Ma­tur­ing busi­ness model

Finweek English Edition - - Marketplace Simon Says - By Si­mon Brown

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.

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