capitec drives record client growth28/03/2017
Cape Town, 28 March 2017: Despite challenging market conditions and a tough economic environment, Capitec Bank has reported a record growth of 1.3 million new clients for the financial year to February 2017 – active clients totalled 8.6 million by year end (February 2016: 7.3 million). The bank reported 18% growth in headline earnings to R3.8 billion (2016: R3.2 billion).
Capitec Bank CEO Gerrie Fourie said the bank has remained committed to its fundamentals of delivering simplified banking that is affordable and easy to access through personal service. “This resonates with most South Africans and is what sets us apart, especially in the current tough economic climate, giving clients a sense of value and allowing them to feel in control of their money. Through strong marketing communications, a focus on client service and positive word of mouth, the Capitec brand has grown in stature, with South Africans from all walks of life accepting Capitec as their first choice bank.”
Primary banking clients (those clients who make regular deposits – mainly salaries) grew in line with total client growth and represent 46% of all active clients. These primary banking clients are less likely to move their banking elsewhere and, on average, do 5 times more transactions than other clients.
Net transaction fee income, driven by a combination of the growth in Capitec’s active client base, expansion of the ATM and branch network and strong take-up of cellphone banking, increased by 30% year-on-year. The net transaction fee income covered 72% (February 2016: 66%) of the bank’s operating expenses and contributed 37% (February 2016: 33%) of its net income.
Over 1.8 million Capitec clients now use the cellphone banking app to gain free access to their accounts and statements or to do payments, transfers and pre-paid purchases at R1.50 per transaction – less than a third of the cost in a branch. The bank reported that its strategy of increasing out-of-branch transacting continued to deliver strong results. Clients are able to perform more cost-efficient transactions through self-service terminals, the cellphone banking app, USSD-based cellphone banking and dual note recyclers (ATMs that accept deposits).This moves existing clients out of the branches creating more capacity to focus on the positive service experience of new banking and credit clients. Self-service banking transactions increased 46% year-on-year to 728 million (February 2016: 499 million), while ATM and branch transactions increased only 15% for the same period.
“A core principle in our organisation is to act with the best interests of the client in mind. We opened 76 new branches during the financial year in order to alleviate pressure in high volume areas and to grow the brand footprint in higher-end shopping malls. 301 of the 796 branches trade 7 days a week and all branches are open longer trading hours than the industry norm to ensure the highest level of client accessibility,” Fourie said.
The bank created 1 629 new job opportunities and has invested significantly in the training and development of its 13 069 employees. “Our philosophy is to recruit for potential and to develop for skill to ensure that we deliver client service that will set us apart from the competition. We have a healthy company culture and client centric values, and we are proud to offer so many young matriculates and graduates a strong foundation on which to build their careers,” Fourie said.
Capitec reported a 10% increase in gross loans and advances to R45.1 billion (February 2016: R40.9 billion). Arrears as a percentage of gross loans and advances increased to 6.3%. The financial stress and economic difficulties experienced by clients during the year were evident and debt review applications and retrenchment letters received, increased by 19% and 15% respectively year-on-year. There was also an increase in clients who received their salaries late or experienced reduced or no inflows. “Due to our conservative approach and prudent credit granting criteria we granted 176 655 fewer loans in 2017 than in the previous year. We granted lower-risk, higher value loans to better quality clients this year. This resulted in the value of new loans growing by 12% from R24.2 billion in 2016 to R27.2 billion in 2017.”
Looking ahead, Fourie said Capitec would continue to grow client numbers, but will shift its focus towards optimising their existing client base, enhancing client service through innovative processes and business efficiencies and towards expanding their digital capabilities to ensure that the organisation remains agile enough to meet and exceed ever changing client needs.
On 24 March 2017, Capitec Bank announced its investment in Cream Finance Holding Limited (Creamfinance). Creamfinance is a leading European online consumer loans company, offering multiple credit products across international markets. The bank will acquire an interest of 40% for €21 million in 3 tranches at 9-month intervals, subject to specific agreed performance measures being met.
“The partnership will provide us with an opportunity to gain experience in entering and operating in foreign countries, with a specific focus on advancing credit in the international and online environment. We are very excited about this investment and the opportunities it presents for us as we expand our interests beyond the borders of South Africa,” Fourie concluded.
The Capitec Bank directors declared a final gross dividend of 800 cents per ordinary share, bringing the total dividend for the year to 1 250 cents per share.