/ 27 March 2018

Capitec shows resilience in first post-Viceroy annual results

Late on Friday Moody’s downgraded Capitec by two notches and placed it on review for a further downgrade.
Late on Friday Moody’s downgraded Capitec by two notches and placed it on review for a further downgrade.

Despite being hit by a damaging report by a US-based short seller into its business model, Capitec Bank [JSE:CPI] on Tuesday reported an 18% jump in headline earnings from R3.8-billion in 2017 to R4.5-billion, boosted by client growth and fee income.

The bank, which is primarily targeted at lower-income earners, lifted net income by 17% in the year ended February 28 2018, with a dividend of 1 470 cents per share.

“Our growth has proved to be sustainable as we tightly manage the risk and performance of our credit business,” CEO Gerrie Fourie said in a statement.

The reporting period reflected the first performance of the bank’s credit card offering, which recorded 289 000 clients as at February 28 2018.

Credit card holders represented 4.2% of the bank’s total loan book, as loans continued to be one of the drivers of the bank’s capital growth.

“Gross loans and advances grew by a conservative 6% to R47.6bn, with the bulk of the growth coming from the higher income credit card book,” said Fourie.

The bank, which was established 18 years ago, said it has increased its customer base to 9.9 million, making it the country’s second-largest bank by client number.

Loan sales in the 61- to 84-month category increased by 51%, driven by clients with a gross monthly income of more than R20 000, the bank said.

“The company’s earnings growth was therefore driven mostly by their strong banking client growth and resulting fee income,” said Fourie.

In January Viceroy Research, a US-based short seller, published a controversial report into Capitec claiming that the bank is a “loan shark” which approves loans to delinquent customers to enable them to repay their existing loans.

Capitec denied the accusations and said the report was filled with factual errors and unsupported opinions.

The South African Reserve Bank rejected Viceroy’s report, insisting that the bank is solvent, well capitalised and has adequate liquidity.

Capitec shares were trading at R913.41 on the JSE shortly after 11:00, up 2.17%. — Fin 24