Capitec HY HEPS up 9%

Capitec Bank, South Africa's best digital bank according to the 2022 SITEisfaction report, released its August 2023 Interim financial results, showing a 9 per cent increase in headline earnings to R4.7 billion. Capitec Bank CEO, Gerrie Fourie, discussed the factors behind the positive results and the bank's outlook for the future in an interview with CNBC Africa. The bank's performance was driven by a 26 per cent increase in income, with transactional income up by 21 per cent. Value-added services and the insurance business also contributed to the growth. However, impairments were up by 62 per cent, in line with the market trends. Fourie expressed optimism, noting 'green shoots' in the space and improvements in impairments. Capitec has expanded its client base to 21 million, with 11 million clients using digital services. Despite economic challenges and pressure on consumers, Fourie remains positive about the future. He highlighted that while interest rates remain stable, food and general inflation are decreasing, and salary increases and bonuses are on the rise. The bank has been cautious in its credit decisions, focusing on current client income and expenses, and is seeing positive trends in impairments, indicating a potential recovery. One area of concern was the substantial increase in impairments, but Capitec has already seen a 35 per cent improvement in stage two to three impairments in the last quarter. The bank is confident that its credit granting cutbacks and collections focus will lead to further improvements in the future. A notable observation in the bank's financial results was an increase in consumer spending on gambling. Fourie attributed this trend to both consumer pressure and the growth of sports betting, emphasizing the importance of financial responsibility among consumers. On the operational side, Capitec has managed to reduce its cost-to-income ratio to 38 per cent, down from 41 per cent. Fourie explained that the bank's investment in IT systems, new businesses like the business bank and insurance, and new products has been key to this achievement. He emphasized the importance of investing for the future, even amidst challenges. Looking ahead, Fourie remains optimistic about Capitec's growth prospects. The bank's focus on client value and innovation has driven new product income and expansion into business banking and insurance. Despite upcoming elections and potential economic uncertainties, Fourie believes the environment will be more stable in the next year. Capitec Bank is also actively supporting government-private sector collaborations to drive economic growth in South Africa. Fourie emphasized the importance of partnerships and coordination between the two sectors to unlock the country's potential and address key challenges in sectors like education and infrastructure. Overall, Capitec Bank's strong financial performance and strategic focus on innovation and client value position it well for future growth, despite the ongoing economic challenges in South Africa.