Capitec to withhold dividend payments over coronavirus

CAPITEC yesterday withheld its dividend payment for the first time in 20 years after the South African Reserve Bank (SARB) advised local banks to preserve capital as a result of the coronavirus (Covid-19) outbreak.

Chief executive Gerrie Fourie said it was always the intention of the board to declare a final dividend for the year to end December as it was well capitalised with an adequacy ratio of 30.5 percent.

Fourie said SARB’s guidance for the banks to act prudently in preserving capital and focus on financial and economic stability, and the lack of appropriate factual information to determine Covid-19’s full impact on the economy, swayed Capitec to slam the brakes on the dividend payment.

“The board therefore considered the guidance of the SARB as well as the expectation of ordinary shareholders regarding the dividend declaration. After extensive deliberation, the board decided to support the guidance of the SARB and decided against the declaration of the final ordinary dividend,” Fourie said. Last year Capitec declared a total dividend of 1 750 cents a share.

Capitec reported a 19 percent increase in headline earnings to R6.28 billion driven by a 22 percent hike in client base to 13.9 million, a move to digital banking and a solid credit performance.

Headline earnings a share also rose 19 percent to 5 428c while operating profit before tax accelerated 14 percent to R8.06bn. The bank’s retail loan book increased 17 percent to R65.4bn and its clients using digital channels inched up 28.85 percent to 6.7 million retail clients.

Fourie said the results were proof of the bank’s sustainability and its agility. “We have a simple fee structure, a range of affordable and easy-to-understand products and an operating model that is enabled through technology and built for scale. We use advanced data capabilities and machine learning models to understand our client’s behaviour and to inform them of ways to bank better,” he said.

Nolwandle Mthombeni, an investment analyst at Mergence Investment Managers, said the double-digit growth in the bank’s headline earnings was attributable to its different business model compared to its industry peers. Mthombeni said Covid-19, however, remained a concern as clients may not be able to meet debt obligations.

“Capitec has a different business model and it has developed a sort of niche in the higher margin business of unsecured lending. In addition to that, it has been growing customers that led to significant transactional revenue growth,” Mthombeni said.

Capitec shares declined 1.24 percent on the JSE yesterday to close at R1 057.75.