“I think they are a very decent set of numbers given the prevailing economic circumstances. They could have fared a lot worse as we’ve seen with some of their competitors,” Simon Fillmore, chief executive officer of private fund managing company, Independent Securities, told CNBC Africa on Wednesday.
Capitec[DATA CPI:CAPITEC.], which currently has over 5 million active users, reported headline earnings increase of 39 per cent from 700 million rand to 971 million rand and declared an interim dividend of 203 cents.
Net transaction fee income grew by 54 per cent to 899 million rand and now represents 30 per cent of the group’s net banking income while value of loans advanced decreased by 26 per cent to 9.5 million rand.
According to Fillmore, the group’s business model, which consists of funding, credit rules and provisioning, has worked well for them and as long as they stick to it, they will be able to maintain growth levels despite the decline in value of loans.
“You cannot look at the business in a single snap shot, it’s about the processes. In provisioning for instance, we see that Capitec is quite aggressive. A debt that is outstanding for longer than 90 days, they write off the full balance of that loan,” he explained.
“As long as those aspects in their business model are in place, then the integrity of the business remains sound. They just need to constantly apply that formula and realise that as the business moves through different business cycles, you are going to see results like this where the loan impairments does increase quite significantly.”
Despite the economic slowdown placing cost pressures on consumers, Capitec believes that it might prove to work in their favour as consumers reconsider their banking costs and opt to switch to a more affordable bank, such as Capitec.
Also, from an investment perspective, Fillmore stated that because the Capitec share price-earnings (PE) ratio has decreased over the past 18 months, most of the risk has been taken off the share.
“The PE rating for Capitec share over the last 18 months has taken some risk off the share,” he added.
This will prove to be attractive to investors that trade on the Johannesburg Stock Exchange.
According to recent reports, Capitec CEO, Riaan Stassen is set to retire at the end of 2013 and will be succeeded by Gerrie Fourie who is currently an executive member of Capitec’s management team.
Future prospects for the bank are to focus on providing a low cost banking solution as well as unsecured credit lending to consumers.
“Despite South Africa's medium-term challenges, we remain excited about the future and the opportunities available to us. Unsecured credit is here to stay and, for most, the need for a low-cost banking solution is a necessity. Our management approach will remain vigilant, cautious and responsible regarding the management of our clients' money,” said the group in a statement.