By Lehlohonolo Lehana.
Capitec Bank, the biggest digital bank in South Africa, added one million new clients in six months to August 31, considering the weak economic environment.
CEO, Gerrie Fourie, said in an interview yesterday that in fact, the bank had managed to grow at about two million new clients every year, for the past five years.
The bank now has 21.1 million active clients, which is a significant proportion of South Africans. He said if you add all the clients of all the banks in the country together, you come up with between 55 and 56 million people.
However, he stressed that the 21 million accounts are not dormant. He said the 21 million clients Capitec counts are what it considers active clients, which the bank is earning some form of income from.
“If we don’t make an income, then the account is inactive, “he said.
The group’s interim results ending August 2023, the bank presented another view of its customer base, showing that it has what it calls a “fully banked” client base of 7.5 million.
Fourie said this refers to a core group of retail clients who bank first with Capitec.
Looking at the 7.5 million “fully banked” clients, for Fourie, this is the core: the “first of wallet” clients that bank with Capitec first, take up its products, and transact frequently. The key challenge for the bank is converting more of its active base into these core customers, he said.
“We see the 21 million clients as our potential client base and the 7.5 million (are those that) take up our products and transact with us, etcetera.”
“We also have 11 million digital clients – the question is how do we get these clients to take up more products and transact with us and to optimise it?”
When asked whether the bank would try target higher-income clients to achieve its goal of expanding this core base, the chief executive was adamant that the bank wouldn’t put clients into groups or restructure its business to meet specific needs.
But being exposed to the lower income bracket, the bank also bore the brunt of higher impairments as its customers came under strain after 10 successive interest rate hikes.
The Reserve Bank has raised its benchmark lending rate by 4.75 percentage points to 8.25% since it began tightening monetary policy in November 2021 to curb above-target inflation.
Although inflation has fallen back within the central bank’s 3% to 6% tolerance range, Fourie warned there may be one more 25 basis point hike before the current hiking cycle peaks.
The impact of inflation and higher rates on Capitec’s loan book has prompted the group to tighten lending criteria.
This saw retail loan sales and disbursements decrease by 9% to R24 billion. The bank also drastically reduced new access facility limits to R3.8 billion, down from R10.5 billion in August 2022. In addition, access facility limits were cut by more than R3 billion, while payouts from access facilities were reduced to R7.3 billion from R9.9 billion.
“All credit providers have pulled back – it’s a pure function of interest rates and inflation going up and the impact on the cost of living,” said Fourie. “Our impairments going up is very much in line with the financial industry.”
Fourie said, the million-dollar question is the economy. [You’re] definitely seeing strain [among our clients] and that’s why we’ve cut back [on lending]. But we’re starting to see some very strong green shoots – if everything goes according to plan, then we’ll see a much better provisioning cycle in the second half.
Capitec Bank reported a 9% rise in its half-year profit with headline earnings per share – the country’s standard profit measure – of 40.72 rand, and distributed more than a third of this dividend.