Capitec’s share price rose by 3% to R922.29 on Tuesday morning after the company released its results for the year to end-February.
Growth in headline earnings (+18% to R4.461 billion) came in slightly below expectations, and its operating expenses rose by 17% to R6.364 billion.
Still, the market was clearly reassured by the growth in Capitec loans and credit (+6% to R47.6 billion, largely due to its new credit cards), and the decline in the percentage of loans in arrears – from 6.3% to 5.7%.
Net income from transaction fees rose 31% to R5.1 billion.
Capitec has been under fire after the shortselling firm Viceroy accused it of concealing loan losses, underestimating bad debts and being an irresponsible lender.
This triggered large losses in Capitec’s share price, which is still 16% lower than before the first Viceroy report. But despite some initial uncertainty and customer withdrawals amid Viceroy's accusations, Capitec saw strong growth in client numbers in the past year. It gained 1.3 million clients.
The bank now has 9.9 million active clients – equal to almost 25% of South Africa’s adult population. The average loan size is R2,621 (for loans over six months or less) and R36,302 (for six months and longer). There are some 289,000 active Capitec credit cards, with a book value of R2 billion.
Depositors earned more than R3.4 billion in interest from Capitec in the past year.
The market is reassured by the fact that Capitec has made a provision of R5.3 billion for bad debts – while loans that are currently in arrears or that have been rescheduled total some R4 billion, says Cassie Treurnicht, portfolio manager at Gryphon Asset Management.
“From the numbers, it looks like its bad debts are under control.”
“Viceroy is asking, however, how reliable the numbers from Capitec are,” he says. “And who knows whether that is a valid concern.”
The group on Tuesday announced that the Capitec Funeral Plan, underwritten by Sanlam, will be launched in May. (Sanlam's share price gained almost a percent to R92.63.) The new funeral policy can benefit to up to 21 dependents, and may be paused if a policy holder is under financial strain. Should an unnatural death or accident occur, the life assured will be covered immediately at twice the amount.
Credit cards, which offer high margins, and funeral policies, which could get new customers in the door, may provide some support for Capitec growth in coming years, Treurnicht added. Still, he thinks Capitec, trading at 5.6 times its book value, is currently expensive.