Capitec’s strive for digital financial inclusivity sees a 17% growth in headline earnings

The bank’s earnings soar despite prevailing economic conditions in South Africa.

2023 Capitec Bank Interim results

South Africa, 29 September: Global and domestic uncertainty pose a risk to the economic environment – the impact of the Russia-Ukraine war, persistent loadshedding, the KZN floods and weak business and consumer confidence being key drivers. Despite this, the South African economy demonstrated itself to be resilient. And Capitec, true to its nature, proved no different and yielded a 17% growth in group headline earnings to R4.7 billion from R4.0 billion for the comparative period as a result. The bank attributes this to its client-centricity enabled through technologies that create the future and satisfy client needs while supporting their financial well-being.

On average, over 165 000 new clients joined the bank – ranked number one for outstanding disruption in financial services in this year’s Africa Bank 4.0 Awards – every month for the past year. Its active client base increased by 13% to 19 million and digital banking clients that bank on the app, internet banking and USSD increased by 21% to 10.8 million – now representing 57% of its total active clients.

Gerrie Fourie, chief executive officer at Capitec, says, “The year has not been an easy one for our country and the South African consumer took considerable strain in this period due to inflationary pressure, higher interest rates and record-high fuel prices. Over the last five financial years, we have seen consistent growth despite this, demonstrating the underlying resilience of our country, our business and our clients. This has been a testament to each of our employees, who have never been deterred by opposition and have always seen it as an opportunity to take ownership and deliver solutions.”

Innovative solutions ushered in by the migration of their data platform to the cloud have renewed the bank’s effort to recruit for technology and data skills. During the past year, 1 642 new employees were appointed with 20% of new hires fulfilling critical technology and data roles. Despite the pandemic, the business continues to grow and invest in its people and has already started recruiting top talent to fill nearly 900 new positions by the end of the financial year.

“We are not only passionate about finding such talent, but also about developing our people – over 30% of our vacant positions were filled by internal candidates. We’ve done this through online learning partnerships, Salesforce and AWS amongst others in order to implement world class innovations that make digital banking simple, seamless and accessible,” Fourie continues.

“This has enabled us to build our products to bring about real financial inclusivity enabled through technology, making banking more accessible than ever. Our digital data has enabled us to understand our clients more intimately, creating value for them tailored to their lifestyles where and when they need it.”

South Africa’s coolest bank, according to the Sunday Times NextGen awards, saw an increase in digital innovations that make banking simpler and more intuitive as the key driver, with a 27% increase to 791 million in digital transaction volumes in the last 6 months. Overall, net transaction income grew by 8% to R5.6 billion – driven by the continued shift away from cash to more cost effective digital and point-of-sale transactions.

As a result, Capitec has expanded its payments ecosystem. Samsung Pay and Google Pay were launched for contactless mobile payments to clients with zero fees for local card purchases. Capitec Pay, a secure online payment tool, was introduced to meet clients' need for secure, convenient payment tools that can be used for online transacting.


Earnings breakdown

Operating profit before tax and credit impairments grew by 24% to R8.8 billion, compared to R7.1 billion a year ago. Lending income grew by 13% to R8.0 billion and net credit life insurance and funeral plan income grew by 64% to R1.5 billion.

The net transaction, net foreign currency and funeral plan income to operating expenses ratio improved from 98% in August 2021 to 108% in the current year.

Net credit life insurance income grew by 60% due to growth in active policies and a reduction in claims paid. Funeral plan income grew by 72% based on growth in the active policy book, growth in average premiums and lower claims.

Other indicators highlighting the Group’s diversified growth were:

  • Total transaction volumes increased by 26% as clients migrated away from cash transactions to digital and POS transactions. Banking app volumes increased 51% from 340 million to R515 million and now represent 65% of the total digital transactions (August 2021: 55%)
  • Interest income on investments grew by 31% to R2.5 billion for the 6 months ended August 2022 (August 2021: R1.9 billion) as it was positively impacted by the increase in the repo rate
  • Total retail loan sales and disbursements grew 35% to R26.5 billion (August 2021: R19.7 billion). This resulted in the retail gross loans and advances book increasing by 18% to R77.9 billion (August 2021: R66.1 billion)
  • Retail credit impairments increased by 44% to R2.9 billion (August 2021: R2.0 billion) driven by the increase in loan sales and disbursements, changes in the composition of the loan book as well as a partial release of the forward-looking macroeconomic expected credit loss provision
  • Capitec remained well capitalised with a capital adequacy ratio of 35% and generated a return on equity of 26%


Retail Credit appeal to higher income clients

Credit granted to new clients earning over R50,000 increased by 49% with the highest growth seen in the Access Facility. The Credit Card and Access Facility combined now make up 61% of credit sales and disbursements as the bank continue to grow beyond the term loan market.


Capitec Connect changes the prepaid game

Capitec Connect, a prepaid mobile offering in partnership with Cell C, launched in September 2022. Capitec Connect combines low, flat prepaid rates with bundles that do not expire. Flat rates mean that the cost per unit for data, voice minutes or SMSs stays the same whether clients purchase a little or a lot.

8 million clients already buy pre-paid data and airtime on the bank’s digital channels and the opportunity to offer them a simpler solution at rates almost 50% below the average rate in the market. There are no out-of-bundle charges. Data costs R4.50 per 100MB, voice minutes 90 cents per minute and SMSs 25 cents per SMS. Clients do not pay transaction fees when they recharge. Clients can top up on USSD or their Capitec app.


Real rewards made simple and accessible

Now fully-fledged, Live Better is already the fastest growing rewards programme in South Africa with 8.5 million clients that are registered. Clients benefit from Bank Better rewards, automated savings tools, and Spend Better partner discounts as we aim to help clients save R1 billion by the end of February 2023.


The road to Capitec Business Bank

Business bank grew by 60%, contributed R201 million to group earnings for the period (August 2021: R126 million).

“Our vision is to provide personalised digital business banking in a scalable way to help entrepreneurs and SMEs grow. As a result, total clients, including POS merchants, grew by 14% to 142 185 during the current period. We are on track to rebrand Mercantile to Capitec Business early in the next financial year,” Fourie adds. “We want them to experience the same unique simplicity, affordability and personalised service offered by our Global One offering.”


Capitec in the year ahead

Technology has become integral to the way in which things are done in society – as well as to Capitec’s DNA in making banking simple, affordable, accessible and transparent.

Fourie concludes, “It's not about being tech first but rather about meeting our clients where they are at, which is often in a hybrid world enabled through technology. We will continue to use our capabilities to turn our obsession with our clients into value-driven products and solutions that allows them to bank better so they can live better. Our story is one of hope and unwavering determination by our nearly 15 300 employees. And our vision is simple – to build a bank that will truly transform our clients lives and the landscape of South Africa for years to come.”

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