Pleasing results
Performance indicates the ‘bank is growing very nicely’
Customers queue to draw money from an ATM outside a branch of Capitec Bank in Cape Town in this file photo. Capitec shares are slowly regaining lost ground after the adverse Viceroy Report.
CAPITEC Bank’s share price surged by 3.07 percent on the JSE after the group released annual results that were in line with market expectations.
Later in the day, the share price closed at R900 after the bank said its headline earnings increased by 18 percent for the year to February, to R4.46 billion, up from R3.81bn reported last year.
The share price is slowly recovering from a damning Viceroy Research report, which led to a decline of 25.31 percent in the group’s share price at the end of January.
Viceroy said the bank was involved in reckless lending practices, which included “refinancing delinquencies”.
Chief executive Gerrie Fourie maintained that there was nothing sinister about the bank’s practices.
“Viceroy capitalised on the report they released on Steinhoff last year. It seemed like everybody believed them and no-one bothered to ask where Viceroy came from. As the bank, we only wanted the media to report a balanced view and to analyse Viceroy’s report carefully,” Fourie said.
In the midst of it all, the bank has not stopped adding new clients. It had 9.9 million active clients at the end of February, compared with 9.2 million at the end of August.
Nesan Nair, a senior portfolio manager at Sasfin Securities, said Capitec was yet to recover fully from that report.
“You will remember that the share price was trading at R1 075 a share, prior to the report, and subsequently fell to R710 on the news,” Nair said.
He added that it was hard to say whether the Viceroy report would affect future results, but the current results seemed to indicate that the bank was growing very nicely, particularly on the transaction and insurance side.
Jordan Weir, an equities trader at BayHill Capital, agreed with Nair and said Capitec had not recovered entirely from the allegations.
“Aside from the South African Reserve Bank stepping in to assure shareholders that Capitec’s solvency was in a healthy position, the whole incident has brought a general focus back on to the company in terms of its true intrinsic value, even if one strips away the Viceroy report,” Weir said.
He added that the bank had seen an outstanding performance with regard to the market value of its listed security over the past few years, but the growing question in the general market seems to be: “Has Capitec’s share price run away too aggressively from its assumed underlying intrinsic value, or not?”
In an effort to diversify its offerings, the bank will offer Capitec Funeral Plan in May, which will be underwritten by Sanlam. Also, the financial year presented the bank with its first full 12-month performance of its credit card. At the end of February, 289 000 active credit cards were in issue, with a total book value of R2bn.
Net income jumped to R12.5bn, compared with last year’s 10.7bn. Headline earnings a share increased 18 percent to 3 858 cents a share. The group declared a final dividend of 1 470c a share.
Fourie said the group’s growth had proved sustainable, as the company had tightly managed the risk and performance of its credit business.
Gross loans and advances grew by a conservative 6 percent to R47.6bn. The loans in arrears declined from 6.3 percent to 5.7 percent.
Both Nair and Weir said Capitec’s results were in line with market expectations.
“They did guide the market on March 5 that earnings would be between 15 percent and 19 percent higher, so it is in line with the upper end of their guidance,” Nair said.
He added that the results were pretty impressive, given the lacklustre growth environment, and that most of the major banks, except Standard, were showing low, single-digit earnings growth.