Capitec profits surge as rapid growth in new clients keeps the bank among the big players

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Capitec branch. (Photo provided by Capitec).

  • Capitec increased its profits by 18% in the six months to February 2021, after falling 78% in the first six months of the lockdown.
  • The bank says most customers are repaying their loans, while transaction activity has increased as Capitec has expanded its customer base.
  • Even when people were confined to their homes, Capitec recruited 160,000 people per month on average.

Capitec’s fortunes have improved dramatically since South Africa’s lockdown began over a year ago. The bank – which is now the largest in the country in terms of number of customers – recorded an 18% increase in net profits for the six-month period ended Feb.28.

In the first six months of the foreclosure, Capitec’s profits fell 78% to just R650 million as customer transactions, and new credit disbursements declined dramatically as many customers demanded relief from their payments. refunds. But from September to February 2021, overall profits soared to 3.9 billion rand, surpassing the six months leading up to the lockdown by 18%.

However, the significant drop in its results for the six-month period ended August 2020 further reduced the bank’s annual results by 27% compared to the previous year.

Capitec is the only bank whose results show the impact of the pandemic beyond 2020 since its financial year ended on February 28, 2021.

“I remember the first forecast we made for this year. I said we would make a profit of just over a billion, and it was quite shocking,” said Gerrie Fourie, CEO of Capitec, during the presentation of the results Tuesday morning.

Fourie said the launch of six new products, mostly in the second half of its fiscal year, which has resulted in rapid customer growth, came to Capitec’s rescue. These products included an access credit facility, instant cash delivery, scan-to-pay app, and virtual cards, which allowed the bank to transfer more customers to digital banking platforms. The bank found itself with 8.6 million digital banking customers at the end of February, up 28% from before the pandemic.

Capitec also launched a home loan partnership with SA Home Loans and remote integration in March 2021.

After an initial reservoir of its transaction volumes during the first months of the foreclosure, these initiatives have helped Capitec to relaunch transactions with customers. He ended the year with a 17% year-over-year increase in net transaction fee income.

Reduce dependence on Capitec’s credit portfolio

Fourie said Capitec was now able to cover all of its operating expenses with income from the sale of transaction and funeral covers, decreasing its reliance on interest earned on the sale of loans. At the end of February, 61% of Capitec’s total income came from trading activities, even though the bank has not increased its commissions for two years.

Fourie said the rapid growth in the number of clients over those two years has resulted in this increase in transaction revenue.

Capitec has gained 4.2 million new customers over the past two years, he said. Even when people were housebound for most of 2020, it continued to sign on around 160,000 customers per month, bringing its customer base to 15.8 million at the end of February of this year, from 13.9 million in February. 2020.

“Over the past two years, we’ve grown our customer base from 11.4 million to 15.7 million. That’s 4.2 million more customers we’ve actually attracted,” said Fourie.

Customers repay their loans again

In addition to customer growth, Fourie said most of Capitec’s customers are also recovering well from the Covid-19 economic crisis and are repaying their loans again.

Of Capitec’s 15.7 million customers, only 1.1 million are credit customers.

The bank gave them payment relief worth R 7.5 billion at the start of the lockdown. Fourie said of that amount, 3.9 billion rand had been settled at the end of February. Another R 1.7 billion in payment holidays has been extended while R 1.3 billion is in arrears or written off.

Capitec has started to repay the interest of clients who have resumed repayment of their loan at the end of their vacation, in order to encourage them to return to this rhythm of monthly payments. Fourie said it worked well. He said the bank now expects to pay around R410 million in interest repayments.

“In fact, for the first time, people have called our collection service to say, ‘Hey, you haven’t collected, and you have to collect, otherwise I’m going to miss my incentive. “So we changed the behavior,” Fourie said.

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