Despite a turbulent year in the banking industry, Capitec Bank posted good results on the back of significant client growth, transaction volume growth and prudent credit management.
Headline earnings for the 2014/15 year was up 26% to R2,5-billion, with transaction income up 35% to R2,6-billion, due to the growth in active clients of 16%. Headline earnings per share increased by 26% to 2 209 cents and a final dividend of 590 cents per share is proposed, up 28% from 460 cents last year.
Capitec Bank reported that income was specifically buoyed by the 26% growth in primary bank clients to 2,8 million. These clients deposit their monthly income and transact regularly during each month.
Net transaction income now covers 65% of operating costs, up from 59% for the previous period and comprises 34% of net banking income, up from 32% the previous year.
Capitec Bank CEO Gerrie Fourie stated that he was pleased with the growing level of brand acceptance and the increasing average income profile of new clients.
"In line with our long term growth strategy, Capitec Bank is attracting higher income and younger clients which influences growth in our transaction income. Primary bank clients still amount to only 44% of our total active client base of 6,2 million. This reflects the opportunity still available to us."
"We are attracting more than 100 000 new clients per month, because we simplify banking through innovation and transparency. Clients know what they get and know what they pay," said Fourie.
The bank increased its distribution footprint in South Africa by another 39 branches and 500 ATMs during the past financial year, to bring the total of these access points to 668 and 3 418 respectively. Fourie confirmed a significant increase in workstations and consultants in existing branches to address client growth and service levels.
"We focus on building relationships with clients through our service support and find that our unique, side-by-side contact between our consultants and client remains very important to our clients when making decisions," he commented. "We are however pleased with the take up of remote banking services through cellphone and internet which now has 3,4 million users and 309 000 users respectively," Fourie added.
Credit advanced for the year grew by 7%, reflecting the prudent approach applied by Capitec Bank under the present industry conditions. This was on the back of the demise of African Bank (Abil) and the decline in advances by this competitor subsequent to their curatorship.
"Conditions remain tight in the credit market and we have applied more stringent credit criteria over recent years and again during the past year, which has proved to be a prudent approach on our part," Fourie stated.
"Credit applications declined by Capitec Bank have increased to 57% of all applications processed for the year, up 3 percentage points from February 2013," Fourie said. Applications approved, but not taken by the client, have increased to 13% across all applications.
"These are typically instances where we have offered less than what clients requested, based on their affordability and the clients have walked away from our offer," Fourie added.
Gross loans and advances at year-end increased by 8% to R36,3 billion and net loan impairment expense increased by 1% to R4,0 billion. Arrears to gross loans and advances decreased from 6,5% to 5,4% year on year.
"We are pleased with this improvement under the conditions. Our solid credit performance bears testament to the benefits of our conservative credit model and improved collections strategies that we have applied during 2014," Fourie commented.
Provisions for doubtful debts remained high, even though arrears have declined. Provisions to arrears increased to 196% from 167% at the end of the previous financial year.
"We are happy with the performance of Capitec Bank’s book and that it is within our risk appetite. We continue to apply our conservative approach to provisioning which covers 8% of all up to date loans, 45% for loans one instalment behind, 73% for two instalments and 87% for three instalments. We write off all loans in excess of 90 days in arrears," Fourie explained.
Moody’s ratings and competitor curatorship seems to have done little to dent the confidence in this sector of the banking industry over the longer term. Retail call savings deposits increased substantially by 32% for the year to R19,3 billion and retail fixed savings increased by 19% to R10,7 billion for the year. Fourie stated that the client response to Abil and Moody’s was evident in the first few months after August, but that by November client savings activity was back to normal.
Capitec Bank received two significant awards in the last six month, topping the Ask Afrika Orange index for service in banking and being placed first in the SAcsi consumer satisfaction index for banking, which also saw Capitec Bank named as the best value for money bank in South Africa.
"Capitec Bank has a very supportive approach to customer service, which is a direct result of the extensive training our consultants receive when they are recruited to work for us. We are always excited by this recognition given to us by our clients, but know that delivering quality service remains a challenge that never ends," Fourie stated.
When asked about the future, Fourie commented that he felt the brand was going from strength to strength, service delivery was continuously evolving and improving, and efficiencies continued to improve.
"We remain prudent on credit extension and will continue to expand our remote banking offer through cellphone and internet as we feel this is the future of convenient banking for Capitec Bank’s clients," said Fourie.