Capitec Bank Holdings Limited · JSE:CPI
Capitec Bank — H1 2023 Earnings Presentation
35 slides from Capitec Bank's earnings presentation, August 2022
Slide 1: Interim financial results
Interim financial results August 2022
Slide 2: Hello
Hello Please send any questions to: InvestorRelations@capitecbank.co.za Questions will be answered at the end of the presentation.
Slide 3: Changing economic environment
Changing economic environment Global and domestic factors
Slide 4: Economic environment
Economic environment Global and domestic uncertainty posing downside risk to the economic outlook Global uncertainty: • ‘Stagflation’ • Continued impact of Russia-Ukraine war and related tensions in Europe • Supply constraints due to China’s hard lockdowns • Aggressive tightening of US and European
Slide 5: Economic environment
Economic environment Despite the current state, the South African economy proved to be resilient The resilience was underpinned by: Terms of trade (including gold) (Seasonally adjusted, 2015=100) • Favourable terms of trade and exposure to US Dollar 128.9 • Positive current account balance from Q3 2
Slide 6: Economic environment
Economic environment The South African consumer showing strain due to deteriorating economic conditions Indicators showing strain: Debt-to-disposable income of households • Debt-to-disposable income ratio stable, but under pressure due to: 77.9 - Rising interest rates resulting in higher debt servic
Slide 7: Financial overview
Financial overview Capitec Group
Slide 8: Headline earnings increased by 17%
Headline earnings increased by 17% to R4 665 million Consistent performance shows resilience and quality of earnings Interim ordinary dividend: 1 400 cents per share (up 17%) Feb 2022 ROE: 5 000 5-year CAGR: 17% 26% ROE: 27% 4 000 Headline earnings (R’ million) ROE: 28% 3 000 ROE: 27% 4 665 2 000 3
Slide 9: Key financial performance indicators
Key financial performance indicators Group’s operating profit before credit impairments increased by 24% to R8.8 billion Operating profit before credit impairments Net transaction, net foreign currency 1 (R’ billion) and funeral plan income to operating expenses (%) 8.8 108 6.0 6.7 7.1 99 98 5.8 90
Slide 10: Key drivers of results
Key drivers of results Credit Insure Transact Operating expenses
Slide 11: Retail credit
Retail credit Agile management of granting Loan sales and disbursements Higher-income new clients Gross loans and advances Prudent provisioning
Slide 12: Agile management of granting
Agile management of granting Higher number of enquiries reflect demand for credit Growth: 3 000 +47% 2 539 2 500 Number of credit enquiries received (‘000) Growth: 2 000 +12% 1 813 1 828 1 696 1 725 1 636 1 458 1 500 1 356 990 1 000 870 Growth: +51% 500 431 289 239 285 202 - Capitec App Web Consulta
Slide 13: Agile management of granting
Agile management of granting More stringent credit granting criteria in reaction to elevated levels of cash stress 5-year view Financial reporting period (6-month period ended) 40 40 Retail credit take-up rate (%) Retail credit take-up rate (%) 30 28.4 30 27.2 24.4 24.8 24.5 25.0 23.0 23.1 21.0 20.5
Slide 14: Loan sales and disbursements grew by 35% to R26.5 billion
Loan sales and disbursements grew by 35% to R26.5 billion Attributable to higher demand and our return to pre-pandemic risk appetite Book growth: R480 million upfront credit impairment charge 30 000 (12-month expected credit loss) R26.5 billion 25 000 Loans sales and disbursements (R’ million) 6 299
Slide 15: Higher-income new clients
Higher-income new clients Retail credit granted to new clients earning > R50 000 grew by 49% 120 000 100 000 9 878 Number of new retail credit clients 80 000 6 196 6 623 45 286 3 727 60 000 28 958 28 564 18 989 3 253 40 000 15 650 46 350 47 280 1 20 000 43 188 38 415 25 654 - Aug 18 Aug 19 Aug 20 Au
Slide 16: Retail gross loans and advances
Retail gross loans and advances Access facility book grew to R19.8 billion within 3 years of launch 60 000 Growth: Gross loans and advances & interest income on loans (R’ million) +1% 50 000 40 000 Interest income on loans: 30 000 Lower growth due to delayed income recognition 50 317 50 957 Growth:
Slide 17: Retail gross loans and advances
Retail gross loans and advances Stage 1 book represents 63% of the total book, which grew by 18% to R77.9 billion 70 60 50 % of gross loans and advances 40 30 61 63 63 20 10 21 19 21 18 18 16 - Stage 1 Stage 2 Stage 3 (Up-to-date book) (Up-to-date with SICR and ADR > 6 months, (2 - 3 months in arrea
Slide 18: Retail provision for expected credit losses
Retail provision for expected credit losses Prudent provisioning – ECL coverage remains above pre-pandemic levels 25 000 30 28.0 26.5 23.5 25 20 000 21.3 Total provision for credit (R’ million) Expected credit losses (ECL) coverage 18.4 20 15 000 15 10 000 17 766 17 484 18 299 10 12 849 5 000 9 471
Slide 19: Retail insurance
Retail insurance Credit life insurance Funeral plan
Slide 20: Net credit life insurance income up by 60% to R912 million
Net credit life insurance income up by 60% to R912 million Supported by the normalisation of claims to pre-pandemic levels, while insured book grew by 14% 1 000 IBNR provision: 20 000 Net credit life insurance income Positively impacted by better claims experience 900 Total number of claims paid 18
Slide 21: Funeral plan income up by 72% to R629 million
Funeral plan income up by 72% to R629 million Attributable to growth in active book supported by improved claims experience 700 88 Active book grew to 2.0 million clients within 5 years 2.0 thousand million 600 Drivers of performance: • Active policies up by 34% 500 • 12-month persistency ratio: 61%
Slide 22: Transact
Transact Growth in digital clients Transaction volumes shift to digital Net transaction income
Slide 23: Digital banking clients grew by 21% to 10.8 million
Digital banking clients grew by 21% to 10.8 million Retail transaction volumes supported by growth in quality banking clients and digital users 15 Active clients 19.0 million (up by 13%) Growth: +21% 12 10.8 Growth: Number of clients (‘ million) +30% 8.9 9 7.8 Growth: 7.3 6.8 + 16% 6.0 6 5.1 4.7 4.4
Slide 24: Shift from cash to digital and card transactions
Shift from cash to digital and card transactions Our focus is on making banking more affordable and accessible through digital innovation 1 500 Bank app transactions: 65% of total digital transactions (Aug 2021: 55%) Real Time Clearing (RTC): 1 200 28.5 million (up 63%) and 41% market share of issui
Slide 25: Retail net transaction income up by 9%
Retail net transaction income up by 9% to R5 209 million Muted growth driven by digital transactions attracting lower fees Growth: 8 000 +17% Transaction income 7 000 • Drivers of lower growth - Most digital fees remained flat 6 000 (but absorbed cost increases) Net transaction income (R’ million) -
Slide 26: Operating expenses
Operating expenses Investment in technology
Slide 27: Operating expenses
Operating expenses Growth in costs (excl. staff incentives) driven by our digital journal and migration to cloud 3 750 Cost-to-income: Improved to 40% (Aug 2021: 45%) Salaries (up by 12%) • Group headcount – 15 295 (up 3%) 3 000 2 805 • Drive to appoint IT and data specialists 2 494 Operating expens
Slide 28: Creating the future
Creating the future Digital banking Live Better Business bank Capitec Connect Foundations for growth
Slide 29: VIDEO
VIDEO
Slide 30: Digital banking
Digital banking Investment enables scale, efficiency and better client experience Investment: R213 million with 2 377 system enhancements delivered Scale: 8.9 million digital and card payments every day • Peak system transactions of 5 061 per second Efficiency: Facial biometrics on app for onboardin
Slide 31: Live Better
Live Better The fastest-growing rewards programme and biggest in financial services in SA 8.5 million clients registered at the end of Aug 2022 Bank Better cash back of R97 million drives successful behaviour change • From cash to card payments and online shopping • Better repayment behaviour on cre
Slide 32: Business bank
Business bank Headline earnings increased by 60% to R201 million for the 6-month period Our vision is to provide personalised digital business banking in a scalable way to help entrepreneurs and SMEs grow. On track for the rebrand of Mercantile Bank to Capitec Business in the next financial year. Ke
Slide 33: Capitec Connect
Capitec Connect Disrupting prepaid data and airtime in the best interest of our clients Why? 8 million Capitec clients buy prepaid mobile on our channels every month • More than 30% market share of prepaid sales • Data and airtime are expensive and complicated, and bundles expire • Average prepaid p
Slide 34: Foundations for growth
Foundations for growth Ensuring depth in leadership and technology that enables growth New leadership structures provide for the development of young and diverse talent across retail, business and shared services. Data and Technology migration to software-as-a-service and cloud services enable bette
Slide 35: Thank you
Thank you @ cCAPITEC
Capitec Bank Holdings — H1 2023 Earnings Presentation on 6ix