Most vulnerable hit hardest — Capitec
Capitec ’ s results for the six months ending August paints a picture of a recovering SA economy but undoubtedly shows the country ’ s most vulnerable bearing the brunt of the lockdown and associated economic fallout.
“We have seen the lowerincome customers taking the biggest hit on income levels, as well as casual and contract workers,” says Capitec CEO Gerrie Fourie, adding that there has been a sharp reduction in remuneration for overtime and in bonuses.
Fourie’s comments are based on analysis of salaries paid by employers, transfers made to Capitec bank accounts, and data on businesses made available from its recent acquisition of Mercantile Bank. With no-frills savings accounts, Capitec has traditionally attracted budgetsavvy low- to middle-income consumers.
The company reported a 78% drop in interim headline earnings — the primary measure of profit that excludes one-off, non-trading items — to R650m, or R5.62 per share, weighed down by a R4.3bn provision for future bad debts.
SA banks have set aside billions to cover a potential wave of defaults as a spike in unemployment caused by the shutdown of whole industries strains people’s ability to make their monthly debt payments.
More than 2-million jobs were lost in the second quarter, official Stats SA data showed this week.
Capitec ’ s rivals Absa, FirstRand, Nedbank and Standard Bank have set aside R13.66bn in forward-looking provisions for bad debts that are expected to materialise in the second half of the year, which is still expected to be tough on consumer finances as banks roll back payment relief packages and the government ends its salary protection programme.
Fourie believes the provisions are more than adequate to cover expected bad debts and the bank’s return to prepandemic profitability levels.
The bank added 800,000 active clients over the period, a
rise of 16% to 14.6-million. Of this, 3.8-million are termed “quality ” bank clients characterised by stable inflows to their accounts, remote banking, card purchases and debit orders.
Of the industries hit the hardest, employees in travel and leisure have seen their inflows fall by 28% on average since March.
Most of the pain felt in the bank’s business clients were small and medium-sized enterprises that employed 10 or fewer people, Fourie said.
On the positive side, Capitec ’ s analysis of its 1.1-million credit customers shows that salaries have recovered to about 95% of the level in August as opposed to before the pandemic.
Industries faring well based on transaction values seen by the bank are home maintenance, where expenditure is up nearly 50% since March, and food retail, which is 16% higher than before the pandemic.
Surprisingly, expenditure at restaurants has recovered to
95% of what was seen at the advent of the lockdown.
Fourie stressed the importance of getting the economy growing to prevent long-term damage to people’s livelihoods.
“The government needs to create confidence and trust for the private sector to invest,” said Fourie, referring to the delays in tabling and implementing an economic recovery plan, and ongoing delays in structural reforms that could unleash investment in spectrum and renewable energy.
Overall, Fourie was pleased with the way the bank performed, pointing to the fact that pre-provision income rose 10% to R10.99bn over the prior corresponding period, which included the incorporation of Mercantile’s results for the first time.
Even on a like-for-like basis, income from lending, transactional fees and funeral income all advanced during the period. Non-lending income now covers 97% of operating expenses.