Capitec Bank, South Africa’s largest bank in terms of customer numbers, has warned its customers to live within their means as credit impairments rise by 80% to R6.3 billion as the economy deteriorates and inflation rises. Capitec CEO Gerrie Fourie stressed the impact of rising expenses and falling incomes and advised consumers not to keep up with the Joneses. Net loans and advances increased by 17% to R78.2 billion for the year, while total deposits and wholesale funding totalled R146.5 billion.
Credit limits at Capitec Bank have decreased after increasing from R1.3 billion to R3.5 billion in the previous year. The bank’s loan approval rate is currently at its lowest point in history, at 45%. Credit application numbers, on the other hand, are surging, with approximately four million applications compared to slightly more than 2.8 million credit applications in February 2021.
Fourie reported that 20% of clients completed debt reviews within a year after paying R9,000 to the debt counsellor and experiencing no change in their indebtedness. Instead of seeking a debt review, the CEO advised clients who were in a bad financial situation to go to the bank and reschedule their debt.
On the bright side, the bank’s Live Better rewards programme, which has 13.4 million participants, has returned more than R800 million to customers in the form of fee reductions and rewards. Capitec has invested R1.4 billion in strategic initiatives such as Capitec Business, the formation of an insurance business, the launch of Capitec Connect, the expansion of value-added services, and the continuous improvement of its data and technology infrastructure and cloud services.
Capitec Connect is rapidly expanding, with over 500,000 active SIM cards, and is disrupting the prepaid market with low-cost data that never expires. Capitec Business allows new customers to open an account in minutes and immediately qualify for a scored overdraft or structured finance. Merchant Solutions, rental finance options, payment services, and forex are among the additional services offered.
Capitec Bank’s headline earnings increased by 15% to R9.7 billion in the fiscal year 2023, while profit in the retail bank and insurance businesses increased by 12% to R9.3 billion. Lending, investment, and insurance income increased by 14% to R17.2 billion, driven by increases in net loans and advances, interest income, credit life insurance income, and the impact of repo rate increases on interest income and expenses.
Gerrie Fourie, CEO of Capitec Bank, advises clients not to keep up with the Joneses by living within their means as credit impairments rise. The bank has seen a decrease in credit limits as well as a surge in credit application volume. However, the bank’s Live Better rewards programme and strategic initiatives, such as Capitec Connect and Capitec Business, demonstrate the banking sector’s potential for growth and innovation.
