Capitec to pay dividend despite 27% decline in earnings
CAPITEC Bank, with 15.8 million customers under its belt, resumed a dividend payment for the year to end February, despite a 27 percent decline in headline earnings,
Capitec declared a final dividend of 1 600 cents a share during the year after withholding dividend payment for the first time in 20 years last year on the advice of the SA Reserve Bank, which encouraged South African banks to preserve capital as a result of the Covid-19 outbreak.
Capitec joined banks like Standard Bank and FirstRand that have recently declared a dividend after the pandemic. Nedbank indicated in March that it expects to declare an interim dividend during its half-year results later this year. Capitec chief executive Gerrie Fourie said after taking the SA Reserve Bank’s guidance last year the bank felt it was in a good position to resume dividend payment during the period.
“The board recommended we declare a final dividend, because the bank has enough capital, with a capital adequacy ratio of 37 percent, and we also considered our future profitability levels going forward,” Fourie said.
The bank felt the impact of Covid-19 in its operations as headline earnings declined by 27 percent to R4.6 billion, with a return on equity of 17 percent, but headline earnings were up by 18 percent to R3.9bn in the second half of the financial year after declining by 78 percent in the first half. Its headline earnings per share also declined by 27 percent to 3 966c and operating profit before tax decreased by 31 percent to R5.59bn.
The bank continued with its growth trajectory during the year by adding 160 000 clients a month to 15.8 million customers, up by 14 percent compared to a year earlier.
Fourie said the bank’s agility and tech focus came to the fore during the Covid-19 pandemic as it acted swiftly to counter the impact on its clients and its business operations.
“We embraced innovation and digitalisation and so did our clients, and the permanent benefits and cost savings are expected to flow in the coming years. Clients are now more than ever before motivated to use digital channels such as our new banking app as they set to benefit from the lower transaction fees and zero-rated data charges,” Fourie said.
Capitec’s digital clients increased by 28 percent to 8.6 million clients.
The bank offered payment relief of R7.5bn to its clients to deal with the impact of the pandemic.
Its credit granting criteria were tightened during lockdown and only 40 percent of total loan sales and disbursements were made during the first six months and the gross loan book decreased by 2 percent to R64bn while the gross credit card book grew by 17 percent to R6.8bn.
Looking ahead, Fourie said at the beginning of March that the bank officially celebrated its 20th anniversary and that they looked back on how they had transformed banking and it inspired them to continue to improve the financial lives of their clients.
“Agility and digitalisation will be the focus of our efforts to make banking simpler, more affordable, more accessible and more personalised. Our strategy remains to shift clients towards a digital banking platform, underpinned by self-service. Our focus will be on digital e-commerce product opportunities and driving client behaviour,” he said.
Capitec shares closed 0.39 percent lower at R1 385 on the JSE yesterday.