Capitec Bank Holdings Limited · JSE:CPI
Capitec Bank — FY2020 Earnings Presentation
38 slides from Capitec Bank's earnings presentation, February 2020
Slide 1: Financial Results
Financial Results February 2020
Slide 2: South African landscape: Covid-19 response
South African landscape Covid-19: our response Putting our Clear Communication people and our • Employees: create clarity and instill confidence clients first • Clients: Promote remote banking and provide financial health tips • Collaborating with regulators and industry bodies Credit • Credit treat
Slide 3: Covid-19 response: Operations
South African landscape Covid-19: our response Putting our Operations people and our • Continued payment to employees, suppliers and landlords clients first • Head office and client care enabled to work from home (>2 000 computers) • 50% of branches open and consultants rotate in shifts to allow for
Slide 4: Covid-19: the economy
South African landscape Covid-19: the economy Wave 1: lockdown – how long? • Severe economic impact • Contagion risk in high density areas • Social impact especially in low income/informal sector • Health services Wave 2: post-lockdown • Significant increase in unemployment • Need stimulus for busin
Slide 5: Covid-19: perspective
South African landscape Covid-19: perspective Positives from current economic conditions • Decisive leadership and action led by President Ramaphosa • Quick national response and co-operative spirit amongst political parties • Supporting the private sector as well as creating partnerships • ‘Thuma M
Slide 6: Regulatory changes to enhance capital conservation
South African landscape Regulatory changes to enhance capital conservation Prudential Authority issued guidance note 4 of 2020: • Ordinary dividend – no dividend will be paid in 2020 • No cash bonuses will be paid to executives • No increase in director fees and executive salaries 6
Slide 7: Key indicators
Key indicators Client growth and diversification
Slide 8: Drivers of growth 2019
Key indicators Drivers of growth 2019 • Focus on our fundamentals Top company • Changing client behavior award • Diversification • New opportunities - Sunday Times 8
Slide 9: Headline earnings up by 19% – Group
Key indicators Headline earnings up by 19% – Group Headline earnings (R’ million) 38 36 37 35 36 34 34 35 8,000 34 33 31 32 31 30 7,000 28 28 29 27 27 27 28 27 26 25 6,000 6,277 24 23 22 21 5,000 5,292 20 19 18 17 16 4,000 4,461 15 14 13 3,793 12 11 3,000 3,222 10 9 8 7 6 2,000 5 4 3 2 1 1,000 - 201
Slide 10: Net income by product – Retail bank
Key indicators Net income by product – Retail bank (R’ million) Feb 20 Feb 19 Change Net term loans (incl. credit facility and provisions) 10 108 9 519 589 Net transaction fee 7 359 6 464 895 Net credit card (incl. provisions) 613 264 349 Funeral 413 54 359 Net income (excl. investment income and in
Slide 11: Credit impairment charge – Retail Bank
Key indicators Credit impairment charge – Retail Bank Reported credit impairment charge (R’ million) Feb 20 Feb 19 Change % Gross credit impairment charge (1) 5 623 4 917 14 Bad debts recovered (2) (1 263) (467) >100 Net credit impairment charge 4 360 4 450 (2) Comparable credit impairment charge (R
Slide 12: Profitability ratios – Retail bank
Key indicators Profitability ratios – Retail bank Percentage Feb 20 Feb 19 Net transaction fee and funeral income to net income 47 45 Net transaction fee and funeral income to operating expenses 93 87 Return on equity 28 28 Cost-to-income 40 39 Credit loss 7.2 8.6 12
Slide 13: Mercantile Bank Limited
Key indicators Mercantile Bank Limited (Results for the 4-month period ended 29 February 2020) Credit impairment charge • R114 million (R47 million for the 12-month period ended 31 Dec 2018) • Adopted Capitec’s credit loss provision philosophy • Annualised credit loss ratio of 1.1% (31 Dec 2018: 0.5
Slide 14: Focus on our fundamentals
Retail bank Focus on our fundamentals Simplified banking Omni-channel service Affordable credit Developing people Social responsibility
Slide 15: Simplified banking
Simplified banking 13.9 million active clients (up 22%) Quality bank clients Insure clients • 51% active clients between 16 • 1.1 million policies sold this year and 35 years old = high potential • 900k active clients with in-force or • 3.6 million banking clients with pending in-force policy stable
Slide 16: Omni-channel business model
Omni-channel business model Average monthly clients Digital Branch 6.7 million clients (up 29%) 7.8 million clients (up 17%) Feb 20: Feb 20: - App users: 3.3 million (up 49%) - Branches: 852 (up by 12) - USSD user: 4.9 million (up 19%) - ATM/DNR 5 644 (up 13%) New app launched in October 2019 Client
Slide 17: Credit market - NCR
Credit market - NCR Growth in unsecured market and > R15k gross income band (12 months ended 31 December 2019) Credit granted by category (R' billion) Unsecured and short-term credit granted by gross income (R' billion) 180 90 171 170 160 167 85 162 80 157 79 150 140 70 120 60 117 60 109 100 50 80 8
Slide 18: Affordable credit: shift to stable income
Affordable credit Shift to clients with stable income (Gross loan sales for month of Feb per net income band) Contribution to total gross loan sales (%) 60 51 50 47 41 41 40 40 40 34 34 30 29 23 22 20 17 14 13 11 10 10 10 8 8 7 0 <R7 500 R7 500 - R10 000 R10 000 - R20 000 >R20 000 Feb 16 Feb 17 Feb
Slide 19: 'CEO' loans in the best interest of our clients
Affordable credit ‘CEO’ loans in the best interest of our clients Clients can decide on the following: • Lower installment; • Preferred interest rate; • Term that suits his/her requirements ‘CEO’ loan combinations taken up (%): Feb 20 Feb 19 Feb 18 Lower term and lower value 40. 33. 28. Max term and
Slide 20: Continued drive to lower interest rates
Affordable credit Continued drive to lower interest rates Weighted average annual interest rate (%) 30 28.12 27 27.70 26.02 24.74 25.14 23.82 24 23.71 22.63 21 19.11 18.32 18 17.45 15 2017 2018 2019 2020 Term Loan Credit Card Combined 20
Slide 21: Improved impairment charges
Affordable credit Improved impairment charges Net credit impairment charge Credit loss (R’ million) (%) 6,000 14 11.9 11.4 11.4 12 5,000 10 4,000 8.6 8 7.2 3,000 5,121 5,280 6 4,401 4,450 4,360 2,000 4 1,000 2 - 0 2016 2017 2018 2019 2020 Net credit impairment charge (R' million) Credit loss ratio 2
Slide 22: Developing people
Developing people Our employees, the core of “My growth took place throughout the 18 months our delivery journey. I was challenged, I was molded and I was reminded of my purpose. I also had the • 14 029 employees (up by 255) opportunity to give back (as part • 8 917 female employees in total of our
Slide 23: Social responsibility
Social responsibility Making a difference in South Africa Investment (R’ million) Consumer education 26.3 The Capitec Foundation 33.1 Donations 5.0 Enterprise development 11.0 Skills development 35.4 Supplier development 49.9 Total 160.7 23
Slide 24: Changing behaviour
Changing behaviour Digital adoption Growing savings Rewards for good behaviour
Slide 25: Strong digital adoption
Strong digital adoption Total transaction volume up 31% Pricing strategy: reduced digital/debit orders fees, increased branch fees Digital • 327 million app (up 69%) • 453 million USSD (up 16%) • 3.7 million Send Cash (first full year) Branch Card 43.5 million (down 11%) • 796 million card payments
Slide 26: Growing saving
Growing saving Retail deposits of R87.5 billion • From 3.5% to 9.0% interest • R4.7 billion earned by clients Funding • Retail deposit market share is (R’ billion) 8.1% in Jan 2020 100 90 Retail Fixed 80 Up 23% 32 70 26 60 23 50 18 40 14 Retail Call Up 22% 30 55 45 24 30 35 20 10 10 8 6 5 3 - 2016 2
Slide 27: Rewards for good banking behaviour
Rewards for good banking behaviour Giving back to help clients bank better Type of saving/benefit (R' million) Feb 20 Savings to clients through reduced digital bank fees 474 Interest paid on savings 2 289 Savings created through reduced credit pricing (ROE concessions) 153 Savings on data through z
Slide 28: Diversification
Diversification Credit card Funeral plan
Slide 29: Credit card
Credit card 30% growth in clients Feb 20 Feb 19 Feb 18 Active credit card clients 578 488 445 205 274 024 Size of performing book (R’ million) 5 375 3 382 2 014 % New credit clients 30.7% 26.3% 22.5% Maximum limit R250 000 R150 000 R80 000 Minimum interest rate 9.75% 10.25% 14.5% Market share – bala
Slide 30: Funeral plan
Funeral plan One plan, more cover • More than 1.1 million policies issued over last 12 months • Simple and transparent solution for client needs • Competitive pricing results in savings to our clients • 86% of our polices were issued in our branches this year • Collection rate of 82% • Current polic
Slide 31: Prospects
Prospects Impact of COVID-19 New access facility Purpose lending Business banking Our people
Slide 32: Impact of COVID-19: how we see the future
Impact of COVID-19 How we see the future • Focus on our long term business model – Digital innovation – Frictionless cash-less payments – Agility and flexible to respond to client needs – Fundamental - low cost banking • Short term effect – Retail – Business 32
Slide 33: New credit solution - access facility
New credit solution - access facility More flexibility and the end of short-term products Product Client Benefits • Lifetime product • Apply once • Up to R250 000 • Choose the repayment period or • Monthly fee charged only when used monthly instalment • Interest rates of as low as 13.45% • Manage it
Slide 34: Purpose lending
Purpose lending Unsecured vehicle finance • In partnership with We Buy Cars – Our first client: VW Touareg 3.0 V6 TDI 2010 – R189 950 – 60 month – 16.7% • Dealerships 34
Slide 35: Business banking: market potential
Business banking Market potential • 5 000 formal large companies • 131 008 formal medium-sized • 382 778 formal small • 430 981 formal micro & very small • 2 million informal businesses (micro, small and medium enterprises) Informal business landscape 35 Source: IFC and World Bank report on The Unse
Slide 36: Business banking: two year build strategy
Business banking Two year build strategy • Deal concluded in Nov 2019 • 5 business units – Business – 4 000 clients – Merchant services – 28 000 merchants – Payment services – 370 clients, 4 million transaction per month – Forex – 4 600 active clients, 11 500 transactions per month – Rental finance
Slide 37: Our people
Our people Unlock potential • Agility to adjust to the new post-COVID-19 reality • Focus on the Capitec culture with a clear balance between people, client and delivery • New campus enables collaboration, efficiency and creativity • Successful SAP implementation • Quick adoption of remote working an
Slide 38: Thank you
thank you any questions?