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Capitec’s client-centricity sees an 84% increase in group headline earnings

The bank’s results exceed expectations despite the Covid-19 pandemic.

Capitec has been driven by the same vision since its inception. To be the bank that provides everyone with access to simple, affordable and personalised banking and allows them to live better. This unwavering focus on doing what is right for their clients has yielded 84% growth in group headline earnings to R8.4 billion for the 2022 financial year. This represents a compound annual growth rate of 23% since 2012.

Named the strongest brand in SA in the Brand Finance 2022 ranking, the bank increased its active client base by 14% to 18.1 million, which translates to nearly 190 000 new clients per month. Active digital banking clients (app, internet banking and USSD) grew by 17% to 10.1 million, of which 6.6 million clients use the banking app, up 25% since 2021. Despite the challenges presented by COVID-19, several hard lockdowns and the civil unrest in KwaZulu-Natal and Gauteng, Capitec’s accessible product offering continues to resonate with all South Africans. Mercantile Bank, a division of Capitec, also reported a growing client base with its total active business clients increasing by 10% to 125 270.

Gerrie Fourie, Capitec Chief Executive Officer, says, “During the past year, our agility and focus made it easy for the bank to quickly adapt to the new reality. We viewed the challenge as an opportunity to assist our clients and make banking uncomplicated and accessible to all. Capitec’s digital solutions have been crucial in enabling this growth. In addition, our staff have been instrumental in this adoption and have excelled in this new, hybrid, digital world.”

As a result, Capitec continues a strong recruitment drive for technology and data skills, to accelerate the bank’s digital transformation even further. During the past year, 1 367 new employees were hired with 26% of new hires fulfilling critical IT and data business development needs. Despite the pandemic, the business continues to grow and invest in its people and has already started recruiting top talent to fill 500 new positions this year.

“We are also passionate about empowering and upskilling our staff through education, workshops and mentorship. This has resulted in 48% of our available positions being filled internally,” Fourie continues. “We reward our staff for living our fundamentals and driving client-centricity through personal service and digital solutions.”

South Africa’s best digital bank, according to the SITEisfaction® 2021 survey, saw an increase in digital innovations that make banking simpler and more intuitive as the key driver, with a 27% growth in digital transaction volumes. Clients’ transactional behaviour shifted away from cash towards digital channels, accelerated by the pandemic. Overall, net transaction income increased by 21% to R10.5-billion. Clients quickly adopt contactless card payments and online shopping.

Capitec enhanced payment solutions such as Scan to Pay which allows clients to scan any major QR code in SA and pay from the app.  It also introduced an innovation called Pay Me which generates a personalised QR code for every client on their app or WhatsApp, allowing them to receive immediate payments from other Capitec clients at no cost. The capability to join the bank remotely by downloading the app and taking a selfie was further enhanced with the option to have a card delivered to your home for free. The online application for home loans was further simplified to a 4-step process that is completely digital and paperless. Other client favourites included immediate payments at a cost of R7.50 as compared to traditional banks charging up to R50.

Earnings breakdown

For the current year, lending income represented 53% of the total income from operations. Lower interest rates, the composition of loan sales and the annuity impact of lower loan sales during 2021, led to a slight decrease of 1% in interest income on loans.

Insurance represented 9% of income from operations, a 2% increase from the previous year. Net insurance income from credit life policies primarily increased because of a reduction in claims, while funeral plan income increased due to a reduction in claims and improved collection rates.

Other indicators highlighting the Group’s diversified growth were:

  • Total transaction volumes increased by 26% to 6.7 billion
  • Interest income on investments increased by 34% to R4.2 billion
  • Capitec remained well capitalised with a capital adequacy ratio of 36%.
  • Credit impairments decreased by 55% as the full impact of the COVID-19 pandemic was accounted for in the 2021 financial year

Credit uptake increases due to economic conditions

Total gross loans and advances increased by 12% to R84.1 billion from R75.0 billion last year and R75.8 billion in 2021. The business bank's gross loan book increased to R12.9 billion from R11.0 billion in 2021.

Total retail loan sales and disbursements increased by 50% from R29.3 billion to R43.9 billion. This increase in loan sales and disbursements was facilitated by the careful monitoring of credit granting criteria. These criteria were adjusted at an industry and employer level, within credit risk appetite, as economic conditions changed during the year.

More than rewards - Live Better brings tangible value to clients

Capitec’s digital channels have been a key factor in its strong client-base growth. March 2022 saw most of the bank’s digital fees remain unchanged for the 4th consecutive year, thereby encouraging clients to make use of digital channels to manage their banking costs.

To further drive digital behaviour, the bank launched Live Better, a programme that challenges traditional rewards offerings. Fourie adds, “Research showed that our clients want a rewards programme, but we did not believe traditional loyalty programs are truly inclusive and to the client’s benefit.  So, we designed a program with no subscription fees, no points and no tiers.  All clients can receive cash back on all their daily card purchases by simply banking with us. It’s that simple.”

Clients get 0.5% back on the value of debit card payments and 1.5% back on credit card payments regardless of where or how much they spend. The only requirement is to have a credit product, a funeral plan, or fixed-term savings, have 3 debit orders and perform 5 app transactions a month such as buying airtime or paying a beneficiary. 

The cashback is paid on the 10th of every month, known as Live Better day, into the clients’ Live Better savings account which earns a 1% higher interest than their main transactional savings account.

Over 5.7 million clients have already activated their Live Better accounts and the bank will continue adding more rewards partners to its stable.

Employee share scheme introduces new shareholders

Izindaba Ezinhle, the broad-based black economic empowerment (B-BBEE) transaction undertaken in February 2022 contributed R700 million to operating expenses. The transaction rewarded employees that have been permanently employed by the group for at least 3 years. It aligns the interests of employees and shareholders and improves the bank’s B-BBEE ownership status at the same time, and 10 500 employees now call themselves shareholders.

At the end of the 2022 financial year, Capitec had 14 758 employees.

The year ahead

Capitec will continue to innovate to add real value for clients and make banking simpler, as it has done in its two decades.

“Today, Capitec is South Africa’s best and biggest retail bank with over 18 million clients. Our aim? To challenge, disrupt and innovate, not just for innovation’s sake, but rather to continue meeting client needs. Now the bank grows as our clients do, with a future-fit roadmap designed for all South Africans. This means that we have some new developments on the horizon. After 22 years of building what is now a fully-fledged bank, for us, the job is not over yet. It has only just begun,” Fourie concludes.

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