Client growth sees Capitec earnings grow with interest

Capitec media release

Consumers move towards better value in the market during the tough economic times. In the past six months under review, Capitec Bank has grown its transactional client base and its net transaction fee income (non-lending) now makes up almost half of its total net income, covering 90% of its operating expenses.

Its net transaction fee income (non-lending) increased by 32% to R3.1 billion (2017: R2.4 billion).

The bank attracted on average 109,000 additional active clients every month over the past six months, and CEO, Gerrie Fourie, says the uptake of its mainly digital solutions resulted in a 25% growth in total transactional volume.

“We have a strong focus on the client experience – our digital innovation assures our clients of convenience and security.” He added that the self-service banking transactions – including the banking app, USSD for those without smart phones and in-branch self-service terminals – increased in volume by 27% to 295 million (August 2017: 231 million).

Capitec CEO Gerrie Fourie

At the end of the August 2018 there was a 62% increase of clients using the banking app, totalling 1.8 million clients and 146 million transactions.  “Our younger client base rapidly embraces technology – and the increased efficiency not only improves our clients’ financial lives, but it unlocks shareholder value.”

He said clients continue to place their trust in Capitec Bank – this is reflected in the 20% increase in total retail deposits which was declared at R66 billion (August 2017: R55 billion) with retail call savings up by 22% and retail fixed savings up by 15%.

During the past six months Capitec refined its credit solution that allows clients to choose either the amount that suits their purpose, monthly instalments to suit their cash flow or an option that gives them the best interest rates. The strict criteria, applied since the previous period, also resulted in extending loans to better quality clients.

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Capitec’s conservative approach in the current economic context resulted in the value of loan sales growth by 4% while the net loan book was up by 3%. Much stronger growth was realised in longer-term loans to clients with higher disposable income.

“We continue to improve our understanding of our clients’ behaviour and risk profiles that allow us to price loans so as to achieve a healthier, more sustainable loan book.“

Commenting on the company’s credit offering, Fourie added that refinement to its credit strategy resulted in an improved credit loan book. “Arrears up to 3 months decreased by 10% and recovered bad debts increased by 14%, compared to the six months ended February 2018.”

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Capitec has also grown its credit card clients to 360,000 – based on excellent credit records and affordability – some customers pay interest rates as low as prime.

The bank also added funeral insurance to its product offering in May 2018 and the revenue derived from this new simple, value-driven product – which can also be managed on the app – is in line with expectations.

Fourie says the company declared an interim dividend of 630 cents which was 20% higher than the previous year’s interim dividend.

Commenting on the next six months, he said the focus will remain on delivering simple, accessible solutions through personal service to clients.

“Our investment in digital innovation, self-service banking and in our staff will continue to unlock potential across the company, and will continue to assist us to build a stronger value proposition to our clients in the years ahead.”

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