Capitec Bank Holdings Limited · JSE:CPI

Capitec Bank — H1 2019 Earnings Presentation

43 slides from Capitec Bank's earnings presentation, August 2018

  1. Slide 1: Interim results presentation - August 2018

    Interim results presentation - August 2018

  2. Slide 2: Our focus is people

    Our focus is people. We enable clients to improve their financial lives through a personalised experience that is consistently simple, affordable and easily accessible. We inspire employees to unlock their full potential through a culture that is entrepreneurial and passionate about growth. The resu

  3. Slide 3: Key Indicators

    Key Indicators

  4. Slide 4: Key indicators: headline earnings +20%

    Key indicators Headline earnings +20% in H1 2019 5,000 27 27 27 27 28 4,500 26 4,461 26 4,000 26 26 24 3,500 3,793 22 3,000 3,222 R’ Millions 20 2,500 2,461 18 2,000 2,046 1,500 1,754 16 1,469 1,000 14 500 12 - 10 Aug 15 2016 Aug 16 2017 Aug 17 2018 Aug 18 Return on equity (%) © Capitec Bank Limited

  5. Slide 5: Key indicators: drivers of growth

    Key indicators Drivers of growth • Continued focus – Simple, affordable solution delivered through great service to make clients feel in control • Strong client growth • Move towards digital/self-service channels • Credit decisions • Credit card © Capitec Bank Limited 5

  6. Slide 6: Change in key indicators

    Key indicators Change in key indicators Income statement line 2018 2018 Difference 2017 Difference (R’ millions) adjusted (*) (%) Interest income 7 606 8 048 442 7 759 4 Net loan fee and insurance income 693 835 142 640 30 Net provisions for doubtful debts (2 542) (2 984) (442) (2 811) 6 charge Taxa

  7. Slide 7: Cost-to-income

    Key indicators Cost-to-income (%) Constant on gross basis (income excludes provision for doubtful debts charge) 39 38 38 37 36 36 36 36 Percentage 36 35 34 34 34 34 33 32 Aug 15 2016 Aug 16 2017 Aug 17 2018 Aug 18 Adjusted © Capitec Bank Limited 7

  8. Slide 8: Net transaction fee income to net income

    Key indicators Net transaction fee income to net income (%) 50 47 45 40 41 40 37 37 35 32 33 30 Percentage 25 20 15 10 5 0 Aug 15 2016 Aug 16 2017 Aug 17 2018 Aug 18 © Capitec Bank Limited 8

  9. Slide 9: Net transaction fee income to operating expenses

    Key indicators Net transaction fee income to operating expenses (%) 90 90 81 80 76 72 70 70 66 61 60 Percentage 50 40 30 20 10 - Aug 15 2016 Aug 16 2017 Aug 17 2018 Aug 18 © Capitec Bank Limited 9

  10. Slide 10: South African landscape

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  11. Slide 11: South African landscape: positive signs

    South African landscape Positive signs • President Ramaphosa • Re-instating key competent ministers (e.g. Nene, Gordhan) • SARS commissioner replaced • SOE boards reviewed • Change in Head of NPA • Foreign investment © Capitec Bank Limited 11

  12. Slide 12: Population in context

    South African landscape Population in context Million Total population 57.7 Social grants 17.5 Total employment 16.3 Formal employment 10.2 Tax payers 7.5 Income over R 20,000 p.m. 2.0 Income over R 40,000 p.m. 0.4 Source: STATS SA, SASSA, SARS, Tradingeconomics.com and Establishment Survey © Capite

  13. Slide 13: Capitec clients compared to SA population

    South African landscape Capitec clients compared to SA population South African population Age SA Capitec Capitec % of (per age group) Group (‘000) (‘000) population 3% 5% 0 – 14 17,044 217 1.3 0-14 30% 15-19 15 – 19 4,734 477 10.1 20-34 20 – 34 15,851 4,928 31.1 26% 35-54 35 – 54 15,208 3,770 24.8

  14. Slide 14: Banking

    Banking

  15. Slide 15: Active clients up 15% to 10.5 million

    Banking Active clients up 15% to 10.5 million 12.00 10.52 10.00 9.18 7.92 8.00 6.34 Millions 6.00 4.87 4.19 4.00 3.61 3.02 2.00 1.25 1.43 1.42 1.31 - Credit Banking Total Aug 15 Aug 16 Aug 17 Aug 18 © Capitec Bank Limited 15

  16. Slide 16: Transaction volume growth of 25%

    Banking Transaction volume growth of 25% 600.00 Up 27% 500.00 Self-help transactions 400.00 Millions 300.00 Up 14% 200.00 ATM 100.00 Down 4% Branch - Aug 15 2016 Aug 16 2017 Aug 17 2018 Aug 18 Branch ATM & DNR Withdrawal USSD\App\Card\Internet\SST\DNR Deposit © Capitec Bank Limited 16

  17. Slide 17: Self-service transaction volume

    Banking Self-service transaction volume 57% Card vs 43% Cash 84% Possible self-service vs - up from 54% branch transactions - 60% for August 2018 - up from 74% 1.8 million App users USSD transactions - up with 62% - up by 12% - 146 million transactions for the 6 - 313 million transactions for the 6

  18. Slide 18: Save

    Save

  19. Slide 19: Retail deposits

    Save R 66 billion in retail deposits 45,000 40,000 22% growth 35,000 30,000 15% growth R‘ millions 25,000 20,000 15,000 10,000 5,000 - Aug 15 2016 Aug 16 2017 Aug 17 2018 Aug 18 Retail call Retail fixed Wholesale © Capitec Bank Limited 19

  20. Slide 20: Insure

    Insure

  21. Slide 21: Funeral Plan

    Insure Funeral Plan • Launched – 21 May 2018 • Strong adoption through branch and app (78% vs 22%) • Benefits • Cover up to 21 dependents • Lower pricing • Waiting period waiver • Voluntary policy pause • Simple claims process • Transparent – puts the client in control © Capitec Bank Limited 21

  22. Slide 22: Funeral Plan: price and claims examples

    Insure Funeral Plan Price example: A recent client paid R845 per month for a competitor funeral plan. This client switched to Capitec and got the same cover for the same dependents for R338 per month. Claims example: © Capitec Bank Limited 22

  23. Slide 23: Credit

    Credit

  24. Slide 24: Improved consumer market

    Credit Improved consumer market 180 000 160 000 140 000 120 000 100 000 R’ millions 80 000 60 000 40 000 20 000 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Secured Credit Mortgage Unsecured and Short Term Credit Facility © Capitec Bank Limited 24

  25. Slide 25: Improved consumer market

    Credit Improved consumer market Mar-15 Mar-16 Mar-17 Mar-18 Credit active consumers (millions) 23.11 23.88 24.68 25.46 Current 42% 48% 48% 50% 1-2 months in arrears 13% 12% 12% 12% 3+ months in arrears 22% 22% 22% 22% Adverse listings 12% 10% 11% 11% Judgments and administration orders 10% 8% 6% 5%

  26. Slide 26: Unsecured and short term credit market

    Credit Unsecured and short term credit market (granted by income group for 12 months to Mar 18) (R’ million) 2016 2017 2018 Gross Income Difference Market Market Market R 0 – R 5 500 13 457 11 085 8 251 (2 834) R 5 501 – R 10 000 17 846 15 731 14 806 (925) R 10 001 – R 15 000 17 998 17 785 17 852 67

  27. Slide 27: Applications with additional income

    Credit Applications with additional income 30,000 25,000 20,000 Number of clients 15,000 10,000 5,000 - Aug 16 Nov 16 2017 May 17 Aug 17 Nov 17 2018 May 18 Aug 18 <R7,500 R7,500 - R10,000 >R10,000 © Capitec Bank Limited 27

  28. Slide 28: Applications with overtime

    Credit Applications with overtime 20,000 18,000 16,000 14,000 Number of clients 12,000 10,000 8,000 6,000 4,000 2,000 - Aug 16 Nov 16 2017 May 17 Aug 17 Nov 17 2018 May 18 Aug 18 <R7,500 R7,500 - R10,000 >R10,000 © Capitec Bank Limited 28

  29. Slide 29: Applications with recurring income

    Credit Applications with recurring income 20,000 18,000 16,000 14,000 Number of clients 12,000 10,000 8,000 6,000 4,000 2,000 - Aug 16 Nov 16 2017 May 17 Aug 17 Nov 17 2018 May 18 Aug 18 <R7,500 R7,500 - R10,000 >R10,000 © Capitec Bank Limited 29

  30. Slide 30: Living expenses used vs. NCA minimum

    Credit Living expenses used vs. NCA minimum 150% 145% 140% 135% 130% Percentage 125% 120% 115% 110% 105% 100% 2016 Aug 16 2017 Aug 17 2018 Aug 18 Granting period Source: NCR © Capitec Bank Limited 30

  31. Slide 31: Applications outcome

    Credit Applications outcome 6 months ended Aug 17 (%) Feb 18 (%) Aug 18 (%) Application decline rate 67 72 70 Application approved: not taken-up 6 5 5 rate Application taken-up rate 27 23 25 Total 100 100 100 © Capitec Bank Limited 31

  32. Slide 32: Improved offering

    Credit Improved offering • 21% take up loans over shorter periods • 37% take up loans with an interest of 22.7% or lower • 20% ROE for lowest risk clients • Credit changes in key market sectors © Capitec Bank Limited 32

  33. Slide 33: Loan book clients' cash availability

    Credit Loan book clients’ cash availability Total book cash availability* Feb-17 (%) Aug-17 (%) Feb-18 (%) Aug-18 (%) More than 40% cash available 74 78 75 81 Between 39% and 21% cash available 14 12 14 11 Cash stress less than 20% cash available 7 6 8 5 No inflow 5 4 3 3 * Clients where loan instal

  34. Slide 34: Focus on higher income market

    Credit Focus on higher income market (loans granted) 100% 90% 80% 70% 60% Percentage 50% 40% 30% 20% 10% 0% Aug 15 2016 Aug 16 2017 Aug 17 2018 Aug 18 <R10,000 R10,000 - R20,000 >R20,000 © Capitec Bank Limited 34

  35. Slide 35: Focus on longer term

    Credit Focus on longer term (value of loans) 7,000 6,000 5,000 R’ millions 4,000 3,000 2,000 1,000 - Facility & Credit Card Short Medium Long (1 - 12 months) (13 - 48 months) (49 - 84 months) Aug-15 Aug-16 Aug-17 Aug-18 © Capitec Bank Limited 35

  36. Slide 36: Credit card

    Credit Credit card Measure Aug-17 Feb-18 Aug-18 Active Credit Card Clients 190 577 274 024 360 778 Size of Performing Book (R’ millions) R 1 332 R 2 014 R 2 659 % New Capitec Clients 19.5% 22.5% 24.0% Maximum Limit R 80 000 R 80 000 R 150,000 Minimum interest rate 14.50% 14.50% 10.00% Market share -

  37. Slide 37: IFRS main differences

    Credit IFRS 9 main differences Status of book IAS 39 IFRS 9 Up-to-date book IBNR emergence period of 3 months 12 month ECL SICR applied – lifetime ECL Up-to-date book 12 month forward-looking provision Lifetime ECL rescheduled but not rehabilitated * Arrears book Lifetime ECL Lifetime ECL Write-off

  38. Slide 38: IFRS book comparison

    Credit IFRS 9 book comparison (6 months ended) Feb 18 vs Rounded (R’ millions) Stage Feb 18 Aug 18 Aug 18 (%) Up-to-date 1 37 165 39 461 7 Up-to-date with SICR and applied for debt review > 6 months 2 4 401 3 485 (21) Total up-to-date 41 566 43 126 4 Arrears – up to 1 month in arrears 2 1 003 911 (9

  39. Slide 39: Prudent provisioning: IAS vs IFRS9

    Credit Prudent provisioning: IAS 39 vs IFRS9 (Including write-off ) Ratio: 107% Ratio: 120% Ratio: 115% Ratio: 121% Coverage ratio (excl. bad debt write-off) 12,000 Ratio: 105% Ratio: 112% Ratio: 108% Ratio: 118% Coverage ratio (incl. bad debt write-off) 10,000 Rescheduled from up-to-date within 6 m

  40. Slide 40: Future

    y POSITIVE IDENTIFICATION = 2 at —

  41. Slide 41: Future: Cream Finance

    Future Cream Finance • One brand strategy • Improved performance • Further investment tranche © Capitec Bank Limited 41

  42. Slide 42: 2018 Focus

    Future 2018 Focus • Leadership and people development • Increased resources and investment in digital • New systems and cloud solutions drive scale and agility • Scalable way of work • Paperless • Improved Merchant Solutions • Mercantile Bank © Capitec Bank Limited 42

  43. Slide 43: © Capitec Bank Limited

    © Capitec Bank Limited 43

Capitec Bank Holdings — H1 2019 Earnings Presentation on 6ix