Capitec Bank Holdings Limited · JSE:CPI
Capitec Bank — FY2019 Earnings Presentation
44 slides from Capitec Bank's earnings presentation, February 2019
Slide 1: Results presentation February 2019
Results presentation February 2019
Slide 2: The year under review
The year under review Highlights for FY ’19 • Mar ‘18 – Feb ‘19: Successfully maintained trust in our brand • May ’18: Launched Capitec Funeral Plan • Aug ’18: New campus • Nov ’18: Successful bid for Mercantile Bank • Jan and Feb ’19: 500 000 new clients • Accolades Lafferty Top 500 banks – Best Ba
Slide 3: Key Indicators
Key Indicators
Slide 4: Key indicators: drivers of growth
Key indicators Drivers of growth • Strong client growth • Move to digital banking and self-help • Solid credit performance © Capitec Bank Limited 4
Slide 5: Headline earnings and ROE
Key indicators +19% in 2019 Headline earnings and ROE 6,000 28 27 27 27 28 5,000 25 26 5,292 24 Return on equity (%) Headline earnings 4,000 4,461 22 (R’ million) 3,793 3,000 20 3,222 18 2,547 2,000 16 14 1,000 12 - 10 2015 2016 2017 2018 2019 IAS 39 IFRS 9 © Capitec Bank Limited 5
Slide 6: Cost-to-income
Key indicators 1% up on comparative basis Cost-to-income (%) due to IFRS 9 40 39 39 Increased investment in 38 future growth: 37 • IT infrastructure Cost-to-income (%) • Digital development 36 36 • Data and analytics 35 • Leadership development 35 34 34 34 Accounting impact: 33 • Share incentives 32
Slide 7: Net transaction fee income
Key indicators Net transaction fee income – 26% growth 7,000 100 86 90 6,000 81 86% of operating 80 72 expenses covered 5,000 65 66 70 by net transaction Net transaction fee income 4,000 60 fee income (R’ million) 44 50 41 3,000 37 34 33 40 2,000 30 44% of net income 20 1,000 covered by net 10 2,608
Slide 8: Economic landscape
economic landscape
Slide 9: Economic landscape
Economic landscape Focus on our fundamentals Uncertainty • Political • Elections • Eskom Positive focus • Partnerships (private sector, regulators, government) • Invest in radical economic growth © Capitec Bank Limited 9
Slide 10: Our approach
our approach
Slide 11: Focus on fundamentals
Focus on fundamentals “Banking is about people, passionately delivering on clients' needs” Be the leader in client centric design and delivery, and nurture our passion for helping clients to improve their financial lives. Develop cohesive teams Cultivate a high performance with visionary leadership,
Slide 12: People
people our people deliver on our value proposition
Slide 13: People
People Developing people, leaders and culture • Employ 13 774 people (up by 441) • 2 124 promoted to new or vacant positions • 10 006 employees trained • 444 internal bursaries • CSI spend – 117 million • Capitec Foundation (Math and Science) • Enterprise and supplier development • Financial educati
Slide 14: Banking
banking evolution from branch to digital & self-help
Slide 15: Active clients up 15.3% to 11.4 million
Banking Active clients up 15.3% to 11.4 million 12.00 11.39 10.00 9.87 8.00 8.57 Active clients (million) 6.00 5.25 4.00 4.51 3.91 2.00 1.45 1.37 1.27 - Credit Banking Total 2017 2018 2019 © Capitec Bank Limited 15
Slide 16: Banking new clients in Jan – Feb '19
Banking 500 000 new clients in Jan – Feb ’19 Age 56+ (7%) Age 0 - 20 (23%) Age 36 - 55 (21%) Age 21 - 35 (49%) © Capitec Bank Limited 16
Slide 17: Digital banking client growth
Banking Digital banking client growth (monthly average) 5.2 million 6.6 million Digital Clients Branch Clients (up 18%) (up 11%) Overlap Feb’19: 3.5 mil Feb’19: 2.2mn App users (up 47%) 840 Branches (14 new) 4.1mn USSD users (up 12%) 5011 ATMs (366 new) Relevant Communication © Capitec Bank Limited
Slide 18: Self-service transaction volume: app and USSD
Banking Self-service transaction volume (million) Banking app 196 2018 Up 75% 2019 343 USSD 560 2018 Up 14% 2019 640 © Capitec Bank Limited 18
Slide 19: Self-service transaction volume: terminals and recyclers
Banking Self-service transaction volume (million) Self-service terminals 2018 8 2019 18 Up 111% Dual-note recyclers 2018 19 2019 Up 55% 29 © Capitec Bank Limited 19
Slide 20: Banking: New entrants
Banking New entrants • Digital only vs Omni-channel service plus communication • Perception of ‘free banking’ • Banking is about trust – regulation, compliance and security Our Fundamentals • Simplicity • Affordability • Accessibility • Personalised Experience © Capitec Bank Limited 20
Slide 21: Banking – Future: growth in middle to higher income
Banking – Future Growth opportunity in middle to higher income segment Publisher Audience Measure Survey (PAMS)* Question: Which one bank do you regard as your main bank? Capitec Bank Total Banked Market Share Monthly Personal Income # Clients (‘000) Population (‘000) (%) Other 271 902 30% R0 - R4 9
Slide 22: Digital efficiencies result in client savings
Banking – Future Digital efficiencies result in client savings • Better efficiencies enabled through technology • Move behaviour away from cash • Saved clients R117 million in data app cost • Pass R360 million in savings on to clients (digital banking fees) © Capitec Bank Limited 22
Slide 23: New fees FY'20
Banking - Future New fees FY’20 FY 2019 FY 2020 Monthly admin fee 5.75 5.00 Electronic payments 1.60 1.00 Cashback at retailers 1.61 1.00 Debit orders 3.70 3.50 Recurring payments 5.00 1.00 Capitec ATM 6.56 6.00 per R1000 Other ATM 8.83 8.00 per R1000 Immediate (real time) payments app and internet
Slide 24: Save
save let your money make money
Slide 25: Funding and retail deposits
Save • From 5.0% to 9.71% interest Retail deposits of R71 billion (23% increase) • R3.9 billion earned by clients 90 80 70 26 Up 14% Funding (R billion) 60 23 50 18 45 14 40 11 35 30 30 9 24 Up 29% 19 20 15 10 12 11 10 8 6 5 - 2014 2015 2016 2017 2018 2019 Wholesale deposits Retail call savings Reta
Slide 26: Insure
insure one plan, more cover @UNDERWRITTEN BY CENTRIQ LIFE ra) Calculate Premium Your Needs © MRC FREEMAN Cover Amount Available Balance © Spouse © Child © Parent © Extended Family Calculate Cancel i 5000 oy
Slide 27: Insure: Funeral Plan
Insure Funeral Plan • Launched 21 May 2018 • Market size +/- 11 million formal policies • Key benefits • Over 500 000 policies sold (73 833 in Oct’18) • Over 360 000 policies retained • 80/20 ratio between branch and app • The power of branch network in a South African context © Capitec Bank Limited
Slide 28: Get credit for the right reasons
get credit for the right reasons Rethink credit, realise dreams. |i_Fixed-term Credit a Credit Credit Card R7 400.00 > ‘Avalabe Balance 60 month term loan R185920.93 > Cusianding Balance
Slide 29: Credit Market – NCR: improved performance, fewer consumers
Credit Market – NCR Improved performance, fewer consumers Sep-15 Sep-16 Sep-17 Sep-18 Credit active consumers (million) 23.45 24.25 25.08 24.05 Current 46% 48% 49% 51% 1-2 months in arrears 12% 12% 11% 12% 3+ months in arrears 22% 22% 22% 22% Adverse listings 12% 11% 11% 9% Judgments and administrat
Slide 30: Increase in credit advances
Credit Market – NCR Increase in credit advances 180,000 171,378 (6%) 160,000 148,127 149,458 156,693 (7%) 140,000 Credit advanced (R’ million) 145,202 135,631 116,401 (19%) 120,000 98,352 100,000 83,300 80,000 60,000 71,693 (16%) 68,275 40,000 52,902 20,000 0 2014 2015 2016 2017 2018 Secured Mortgag
Slide 31: Unsecured credit market by income group
Credit Market – NCR Unsecured credit market (granted by income group for 12 months to Sep 18) (R’ million) 2016 2017 2018 Gross Income Difference Market Market Market R 0 – R 5 500 12 927 9 245 8 001 (1 244) R 5 501 – R 10 000 17 087 14 792 15 993 1 201 R 10 001 – R 15 000 18 061 17 381 19 457 2 076
Slide 32: Unsecured credit granted - market share
Credit Market – NCR Unsecured credit granted - market share Apr – Jun 2018 Jul – Sep 2018 Term loan 22.0% 24.1% Credit Card 5.6% 5.5% Source: NCR 2018Q3 report © Capitec Bank Limited 32
Slide 33: Debt review and retrenchments
Credit Market – NCR Debt review and retrenchments Financial year Debt review Retrenchments (*) 2015 143 786 8 304 2016 143 758 8 539 2017 166 414 12 256 2018 174 102 13 916 2019 145 875 11 603 (*) Retrenchment letters received by Capitec © Capitec Bank Limited 33
Slide 34: Credit strategy
Credit Strategy Granting • Utilise machine learning models for efficiency and accuracy • Improve offer to low risk clients • Reduce exposure to frequent maximum borrowers • More effective exceptions Book • Optimise treatments for clients in arrears • Hold back • Credit Assistance Programme • Debt re
Slide 35: Continued focus on reducing cost of credit
Credit Continued focus on reducing cost of credit Term Loan Credit card • Average interest rate down from • Best rate at prime 25.3% to 24.0% • 57% sold at less than 16% interest • 27% of sales are at lower ROEs rate • 56% of sales over shorter period or at lower value than max (Feb 2018: 45%) © Cap
Slide 36: Focus on higher income market
Credit Focus on higher income market (loans granted) 100% 90% 22.0% 23.9% 28.6% 33.0% 80% 40.3% 40.9% 47.6% 70% Percentage 60% 40.5% 40.1% 50% 40.5% 39.7% 40% 38.6% 38.0% 34.0% 30% 20% 37.5% 36.0% 30.9% 27.4% 10% 21.1% 21.2% 18.4% 0% 2016 Aug 16 2017 Aug 17 2018 Aug 18 2019 Gross salary <R10,000 R10
Slide 37: Focus on longer term
Credit Focus on longer term (value of loans) 8,000 32% 7,000 26% 26% 6,000 Loans advanced 5,000 20% (R’ million) 18% 17% 17% 4,000 14% 3,000 10% 9% 2,000 6% 4% 1,000 - 1 -6 months 7-12 months 13-36 months 37-48 months 49-60 months 61-84 months 2016 2017 2018 2019 © Capitec Bank Limited 37
Slide 38: Credit card
Credit Credit card Measure Feb-18 Aug-18 Jan-19 Active Credit Card Clients 274 024 360 778 445 205 Size of Performing Book (R’ million) R2 014 R2 659 R3 382 % New Credit Clients 22.50% 24.00% 26.29% Maximum Limit R80 000 R150 000 R150 000 Market Share – Balances on Book (*) 1.9% 2.4% 2.9% (*) Source
Slide 39: Loan book breakdown
Credit Loan book breakdown (R’ million) 1 Mar 2018 28 Feb 2019 Difference (%) Up-to-date book 37 165 41 587 12 Up-to-date significant increase in credit risk (SICR) 4 401 3 765 (14) Up to 3 months in arrears 2 700 2 476 (8) Up-to-date that rescheduled from up-to-date (not yet rehabilitated) 1 085 85
Slide 40: Prudent provisioning
Credit Prudent provisioning 130% 109% 10,000 9,000 1,087 Stage 2 (Up to one month in arrears) 8,000 7,000 6,000 R million Stage 3 (More than 3 months in 5,000 10,364 arrears and legal status (Excluding 1,003 8,440 expected recoveries receivable)) 4,000 6,715 3,000 Provison for doubtful debts 2,000 4
Slide 41: Future
@) cCAPITEC
Slide 42: 2020 Focus
Future 2020 Focus Digital and Artificial intelligence • Next generation of digital banking and payment solutions • New digital platform enabled by cloud technology • Advanced behavioural analytics enable client insights New products • New and improved products • Send cash People • Unlocking the pote
Slide 43: Thank you, any questions?
thank you any questions?
Slide 44: #BankBetterLiveBetter Capitec
#BankBetterLiveBetter qe CAPITEC capitecbank.co.za Capitec Bank is an authorised financial services provider (FSP 46669) and registered credit provider (NCRCP13) Capitec Bank Limited Reg. No.: 1980/003695/06