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Capitec CEO Gerrie Fourie at the company’s results presentation on April 23. Picture: SUPPLIED
The CEO of Capitec, SA’s largest bank by customer numbers, has cautioned against the trend of debt counsellors placing consumers under debt review, despite their financial position not warranting such action.
Gerrie Fourie said that while debt review had a place, there was a worrying trend of the mechanism being used against the interests of clients.
“It is worrying that we are increasingly seeing many clients being advised to go the debt review route when their financial position does not warrant the drastic step. This is not only shrinking the credit market but it is hurting the clients’ prospects in the long term,” Fourie said, after the release of the group’s results on Tuesday.
“If deployed correctly, debt review has a place in SA’s credit market, but it should not be used to dig consumers into deeper problems.”
Debt review is meant to help customers who are struggling to meet their debt obligations. A debt counsellor approaches creditors and makes payment arrangements on a client’s behalf, reducing payments to a manageable monthly amount.
The process typically spans three to five years, during which time a consumer cannot access the credit market. Banks and other lenders cannot take legal debt enforcement actions against a consumer who is under debt counselling.
Capitec’s results for the year to end-February show a 38% increase in credit impairment charges to R8.7bn — in line with other banks. The total migration of balances into default for the 2024 financial year amounted to R12.8bn, with R4.1bn relating to clients under debt review.
The results show that the group has made big progress in attracting higher-income customers. It reported a 61% increase over the past three years in the number of clients earning R15,000 or more a month, resulting in a total 2.9-million clients in this category. Fourie said the lender had about 1.1-million clients earning more than R30,000 a month.
“We are achieving what we set out to do when we launched this bank. It is becoming a bank for all South Africans,” he said.
Capitec reported a 16% rise in headline earnings for the year under review. Operating profit before tax increased 16% to R13.4bn, while headline earnings per share rose 16% to R91.71.
The total dividend per share increased 16% to R48.75.
Earnings for the previous year were restated after the group adopted the IFRS 17 insurance contracts standard on March 1 2023.
Non-interest income rose to 72% of income from operations after credit impairments, compared with 66% in 2023, Capitec said on Tuesday.
Diversification of the retail bank driven by the introduction of new products yielded positive results in 2024, it said.
Retail bank active clients grew to 22-million from 19.9-million in 2023, with 11.2-million of them using the banking app. Fully banked clients, who perform more transactions and therefore contribute more to income, increased to 7.8-million from 6.9-million in 2023.
The number of clients using value-added services grew by 17% to 9.8-million.
A total 4.6-million unique digital clients used Capitec Pay and more than 500,000 made use of ApplePay, GarminPay, GooglePay and SamsungPay.
Net transaction and commission income grew 29% year on year to R14.8bn.
Income from value-added services contributed 52% of the increase in group after-tax transaction and commission income from the first half to the second as these services were rapidly adopted by clients.
Digital and point-of-sale transactions grew 27% as clients continued to shift away from branch and cash transactions to the digital and card-based payment channels. Net interest income rose 16% to R16.5bn and 5% in the second half compared with the first half.
Yields and net interest-bearing assets grew. The yield on the loan book and investment portfolio increased based on the 100 basis point (bps) increase in the repo rate in 2024 and the annuity impact of the 325bps increase in 2023.
Net interest-bearing assets grew 9%.
The net insurance result increased 18% to R3.2bn, with funeral insurance income rising 27% to R1.3bn and credit life insurance income advancing 13% to R1.9bn.
The group said it would build on the initiatives that had already been undertaken. “Capitec has become a data company with 22.2-million clients. We have almost 2-trillion data points that will continue to be used in the future to exceed our clients’ expectations and create value beyond banking.”
By February 29, its active client base comprised 36% of SA’s total population (from 33% in 2023), and it had a footprint of 866 branches and 8,382 ATMs and dual note recyclers throughout SA, it said.
In March the SA Reserve Bank approved a transaction in which Capitec will increase its shareholding in international online consumer lending group Avafin Holdings from 40.66% to 97.69% at a purchase price of €26.3m. Capitec said that by April 15 all the regulatory approvals for the transaction had been obtained.
Avafin provides online consumer loan products in Poland, Latvia, Spain, the Czech Republic and Mexico. Capitec said the controlling interest in Avafin was acquired due to the strong culture fit, geographical diversification and an excellent management team. “Avafin is closely aligned with our client-centric retail business philosophy and is well positioned for growth.”
Update: April 23 2024 This story has been updated with new information throughout.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Capitec boss alarmed at abuse of debt review
The CEO of Capitec, SA’s largest bank by customer numbers, has cautioned against the trend of debt counsellors placing consumers under debt review, despite their financial position not warranting such action.
Gerrie Fourie said that while debt review had a place, there was a worrying trend of the mechanism being used against the interests of clients.
“It is worrying that we are increasingly seeing many clients being advised to go the debt review route when their financial position does not warrant the drastic step. This is not only shrinking the credit market but it is hurting the clients’ prospects in the long term,” Fourie said, after the release of the group’s results on Tuesday.
“If deployed correctly, debt review has a place in SA’s credit market, but it should not be used to dig consumers into deeper problems.”
Debt review is meant to help customers who are struggling to meet their debt obligations. A debt counsellor approaches creditors and makes payment arrangements on a client’s behalf, reducing payments to a manageable monthly amount.
The process typically spans three to five years, during which time a consumer cannot access the credit market. Banks and other lenders cannot take legal debt enforcement actions against a consumer who is under debt counselling.
Capitec’s results for the year to end-February show a 38% increase in credit impairment charges to R8.7bn — in line with other banks. The total migration of balances into default for the 2024 financial year amounted to R12.8bn, with R4.1bn relating to clients under debt review.
The results show that the group has made big progress in attracting higher-income customers. It reported a 61% increase over the past three years in the number of clients earning R15,000 or more a month, resulting in a total 2.9-million clients in this category. Fourie said the lender had about 1.1-million clients earning more than R30,000 a month.
“We are achieving what we set out to do when we launched this bank. It is becoming a bank for all South Africans,” he said.
Capitec reported a 16% rise in headline earnings for the year under review. Operating profit before tax increased 16% to R13.4bn, while headline earnings per share rose 16% to R91.71.
The total dividend per share increased 16% to R48.75.
Earnings for the previous year were restated after the group adopted the IFRS 17 insurance contracts standard on March 1 2023.
Non-interest income rose to 72% of income from operations after credit impairments, compared with 66% in 2023, Capitec said on Tuesday.
Diversification of the retail bank driven by the introduction of new products yielded positive results in 2024, it said.
Retail bank active clients grew to 22-million from 19.9-million in 2023, with 11.2-million of them using the banking app. Fully banked clients, who perform more transactions and therefore contribute more to income, increased to 7.8-million from 6.9-million in 2023.
The number of clients using value-added services grew by 17% to 9.8-million.
A total 4.6-million unique digital clients used Capitec Pay and more than 500,000 made use of ApplePay, GarminPay, GooglePay and SamsungPay.
Net transaction and commission income grew 29% year on year to R14.8bn.
Income from value-added services contributed 52% of the increase in group after-tax transaction and commission income from the first half to the second as these services were rapidly adopted by clients.
Digital and point-of-sale transactions grew 27% as clients continued to shift away from branch and cash transactions to the digital and card-based payment channels. Net interest income rose 16% to R16.5bn and 5% in the second half compared with the first half.
Yields and net interest-bearing assets grew. The yield on the loan book and investment portfolio increased based on the 100 basis point (bps) increase in the repo rate in 2024 and the annuity impact of the 325bps increase in 2023.
Net interest-bearing assets grew 9%.
The net insurance result increased 18% to R3.2bn, with funeral insurance income rising 27% to R1.3bn and credit life insurance income advancing 13% to R1.9bn.
The group said it would build on the initiatives that had already been undertaken. “Capitec has become a data company with 22.2-million clients. We have almost 2-trillion data points that will continue to be used in the future to exceed our clients’ expectations and create value beyond banking.”
By February 29, its active client base comprised 36% of SA’s total population (from 33% in 2023), and it had a footprint of 866 branches and 8,382 ATMs and dual note recyclers throughout SA, it said.
In March the SA Reserve Bank approved a transaction in which Capitec will increase its shareholding in international online consumer lending group Avafin Holdings from 40.66% to 97.69% at a purchase price of €26.3m. Capitec said that by April 15 all the regulatory approvals for the transaction had been obtained.
Avafin provides online consumer loan products in Poland, Latvia, Spain, the Czech Republic and Mexico. Capitec said the controlling interest in Avafin was acquired due to the strong culture fit, geographical diversification and an excellent management team. “Avafin is closely aligned with our client-centric retail business philosophy and is well positioned for growth.”
Update: April 23 2024
This story has been updated with new information throughout.
mackenziej@arena.africa
khumalok@businesslive.co.za
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