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Capitec banks 25% earnings as clients grow

Sep 29 2015 10:38

(Duncan Alfreds, Fin24)

Company Data

CAPITEC BANK HOLDINGS LIMITED [JSE:CPI]

Last traded 1098
Change -15
% Change -1
Cumulative volume 178340
Market cap 0

Last Updated: 01/01/0001 at 12:00. Prices are delayed by 15 minutes. Source: McGregor BFA

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Cape Town - Capitec Bank Holdings [JSE:CPI] increased interim headline earnings by 25% to R1.47 from R1.2bn a year ago for the six months to end-August despite difficult market conditions and a tough economic environment, the company announced on Tuesday.

This came on the back of the bank’s highest growth in active clients in three years. This annualised growth of 902 000 clients was complemented by growth in the numbers in higher income credit clients, driven by Capitec Bank’s proactive credit modelling strategy, the bank said in a statement.

Active client numbers grew during the past six months to 6.7 million at the end of August 2015.

The bank reported growth in transaction fee income, which is primarily driven by new banking clients, of 18%, despite a 60% reduction in the interchange fee earned on card purchases. Loan sales also grew by 18% to R11.1bn, with arrears to gross loans and advances declining to 4.7% from 5.5% a year ago.

Capitec Bank CEO Gerrie Fourie said the bank's focus on building relationships and supporting clients to better manage their finances has helped attract young people in both high and low income categories.

Provisions for doubtful debts remained high, even though arrears have remained stable. “On average, we continue providing prudently. We provide 7% for loans that are up to date, 46% for clients who are behind with one instalment, 74% for two instalments and 87% for three instalments. After 90 days in arrears, we consider the loan bad and write it off,” Fourie said.

Operating costs rose 21% to R2.3bn for the six-month period, representing a year-on-year increase of R403m.

The growth resulted from a 16% gain in employee numbers, with employment costs contributing R277m to the overall increase in operating expense.

The bank's branch network has now extended to just under 700, with ATM distribution at 3 646 and an increase in employees of 1 543 in the last year. The company created 773 new jobs in the last six months (1 543 over the last 12 months) and now employs 11 034 people.

The bank continued to increase its distribution footprint in South Africa. Capitec Bank opened 23 new branches and installed 228 new ATMs during the last six months. Cellphone banking numbers have gone up 869 000 since August 2014, with 3.8 million clients making use of this method to transact.

Fourie said there is still opportunity to increase the number of branches and ATMs, especially in shopping malls, but added that remote banking via cellphone and internet was important for convenience and to reduce costs for clients.

Capital expenditure increased 112% to R307m for the six-month period (August 2014: R145m) due to an aggressive rollout of ATMs, the acquisition of a building to house IT operations and the opening of new branches.

Retail deposit funding increased by 30% to total R34.6bn at August 31 2015.

“This was one of our strongest performances for the first half of a financial year since the bank’s inception, based on client growth. The economy is under duress, which will influence our client base and trading environment, but we approach this as an opportunity,” said Fourie.

The interim dividend went up 52% from 246 cents per share at August 2014 to 375c/share at August 2015. Headline earnings per share went up 25% to 1 271 cents, with a 26% return on equity.

Capitec shares traded flat at R478 by 10:11 on the JSE.

capitec  |  earnings reports
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