Capitec Bank's client base grows to 25 million, driven by more innovative financial solutions

Capitec Bank Holdings continued to grow exceptionally in the six months to August 31, with its client base increasing by 8% and its Personal Bank now serving more than half the population, or 25 million people.

The size of its client base, by far the biggest of the South African banks, allowed it to use economies of scale to reduce cost per transaction and increase revenue. This was achieved despite being a price leader in the market on many fronts and investing in new initiatives and products, the CEO in office for only 2.5 months, Graham Lee, said.

Lee said in an online interview that he had served at Capitec for many years before taking up his new post, and his short-term focus was to ensure continuity of the strategy, which he had helped create with the group’s management. Over the longer term, the strategy might change, but this depended on new data or opportunities that indicated a change may be necessary.

He mentioned that the bank continued to add new clients in the second half, and, “while I speak only half tongue-in-cheek here that we hope in time all South Africans will bank with Capitec, our main focus is to see how much more we can optimise value for our clients.”

Headline earning growth was up 26% to R8 billion, growth that was made possible with their focus on clients and the delivery of additional financial solutions, said Lee in an online presentation.

Non-interest income, including the Value-Added Services (VAS), Capitec Connect, and Insurance, increased by 19% to R13.4bn. The fintech business, including VAS and Capitec Connect, grew by 40% to R2.9bn. The return on shareholders' equity increased to 31% from 29%.

The number of fully banked clients increased by 11% to 9.4 million. The bank claimed a 58% market share of the youth market, with clients aged between 16 and 35 numbering 12 million. The number of clients with salaries above R50 000 per month increased by 24%.

The insurance business contributed 26% to group earnings and includes Credit Life Insurance, Life Cover, and Funeral Plans, which now cover 15.8 million lives, up 16% year-on-year.

The fintech segment’s 26% growth was due to rapid growth across all product lines.

Avafin, the international lending arm in Poland, Latvia, Czechia, Spain, and Mexico, contributed R124m to group headline earnings per share for May 1, 2024, to August 31, 2024, with a 27% rise in active clients.

Lee said Avafin was a small start towards taking the Capitec brand international, and Capitec's management had begun to devote time on how this could be accomplished.

Capitec Business contributed 5% to group earnings, up 2% from last year, and now services 182 000 businesses, expanding its client base by 57%, Lee said.

Lee said they continued to innovate in the six-months. For example, cross-border money transfers through a partnership with Mama Money had enabled payments to 8 African countries through the Capitec App.

A youth-focused credit card enabled younger clients with no credit history to build their credit profile responsibly. A repay-as-you-earn loan was introduced to enable multiple income earners and SMEs to qualify for credit with flexible repayments.

An improved home loan product would be launched with SA Home Loans. Capitec Connect introduced new devices, allowing clients to order any of 22 smartphones from their app.

Digital innovations included AI fraud prevention tools that stopped over 23 000 scam payments; free in-app calling for better security and lower airtime costs; easier connections that allow, for example, Personal Bank credit card clients to receive 1% cash back on purchases; and time-saving initiatives such as statement requests being processed through in-branch self-service terminals, which also freed consultants' time to deal with more clients.

The physical branch and ATM network would also continue to be expanded. A fee simplification and reduction from March 1, 2025, resulted in reduced fees being paid by clients overall of R203m, with only five key transaction fees for Personal and Business Banking of R1, R2, R3, R6, and R10.

Capitec’s app users grew by 13% to 14 million, driving a 35% surge in e-commerce transactions. The adoption of digital payments also increased, with a remarkable 131% year-over-year rise in Digital Wallet transactions.

“Looking ahead, we will focus on better client experiences through inclusive credit, smarter digital tools, and partnerships that remove barriers,” Lee said. There were “green shoots” in the economy, such as the business and government partnership in driving improvements in energy and logistics.

The interim dividend increased by 26% to 2,620 cents per share. Capitec’s share price increased 2.48% to 347 400 cents on the JSE Wednesday, a price that had risen 11% over a year.

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