Capitec expects to buck the trend and grow earnings by double-digits

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Capitec says it expects a double digit increase its profits for the year ended on 29 February 2020, just as other banks who have so far reported their performance saw their earnings hit by a sharp rise in impairments.

The bank, which is now the biggest in South Africa in terms of customer numbers, said its headline earnings per share will increase by between 18% and 21% from the R45.77 cents per share reported in the prior year. But the news failed to cheer the market. While Capitec’s share price rose following the announcement, it quickly retreated and was down about 2% by 4:30pm compared to Thursday’s closing price.

The double-digit surge in earnings will make Capitec one of the best performers in terms of headline earnings growth as Nedbank and Standard Bank, the two that have so far released their results, have come far below that.

Nedbank reported a 7% decline in headline earnings for the 2019 financial year after its impairment charges surged 66% pushing up its credit loss ratio to 82 basis points. Standard Bank only grew its headline earnings by 1% after credit impairment charges increased 23%.

Capitec will give more colour to the reasons behind its growth when it presents its results on or about 14 April 2020 but the bank attributed the good performance in the first half to a surge in retail deposits, good transaction income growth, a thriving funeral plan business which the banks launched in partnership with Sanlam and "improved credit quality" as it grew its gross credit card book grew by 71% among other things.

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