| Wed 1 Oct 2008, 9:00 | | CPI/CPIP - Capitec Bank Holdings Limited - Unaudited financial results for the |
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CPI CPIP
CPI
CPI/CPIP - Capitec Bank Holdings Limited - Unaudited financial results for the
six months ended 31 August 2008
Capitec Bank Holdings Limited
Registration number: 1999/025903/06
Registered bank controlling company
JSE ordinary share code: CPI ISIN: ZAE000035861
JSE preference share code: CPIP ISIN: ZAE000083838
UNAUDITED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2008
* Headline earnings per share up 22.2%
* Interim dividend per share 30 cents
* Return on equity 22%
* Capital adequacy ratio 45%
* Arrears up 23%
* Clients 1.58 million
Six Six Twelve
months months months
August August Growth February
2008 2007 % 2008
PROFITABILITY
Income from banking
operations Rm 916 590 55.3% 1 315
Net loan impairment
expense Rm (228) (87) 162.1% (231)
Banking operating
expenses Rm (504) (355) 42.0% (763)
Non banking operations Rm 3 1 3
Tax Rm (58) (44) 31.8% (95)
Preference dividend Rm (10) (8) 25.0% (17)
Earnings attributable to
ordinary shareholders
Basic Rm 119 97 22.7% 212
Headline Rm 119 97 22.7% 212
Cost to income ratio
banking activities % 55 60 58
Return on ordinary
shareholders equity % 22 21 22
Earnings per share
Attributable cents 145 119 22.3% 259
Headline cents 145 119 22.2% 259
Diluted attributable cents 142 114 24.7% 250
Diluted headline cents 142 114 24.6% 251
Dividends per share
Interim cents 30 25 20.0% 25
Final cents 75
Dividend cover x 4.8 4.7 2.6
ASSETS
Total assets Rm 4 018 2 339 71.8% 2 936
Net loans and advances Rm 2 662 1 225 117.3% 2 019
Cash and cash
equivalents Rm 1 043 571 82.7% 618
Investments Rm 17 267 (93.6%) 14
Other Rm 296 276 7.2% 285
LIABILITIES
Total liabilities Rm 2 739 1 207 126.9% 1 719
Deposits Rm 2 502 1 055 137.2% 1 528
Other Rm 237 152 55.9% 191
EQUITY
Shareholders` funds Rm 1 279 1 132 13.0% 1 217
Capital adequacy ratio % 45 49 36
Net asset value per
ordinary share cents 1 358 1 193 13.9% 1 297
Share price cents 2 950 3 700 (20.3%) 3 900
Market capitalisation Rm 2 443 3 031 (19.4%) 3 195
Number of shares in issue `000 82 798 81 928 1.1% 81 928
Share options
Number outstanding `000 7 468 5 679 5 159
Average strike price cents 2 723 1 650 1 815
Average time to
maturity months 35 27 24
Charge on settlement Rm 15 35 (57.1%) 48
OPERATIONS
Branches 346 307 12.7% 331
Employees 3 190 2 505 27.3% 2 800
Active clients `000 1 583 1 188 33.2% 1 371
ATMs
Own 350 295 18.6% 328
Partnership 520 273 90.5% 437
Capital expenditure Rm 47 68 117
SALES
Loans
Value of loans advanced Rm 3 064 2 146 42.8% 5 162
Number of loans
advanced `000 1 725 1 570 9.9% 3 155
Average loan amount R 1 776 1 366 1 636
Gross loans and
advances Rm 2 898 1 347 115.1% 2 192
Loans past due (arrears) Rm 288 129 122.6% 247
Loans past due to gross
loans and advances % 9.9 9.6 11.2
Provision for doubtful
debts Rm 236 122 93.4% 173
Provision for
doubtful debts to
gross loans & advances % 8.1 9.1 7.9
Arrears coverage ratio % 82 94 70
Loan revenue Rm 933 558 67.3% 1 284
Loan revenue to gross
loans and advances % 32.2 41.4 58.6
Net loan impairment
expense Rm 228 87 162.1% 231
Net impairment expense
to loan revenue % 24.4 15.6 18.0
Net impairment to
gross loan book % 7.9 6.5 10.5
Net impairment expense
to repayments % 7.5 4.2 5.10
Deposits
Value of savings
deposits Rm 984 701 40.4% 842
Number of savings
clients `000 923 669 38.1% 783
Net transaction fee
income Rm 63 36 75.2% 79
MARKET ACCEPTANCE AND OPERATIONS
Our core bank offer is the most affordable, accessible and simplified in the
market. In the current economic climate, this has resulted in significant
growth in bank clients who deposit their salaries at Capitec Bank. This growth
is an indication of the acceptance of our unique banking model and the growing
confidence in the Capitec Bank brand.
We have grown our client base by 33% since last year to 1.58 million clients.
Our branch numbers have increased by 39, to 346 and we now employ 3 190 people.
We will maintain our position as price leaders in the market. Our pricing on
transactions is generally half that of other banks. We have in most instances
chosen to price our loans at levels below that prescribed in the National Credit
Act. Margins and profitability per product are therefore at the levels expected
for the longer term future.
INCOME AND EXPENSE ANALYSIS
Income from banking grew by 55% year-on-year to R916 million. Transaction
income now contributes R125 million to this figure and grew by 72% year-on-year.
This was as a result of our growing client base, the increasing use of debit
cards and our attractive transaction fee offering. Although expenses also
increased due to our ongoing expansion programme, the cost to income ratio
continued to decrease. Most of the additional branches were established during
the early part of 2008. This increased expenses disproportionately over the
first six months of this year, with only a small profit contribution by these
branches. All new branches are, however, growing rapidly and are profitable
within a few months. We expect the expense to income ratio to continue to
decrease as volumes pick up and our infrastructure is used more efficiently.
We are in the process of improving efficiencies in branches and further
standardising the paperless processes. This has the initial effect of increasing
expenses, but will deliver cost savings and improved capacity over the long
term.
LOANS ADVANCED AND IMPAIRMENTS
All our loans are at fixed rates which means clients are not exposed to interest
rate fluctuations on our loans. We continuously adjust our credit vetting
criteria to address the changing environment and to manage arrears and default
rates. We specifically applied more stringent criteria in this period to address
inflationary increases in the cost of living and reduced personal disposable
income due to down-scaling and retrenchments.
The value of loans advanced (sales) grew by 43% to R3.1 billion, whilst the
balance sheet gross advances grew by 115% to R2.9 billion. The main contributor
to the growth was the new 36 month loan product which was launched in October
2007. The 36 month product now amounts to 25% of our gross outstanding loan
book. Despite the fact that we have tightened our credit criteria, the other
medium term loan products, ranging from 12 to 24 months, also showed strong
growth and now comprise 57% of the gross outstanding loan book.
Loan revenue, consisting of interest, origination fees and monthly
administration fees, grew by 67% to R933 million. This growth is higher than the
growth in loans advanced (sales) due to the annuity income of the longer term
products over the term of the loan. The loan impairment expense, however, grew
by 162% to R228 million. This growth is higher than the growth in loan revenue
due to a continuous decrease in our margins (the cost of credit to our clients),
an increase in arrears and the rollout of longer term products. These products
have lower bad debts, compared to the short term products and require clients to
spend less time in the branches resulting in a lower cost to income ratio.
Arrears deteriorated by 23% year-on-year and by 11% compared to the six month
period to February 2008. We do not expect further deterioration as we have
adjusted our credit parameters in anticipation of continued tough market
conditions. Compared to the gross loans, arrears have increased from 9.6% a year
ago to 9.9% and are well within our risk appetite and targets. We do, however,
expect this ratio to increase as the products with a longer tenure increase in
proportion to the total loan book mix. R95 million of the year-on-year increase
in the net loan impairment expense from R87 million in August 2007 to R228
million in August 2008 is due to book growth. The balance of R46 million is due
to an increase in arrears on the short and medium term products and the
refinement of our models as more history becomes available on the new products.
Compared to the six month period to February 2008, R60 million of the R84
million (February 2008`s full year expense less first 6 months of previous year)
increase can be attributed to book growth and R24 million to an increase in
arrears on the short and medium term products.
We write off all debts older than 90 days in arrears and are therefore
comfortable with the provision for doubtful debts to arrears coverage ratio of
82%. All our provisions are calculated on a discounted cash flow model and as
explained at year end, we provide at a much higher rate earlier in the loan
lifecycle than at the end. The net impairment expense ratio as a percentage of
repayments will therefore continue to increase as the size and tenure of the
book increase.
FUNDING
Capitec Bank was listed in 2001, at the time of the small bank crisis in South
Africa. We have therefore always followed a conservative approach to liquidity,
even at the expense of profitability.
The growth in our loan book increased our funding requirements and despite the
present tight liquidity conditions in the market we successfully launched our
domestic medium term note (DMTN) programme in April and raised term funding of
R490 million. A portion of the DMTN issue was done at variable rates and we have
swapped this to fixed rates to match our fixed rate loan book. We also secured
term funding from PROPARCO, the French development agency, of R150 million.
Retail deposits increased to R984 million and we will continue to regard this as
a significant source of funding.
MOODYS NATIONAL CREDIT RATING
Capitec Bank`s short term credit rating improved to P-1.za in May this year.
The bank`s long term rating remained unchanged at A2.za and has a stable
outlook.
BASEL II AND CAPITAL ADEQUACY
We successfully implemented the alternative standardised approach (ASA) to
quantify operational risk capital, a component in calculating our capital
adequacy ratio. This method for the calculation of operational risk is based on
balance sheet size instead of gross margin and requires risk management
processes to be formalised and documented. The approval by the Reserve Bank of
this method led to a reduction in the calculated operational risk capital and an
improvement in our capital adequacy ratio. With a capital adequacy ratio of 45%,
the bank is well capitalised and will remain so for the foreseeable future.
The disclosure in terms of Regulation 43 of the Banks Act is available on our
website.
PROSPECTS
We will continue to monitor the difficult trading conditions which we expect to
remain for the foreseeable future. Due to the size and tenure of the loans we
grant, we have the ability to change the granting parameters immediately. We do
not expect further deterioration in arrears and bad debts.
The bank is well capitalised and this is very useful in these tough economic
conditions. We will continue to manage our expansion and growth in the branches
within our ability to grow the funding base. We are not exposed to liquidity
problems should additional funding not materialise.
The recent advertising and promotional campaigns and the sales effort by our
employer sales team are driving awareness of the unique value of our banking
offer. Client growth has been very positive and we are confident that we will
continue to grow our client base given that we offer the most accessible,
affordable and simplified everyday banking available.
INTERIM DIVIDEND
The directors approved an interim ordinary dividend of 30 cents per share
payable on Monday, 1 December 2008.
The following dates apply:
Last date to trade cum dividend Friday, 21 November 2008
Trading ex dividend commences Monday, 24 November 2008
Record date Friday, 28 November 2008
Date of payment Monday, 1 December 2008
Share certificates may not be dematerialised or rematerialised between Monday,
24 November and Friday, 28 November 2008, both days inclusive.
The preference dividend of 571.13 cents per share for the six months to 31
August was declared on 29 August and was paid on 22 September 2008.
GROUP BALANCE SHEET
Unaudited Unaudited Audited
August August February
2008 2007 Growth 2008
R`000 R`000 % R`000
ASSETS
Current assets
Cash and cash equivalents 1 043 440 571 349 82.6 617 901
Investments at fair value 17 355 267 306 (93.5) 14 424
Loans and advances 1 909 290 1 041 723 83.3 1 493 597
Inventory 16 980 11 756 44.4 17 741
Other receivables 24 719 18 496 33.6 19 347
Non-current assets
Loans and advances 753 162 183 599 310.2 525 603
Property and equipment 197 173 188 819 4.4 196 173
Intangible assets
- banking system 37 981 40 149 (5.4) 37 619
Deferred income tax assets 18 287 15 593 17.3 13 967
Total assets 4 018 387 2 338 790 71.8 2 936 372
LIABILITIES
Current liabilities
Deposits at amortised cost 1 563 810 745 555 109.8 1 314 722
Deposits held at fair value 40 899 13 314 207.2 35 496
Trade and other payables 183 768 104 865 75.2 128 733
Current income tax liabilities 39 608 32 250 22.8 47 456
Provisions - 3 850 (100.0) -
Non-current liabilities
Trade and other payables 14 162 11 118 27.4 14 635
Deposits at amortised cost 896 893 256 425 249.8 160 974
Deposits held at fair value - 39 773 (100.0) 16 929
Total liabilities 2 739 140 1 207 150 126.9 1 718 945
EQUITY
Ordinary share capital and 674 368 647 363 4.2 647 363
premium
Non distributable reserves (10 972) 2 439 (549.9) -
Retained earnings 461 245 327 232 41.0 415 458
Ordinary shareholders` funds 1 124 641 977 034 15.1 1 062 821
Non-redeemable, non-cumulative,
non-participating preference
shares 154 606 154 606 - 154 606
Total equity 1 279 247 1 131 640 13.0 1 217 427
Total equity and liabilities 4 018 387 2 338 790 71.8 2 936 372
GROUP INCOME STATEMENT
Unaudited Unaudited Audited
Six Six Year
Months Months ended
ended ended
August August February
2008 2007 Growth 2008
R`000 R`000 % R`000
Interest on loans advanced 508 321 345 786 47.0 709 166
Interest on cash and
cash equivalents 20 481 19 882 3.0 30 897
Interest expense (105 481) (42 137) 150.3 (101 449)
Net interest income 423 321 323 531 30.8 638 614
Net fee income 487 887 247 933 96.8 653 400
Loan fee income 425 000 212 074 100.4 574 584
Transaction fee income 124 706 72 481 72.1 168 361
Transaction fee expense (61 819) (36 622) 68.8 (89 545)
Dividend income 1 070 10 969 (90.2) 15 392
Net impairment charge on
loans and advances (228 085) (87 084) 161.9 (230 879)
Net movement in financial
instruments held at fair value 4 019 7 569 (46.9) 7 818
Other income 147 - - 8
Non-banking gross profit 8 499 4 997 70.1 10 938
Non-banking sales 97 144 68 686 41.4 159 122
Non-banking cost of sales (88 645) (63 689) 39.2 (148 184)
Income from operations 696 858 507 915 37.2 1 095 291
Banking operating expenses (504 681) (354 471) 42.4 (762 540)
Non-banking operating expenses (5 362) (3 863) 38.8 (8 405)
Operating profit before tax 186 815 149 581 24.9 324 346
Income tax expense (58 109) (44 280) 31.2 (95 281)
Net profit attributable to
equity holders 128 706 105 301 22.2 229 065
RECONCILIATION OF ATTRIBUTABLE EARNINGS TO HEADLINE EARNINGS
Unaudited Unaudited Audited
Six Six Year
Months Months ended
ended ended
August August February
2008 2007 Growth 2008
R`000 R`000 % R`000
Net profit attributable to
equity holders 128 706 105 301 22.2% 229 065
Less preference dividend (9 619) (8 122) 18.4% (17 011)
Net profit attributable to
ordinary shareholders 119 087 97 179 22.5% 212 054
Items excluded from headline
earnings after tax:
Loss on disposal of fixed assets 42 101 (58.6%) 145
Headline earnings 119 129 97 280 22.5% 212 199
GROUP CASH FLOW STATEMENT
Unaudited Unaudited Audited
Six Six Year
months months ended
ended ended
August August February
2008 2007 2008
R`000 R`000 R`000
Cash flow from operating activities 535 249 (154 091) (260 872)
* Cash flow from operations 295 072 184 522 445 732
* Increase in loans and advances (705 846) (432 534) (1 277 943)
* Increase in other liabilities,
provisions and deposits 1 007 725 173 075 680 986
* Tax paid (61 702) (79 154) (109 647)
Cash flow from investment activities (45 272) (219 053) (12 709)
* Net investment in equipment
and software (47 148) (68 004) (116 071)
* Decrease(increase) in other
investing activities 1 876 (151 049) 103 362
Cash flow from financing activities (64 438) (99 253) (152 264)
* Dividends paid (70 987) (49 157) (85 378)
* Shares issued and acquired and
options settled 6 549 (50 096) (66 886)
Increase(decrease) in cash and
cash equivalents 425 539 (472 397) (425 845)
Cash and cash equivalents at
beginning of period 617 901 1 043 746 1 043 746
Cash and cash equivalents at
end of period 1 043 440 571 349 617 901
GROUP STATEMENT OF CHANGES IN EQUITY
Six Six Year
months months ended
ended ended
August August February
2008 2007 2008
R`000 R`000 R`000
Equity at beginning of period 1 217 427 1 117 457 1 117 457
Net profit attributable to
equity holders 128 706 105 301 229 065
Ordinary shares issued 27 006 - -
Loss on settlement of share options
net of share based staff costs (15 511) (47 595) (59 877)
Tax on settlement of share options 4 308 13 756 17 432
Cash flow hedge net of taxation (10 972) - -
Dividends declared (71 717) (57 279) (86 650)
Equity at end of period 1 279 247 1 131 640 1 217 427
SEGMENTAL RESULTS
Wholesale
Banking Distribution Total
R`000 R`000 R`000
Unaudited
Six months ended August 2008
Revenues 1 079 725 97 144 1 176 869
Headline earnings 116 632 2 497 119 129
Assets 3 991 697 26 690 4 018 387
Unaudited
Six months ended August 2007
Revenues 661 192 68 686 729 878
Headline earnings 96 515 765 97 280
Assets 2 318 788 20 002 2 338 790
Audited
Year ended February 2008
Revenues 1 498 408 159 122 1 657 530
Headline earnings 210 513 1 686 212 199
Assets 2 913 528 22 844 2 936 372
COMMITMENTS
Unaudited Unaudited Audited
August August February
2008 2007 2008
R`000 R`000 R`000
Guarantees
* Non-banking institutions - 7 500 7 500
Capital commitments approved
by the board
* Contracted for 39 732 11 878 43 030
* Not contracted for 101 583 95 684 132 852
Operating lease commitments
< 1 year 73 292 55 364 69 462
1 to 5 years 159 949 144 219 158 489
> 5 years 3 943 5 671 6 665
INTERIM FINANCIAL REPORTS
The abridged interim consolidated financial statements are prepared in
accordance with IAS 34 - Interim Financial Reporting and the accounting policies
applied conform to IFRS. The accounting policies applied in the preparation of
the interim consolidated financial statements are consistent with the policies
applied in the previous year.
On behalf of the board
Michiel le Roux Riaan Stassen
Chairman Chief executive officer
Stellenbosch 1 October 2008
www.capitecbank.co.za
Capitec Bank Limited is an authorised financial services and credit provider.
Company secretary and registered office
Christian George van Schalkwyk
BComm LLB CA (SA)
10 Quantum Road
Techno Park
Stellenbosch 7600
(PO Box 12451 Die Boord Stellenbosch 7613)
Transfer secretaries
Computershare Investor Services (Pty) Limited
Registration number: 2004/003647/07
Ground Floor
70 Marshall Street
Johannesburg 2001
(PO Box 61051 Marshalltown 2107)
Sponsor
PSG Capital (Pty) Limited
(Registration number: 2006/015817/07)
Directors
MS du P le Roux (Chairman) R Stassen (CEO)* AP du Plessis (CFO)* KA
Hedderwick TD Mahloele Prof MC Mehl Ms NS Mjoli-Mncube PJ Mouton CA Otto
JG Solms JP vd Merwe
*Executive
Date: 01/10/2008 09:00:01 Produced by the JSE SENS Department.
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