Capitec growth not abating
● Capitec’s almost singular focus on the South African market and its simple business model are still paying off, with the bank outperforming its more geographically diverse rivals.
And the group is not yet experiencing a slowdown in that growth, either in terms of client numbers, now at 10.5-million, or in terms of transactional volumes, which increased 25% for the six months up to the end of August, said Capitec CEO Gerrie Fourie this week.
There was still “plenty of room” for the group to grow locally, he said, and its focus remained in SA.
Capitec has a simple lending, deposit and transactional-fee business model. But the group is now making a push for business banking with a bid for Mercantile Bank, and has launched insurance products.
Fourie said Capitec had done a full due diligence investigation of the state-owned Portuguese bank’s business in SA and, if the bid was successful, Capitec would spend the first year to 18 months aligning the bank with its strategy.
“We have looked at their systems. We have looked at everything and we feel comfortable with the quality of management. We see it as a growing opportunity,” he said.
SA’s big four banks — FirstRand, Standard Bank, Absa and Nedbank — have generated growth from investment banking or from operations on the rest of the continent. But none of them managed to top Capitec’s growth, which saw headline earnings per share increase by 20%.
Capitec managed to attract 109,000 additional active clients every month, increasing its client base to 10.5-million in six months from 9.9-million in the comparable six months.
Jan Meintjes, a portfolio manager at Denker Capital, said there was plenty more transactional income growth to come for Capitec, and insurance income would become another substantial growth avenue for the group. “I think business banking is an opportunity but selling more products to the existing retail-customer base would be a more substantial opportunity.”
He said a lending-driven strategy, such as Capitec’s, would be too risky to roll out in the rest of Africa.
But Capitec has made some tentative steps to expand internationally with the R282m acquisition of a 40% stake in European online lender Creamfinance, which operates in Central and Eastern Europe and Mexico.
Fourie said this was a small acquisition for Capitec, so the group could learn and understand the regulation and international market environment.
He said the main focus was maximising opportunities in the eight countries in which the group now operates, but that Capitec had identified 30 countries into which it would like to expand Creamfinance.
He added that if the group had a lending platform in a country, it would be easier to decide where it wanted to open a banking platform as well.
Fourie said the lack of growth in the economy had created a difficult credit market, which forced the group to take a conservative approach to debt to keep its net loanbook growth low, at only 3%.
“We need to get SA growing. We need radical growth and that must be the number one focus between government and the private sector. We should really put all our effort into how can we grow. ”
But even for a business that is growing, the pressure on its customers is evident.
Higher petrol prices and VAT increases, along with a decline in income, such as overtime and bonuses, had placed the bank’s clients under pressure, Fourie said.
Meintjes said the law of numbers dictated that growth would slow over the medium term but, given the growth in transactional income and the opportunity in insurance, this should sustain Capitec’s growth in excess of growth at the large banks.
Radical growth must be the No 1 focus between govt and the private sector Gerrie Fourie Capitec CEO