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Johannesburg - Rapid expansion is coming at a cost for the affordable banker Capitec Bank Holdings [JSE:CPI] which on Wednesday posted a substantial rise in interim headline earnings, but also saw impairments balloon.
Reporting results for the six months end-August, the R12.45bn group reported a 58% rise in headline earnings per share to 340c, and a return on equity of 34%. Income from banking operations was up 46% to R1.7bn
Impairments, effectively bad debts written off by the bank, and the cost of expansion were higher in the period as the group has continued to add branches.
Net loan impairments rose 56% to R403m. To put the rapid rise of bad debts suffered by Capitec into perspective, it racked up nearly as much impairments in the first half of its current financial as in the whole of its previous financial year when impairments totalled R548m.
"Recoveries should continue to show an increasing trend as the value of handed over amounts increases with the loan book and higher loan values," said CEO Riaan Stassen in commentary accompanying the results.
He did warn that the group was assessing the impact that the recent public sector strikes would have on default rates amongst Capitec clients.
Operating expenses rose 37% to R837m with employee expenses contributing R156m.
Employee numbers increased by 922 souls, up by 24% since August 2009, and have grown by 572, or 14%, since February 2010.
On the plus side, retail savings deposits increased to R3bn from R1.6bn at the end of August 2009 and R2.3bn at the end of February 2010.
Commenting on prospects, Capitec management was cagey. Stassen told investors: "We will continue to open new branches, acquire more clients and grow our advances book while managing our capital requirements."
Shares in Capitec have continued their meteoric price rise this year and closed on Tuesday at R148 per share up from R79/share in January.
- Fin24.com
* The author holds preference shares in Capitec.
Reporting results for the six months end-August, the R12.45bn group reported a 58% rise in headline earnings per share to 340c, and a return on equity of 34%. Income from banking operations was up 46% to R1.7bn
Impairments, effectively bad debts written off by the bank, and the cost of expansion were higher in the period as the group has continued to add branches.
Net loan impairments rose 56% to R403m. To put the rapid rise of bad debts suffered by Capitec into perspective, it racked up nearly as much impairments in the first half of its current financial as in the whole of its previous financial year when impairments totalled R548m.
"Recoveries should continue to show an increasing trend as the value of handed over amounts increases with the loan book and higher loan values," said CEO Riaan Stassen in commentary accompanying the results.
He did warn that the group was assessing the impact that the recent public sector strikes would have on default rates amongst Capitec clients.
Operating expenses rose 37% to R837m with employee expenses contributing R156m.
Employee numbers increased by 922 souls, up by 24% since August 2009, and have grown by 572, or 14%, since February 2010.
On the plus side, retail savings deposits increased to R3bn from R1.6bn at the end of August 2009 and R2.3bn at the end of February 2010.
Commenting on prospects, Capitec management was cagey. Stassen told investors: "We will continue to open new branches, acquire more clients and grow our advances book while managing our capital requirements."
Shares in Capitec have continued their meteoric price rise this year and closed on Tuesday at R148 per share up from R79/share in January.
- Fin24.com
* The author holds preference shares in Capitec.
