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Capitec Bank [JSE:CPI] reported a 20% rise in half-year profit on Tuesday, with the lender’s client base rising to 10.5 million people, representing 109 000 new customers every month over the period.
The bank released its unaudited financial results for the 6 months ended August 2018 on Wednesday.
Capitec CEO Gerrie Fourie said the company was pleased with client growth to August, with a significant number of new high income customers joining the low cost, no-frills bank in the tough economic climate.
In an interview with Fin24 on Tuesday, Fourie said the rising cost of living, combined with bonuses and overtime payments decreasing, created a "double whammy" for clients, forcing them to take on credit.
According to Fourie, the bank had to take a conservative approach to debt in the current economic environment, with the value of loan sales growing by 4% in the six months to August 2018, while the net loan book was up by 3%.
Capitec was launched in 2001 as a micro-lending business, and has moved to operate as a fully-fledged bank with savings, insurance and credit options.
Fourie said it was a "journey" to cut the costs of unsecured credit.
The lowest interest rate given by Capitec on loans not linked to assets is 12.9%, which Fourie compares positively to the prime lending rate of 10% granted by banks to customers with strong credit records for home loans and other forms of secured credit.
Capitec represents just 5% of total credit in South African financial institutions, and Capitec is hoping to increase its share of this.
Digital vs. bank branches
Contrasted with other banks such as FNB or newcomers Bank Zero and Thyme Digital, Fourie still sees a strong role for "brick-and-mortar" bank branches. He says they signed up all 654 000 new clients over the last six months.
The process takes ten minutes in real time and includes taking a clients’ biometric details and verifying them, according to the Financial Intelligence Centre Act (FICA).
Nonetheless, Capitec, which mostly caters to the lower income segment, has 1.8 million people using its digital application, a 62% increase in the six months to August.
The lender declared an interim dividend of 630 cents, 20% higher than the previous year’s interim dividend.
Capitec was accused by short-seller Viceroy Research at the end of January of overstating its assets and income. Fourie, however, said the bank dealt with this extensively at the time and it’s been "business as usual" since the South African Reserve Bank vouched for its financial health.
The market reacted positively to Capitec’s results on Tuesday and at 14:39pm the company’s share price was trading up 2.91% at R992.07.
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