/ 31 October 2011

Capitec plans to issue $110m in new shares

Retail lender Capitec Bank said it aims to raise up to $110-million by issuing new shares to fund its expansion and boost capital ahead of new global banking requirements.

Capitec, a small but fast-growing retail bank, has been chipping away at the market share of South Africa’s “big four” banks by offering lower fees and keeping its branches open later.

The bank said in a statement it will issue up to 4.6-million new shares, representing nearly 5% of its current stock in issue. Shares of the bank tumbled more than 4% on the news.

The bank expects to raise as much as R850-million through the issuance, said finance director Andre du Plessis, adding that the extra capital could help with stricter global banking requirements.

“We don’t know what the rules are. All banks are waiting for the outcome. When the rules are finalised everyone will have to go the market to raise money,” Du Plessis said in a telephone interview.

“We don’t want to be in the washing machine with all the others.”

South African banks are relatively well capitalised, but the Reserve Bank expects they will struggle to meet some of the new global benchmarks under discussion, such as requirements on short-term liquid assets.

Branching out
Absa, the South African bank majority-owned by Barclays, has said it will need $43-million this year to boost its liquidity buffer, after spending a similar amount in the previous year.

Capitec said some of the proceeds would go into increasing its presence across South Africa. The bank plans to have a total of 510 branches by the end of the year, from 490 now.

Capitec’s target is to open 50 new branches annually at the cost of about R1.2-million each, Du Plessis said.

“On a profit basis, we normally break even within six months of opening a branch,” he said from the bank’s Stellenbosch offices.

Bank of America’s Merrill Lynch unit is acting as sole lead manager and bookrunner for the placing.

Capitec said in January it had raised about R1.05-billion in a cash call that had represented 10% of the company’s issued shares.

Capitec’s shares have gained nearly 9% year-to-date. They were down 4.2% at R182 at 11.21am GMT.

Johannesburg’s broad All-Share index was down 1.3%. — Reuters