Why the best bank in the world is determined to remain focused on SA

Capitec Bank’s recent reinclusion in the JSE Top 40 index follows a record-setting run in which it outperformed its banking peers by more than 20% year to date. The banks index has fallen 7.5% since the start of 2017, while at Thursday’s close Capitec had gained 15% — notwithstanding its pull-back from last week’s record high share price of R832.

Business Day asked CEO Gerrie Fourie…

Are you tempted to raise capital from your nicely priced scrip at the moment?

We’re in a capital-flush position. Our capital adequacy is 34%, so we’ve got enough capital. We’re definitely not looking at a rights issue.

We are conservative on the capital side and we’ll keep on being conservative.

Is there a situation in which you would need to raise capital – especially considering your expansion overseas with the recent acquisition of Cream Finance Holding?

At the moment, there’s nothing we’re looking at or are aware of. We have not even had a discussion on a rights issue at board level or any other level for the past couple of years. We’ve had the Cream situation, but that was a very small investment.

Are you being approached by suitors, given your rating by the Lafferty group as the best bank in the world for the second year running?

You’ll always find people who suddenly want to do business with you, but we haven’t had any offers. If you look at Capitec in the past few years, we’ve won quite a few awards, but we know what we need to focus on.

Lafferty’s view is that diversification results in a lack of customer focus. You are looking to expand your product range. What do you think about this view?

I look at the basic needs of a client as savings, transacting, credit and insurance. So we see insurance just as one of those products we’re adding to our portfolio — it won’t take away focus. Where the focus argument comes in is where, for example, you want to buy or start up a bank overseas and suddenly you take 20% to 30% of management away and you lose the experience and focus on this side. I think that’s a much bigger risk. That’s why we’ve always had that question: are we going to go international, and we would, but currently we see a massive opportunity in SA. Cream gives us that opportunity to get international experience and understand what is happening in different countries.

Is Capitec still adding about 150,000 new customers a month in SA?

Remember, the 150,000 and 170,000 were high months. We were averaging about 105,000 a month last year and we haven’t seen a slowdown.

Is that a surprise, given the increasing evaporation of confidence in SA?

Every year we look at the budget and say, that figure somewhere needs to come down, and every year it stays the same or increases. We’ve always said that on the banking side it gives us a massive opportunity given the simplicity and transparency of our products.

Is Capitec on track to hit the market share targets you’ve set yourselves?

We’ve said our overall market share should be 30% by 2020, and our market share among [those earning] between R10,000 and R30,000 is now about 11% and we want to take that up to 20% by 2020. So far, we’re confident we can get there. So that’s where the focus is – to attract quality clients.

As for lending, are nonperforming loans spiking?

It’s certainly tough out there and in an economy that’s not growing you can’t expect a lot. So it’s not easy, you can’t be aggressive on the credit side. But overall, if you take the ANC leadership issue out, inflation is coming down, the exchange rate is lower (although it has gone up a bit now again), jobs are staying pretty much the same. Everyone is looking at that 27% unemployment rate, but what I’m looking at is the 15-million people employed and what’s happening there?

Every year there’s another 600,000 coming into the job market and then one needs to ask oneself, what is happening in the informal sector? The informal, or self-employed sector is, I believe, much stronger than we give credit to. So I’m a bit more optimistic. It’s better than last year.

Really?

Remember last year. If you look at food inflation given the drought, it went up to 16%. Now it’s down to 8% and coming down half a percent every month. [Consider] last year’s petrol prices. There’s at least a rand difference there, so there is some positive news.