Renée Bonorchis
2 October 2008
Johannesburg — CAPITEC Bank, which provides unsecured loans to low and medium income earners in SA, yesterday released what could probably be called the best set of interim results from a financial services firm this season, with headline earnings growing 22,7% to R119m.
While the big four banks have been experiencing a significant falloff in their retail banking businesses, Capitec's CE, Riaan Stassen, said yesterday the key to Capitec's results was the growth in customer numbers.
The bank's active client base grew 33% to more than 1,5-million customers by the end of its interim period to August. Stassen said Capitec was on track to hit the 2-million mark by the end of the year.
Net loan impairment expenses rose 162,1% to R228m -- Stassen said this was in line with what the bank had expected. There had been growth in all loan products but particularly the 36- month loan launched in the last fiscal period. The ensuing increase in loans and advances had led to higher impairment charges.
With higher interest rates and less disposable income, South Africans were struggling to pay off their debts.
Alwyn van der Merwe, director of investments at Sanlam Private Investments, said this week he believed domestic inflation would drop quickly in December, hitting 6% by June and allowing for interest rate cuts of between 150 and 200 basis points.
But to protect Capitec's business in the next 12 months, Stassen said the bank had tightened up on lending criteria and was carefully tracking the more difficult variables such as peoples' credit card debts. He said it was possible that people were taking small loans from the likes of Capitec to pay off larger debts with the big banks, but Stassen said his company had brought in specific rules on credit cards to measure customers' credit exposure.
Capitec had a high capital adequacy ratio of 45%. Yesterday it announced a 20% increase in its interim dividend to 30c, giving the stock a dividend yield of 4,8%.
Capitec's profitability, with its different business model, appears to be immune to the global financial meltdown but its share price has taken a knock -- falling 22% this year. But Van der Merwe said financial and industrial stocks looked compelling and he believed a decrease in inflation and interest rates would boost these stocks in the longer term.
Rand Merchant Bank (RMB) said yesterday that "the tailwinds of a sustained period of low impairments, strong profitability and ample access to capital market instruments before this year have left the South African banking sector strongly capitalised".
But Stassen, contrary to many commentators, said he had an uncomfortable feeling inflation and interest rates would rise in the next six months.
The lender, unlike other financial services firms, was not keen to expand into Africa or to look for buying opportunities in depressed markets. Stassen rather wanted to focus and build Capitec's core strengths while growing market share in SA. The bank opened 39 branches in the past year and planned another 20 before year end.
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