Near-80% slump in profits doesn’t deter Capitec’s outlook, Newsline

DURBAN – Capitec said yesterday that it remained optimistic about the future, despite recording a near-80percent slump in profits during the six months to the end of August on Covid-19. The bank said that its half-year earnings collapsed 78percent on credit impairment charges incurred as a result of the pandemic.

Capitec the lockdown restriction imposed to contain the spread of the pandemic contributed R4.2billion to the total gross impairment charge of R6.3bn during the period. Headline earnings fell to R650 million from R2.9bn reported a year earlier, driven by the impact of the lockdown on all areas of the business.

In the first quarter to end May, the bank reported a loss of R404m but this was offset by a strong recovery in the second quarter to end August and reported more than R1bn in earnings.

Chief executive Gerrie Fourie said the bank would change the way it operated as Covid-19 and the lockdown increased the importance of digital banking.

“The lockdown has accelerated South Africa’s shift towards a digital economy and consumers are now more than ever looking for client-centric digital banking that puts them in control of their finances,” Fourie said. “Our active app clients have grown 38percent to more than four million and our new app is the most downloaded app on all major South African app stores.” Capitec said despite the challenges the bank increased its active clients by 800000 to 14.7million at the end of the period.

Capitec reassessed its loan-granting criteria in light of the Covid-19 pandemic and tightened its lending criteria, with loan sales down by 35percent compared to last year and credit card disbursements decreased by 20percent compared to the six months to end February, but were up by 6percent compared to last year.

Its gross loan book amounted to R63.4bn at the end of August compared with R65.4bn in February.

The bank said its headline earnings per share fell by 78percent to 562cents, while earnings per share decreased by 79percent to 537c.

The group did not declare an interim dividend, in line with the SA Reserve Bank’s guidance.

Jordan Weir, a trader at Citadel, said Capitec’s results showed that the banking sector was not out of the woods yet.

“Much like other SA banks, Capitec has been negatively impacted during the lockdown and specifically been impacted by job losses of their lower income earning clients during the period,” Weir said. “Along with embattled lower income earners, SMEs have been tightening their belts and slashing their overall costs to better weather the storm.”

Weir said this negatively impacts many forms of small contractor business operating within the SME space. With these segments being heavily impacted, Capitec was forced to recognise about R6.3bn in credit impairments.

“Although this seems less than the other banking sector impairments, it is important to note that the profiles of these clients are very different to those who hold ‘secured’ credit services, such as home loans, at other larger banks,” he said.

Capitec shares rose 5.47percent on the JSE yesterday to close at R1037.38.