CAPITEC Bank reported a strong set of interim results with an increase in headline earnings of R271-million to R971-million and a loan revenue increase of nearly 40% for the six months to the end of August.
The bank’s headline earnings is up 39% compared to the same period a year ago and its strong performance has deviated from those recently posted by African Bank, its main rival in the unsecured lending space.
Capitec’s headline earnings per share for the period was up 20% to 844 cents, as growth per share was diluted due to the rights issue in November last year.
By contrast, African Bank Investment Limited (Abil) expects a headline loss of about R200-million in its retail unit, as sales decline at Ellerines due to tightening credit. It announced last month that it planned to sell the furniture retailer.
Headline earnings measure the extent to which a business is financially sound, despite short-term losses it may incur.
African Bank cited challenges including the major banks’ venturing into the unsecured lending space.
Capitec boasted ongoing client acquisition which surpassed the five-million client mark in August and the resultant effect on transaction income which increased by 54% to R899-million for the period. Loan revenue grew by 38% to R4.9-billion.
Chief executive Riaan Stassen said Capitec’s low banking fees elicited positive response from its client base translating into a “remarkable” growth in transaction income.
A recent survey conducted by Solidarity showed Capitec as having the lowest banking fees when compared to First National Bank, Standard Bank, Nedbank and Absa. Capitec said none of its transaction fees had increased except for the cash handling fees this year.
The cost to income ratio continued to decrease significantly, from 42% a year ago to 33% at the end of August.
“We have introduced a number of service and efficiency improvements during the year that are already impacting on our operations. A new front end service flow, queue system and central collections function have contributed to better client service and more efficient processes in branch.” Stassen stated.
“Our service platform has increased by another 55 branches year-on-year to 589 branches and we intend to continue that to over 625 branches by year-end.”
Value of loans advanced was 26% down on the previous period to R9.5-billion as the bank had implemented more stringent credit criteria over the period to address the conditions in the credit market.
Loan revenue however still increased by 38% to R4.9-billion as the book continued to grow. Gross loans and advances grew to R32.6-billion from R24.7-billion, Capitec said.
Arrears increased from R1.07-billion last year to R1.8-billion this year, up 67%. Arrears to gross loans and advances increased from 4.4% to 5.5%.
Stassen said he remained concerned about the average consumer’s economic condition and overall state of credit. “We are declining up to 58% of credit applications as pressure on consumers increases.
“We are also seeing the increasing use of unsecured credit by high income consumers.
“The most recent National Credit Regulator statistics indicate that 45% of the credit taken in the unsecured market is by consumers with a monthly income over R15000. This was 36% a year ago.”
Stassen says the bank is well provided for doubtful debts.
“We have increased provisions by 70% year-on-year to R3.2-billion. This expense as a percentage of gross loans and advances increased from 7.6% to 9.8% year-on-year.” — siyam@dispatch.co.za
Capitec figures show continuing success
The bank’s headline earnings is up 39% compared to the same period a year ago and its strong performance has deviated from those recently posted by African Bank, its main rival in the unsecured lending space.
Capitec’s headline earnings per share for the period was up 20% to 844 cents, as growth per share was diluted due to the rights issue in November last year.
By contrast, African Bank Investment Limited (Abil) expects a headline loss of about R200-million in its retail unit, as sales decline at Ellerines due to tightening credit. It announced last month that it planned to sell the furniture retailer.
Headline earnings measure the extent to which a business is financially sound, despite short-term losses it may incur.
African Bank cited challenges including the major banks’ venturing into the unsecured lending space.
Capitec boasted ongoing client acquisition which surpassed the five-million client mark in August and the resultant effect on transaction income which increased by 54% to R899-million for the period. Loan revenue grew by 38% to R4.9-billion.
Chief executive Riaan Stassen said Capitec’s low banking fees elicited positive response from its client base translating into a “remarkable” growth in transaction income.
A recent survey conducted by Solidarity showed Capitec as having the lowest banking fees when compared to First National Bank, Standard Bank, Nedbank and Absa. Capitec said none of its transaction fees had increased except for the cash handling fees this year.
The cost to income ratio continued to decrease significantly, from 42% a year ago to 33% at the end of August.
“We have introduced a number of service and efficiency improvements during the year that are already impacting on our operations. A new front end service flow, queue system and central collections function have contributed to better client service and more efficient processes in branch.” Stassen stated.
“Our service platform has increased by another 55 branches year-on-year to 589 branches and we intend to continue that to over 625 branches by year-end.”
Value of loans advanced was 26% down on the previous period to R9.5-billion as the bank had implemented more stringent credit criteria over the period to address the conditions in the credit market.
Loan revenue however still increased by 38% to R4.9-billion as the book continued to grow. Gross loans and advances grew to R32.6-billion from R24.7-billion, Capitec said.
Arrears increased from R1.07-billion last year to R1.8-billion this year, up 67%. Arrears to gross loans and advances increased from 4.4% to 5.5%.
Stassen said he remained concerned about the average consumer’s economic condition and overall state of credit. “We are declining up to 58% of credit applications as pressure on consumers increases.
“We are also seeing the increasing use of unsecured credit by high income consumers.
“The most recent National Credit Regulator statistics indicate that 45% of the credit taken in the unsecured market is by consumers with a monthly income over R15000. This was 36% a year ago.”
Stassen says the bank is well provided for doubtful debts.
“We have increased provisions by 70% year-on-year to R3.2-billion. This expense as a percentage of gross loans and advances increased from 7.6% to 9.8% year-on-year.” — siyam@dispatch.co.za
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