Capitec en route to joining the JSE’s elite

2015-04-12 17:00

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Its share price has outperformed the JSE’s Top 40 index over the past six months, and it has flighted advertisements boasting 100?000 new customers a month.

Capitec Bank has surged past Reinet, the investment company controlled by the Rupert family with the lowest market capitalisation in the Top 40 at about R48.9?billion. By Friday afternoon, the bank’s market capitalisation was just less than R63?billion, based on its R539.64 share price.

Double-digit annual growth rates in primary banking clients, which reached 2.8?million in the year to February 28, drove the surge. This is the net number of clients – gained and lost – so the 100?000 new clients it adds each month may not be retained at the end of the year.

Carl Fischer, the bank’s marketing and corporate affairs executive, said its rapid expansion has seen it employ about 160 new people each month over the past four years.

“Every one of these employees is trained over a period of about six weeks, remotely and in Stellenbosch at our training academy,” he said.

This has seen head count more than double to 10?000 people.

All these new employees stand ready to serve clients who are generally ­defecting from the bank’s rivals – Fischer said Capitec was the only bank that grew market share over the past four years, especially in higher-income ­categories.

But it has applied the brakes on growth in retail lending. Growth in gross loans peaked at 94.6% five years ago, and has slowed to just under 8%.

But Capitec’s capital adequacy ratio has suffered as wholesale funders avoided the unsecured lending sector after the collapse of African Bank, and the subsequent downgrade of the five largest banks by Moody’s.

This ratio was at 43% six years ago, but dropped to 36% by February. The common equity tier 1 (CET1) ratio, a measure of financial strength, has dropped compared with last year, but was not published in Capitec’s recent results.

Fischer said the ratio would be published in the annual report.

“The CET1 ratio remains a very healthy 29% [compared with] 30% the ­previous year,” he said. “Capitec is cash rich, and this cash is invested in higher-yielding bank investments, which reduced the ratio.”

Although it could not speculate about future share prices, Capitec believes it can sustain its recent performance because it has managed to grow in one of its most challenging years.

“We believe growth potential is built over time and, for now, we continue to attract new clients and grow market share. We, therefore, see more growth ahead.”

Former CEO Riaan Stassen retired at the end of December 2013. Since then, he and his associate companies have sold almost 809?000 shares for R260.7?million. If he had held on to them until Friday, he would have made R436.6?million.

He still holds more than 1.5?million shares in the company.

“He has regularly been on record that he prefers to diversify his portfolio, as most prudent investors do,” said Fischer.

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