Q&A: CEO says Capitec has done better than expected in six months to August
Gerrie Fourie shares his thoughts and is encouraged by his bank being ‘the biggest digital bank in SA’
In an earnings report that laid bare the impact of the pandemic-induced distress on household finances, Capitec this week reported a 78% plunge to R650m in half-year earnings and set aside R4.3bn to cover potential losses from future skipped consumer loan repayments.
The company, which has traditionally attracted budget-savvy low- to middle-class banking clients with no-frills bank accounts, joins rivals FirstRand, Absa, Nedbank and Standard Bank in stowing away billions of rand to prepare for a wave of bad debts.
Business Day financial services writer Warren Thompson asked CEO Gerrie Fourie to share his thoughts about Capitec’s performance in the six months to the end of August.
Thompson: What do you think of Capitec’s performance during the period?
Fourie: We’ve done better than expectations. If I look at the first prediction we made in April, we have done better. If you look on the transactional side, the operational income before credit impairments is up 10%, which I think is quite strong. So the transactional side has done exceptionally well.
As more clients switch to digital, you have your digital transactions up 52% and you have 7.2-million clients on the digital platform. It’s very encouraging and that makes us the biggest digital bank in SA.
Thompson: On the credit side?
Fourie: It’s very encouraging how quickly and how agile we were in responding to changes, how on a daily, weekly basis, we made changes. We gave those payment breaks and we’re concerned that “are the customers going to have money to pay back?”. And as I’ve mentioned, most people have resumed repayments. It is in line with our expectations, if not slightly better.
Thompson: What about business banking?
Fourie: Talking to the CEOs or the owners, they say “our turnover is down 20% but we’ve cut our expenses and just relooking and making sure that every cent sweats”. Then I think they can survive.
Thompson: Tough trading conditions ahead?
Fourie: I think in the short term we are going to do better. I’m talking SA, not Capitec-specific. But the concerning one is long term. We need to get the economy going. The government needs to create confidence so that the private sector can invest.
Thompson: What needs to happen to boost investor confidence?
Fourie: If we look at the spectrum, we all know that data is very important. Let’s dish out spectrum. On our energy side, on Eskom, let’s get the private sector to invest and create green energy. Let’s get policy clarity. Let’s execute.
Thompson: Where are you going with business banking?
Fourie: If you look at Mercantile Bank, we have a section of the bank which has run the bank and they continue to run Mercantile the way they have been running it. Yes, we have made changes and they’re executing.
At the moment we’re happy we can handle the volumes and we can deliver on the brand promise. We will rebrand to Capitec Business Banking. That’s what we said from the beginning and we’re on track (to rebrand in two years). In the last six months, we have been managing Covid and making sure we’re making the right decisions.
Thompson: You said you are getting 3,000 new business accounts a month. Is that coming through the door?
Fourie: We don’t advertise it at all. It’s purely coming through our branch network. I think it’s just a word of mouth about Capitec owning Mercantile. We’re definitely not advertising anything.
Thompson: You set aside more than R4bn in provisions for future bad debts. Is that enough for this financial year?
Fourie: That’s our best estimate currently, using our best knowledge. If the economy turns better, you can release provisions. But if it gets worse — let’s say tomorrow we move to level 5 lockdown — that is a completely different scenario and that can change it.
Everyone has given payment breaks. We are starting to see the first payments and the second payments. What will happen in September, October, November? There’s still a lot of uncertainty. We’ve taken that into consideration. But that’s our best estimate, given our knowledge of our clients, the industry, the companies and the economy.
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