Capitec profit plunge worse than expected at 78%, but client numbers grow

It’s been a difficult year for businesses in general and South African lender Capitec has certainly had its fair share of woes.

This week, the bank reported a 78% slump in headline profit to R650m for the six months to end-August. Headline earnings per share for the period stood at 537 cents – a significant drop from 2,545 cents in 2019.

As early as May, Capitec warned its shareholders to brace for an earnings loss of at least 70%, blaming the impact of Covid-19 on its customers as the cause of poor interim results, at a time when its share price had already plummeted 40% this year.

Read also: Capitec takes big Covid-19 hit, as customers can’t pay back loans

However, the full effect of South Africa’s strict lockdown on its books took investors by surprise. Its customers, many low-income earners, have been unable to find funds to keep up with loan repayments. As a result, the group impaired R5.8bn for bad debts and rescheduled payments for R7.5m in loans. Banking clients decreased by 25% in April 2020 compared to March 2020. By August income had returned to March 2020 levels.

“Net transaction fee income increased by 3% from R3.5bn in 2019 to R3.6bn for the six months ended August 2020,” Capitec said. “Despite the impact of Covid-19, the number of active retail banking clients grew by 6% to 14.6 million.”

For the full statement of results, click here.

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