Sunday Times

Capitec growth not abat­ing

- By PER­I­CLES ANETOS Business · Finance · Investing · Banking · FirstRand · Nedbank · Mexico · Mercantile Financial Services · Standard Bank Group · Absa Group Limited

● 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

 ?? Pic­ture: Alais­ter Rus­sell ?? Capitec CEO Gerrie Fourie.
Pic­ture: Alais­ter Rus­sell Capitec CEO Gerrie Fourie.

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