Capitec Bank Holdings Limited · JSE:CPI
Capitec Bank — H1 2020 Earnings Presentation
37 slides from Capitec Bank's earnings presentation, August 2019
Slide 1: Interim Financial Results
Interim Financial Results August 2019
Slide 2: The bank for all South Africans
Key indicators Drivers of growth • Brand acceptance The • Changing client behaviour bank • Strong credit performance for all • Successful Capitec funeral plan South Africans 2
Slide 3: Key performance indicators
Key performance indicators Headline earnings up by 20% 6 000 27 28 28 28 27 27 26 5 292 26 5 000 26 24 4 461 4 000 Return on equity (%) 22 Headline Earnings (R‘ million) 3 793 20 3 000 2 943 18 2 461 2 000 2 046 16 1 754 14 1 000 12 - 10 Aug 16 2017 Aug 17 2018 Aug 18 2019 Aug 19 3
Slide 4: Key performance indicators
Key performance indicators Profitability Aug 19 (%) Feb 19 (%) Aug 18 (%) Net transaction fee and funeral income to net income 46 45 47 Net transaction fee and funeral income to operating expenses 91 87 90 Return on equity 28 27 28 Cost-to-income ratio 40 39 38 Credit loss ratio 7.2 8.6 10.2 Earning
Slide 5: Landscape
Landscape Focus on growth
Slide 6: South African landscape
South African landscape Focus on growth • Education – 43% of all adults have a matric qualification – 1.2 million started grade 1 in 2005 • 36% passed matric in 2016 • 13% bachelor pass • 4.5% (55 000) finished matric maths with > 50% • Employment – 38.4 million people of working age (15 to 64 years
Slide 7: South African landscape
South African landscape Focus on growth 1996 2018 Change (‘000) (‘000) (%) Households (1) 9 060 16 671 84.0 Housing - Formal (1) 5 794 13 522 > 100.0 - Informal (1) 1 453 2 184 50.3 - Traditional (1) 1 644 831 (49.5) Average number of people in household (1) 4.5 3.4 (23.4) Number of mortgages (2008Q
Slide 8: Capitec landscape
Capitec landscape Expanding footprint and client service • Branch network – 834 active branches – 122 with ‘branch-of-the-future’ layout • Cashiers replaced by Duel Note Recycler (DNR) ATMs (up to 4 per branch) • Increased number of work stations – 21 new branch openings planned • ATM & DNR’s – 2 19
Slide 9: Banking
Banking Personal service and simplified digital banking
Slide 10: Banking: Active clients up by 20% to 12.6 million
Banking Active clients up by 20% to 12.6 million • Acquiring on average 200 000 clients per month since Jan 19 • Banking clients with stable inflows, remote banking, card purchases and debit orders – 3.5 million (up by 15%) – More than 104 000 new banking clients in Aug 19 • Credit clients – 1.1 mil
Slide 11: Omni-channel approach to client service
Banking Omni-channel approach to client service Digital Branch 6.8 million clients Overlap 6.0 million clients (up 45%) 4.5 mil (up 29%) 2.9m app users (up 61%) Self-service terminal’s 807 (up 5%) 4.7m USSD users (up 21%) Client engagement 11
Slide 12: Digital banking creates capacity
Banking Digital banking create capacity • Total transaction volume – Increased by 30% • Lowering of banking fees – Saved clients R227 million • Volume shift – Branch to digital – Own ATM to Saswitch – Reduction in debit order disputes • Results of the above – 12% growth in net transaction fee income
Slide 13: Digital efficiencies creating additional branch capacity
Banking Digital efficiencies creating additional branch capacity 2016: Branch vs Remote 2019: Branch vs Remote workload (minutes) workload (minutes) Branch 25% Branch 43% Remote 57% Remote 75% 13
Slide 14: Changing behaviour from cash to card
Banking Changing behaviour from cash to card (% cash) % Cash vs Card - Value % Cash vs Card - Volume Average inflows Aug 18 Aug 19 Aug 18 Aug 19 R1 – R2 999 70 68 45 41 R3 000 - R7 499 73 71 43 40 R7 500 – R14 999 66 64 36 33 R15 000 – R29 999 56 53 28 26 > R30 000 46 43 22 21 Grand Total 64 62 37 3
Slide 15: New solutions
Banking New solutions Send Cash launched (15 April 19) • From App or USSD to retail stores • 1.4 million transactions since launch • R618 million since launch Immediate EFT payments (Real time clearing) • Reduced price from R10 to R8 in Mar 19 • 32.8% share of current market (outgoing transactions)
Slide 16: Insure
Insure One plan, more cover
Slide 17: Capitec Funeral Plan
Insure Capitec Funeral Plan Up to R100 000 funeral cover -Up to 21 dependents • Over 1 million policies issued since inception -Double accidental death (100 000 per month for the last 2 months) • Collection rate of 79% benefit • Current on book rate of 67% (based on policies issued until Jul 19) -No
Slide 18: Save
Save Let your money make money
Slide 19: Save: Retail deposits of R81.4 billion
• From 4.75% to 8.55% interest Save • R2.3 billion earned by clients • Retail deposit market share is 7.9% Retail deposits of R81.4 billion (23% increase) 90 30 Retail Fixed 80 Up 21% 26 70 25 60 23 22 Funding (R’ billion) 18 51 50 16 45 41 40 30 34 35 Retail Call 27 Up 24% 30 20 10 8 8 7 6 6 5 - 4
Slide 20: Credit: Focus on higher income growth
Credit Focus on higher income growth
Slide 21: Credit Market – NCR
Credit Market – NCR Credit granted per category 180 000 (0.3%) 160 000 4% 140 000 21.6% 120 000 Credit granted (R’ million) 100 000 20.9% 80 000 60 000 40 000 20 000 - Mortgage Secured credit Unsecured Credit facility Source: NCR 2019Q1 report 2017 2018 2019 21
Slide 22: Unsecured credit granted per income band
Credit Market – NCR Unsecured credit granted per income band 90 000 80 979 80 000 70 000 Unsecured debt granted (R’ million) 62 835 60 000 54 215 50 000 45 850 40 000 30 000 20 936 19 793 20 000 17 494 17 852 17 998 17 785 14 357 15 848 10 000 10 368 9 322 9 570 8 700 - 2015 2016 2017 2018 2019 R0 -
Slide 23: Role of unsecured credit
Credit Role of unsecured credit Purpose of unsecured lending (internal data) % Home and home improvements 61.1 Debt consolidation 12.6 Furniture 3.9 Education 1.7 Family 0.1 Subtotal 79.4 Other/consumption 20.6 Total 100.0 23
Slide 24: Maturity of models & model delivery
Credit Maturity of models & model delivery Dynamic Data Modelling Identify pockets of optimal Lowest Arrears and Analytics Risk-Reward opportunities Investment in Improve Credit Card Granting Client Quality Credit Delivery Team Personalised Client Offers – Better Behavioural Scoring Credit Card Term
Slide 25: Credit – Term loans
Credit – Term loans Continued focus on reducing cost of credit Term Loan • Average interest rate down from 24.4% to 23.6% • 25% of sales are at 20% ROE • 58.5% of sales over shorter period or at lower value than max (Aug 18: 50.9%; Feb 19: 56%) 25
Slide 26: Competitive pricing vs major unsecured credit providers
Credit – Term loans Competitive pricing vs major unsecured credit providers 38% 36% Weighted average cost of credit 34% 32% 30% 28% 26% May 18 Aug 18 Nov 18 Feb 19 May 19 Aug 19 CP 1 CP 2 Capitec CP 3 CP 4 CP 5 CP 6 Source: Compuscan 26
Slide 27: Focus on higher income market
Credit – Term loans Focus on higher income market (loans granted) 100% 90% 22% 24% 29% 33% 80% 40% 41% 48% 47% 70% 60% 41% Percentage 40% 50% 41% 40% 40% 39% 38% 34% 34% 30% 14% 14% 12% 20% 12% 10% 10% 8% 8% 10% 23% 22% 19% 16% 11% 11% 10% 11% 0% 2016 Aug 16 2017 Aug 17 2018 Aug 18 2019 Aug 19 Gross
Slide 28: Focus on longer term loans
Credit – Term loans Focus on longer term loans 5 000 35% 4 500 35% 30% 4 000 33% 30% 3 500 25% Loans advanced (R’ million) 29% 27% 25% 3 000 2 500 2 000 1 500 10% 10% 10% 1 000 500 - 1-12 month 13-36 month 37-60 month 61-84 month Aug 18 Feb 19 Aug 19 28
Slide 29: Loan book clients' cash availability
Credit – Term loans Loan book clients’ cash availability Total book cash availability* Feb 18 (%) Aug 18 (%) Feb 19 (%) Aug 19 (%) More than 40% cash available 75 81 77 83 Between 39% and 21% cash available 14 11 13 10 Cash stress less than 20% cash available 8 5 7 5 No inflow 3 3 3 2 * Clients wher
Slide 30: Credit – Credit card: Focus on quality
Credit – Credit card Focus on quality • Transactional data utilized to enhance ‘thin-file’ offer • Credit cards from prime interest rate • Bigger limits for qualifying clients (up to R250 000) • Driving high income client acquisition 30
Slide 31: Credit card book
Credit – Credit card Credit card book Feb 18 Aug 18 Feb 19 Aug 19 Active Credit Card Clients 274 024 360 778 445 205 516 223 Size of Performing Book (R’ million) 2 014 2 659 3 382 4 189 % New Credit Clients 22.5% 24.0% 26.3% 28.5% Maximum Limit R80 000 R150 000 R150 000 R250 000(2) Minimum interest
Slide 32: Loan book breakdown
Credit – Book Loan book breakdown (R’ million) Aug 18 Aug 19 Difference (%) Up-to-date book 39 641 45 311 14.3 Up-to-date significant increase in credit risk (SICR) 3 485 3 284 (5.8) Up to 3 months in arrears 2 428 2 161 (11.0) Up-to-date that rescheduled from up-to-date (not yet rehabilitated) 963
Slide 33: Improved arrears performance
Credit – Book Improved arrears performance 3 000 14.0% 12.4% 12.2% 12.0% 2 500 10.2% Credit impairment charge (R’ million) 10.0% 2 000 Credit loss ratio 8.0% 7.2% 1 500 6.0% 1 000 4.0% 500 2.0% - 0.0% Aug 16 Aug 17 Aug 18 Aug 19 Credit impairment charge Credit loss ratio (annualised) 33
Slide 34: Future
Future Business banking and new products
Slide 35: Business Banking
Future Business Banking Mercantile Bank Transaction pending: • Regulatory approval • R3.2+ billion investment with ROE of 10% • 5 Business units offer strategic opportunities • Immediate investment in growth (Digital and IT) • 2 Year roadmap 35
Slide 36: New products
Future New products New Global One Card • Contactless enabled • Manage all limits separately on app • The best card for international travels New Banking App • Improved user experience • Better transaction categorization • New technology platform for scale and agile delivery Focus on culture • Peopl
Slide 37: Thank you
thank you =) CAPITEC capitecbank.co.za Capitec Bank is an authorised financial services provider (FSP 46669) and registered credit provider (NCRCP18) Capitec Bank Limited Reg. No.: 1980/003695/06
Capitec Bank Holdings — H1 2020 Earnings Presentation on 6ix