Capitec’s new life cover has taken off with its clients, having attracted nearly 40,000 policies in three months, valued at R25.5bn.
The Stellenbosch-based bank launched its life cover in June, quickly raking in 38,526 active policies, with the company expecting to gain further market share.
“We are fairly happy with the uptake of the life cover product,” Capitec CEO Gerrie Fourie said on Tuesday after the release of the group’s results for the six months ended August.
The group also reported a surge in its funeral policy business, which saw funeral sum assured increase 25% to R405bn. This is on the back of a 22% increase in total active policies to 3-million, with lives covered increasing 2.5-million to 13.6-million people.
The group will from November go it alone, when its funeral product co-operation arrangement with Sanlam stops at the end of this month.
The bank made a foray into the lucrative life insurance business in 2018 following its agreement with Sanlam. It has been offering credit life and funeral policies through two cell captive agreements, with the underlying policies underwritten by licensed cell captive insurers.
Another area Capitec sees growth is in the home loans market, which recently attracted a new competitor in the form of Discovery Bank. Fourie said the board has approved a new special purpose vehicle with SA Home Loans, with plans to disburse a further R5bn in home loans.
The group produced a strong performance at the halfway stage of the financial year, which it attributes to lower credit loss ratios and robust growth in non-lending income.
Headline earnings increased by 36% to R6.4bn, or R55.44 per share, the group said in a statement on Tuesday. An interim dividend of R20.85 was declared, up 36% from a year ago. The headline earnings reported in the period under review are more than double those reported by the company before Covid.
Operating profit before tax increased 41% to R8.3bn.
Loan disbursements were muted because of tight lending criteria, and non-interest income contributed 67% of operating profit after credit impairments compared with 74% a year ago.
The reduced contribution is due to lower credit impairments over the past six months, the group said.
Net transaction and commission income, including value-added services (VAS) and Capitec Connect, was one of the main drivers of growth. Net transaction income and commission excluding VAS grew by R1.1bn, while growth in VAS contributed R833m to profit before tax.
Digital and card payment volumes increased 24% and now represent 89% of the total transaction volume excluding system-generated transactions.
Total interest income net of interest expenses grew 20%, adding R1.6bn to profit before tax. The high interest rate environment in SA and a growing investment portfolio had a positive effect on interest on lending and investments.
Capitec plans to invest an additional R174m in the next six months over and above operating expenses in technology and cloud services to build scalability and agility.
Business Banking, formerly Mercantile Bank, reported a 12% decline in headline earnings as the group continues to invest and compete for market share.
The acquisition and growth of Avafin forms part of Capitec’s vision and is a step towards expanding its geographical footprint.
Effective from May 1, Capitec began treating Avafin as a subsidiary, incorporating 97.075% of its profit into the group’s income statement. Previously, the bank held a 40.66% stake in the company, recognising it as an associate. That acquisition supported Capitec’s strategy of diversifying income streams and expanding its presence, it said.
Fourie said Capitec’s board had resolved to financially back Avafin to unlock value in the business.
For the remainder of the 2025 financial year Capitec’s focus would be on performance, service and the growth of its current suite of products, it said.
Old Mutual Wealth Private client research analyst Tasneem Samodien said the wealth manager’s long-term investment case was predicated on Capitec continuing to leverage its digital platform to drive penetration of existing and new products into its large client base as well as to new clients.
“Pairing the bank’s growth opportunities with management’s track record, an existing efficient operational base and leading digital platform, we believe Capitec can continue to grow earnings at rates above peers, and remain deserving of their premium in the market,” Samodien said.
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