Strategic investments drive 30% growth in Capitec business banking client base

Capitec reports 36% growth in its financial results for the six months ended August 31, driving headline earnings to R6.4bn.

The nation’s leading retail bank — now with 23-million clients — says its strategic focus and continued investment in digital transformation since 2020, product diversification and client-centric solutions continue to yield impressive results, positioning it as a trailblazer in SA's financial services sector.

CEO Gerrie Fourie says Capitec’s performance reflects its transformation from a traditional bank to a multidimensional financial services provider.

“Our strong results demonstrate the strength of our diversified business model. We have continued to invest significantly since 2020, despite the tough economy, and have developed solutions that meet the needs of our clients,” he says.

“Political stability, including positive sentiment about the government of national unity, normalised inflation and reduced interest rates, promote economic confidence and sets the scene for future growth. We will continue to invest and leverage our scale to enhance our solutions and unlock value for our clients beyond banking.”

Highlights of Capitec Group's interim financial results:

• Headline earnings increased by 36% to R6.4bn (August 2023: R4.7bn).
• Net transaction and commission income rose 19% to R6.9bn (August 2023: R5.8bn).
• Value-added services and Capitec Connect revenue grew by 79% to R2bn (August 2023: R1.1bn).
• Banking app clients increased by 21% to 12.4-million (August 2023: 10.3-million).
• Return on shareholder equity increased to 29% (August 2023: 24%).

Digital growth and app adoption is a platform for growth 

The digital bank says its growth was driven by strong performance across multiple business segments, particularly in digital banking and transaction income. 

Active banking app clients increased by 21% to 12.4-million, now 54% of the total 22.8-million clients, underscoring Capitec's success in digital transformation.

Digital and card payment volumes increased by 24%, now representing 89% of total transaction volume, with the banking app seeing a 30% increase in transaction volumes, accounting for 88% of all digital transactions.

“These figures represent millions of South Africans who are embracing digital financial solutions that make their lives easier and access to finance more affordable. We're successfully transforming how people bank,” says Fourie.

Value-added services enhance client experience and revenue

Capitec’s value-added services (VAS) net income surged by 73% to R2bn, with the number of clients using send cash, bill payments, prepaid, vehicle licence renewal and buying retail or Showmax vouchers growing by 16% to 10.7-million. The bank sold 132-million vouchers during the period and increased the average transaction value. 

Capitec Connect, the bank’s mobile virtual network operator, introduced new bundles and grew active sims to 1.2-million at the end of August 2024. Data usage increased to more than five petabytes (more than 5-million gigabytes), resulting in a net income contribution of R69m (August 2023: R4m).

“Our focus on expanding our VAS offerings and transforming cash transactions to frictionless digital banking is paying off. We're seeing strong adoption of our new payment channels, Capitec Connect and VAS, which are improving the client experience and providing us with valuable data to enhance our offerings even further,” says Fourie.

Increased adoption of insurance and life cover

Capitec's insurance business continued its robust growth with the net funeral insurance result increasing by 14% to R727m, contributing 11% to Group headline earnings. The bank’s funeral book grew by 20% to 3-million active policies, covering 13.6-million lives.

Fourie says: “We launched our affordable and transparent life cover solution in June 2024. By August 31, the product had already accumulated 38,526 active policies with a sum assured of R22bn, contributing R8m to the insurance result.”

Strategic investments drive 30% client growth in business banking

Capitec Business headline earnings decreased by 12% to R214m, largely due to strategic decisions including deliberate fee reductions and changes to the merchant e-commerce strategy.

As a result, the segment saw strong growth in its client base, with active clients increasing by 30% and active merchants growing by 31%.

“Our business banking strategy is focused on long-term growth and market expansion. By aligning our fees with retail banking and adjusting our merchant services pricing, we're positioning ourselves to serve SMEs and tap into the underbanked emerging market,” says Fourie. 

AvaFin acquisition reflects Capitec’s international expansion 

In May 2024, Capitec acquired AvaFin as a subsidiary, marking a significant step in its international expansion strategy.

AvaFin, a leading online consumer lender, operating in Poland, Latvia, Czechia, Spain and Mexico, generated a profit after tax of R66m from May to August 2024.

Fourie says: “The AvaFin acquisition gives us exciting growth opportunities through global reach and access to new markets and products. This aligns perfectly with our 10-year vision of becoming a leading global financial brand.”

Igniting growth and opportunities for 23-million South Africans 

Capitec says it’s leveraging its strong financial performance to fuel an ambitious vision of empowerment and innovation beyond traditional banking services.

“We're not just growing a bank; we're igniting growth and creating new opportunities for 23-million South Africans. Our additional R174m investment, beyond operating expenses, in technology and cloud services over the next six months isn't just about scaling our business; it's about unlocking value and creating opportunities for every client we serve.”

The bank says it has seen particularly strong growth in the
36 to 60 age bracket. It’s increased its market share to 54.4% in this demographic, which represents about 16.9-million of SA’s population.

Fourie says that the leading digital bank is putting the power of financial freedom into the palms of its clients' hands.

“We're removing friction and creating value through international payment services and vehicle licence renewals within a few taps in our app,” he says.

“Our Capitec Connect bundles connect families and empower entrepreneurs with affordable data and voice packages.

“Our vehicle, education and home improvement loans are enabling clients to improve their lives, and our new notice deposits are providing higher interest rates to clients with short-term savings needs.

“And offering services like Showmax streaming vouchers means we're not just banking lives, but enriching them.” 

Click here to watch the presentation for Capitec's financial results for the six months ended ended August 31.

This article was sponsored by Capitec.