Against the backdrop of the impact of COVID-19 on the South African economy, Capitec Bank declared an increase in headline earnings of 18% to R3,9 billion during the last six months of its annual period up to end February 2021, however, as a result of the first six months of COVID impact on operations, its annualised basis headline earnings were down by 27% to R4,6 billion.
A final dividend of 1 600 cents per ordinary share was declared (Feb 2020: 755c per share).
Capitec, which is now the largest digital bank in the country, experienced an increased digital adoption by its clients of 28% with digital clients now totaling over 8.6 million. The bank’s agility and nimbleness combined with the permanent adoption of digital channels by its clients, contributed to 35% increase in the number of digital transactions to 1,1-billion illustrating Capitec’s ability to scale.
Gerrie Fourie, CEO of Capitec Bank, says the bank’s agility and tech focus came to the fore during the COVID-19 pandemic as it acted swiftly to counter the impact on its clients and its business operations.
“We embraced innovation and digitalisation and so did our clients, and the permanent benefits and cost saving are expected to flow in the coming years. Clients are now more than ever before motivated to use digital channels such as our new banking app as they set to benefit from the lower transaction fees and zero-rated data charges.”
During the past year it continued to grow its active client base by an average of 160 000 clients per month – a 14% increase to 15,8 million customers.
Fourie added, “It is a privilege to be able to help nearly 16 million South Africans simplify their banking so that they can live better. We believe the strong client growth we’ve seen over the last year is testament to the fact that our offering of simplified, affordable banking delivered through personalised service is more relevant than ever.”
Its net transaction fee income increased by 17% over the past year despite the pandemic. Net transaction fee and funeral plan income now cover 99% of operating expenses.
Indicators highlighting the retail bank’s diversified growth were:
- Transacting: Total net transaction fee was 9% higher to R8,1 billion;
- Saving: Retail deposits increased by 18% to R107.1 billion, and Capitec paid R4,1 billion back to clients as interest on deposits, fixed deposits and credit cards;
- Funeral Plan: Its funeral plan income increased by 57% to R650 million with 1,2 million active policies;
- Credit Life insurance: Net insurance income decreased slightly (2%) to R965 million;
- Credit: Credit granting criteria were tightened during lockdown and only 40% of total loan sales and disbursements were made during the first six months;
- The gross loan book decreased by 2% to R64 billion while the gross credit card book grew by 17% to R6,8 billion.
Retail credit clients who were impacted by the financial constraints of the pandemic were offered payment relief during the 3,5 months of hard lockdown. “This was welcomed by our clients as we offered support ranging from payment breaks to variable payment schedules to the value of R7,5 billion. We also offered clients an interest refund incentive for good repayment behaviour and R211-million has been paid back to date. The majority of COVID-19 related reschedules have rehabilitated and by end Feb 2021 the outstanding balance was R1.7 billion – compared to the R7,5 billion that was initially rescheduled.”
During the year, the bank launched seven new solutions, allowing them to offer increased value to their clients through their Global One ecosystem.
The new Access Facility launched in May offering clients revolving credit up to R250 000 linked to prime has become a flagship product, with 159 000 clients and contributing 28% to disbursements in the last six months.
It’s banking app was further bolstered through the ability to ‘Scan to Pay’ on any major QR code, their new virtual card for safer online shopping with no fees as well as the EasyEquities widget allowing clients to buy and sell shares seamlessly on their app. It’s Send Cash option – for sending funds to family and friends – allows for cash collection at any Capitec ATM or partner store with R6.1-billion sent during the year.
Furthermore, in response to strong demand from South Africans the bank launched the Capitec Home Loan solution in partnership with SA Home Loans. The solution offers clients a simple digital application process and reduced fees.
On March 1, 2021 Capitec celebrated its 20th anniversary, and Fourie says the bank is today a transformed digital banking player that is agile and nimble.
“We have transformed banking over these two decades and have had a meaningful impact on the financial lives of our clients. We will remain focused on making banking simpler, more affordable, more accessible and more personalised.”
Commenting on the focus for the year ahead, Fourie says the bank will be upgrading branches to assist clients with shifting towards a digital banking platform, underpinned by self-service. “We just launched the ability to open an account and join Capitec on our app by simply taking a selfie and scanning your ID, and the option to order your card for home delivery will launch in the near future.”
He said he was excited about the Business bank and progress was being made to develop it into a digitally enabled, scalable solution, in line with the Capitec promise of simplicity and affordability.
Capitec Business Bank, previously Mercantile, made a small loss of R1,5 million as the focus remains on integration and consolidation. The business bank client base increased by 33% to 90 534.
The bank generated an overall return on equity of 17% for ordinary shareholders and it remained well capitalised with a capital adequacy ratio of 36,7% for the group. The S&P Global ratings affirmed Capitec’s rating as stable with a global long-term rating of BB- and a short-term global rating of B.