Capitec’s headline earnings surge ahead

Capitec Bank reported a surge in headline earnings by 25.78 percent to R3.2 billion on the back of the bank’s highest annual client growth experienced in its history in terms of active banking client numbers.

Johannesburg - Capitec Bank reported a surge in headline earnings by 25.78 percent to R3.2 billion on the back of its highest annual client growth experienced in its history in terms of active banking client numbers.

The bank increased its clients by 1.03 million, to a total of 7.3 million for the year to end February 2016. Chief executive Gerrie Fourie said the results reflected the bank’s investment in its staffers.

Read: Capitec banks on the economy

Fourie said that the brand acceptance continued to grow substantially in the market and that 26 percent growth in total retail deposits to R37.8bn was further testimony to the trust in the brand.

“We are excited about the continued growth in client numbers and in particular the higher income clients who are finding our offer the best value in the market, which is an important consideration for consumers in the current economic climate,” said Fourie. Capitec share rose 1.25 percent yesterday to close at R569.29.

Early this month British based Lafferty Group chose Capitec as the best bank in the world, despite operating in tough economic conditions where South Africa’s economy is predicted to grow by 0.7 percent for the year.

“We are worried by the South African economy, but we also see some big opportunities for our business. The banking and transactional division we have seen opportunities for growth as we get new clients. However, it is on the credit side of our model where we anticipate a poor third and forth quarter because of an increase in interest rates. This will have a negative impact on business, but we have a credit model that will handle the toughest of times,” Fourie said.

The bank granted 864 935 more loans in 2015 than in 2014. Gross loans and advances increased by R4.6bn to R40.9bn. Capitec has increased the number of branches by 52, to 720 overall and expanded its distribution footprint in key urban areas. It increased the number of its automatic teller machines by 287 to 3 705 for the year and introduced cash recyclers so that smaller retailers could do cash deposits at very low cost.

“There is still a lot of opportunities in the country and we remain committed to South Africa and it is here where we want to grow first. We have no plans to spread beyond our borders just yet,” Fourie said.

Next Monday the market will see African Bank making a return in the banking sector. However, Fourie was unfazed by the competition. “We serve our clients’ needs and we will continue with our strategy that has worked well for us. We understand our client and we are not afraid of losing our market share to any other bank,” he said. Capitec’s headline earnings per share were up by 26 percent to 2 787 cents.

Brad Preston, chief investment officer at Mergence Investment Management said: “The Capitec results were very solid, with strong growth in both net interest income and net fee income. This strong performance came despite Capitec increasing their provisioning quite aggressively and growing their provision for doubtful debts by 33 percent to take into account the potential negative impact of the macro environment on their clients’ financial health.”

Capitec declared a gross dividend of 680 cents, bringing the total dividends paid for the year to 1 055c, an increase of 26 percent on the previous year.

BUSINESS REPORT