Capitec, South Africa’s biggest retail bank by customer numbers, wants to grow its international footprint after its investments in technology helped drive market-share gains in its value-added service offering.
Capitec aims to grow Avafin, its international online consumer loan offering, after increasing its shareholding to 97.69% from 40.66% in March 2024. Avafin operates in Poland, Latvia, Spain, the Czech Republic and Mexico, underscoring the group’s geographical diversification. Avafin contributed R66m to group net profit in the six months ended August 2024.
It has 197,000 active clients and has advanced €156m (about R2.9bn) in loans since May 2024.
As part of its long-term vision, Capitec plans to increase the capital deployed to Avafin.
Capitec CEO Gerrie Fourie told Business Times that Avafin is in the position Capitec was in 2000.
"It [Capitec] was a one-month lending organisation. We have built that in 24 years to where we are today. We will follow that same recipe to grow Avafin and make it into an international brand."
Stellenbosch-headquartered Capitec, bolstered by non-interest revenue and an improved impairment profile, reported strong numbers in the six months ended August 2024 earlier this week.
Headline earnings jumped 36% to R6.3bn as non-interest income jumped 22% to R11.28bn, while its credit impairment profile declined by 22% to R3.7bn from R4.7bn a year earlier.
Fourie said the lower impairment reflected the tightening of the group’s lending criteria as households took strain in a high interest rate environment over the past couple of years.
"Last year we had a very high impairment rate. We said we are going to pull back. You have seen the results of the pullback where our impairments have gone back to normal levels," Fourie said.
Personal banking clients grew to 23.2-million, with 18.8-million active clients between 20 and 60 years old.
"We can be proud to say 50% of South Africans between 20 years and 60 years have a Capitec bank card in their hands and are operating with Capitec. I think that is a very strong accomplishment we have reached over the last couple of years. It shows the strength of the brand and how it has been accepted in the market," Fourie said.
The group’s value-added services and Capitec Connect revenue grew by 79% to R2bn from R1.1bn in 2023, with market share gains in prepaid data and airtime, prepaid electricity, Lotto purchases and vehicle licence disc renewals.
Capitec is aiming to disrupt the market with the launch of a DStv streaming service at the end of the month.
The group’s funeral insurance income grew 14% and contributed 11% to headline earnings. Boasting 3-million active policies covering 13.6-million lives, from November 2024 Capitec funeral policies will move away from the Sanlam platform to its own licence.
Mergence Investment Managers senior investment analyst Radebe Sipamla said Capitec reduced impairments by proactively reducing its credit appetite and reducing lending by being more conservative in its risk tolerance.
Radebe said the group’s results also reflect an inflection point in Capitec’s foray into the insurance space.
"It is becoming a meaningful bancassurance player as it will now roll out its funeral product on its own insurance licence, and it has launched a simple, affordable and innovative life insurance product that will disrupt the sector and enable it to claw market share away from the large insurance players such as Sanlam, Old Mutual and Metropolitan."
Fourie said South Africa was in a better space with lower inflation and the Reserve Bank’s interest rate cycle reduction, as well as traction from the formation of the government of national unity.
With inflation lower and interest rates going down, he expects the rand to regain strength against the US dollar.
"Yesterday [Monday] it touched R17, so that is positive for imports. We import a lot, and it is going to be positive for fuel. We saw fuel dropping by R1 a litre. We are in a better space than we were three or four months ago. Everyone is much more positive, everyone sees light at the end of the tunnel. If we can focus on the right things, we can do amazing things in South Africa."
Fourie said growth should be front and centre of the government’s focus.
"I think the important part is going to be for the GNU to make certain that there is one objective. That objective must be to grow South Africa. If I were in the president’s shoes, growth would be my number one priority, my number one objective."
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