Maturing business model
Capitec’s* results for the six months to August impressed with the headline earnings per share (HEPS) and dividend up 20%. It now has 10.5m clients. Transaction fees now account for almost half of all income, showing a maturing of the business model: the bank is not just an unsecured lender. Cost-to-income is now at 38% (under international financial reporting standards 9). As I have written before, this is expected and is likely to settle around the mid40s, a full 10% lower than the other large local banks. The one issue being raised by many is that loan duration continues to increase. This was in part what Viceroy Research was worried about when it released its report, slammed by Capitec, in January. However, I am happy with my holding, but at above R1 000 the stock remains expensive.