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Capitec won't adopt a one-size-fits-all approach to assisting financially distressed clients impacted by the coronavirus lockdown, according to CEO Gerrie Fourie.
"We would apply what is appropriate to the client... we can't apply a blanket approach," said Fourie, who was speaking after the bank reported a 19% rise in annual headline earnings to R6.28 billion.
With 13.9 million clients, Capitec would extend a variety of options to clients whose income has been impacted by the lockdown, including a provision for claiming against credit insurance, payment rescheduling or payment breaks.
Fourie said the five-week lockdown, enforced by government to prevent the spread of the coronavirus, is likely to have a negative economic impact in the short term, but added that it was difficult – at this stage – to assess the virus' overall impact as there were too many variables to consider.
However, Finance Minister Tito Mboweni said earlier on Tuesday that Treasury was anticipating a deep recession and would be reprioritising the national budget. Business for South Africa, an alliance formed four weeks ago in the wake of the pandemic, has warned that as many as one million jobs could be lost, according to its early modelling.
Capitec at the coalface
Patrick Mathidi, Head of Equities at Aluwani Capital, said Capitec's exposure to the unsecured lending market puts the bank "at the coalface of the lockdown" financial impact, as a large number of their client base might find themselves unable to service debt due to loss of employment. This is likely to lead to a spike in bad debt.
"Unlike other big banks, Capitec does not have a diversified business offering, even their business division which they got into through the acquisition of Mercantile Bank is not big enough to help them absorb the pressure," he said.
"The impact will hit once people start losing jobs... once that happens, no amount of debt restructuring can help them if people have no jobs."
Capitec's primary focus had been in the lower segment of the market, but the bank has over the past few years gradually made inroads in the higher income base.
The bank, which is now the largest in terms of client numbers, had in the year under review attracted higher-income clients, allowing it to advance better quality loans at lower interest rates.
During the financial year to end February, Capitec reported a 19% increase in loans over the 37-84 month loan period, and 52% of credit granted over the last three months to clients with a net income over R20 000.
Gross loans and credit cards in arrears by three months or more, including debt review and handed over loans, ticked up from R5.7 billion in 2019 to R7.4 billion.
Fourie said given the tougher trading conditions, Capitec tightened its affordability criteria and raised the minimum living expenses threshold for its credit clients.
Technology push
The bank had increased digital clients by 29% to 6.7 million clients, and the coronavirus pandemic had propelled it to act with urgency to implement some of the digital innovations which were initially planned for later in the year.
"For instance, we have had to convert our branches into call centres, whereby our consultants can talk to clients and perform transactions which were normally performed in a branch," he said.
"That was not even planned, we got a team together in a very short space of time.... and within 7-8 days we delivered the product."
He said the system was already tested in 40 branches, and plans were afoot to roll-out the system to other branches.
No dividend
In line with the Reserve Bank recommendation to banking institutions, the bank would not declare a dividend for the year, the first in its 20-year history.
There will also be no increases in director fees and senior executive salaries, and senior executives will not be paid cash bonuses.
The Reserve Bank's Prudential Authority earlier this month advised banks not to distribute ordinary dividends, and for bonuses to senior executives in the wake of Covid-19, saying there was a high probability that the impact of virus which has hit the global markets will result in heightened stress in the banking system.
