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Capitec shares surge on earnings news

Johannesburg - Capitec [JSE:CPI] advised on Thursday that a reasonable degree of certainty exists that earnings per share and headline earnings per share for the half year ended August 31 2014 will exceed the comparable results for the previous corresponding period by between 18% and 22%.

Capitec's share price surged more than 8% to R230 after the announcement.

The bank said key performance indicators which contributed to this performance include continued strong growth in active clients.

The company said transaction income grew significantly not only because of an increase in client numbers, but also because it attracted clients in higher income groups who do more transacting.

The mix of transactions has improved in line with its strategy to encourage clients to reduce fees by using their cards, mobile and internet banking.

The take up of its smartphone app has also exceeded its expectations.

Growth in retail lending was satisfactory under the current market conditions and the bad debts results were in line with its risk appetite which factored in these market conditions.

Cost management was within its stated objectives.

Preference shares which no longer counted as capital were repurchased and replaced with less expensive fixed deposits.

READ: Business as usual at Capitec

The bank remains very well capitalised, it said. Healthy growth in retail deposits occurred, both in call and fixed-term products, tracking the robust growth in client numbers.

The financial information on which this trading update is based has not been reviewed and reported on by Capitec's auditors. The financial results for the interim reporting period ended August 31 2014 are expected to be published on or about September 29.

In August, when ratings agency Moody’s downgraded the bank by two notches, Capitec finance director Andre du Plessis told Fin24 it was a kneejerk reaction after what happened to African Bank.

“We believe Capitec is very different, as we do transactions and deposit banking, which makes us less reliant on unsecured loans to make a success of the business,” Du Plessis said at the time.

Unsecured lender African Bank was placed under curatorship on August 10. The next day Resreve Bank governor Gill Marcus announced a rescue plan whereby a consortium of the major banks would inject R10bn into African Bank. Capitec is part of the consortium.

Capitec's executives said at the time that the company performance will be in line with its budget expectations.

READ: Capitec slams Moody's downgrade


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