Strong Capitec Growth Driven by Digital Adoption and Higher Income Credit Clients

SA’s leading retail bank has again produced a solid set of interim results. Their affordable banking solution that is simple to understand, transparent and helps clients improve their financial lives continues to resonate with consumers from all walks of life.

Capitec obtained an average client growth of almost 200 000 clients per month over the last 6 months. Their active client base now sits at over 12.6 million, the largest in the country. An unwavering focus on client centricity has led to an offering that puts clients in control of their money, through both personal service in over 834 branches, and their industry leading digital banking channels, as rated in the 2019 Columinate SITEisfaction® survey.      

Both headline earnings per share and interim dividend per share were up by 20% respectively at 2 545 cents per share (2018: 2 128 cents per share) and 755 cents per share (2018: 630 cents per share).

Other key indicators highlighted the bank’s positive trajectory:

  • Headline earnings up by 20% to R2.943 billion. Driven by strong client growth, adoption of digital banking and solid credit performance.
  • Digital banking clients up by 45% to 6.8 million.
  • 2.9 million clients actively use the banking app (up by 61.1%).
  • Total transaction volume grew by 30%.
  • Net transaction fee income (non-lending) increased by 12% to R3.53 billion. This was influenced by consumers’ adoption of digital banking and the substantially reduced digital banking fees. 
  • 4.7 million clients have deposits amounting to R81.4 billion. A growth of 23% driven by trust in the brand.
  • Clients earned R2.3 billion (August 2018: R1.86 billion) in interest on flexible and fixed term savings accounts.
  • Over 1 million Capitec funeral plan policies issued since the product launch in May 2018.
  • The gross loan book increased by 17% to R60.25 billion for the period from R51.36 billion in the prior period.
  • The total arrears up to 3 months decreased by 11% to R2.16 billion at the end of August 2019
  • 1.1 million credit clients in good standing (up by 6%)
  • Gross credit card book growth of 71% to R4.55 billion (August 2018: R2.66 billion).

Gerrie Fourie, CEO of Capitec Bank says that the continued growth can be accredited to an offering that resonates with South Africans, built on client-centricity and fundamentals that challenge the norms of traditional banking.

“We are committed to providing clients with solutions that are simple, accessible and affordable. This allows us to continue to make a meaningful contribution to the financial well-being of our clients and ensures the sustainability of our business. The South African landscape has evolved rapidly in recent years and we recognise the importance of accessibility offered through both our branches and digital channels. Over 6 million clients visit our branches every month, while our digital channels are actively used by over 6.8 million clients. This likely makes us the biggest digital bank in the country. The annual Sunday Times Top Brands Survey also recently recognised us as South Africa’s leading online bank, an award that tells us we are headed in the right direction.”

“The implementation of relevant innovation has allowed us to improve efficiencies, which we passed onto our clients in March 2019 through a reduction in transaction fees for payments made via our app, Internet banking or USSD and the monthly administration fee on our Global One solution. Our philosophy is to give back to clients as the implementation of technology and uptake of digital products increases efficiencies. This translated into R277 million in savings for our clients since March 2019.”

“We’ve seen an increase in digital banking transactions of 99% to 290 million for the period under review. This behaviour shift towards digital banking is in line with our strategy, and has created capacity in our branches to accommodate the strong growth in clients, credit and funeral plan applications.”

The Capitec funeral plan, underwritten by Centriq Life Insurance Company Limited, was launched to the market in May 2018 and has seen a strong demand from clients. The competitive pricing and ability to personalise plans has led to over 1 million policies sold since launch.

Fourie adds, “We stayed true to our fundamentals and designed our funeral plan with competitive pricing that unlocks savings for our clients. This allows clients to either cover additional family members, increase their cover amount or have more disposable income. The product is also easily accessible and can be activated on our banking app or at the client’s nearest branch.”

A further continued focus on client-centricity has helped the bank to improve its credit offering. The use of innovation to better understand consumers’ behaviour has enabled Capitec to grant certain client segments improved offers, including unsecured interest rates that are competitive within even the secured credit market.

“During the last 2 years we have focused on our clients’ profiles and their behaviour, which lead to us tightening the credit criteria. Stricter granting criteria resulted in an improved arrears performance, which allowed us to extend better offers to certain client segments. Our gross loan books increased by 17% to R60.25 billion for the period from R51.36 billion in the prior period, while total arrears up to 3 months decreased by 11% to R2.16 billion at the end of August 2019.”

“Our credit card offering has also benefitted from our understanding of clients’ behaviour, allowing us to offer increased credit limits of up to R250 000 from August 2019 while continuing to grant interest rates from as low as prime. This has seen our credit card book grow by 71% to R4.55 billion.”

Strong results were also noted in retail deposits, an area of key importance for South Africa given the need to foster a savings culture in the country. The decision to place this money with Capitec shows consumer trust in the brand.

“Retail deposits have increased by 23% to R81.4 billion. A key way we are improving the financial lives of our clients is through offering interest on money deposited in transactional accounts. Research shows that there is roughly R295 billion in South African bank accounts that earns no interest. Our clients earn from 4.75% to 8.55% interest per year on positive balances. We’ve paid out R2.28 billion in interest on retail call deposits, fixed deposits and positive credit card accounts during this 6 month period.”

Fourie concluded, “Going forward our focus will remain on delivering simple, affordable, accessible solutions to our clients through personal service, not only through our retail bank, but also through our business bank in the near future. We believe in a positive long-term view of South Africa, that is why we look forward to integrating Mercantile Bank. Announcements regarding the approval of the Mercantile Bank acquisition and related details will be made via the JSE News Service.”

“We will continue to grow our branch footprint and further use digital innovation and artificial intelligence to ensure that we provide our clients with the best digital banking and payment solutions, as well as improve our client insights. We’re fortunate to be growing, continuously hiring new employees and not retrenching. We plan to appoint over 600 new employees in the next 6 months in positions ranging from service consultants to coders and data scientists. Our implementation of technology in the business has not posed a threat to jobs, instead it has helped us improve processes, freeing up our staff to help clients bank better. Our new contactless card and new banking app are already in pilot phase and will launch for clients in the near future, further strengthening our digital offering.”