our products and for paying with their debit and credit cards instead of cash. This motivates positive banking behaviour and provides rich data based on which we can offer our clients better solutions and more value. We also bring clients value-added services and world-class digital payment solutions. Capitec Connect is growing well with over 500 000 active sim cards and is disrupting the pre-paid market with low-cost data that never expires. We’ve also introduced conversational banking on WhatsApp and Facebook messenger, allowing the bank to scale its service model to deliver exceptional client experiences.” said Fourie.


Overview of financial results

During the 2023 financial year, Capitec's headline earnings grew by 15% to R9.7 billion with the retail bank and insurance business's profit increasing by 12% to R9.3 billion. Although from a smaller base, the business bank's profits surged by 124% to R389 million. Net 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.  Operating expenses decreased by 5%.

Net transaction and commission income grew to R11.5 billion, while funeral plan income grew by 58% to R1.4 billion. The group's operations income grew to R30.3 billion and was offset by an increase of 80% in the credit impairment charge due mainly to the deteriorating economy and the impact of higher inflation on its clients. Net loans and advances grew by 17% to R78.2 billion, while total deposits and wholesale funding grew from R134.5 billion to R146.5 billion.

Other indicators highlighting the group’s growth include:

  • Headline earnings grow 15% to R9.7 billion or 8 420 cents per share
  • Active clients increase by 11% to 20.1 million
  • 6 million Savings clients
  • 3 million Credit clients
  • 2 million Funeral Plan clients result in R1.4 billion net income
  • 4 million digital clients with 26% growth in banking app users as they switch from USSD
    • 9 billion card payments up 28%
    • 1 million daily digital payments
  • Live Better Rewards Programme
    • R256 million Bank Better cash backs
    • R106 million Spend Better savings from rewards partners
    • 2 billion Save Better automated savings

Building Capitec Business

The Business bank rebranding to Capitec Business has commenced and 4 of the 5 sub-divisions have already been rebranded. Existing clients are currently being migrated onto a new platform and portal in anticipation of the full relaunch in the next few months. The new business bank will offer new clients the ability to open an account in minutes and qualify for a scored overdraft immediately or structured finance in a couple of days. The new online banking portal and business bank app will allow small businesses to bank from anywhere at any time, while they are supported by relationship managers over live chat or video call in real-time. Additional services include merchant solutions, rental finance options, payment services and forex. 

Fourie comments, “South Africa has over 2.5 million SMEs that contribute around 40% to the GDP. We believe that these small businesses are often underserved and burdened with expensive and complex banking solutions.  Offering simple, transparent and more affordable banking to small and medium businesses can unlock economic potential and create job opportunities in South Africa.”


Gearing for future growth

Capitec's strong performance in the 2023 financial year is a testament to its resilience, agility, and commitment to its clients. Capitec made substantial investments in world-class technology and views it as integral to its objective of providing clients with an ecosystem of products and services that address their financial needs. It is migrating to Amazon Web Services (AWS) and is building its ability to engage its clients across multiple channels in a seamless way with the services offered by global leaders like Salesforce or LivePerson. By focusing on a culture of innovation, the right data strategy and cloud technology, and client insights the bank is well-positioned to continue its upward trajectory in the years to come.  

Fourie concludes, “We are determined to be at the forefront of South Africa's growth story, leveraging our expertise and resources to build a stronger, more prosperous future for our company and the communities we serve. We have evolved over the past 22 years from a lender to a bank to a financial services company, and with advanced data and technology we believe we are well-positioned to leverage our client base and make the most of our opportunities for clients and all stakeholders.”

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