Blue-collar Capitec branches out into Sandton
● After two decades, Capitec Bank finally has a branch in the heart of SA’s richest square kilometre, Sandton.
“We never said we won’t ever open a branch in Sandton. We just said we wouldn’t do it if the rent is too high,” CEO Gerrie Fourie told Business Times.
With other banks slimming down their branch footprint and retailers such as Edcon also trimming store sizes, Capitec has been able to drive a harder bargain than before.
“Fifteen years ago they wanted us to pay more than R1,000/m², now it is much less,” said Fourie, who has been CEO of Stellenbosch-based Capitec since 2013.
The opening of the Sandton branch tells the story not only of expansion, but of a deliberate pivot towards thrifty middle- and high-income groups after years of cutting its teeth on microloans to the bottom end of the market.
And transaction fees are steadily becoming more and more important. The bank’s results for the half-year to end-August, released this week, show that growth in transaction fee income is outpacing interest income. Most of Capitec’s business is still from granting unsecured loans, but these are aimed more at higher-income groups, according to the bank.
About 47% of its term loan clients earn more than R20,000 a month, compared to 22% three years ago, the bank said in a presentation accompanying the results.
And so far, Capitec is shrugging off the threat of new entrants to the banking sector.
African Rainbow Capital’s Tyme Bank has been on the scene since the start of the year and though it has more than half a million clients signed up, Fourie said he would be interested to see how many transactions are done on those accounts. Discovery’s bank is still in its infancy. Zero’s launch has been delayed until 2020.
About 80% of South Africans have more than one bank account, he says, but the trick is to get those clients to do their everyday banking with your account.
Fourie has overseen the latest phase of Capitec’s growth spurt that now has the company valued at more than R150bn.
Capitec reported a 20% rise in half-year profit this week and now has 2-million more clients than a year ago.
It is still opening new branches at about 50 locations, but the migration to digital channels is running ahead of the bricks-andmortar expansion.
The bank’s total active clients now number 12.6-million.
Sanlam Private Wealth analyst Patrice Rassou thinks Capitec is doing exceptionally well to grow at 200,000 clients a month.
“Bear in mind that Absa has been losing clients and Standard Bank also has been struggling,” he said.
Capitec’s new customers are buying into the idea that their total costs could be lower if they pay very little in banking fees — one of Capitec’s selling points, Rassou said.
“Only Nedbank and FNB have actively offered unsecured loans to their customer base in order to be able to defend their client base,” he said.
Capitec’s results also revealed rapid growth in what is a relatively new offering — funeral policies. And with its acquisition of Mercantile Bank edging towards final approval, Fourie is also planning to have a Capitec Business Bank up and running in two years’ time.
This reflects a deliberate pivot towards higher income groups