Capitec loans and advances up 10%
• Unsecured lending market helps bank grow customers and loans
Capitec’s gross loans and advances for the year to end-February rose 10%, even as the banking sector as a whole pared credit extensions to households in response to the weaker economy. Gross loans and advances grew to R45.1bn, from R40.9bn previously. Rivals’ loan books grew an average 4.1%.
Banker Capitec’s gross loans and advances for the financial year to February rose 10%, even as the banking sector as a whole pared credit extensions to households in response to the weak economy.
Gross loans and advances grew to R45.1bn from R40.9bn previously, with growth marking a change from rivals, whose loan books grew an average 4.1% in the 2016 financial year – the lowest in five years, according to professional firm EY.
The main reason for the increase was Capitec’s continued exposure to the unsecured lending market, which continued to grow in value in the third quarter even as credit agreements declined, while other banks had a higher exposure to secured products such as mortgages, which declined in value.
Capitec CEO Gerrie Fourie said the National Credit Regulator’s statistics showed worse declines across the sector. Credit granted fell 5%, mortgages fell 7%, secured credit 4%, and credit facilities 22% year on year. In contrast, unsecured credit extensions rose 9.64%.
“These sectors are moving in different directions, given the state of the economy,” he said.
The bank classifies people earning less than R5,000 a month as low-income customers. It granted fewer loans during the financial year, although the loans were larger at an average amount of R7,761.
Fourie said Capitec had not picked up customers rejected by other banks. “There are a lot of clients we reject. The number of people approved [for] and taking up loans fell from 42% to 31%.”
Capitec also cut the term of its loan book from 40 months to 38 months, a result of customers’ weaker credit profiles and its lower risk appetite.
The bank signed up a record 1.3-million new retail customers and launched a credit card offering during the course of the year that analysts welcomed along with the lowering risk in its loan portfolio.
“[These] serve to move perceptions from unsecured lender to fully fledged bank and, with a marked share of just 5% in SA, we see plenty of growth opportunities,” Arqaam Capital analysts Jaap Meijer and Leen Antonios said.
The bank also delivered an 18% rise to R3.8bn in earnings, while return on earnings (shareholder investment as a percentage of profit) reached 27%.
Fourie said Capitec’s growth in earnings was thanks to the growth in customer numbers, which reached 8.6-million.
Primary banking customers, who make regular deposits such as salaries, numbered 3.9-million.
The increase in customers, coupled with the expansion in the ATM and branch network, and customers’ increased use of self-service channels have resulted in a 30% increase to R3.9bn in transaction income.