| Wed 31 Mar 2010, 7:51 | | CPI / CPIP - Capitec Bank Holdings - Summarised audited financial statements for |
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CPI CPIP
CPI
CPI / CPIP - Capitec Bank Holdings - Summarised audited financial statements for
the year ended 28 February 2010
Capitec Bank Holdings Limited
Registration number: 1999/025903/06
Registered bank controlling company
Incorporated in the Republic of South Africa
JSE ordinary share code: CPI ISIN code: ZAE000035861
JSE preference share code: CPIP ISIN code: ZAE000083838
SUMMARISED AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED
28 FEBRUARY 2010
Headline earnings per share up 44% to 527 cents
Final dividend per share: 155 cents
Return on equity: 32%
Active clients: 2.1 million
Shareholders` funds: R1.7 billion
Change %
2010 2009 2010/2009 2008
PROFITABILITY
Income from banking
operations Rm 2 556 1 983 29 1 315
Net loan impairment
expense Rm (548) (468) 17 (231)
Banking operating
expenses Rm (1 368) (1 065) 28 (763)
Non-banking operations Rm 2 6 (67) 3
Tax Rm (193) (137) 41 (95)
Preference dividend Rm (14) (19) (26) (17)
Earnings attributable to
ordinary shareholders
Basic Rm 435 300 45 212
Headline Rm 437 302 45 212
Cost to income ratio -
banking activities % 54 54 58
Return on ordinary
Shareholders` equity % 32 27 22
Earnings per share
Attributable cents 525 364 44 259
Headline cents 527 366 44 259
Diluted attributable cents 509 357 43 250
Diluted headline cents 511 359 42 251
Dividends per share
Interim cents 55 30 83 25
Final cents 155 110 41 75
Total cents 210 140 50 100
Dividend cover x 2.5 2.6 2.6
ASSETS
Total assets Rm 9 488 4 969 91 2 936
Net loans and advances Rm 5 225 2 982 75 2 019
Cash and cash
equivalents Rm 2 567 1 514 70 618
Investments Rm 1 306 150 771 14
Other Rm 390 323 21 285
LIABILITIES
Total liabilities Rm 7 760 3 563 118 1 719
Deposits Rm 7 360 3 317 122 1 528
Other Rm 400 246 63 191
EQUITY
Shareholders` funds Rm 1 728 1 406 23 1 217
Capital adequacy ratio % 37 43 36
Net asset value per
ordinary share cents 1 896 1 512 25 1 297
Share price cents 8 200 3 001 173 3 900
Market capitalisation Rm 6 805 2 485 174 3 195
Number of shares in
issue `000 82 983 82 798 - 81 928
Share options
Number outstanding `000 5 322 5 713 (7) 5 159
Number outstanding to
total shares in issue % 6 7 (14) 6
Average strike price cents 2 888 2 487 16 1 815
Average time to
maturity months 24 25 (4) 24
Charge on settlement Rm 1 34 (97) 48
OPERATIONS
Branches 401 363 10 331
Employees 4 154 3 414 22 2 800
Active clients `000 2 122 1 545 37 1 110
ATMs
Own 417 368 13 328
Partnership 821 571 44 437
Capital expenditure Rm 149 133 12 117
SALES
Loans
Value of loans advanced Rm 8 645 6 273 38 5 162
Number of loans
advanced `000 3 861 3 536 9 3 155
Average loan amount R 2 239 1 774 26 1 636
Gross loans and
advances Rm 5 607 3 238 73 2 192
Loans past due (arrears) Rm 350 326 7 247
Arrears to gross
loans and advances % 6.2 10.1 (39) 11.2
Provision for doubtful
debts Rm 382 256 49 173
Provision for
doubtful debts to
gross loans and advances % 6.8 7.9 (14) 7.9
Arrears coverage ratio % 109 79 38 70
Loan revenue Rm 2 603 2 032 28 1 273
Loan revenue to gross
loans and advances % 46.4 62.8 (26) 58.1
Gross loan impairment
expense Rm 620 514 21 265
Recoveries Rm 72 46 57 35
Net loan impairment
expense Rm 548 468 17 231
Net loan impairment
expense to loan revenue % 21.1 23.0 (8) 18.1
Net loan impairment
expense to gross loan
book % 9.8 14.5 (32) 10.6
Net loan impairment
expense to instalments
due % 6.6 7.2 (8) 5.1
Deposits
Wholesale deposits Rm 3 669 1 690 117 632
Retail savings Rm 2 346 1 306 80 842
Retail fixed deposits Rm 1 148 265 333 -
Net transaction fee
income Rm 295 160 84 89
1. CAPITEC BANK IS A BUSINESS NOT A BANK
At Capitec Bank we focus on the needs of our clients. This is the norm in
competitive businesses.
Many South Africans complain about their bank but have been with the same bank
for years. Banks know that their clients are locked in and can afford to focus
on their internal processes and their own needs. This is best illustrated by
their operating hours: what client-focused business would close at half past
three on weekdays and at eleven o`clock on Saturdays for the weekend when
retailers are open for twelve hours a day, seven days a week?
Our clients have alternatives and we are continuously exposed to competitive
pressure. Our primary source of income is unsecured personal loans. Every loan
is a new transaction and more than half of the loans we offer are to clients who
bank with a competitor. Borrowers are not locked in and remain free to go to one
of our competitors for their next loan. Many of the people who have a savings
account with us do just that. This keeps us humble and forces us to renew the
trust of our clients every time we deal with them.
2. EVERYTHING HAPPENS FOR A REASON
More than a year ago, we realised that the banking crisis meant we had to
concentrate on two areas: managing bad debts and securing long-term funding.
We set stricter selection criteria for borrowers who needed a loan, and put
emphasis on the quality of the employer of a prospective borrower. The results
have been impressive and our bad debt ratio (technically "gross loan impairment
expense less recoveries to gross loan book") decreased from 14.5% to 9.8%. We
made 2.9 million short term loans that are to be repaid within a month, during
the year. This enables us to constantly evaluate the effectiveness of our
lending criteria and to make rapid adjustments when the behaviour of borrowers
changes.
In November 2008 we offered our first fixed term retail deposit to address our
funding concerns because retail deposits are the most reliable source of funding
for a bank. We now have more than R1 billion of these deposits and more than R2
billion of normal savings deposits. Although savings deposits are theoretically
call deposits that can be withdrawn without any warning, experience throughout
the world shows that savings deposits are "sticky" and do not react as quickly
to rumours as wholesale deposits.
We have also been able to obtain long-term corporate deposits, now amounting to
R3 billion of which R2 billion was raised through our listed bond programme.
These bonds are for three, five and seven years. We also obtained a R250 million
12 year subordinated loan that counts as secondary capital during the first 7
years. This is a red letter achievement for Capitec Bank.
In short, despite the international crisis our funding has more than doubled
from R3 billion to R7 billion and is not a constraint on our growth.
3. SURVIVAL, WITH CASH
In a bank liquidity refers not only to our current cash position, but also to
the ability over time to survive a loss of confidence. Some large profitable
international banks went down because markets lost confidence and their access
to money collapsed. It was borrowing short and lending long. At Capitec Bank we
do the opposite: we borrow long and lend short. Like all banks we do a
theoretical exercise, liquidity gap management. This theoretical exercise
assumes that all funding to the bank dries up and current funders to the bank
demand their money back as soon as they are legally entitled to do so. In such a
doomsday scenario, what would happen to our bank?
At year-end Capitec Bank would have been able to repay all its saving deposits
immediately and on average throughout the year, within one day.
This is not a cost-free option. Holding surplus cash is expensive.
Why has Capitec Bank been so prudent? We obtained our banking licence in 2001.
At the time a small banks crisis was occurring in a small country at the
southern tip of Africa. Hardly anybody else remembers it, but we do. We saw how
small banks failed overnight when markets lost confidence and the banks were
caught in a liquidity trap. Even before that, in 1997, we saw how a financial
crisis in Asia could rock banks in Africa. When we started the bank, we decided
that Capitec Bank should never put itself in a position where a bad day in the
markets can destroy a bank built up over a lifetime.
The international banking crisis may be over. One thing is certain: there will
be more banking crises and we intend to manage our liquidity in such a manner
that we will always survive.
4. GROWTH
Our foundations have been well laid and the past year was a year of expansion.
Our client numbers grew 37% to 2.1 million.
We now have 401 branches throughout South Africa compared to 363 a year ago. Not
a single established branch is loss-making. We should clearly increase our
branch network faster.
Our number of employees grew by more than 22% to over 4 000, although our number
of branches only increased by 10% because we created additional capacity in our
existing branches. Every one of our consultants is trained in Stellenbosch
before they are allowed to deal with clients. Our Firm Foundations training
course was attended by 1 097 employees this year.
We advanced more than 3.8 million loans during the year, which on average
equates to more than 12 000 loans per working day. After five o`clock on the
afternoon of Friday 26 February we granted 3 069 loans. On that same day we
served 393 000 Capitec Bank clients who entered a branch, used their card to
make a payment or used our internet service. Still modest figures, but growing
all the time.
The total value of loans granted increased by 38% to R8.6 billion. Our total
book (loans outstanding at year-end) grew 73% to R5.6 billion as more clients
moved to longer term loans. We increased the longest term for a loan from 36 to
48 months and the maximum size of a loan from R50 000 to R100 000.
5. PROFITABILITY
Our profit grew from R300 million last year to R435 million. This is an
impressive performance. In the five years since 2005, our profit has grown from
R67 million at a compound rate of 45% per year. Our return on ordinary
shareholders` funds was 32%.
Net transaction income grew by 84% and represents 15% (against 11% last year) of
our income from banking operations, the other 85% deriving from loans.
We concentrate exclusively on personal banking. We have no business clients
(except to facilitate employers to pay salaries and merchant accounts to
facilitate card acquiring) and do no treasury trading.
Operating expenditure grew by 29%. We opened 38 new branches and plan to open
another 50 in the next twelve months.
We remain extremely cost conscious. At Capitec Bank, nobody flies business
class.
6. ARREARS, BAD DEBTS AND PROVISIONS
Our net bad debts (after taking into account recoveries) grew by 17% from R468
million to R548 million. Last year this figure doubled, compared to the previous
year. Our loan book has grown 73% in this year, while arrears on the last day of
the financial year declined from 10.1% last year to 6.2% this year. All debts
over 90 days outstanding are written off. From every perspective, this has been
a commendable performance. It is the result of tightening our lending criteria
more than a year ago and improving our operational efficiency.
The bad debt expense before recoveries increased by R106 million from R514
million to R620 million. The increase includes a R178 million increase due to
loan book growth and a decrease of R4 million in the income due to the valuation
placed on handed-over loans. The expense before book growth decreased by R76
million due to an improvement in default rates.
The loan impairment expense as a percentage of instalments due, by product,
compared as follows against last year:
2009
% %
1 month 1.4 1.4
3 month 3.8 4.3
6 month 5.2 6.7
12 month 10.9 12.7
18 month 10.8 11.4
24 month 11.5 12.7
36 month 14.4 21.7
48 month 50.8 -
Weighted average 7.5 7.9
Recoveries (0.9) (0.7)
Net bad debts 6.6 7.2
The best measurement of arrears and impairments on the short-term products is
against instalments due and not outstanding balances because a large part of the
short-term loans is repaid before month-end/year-end and is therefore not
reflected on the balance sheet. Computations based on the outstanding balance
therefore distort this ratio on short-term products.
The 48 month loan product is only 4 months old and the level of impairment is
therefore very high. The impairment charge is calculated by stretching the
historical data that is available on the other longer-term loan products to
produce a vintage graph. The impact of a missed instalment on a longer-term loan
is more severe at the beginning of a loan repayment period, as the full loan
amount may be at risk. Therefore, the provision as a percentage of instalments
due is higher for a new and growing loan book. Over time every new product
reverts to a normal distribution. The impairment expense of the 36 month loans
indicates this trend. It is expected that the level of impairment on the 36
month loans will continue to reduce as the product matures. The product is
currently 28 months old but the average age of loans on this book is only 18
months.
One of the reasons for the international credit crunch was a false complacency
within banks that they fully understood the risks inherent in their products. At
Capitec Bank we know we can never relax. Credit risk is the major risk that we
have to manage every day.
7. 27 GREAT BRANDS
What do the following brands have in common: Tiffany and Co, Amazon, Apple,
Mercedes-Benz, China Merchant Bank, Mahindra, Facebook, Julius Baer, Polo, Ralph
Lauren and Capitec Bank?
The Credit Suisse Research Institute has released "Great Brands of Tomorrow", an
in-depth look at how a company`s brand can be one of the few true competitive
advantages remaining in modern industry. In it, they identified 27 great global
brands of tomorrow, some old and powerful, some young with potential. Capitec is
the only brand from Africa on that list.
A group of 3 000 analysts in 50 countries participated in the survey, which
aimed to distinguish those brands that were likely to outperform the competition
in the future and rise to the top in their respective markets. Credit Suisse
rated its top brands on three main factors: innovation, aspiration and scale.
8. PROSPECTS
We are proud of our people, we have good products and a niche in the market. We
expect our growth to continue during the coming year.
9. DIVIDENDS
The directors have recommended a final dividend of 155 cents per share bringing
the total dividends for the year to 210 cents per share. The dividend will be
presented for approval by the shareholders at the annual general meeting.
Last day to trade cum-dividend Thursday, 10 June 2010
Trading ex-dividend commences Friday, 11 June 2010
Record date Friday, 18 June 2010
Payment date Monday, 21 June 2010
Share certificates may not be dematerialised or rematerialized between Friday,
11 June 2010 and Friday, 18 June 2010, both days inclusive.
On behalf of the board
Michiel le Roux
Chairman
Riaan Stassen
Chief executive officer
Stellenbosch
30 March 2010
GROUP BALANCE SHEET
Audited Audited
February February
2010 2009
R`000 R`000
ASSETS
Cash and cash equivalents 2 566 588 1 513 989
Investments at fair value through profit
or loss 1 306 298 150 044
Loans and advances to clients 5 225 139 2 981 685
Inventory 26 067 22 120
Other receivables 41 127 20 114
Property and equipment 281 610 240 134
Intangible assets - banking system 22 211 27 669
Deferred income tax assets 19 183 13 667
Total assets 9 488 223 4 969 422
LIABILITIES
Loans and deposits at amortised cost 7 360 325 3 298 897
Loans and deposits held at fair value
through profit or loss - 17 916
Trade and other payables 358 352 229 910
Current income tax liabilities 34 452 16 498
Provisions 7 117 -
Total liabilities 7 760 246 3 563 221
EQUITY
Ordinary share capital and premium 682 219 674 369
Cash flow hedge reserve (15 839) (23 873)
Retained earnings 906 991 601 099
Share capital and reserves attributable
to ordinary shareholders 1 573 371 1 251 595
Non-redeemable, non-cumulative,
non-participating preference share
capital and premium 154 606 154 606
Total equity 1 727 977 1 406 201
Total equity and liabilities 9 488 223 4 969 422
GROUP INCOME STATEMENT
Audited Audited
Year Year
ended ended
February February
2010 2009
R`000 R`000
Interest income 1 763 966 1 212 896
Interest expense (490 636) (269 621)
Net interest income 1 273 330 943 275
Loan fee income 1 038 905 897 502
Loan fee expense (52 706) (21 889)
Transaction fee income 507 438 281 548
Transaction fee expense (212 064) (121 452)
Net fee income 1 281 573 1 035 709
Dividend income 519 1 099
Net impairment charge on loans and
advances to clients (547 731) (467 727)
Net movement in financial instruments
held at fair value through profit or loss 1 011 2 197
Other income 43 280
Non-banking gross profit 20 750 18 218
Non-banking sales 208 604 208 915
Non-banking cost of sales (187 854) (190 697)
Income from operations 2 029 495 1 533 051
Banking operating expenses (1 368 324) (1 063 672)
Non-banking operating expenses (18 815) (12 696)
Operating profit before tax 642 356 456 683
Income tax expense (193 132) (137 351)
Profit for the year 449 224 319 332
Earnings per share (cents)
Basic 525 364
Diluted 509 357
GROUP STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
Year Year
ended ended
February February
2010 2009
R`000 R`000
Profit for the year 449 224 319 332
Other comprehensive income for the year
net of tax 8 034 (23 873)
Cash flow hedge before tax 11 158 (33 157)
Income tax relating to cash flow hedge (3 124) 9 284
Total comprehensive income for the year 457 258 295 459
RECONCILIATION OF ATTRIBUTABLE EARNINGS TO HEADLINE EARNINGS
Audited Audited
Year Year
ended ended
February February
2010 2009
R`000 R`000
Net profit attributable to
equity holders 449 224 319 332
Less preference dividend (14 163) (19 127)
Net profit attributable to
ordinary shareholders 435 061 300 205
Non-headline items:
Loss on disposal of assets 2 287 2 314
Income tax charge (640) (648)
Headline earnings 436 708 301 871
GROUP STATEMENT OF CASH FLOWS
Audited Audited
Year Year
Ended Ended
February February
2010 2009
R`000 R`000
Cash flow from operations 2 688 959 1 436 047
Income taxes paid (184 324) (150 235)
Cash flow from operating activities 2 504 635 1 285 812
Purchase of property and equipment (128 481) (114 723)
Proceeds from disposal of property
and equipment 2 161 101
Purchase of intangible assets (20 744) (17 869)
(Acquisition)/ disposal of investments
at fair value through profit or loss (1 155 243) (133 685)
Cash flow from investing activities (1 302 307) (266 176)
Dividends paid (153 651) (105 446)
Shares issued and acquired for options
settled 3 922 (18 102)
Cash flow from financing activities (149 729) (123 548)
Net increase in cash and cash
equivalents 1 052 599 896 088
Cash and cash equivalents at the
beginning of the year 1 513 989 617 901
Cash and cash equivalents at the end
of the year 2 566 588 1 513 989
GROUP STATEMENT OF CHANGES IN EQUITY
Audited Audited
Year Year
Ended Ended
February February
2010 2009
R`000 R`000
Equity at the beginning of the year 1 406 201 1 217 427
Net profit for the year 449 224 319 332
Cash flow hedge net of taxation 8 034 (23 873)
Ordinary dividend (136 921) (86 938)
Preference dividend (14 163) (19 127)
Share-based employee costs 12 186 8 992
Shares issued and acquired for employee
share options at cost (12 591) (26 661)
Realised loss on settlement of employee
share options less participants`
contributions 16 538 8 597
Tax effect on settlement of share
options (506) 8 490
Share issue expenses (25) (38)
Equity at the end of the year 1 727 977 1 406 201
SEGMENT ANALYSIS
In the 2010 financial year, segment reporting by the Group was prepared for the
first time in accordance with IFRS 8, `Operating segments`. Comparative segment
information disclosed for 2009 did not require restatement to conform to IFRS 8.
The Group has two operating segments which conduct business within the Republic
of South Africa:
Banking - incorporating retail banking services including savings, deposits,
debit cards and consumer loans to individuals.
Wholesale distribution - consisting of the wholesale distribution of fast
moving consumer goods.
There are no clients that account for more than 10% of revenue.
Transactions between the business segments are on normal commercial terms and
conditions.
The segment information provided to the Executive Management Committee for the
reportable segments is as follows:
Wholesale Intra-
Banking distribution segment Total
R`000 R`000 R`000 R`000
Year ended February 2010
Segment revenue 3 311 532 208 604 (661) 3 519 475
Segment earnings after tax 448 205 1 019 - 449 224
Year ended February 2009
Segment revenue 2 393 965 208 915 (640) 2 602 240
Segment earnings after tax 314 864 4 468 - 319 332
The wholesale distribution segment`s contribution to depreciation,
amortisation, interest expenses and other non-cash items is not material.
COMMITMENTS
Audited Audited
February February
2010 2009
R`000 R`000
Guarantees issued to non-banking
institutions - -
Capital commitments approved by the
board
Contracted for 41 510 22 810
Not contracted for 287 961 163 031
Operating lease commitments
Future aggregate minimum lease
payments
Within one year 105 086 80 494
From one to five years 267 967 191 508
After five years 18 566 4 155
Total future cash flows 391 619 276 157
Straight lining accrued (19 778) (15 817)
Future expenses 371 841 260 340
NOTES
1. ACCOUNTING POLICIES
The abridged audited consolidated financial statements are prepared in
accordance with IAS 34 - Interim Financial Reporting. The accounting policies
applied conform to IFRS and are consistent with those applied in the previous
year except for the standards noted below that became effective on 1 January
2009: IAS 1 - Presentation of Financial Statements (revised) and IFRS 8 -
Operating segments. The adoption of these standards has no material effect on
the results, nor has it required any restatement of the results.
The following items have been reclassified and the reclassification has been
applied to prior period figures: The future value of expected recoveries on
loans and advances written off of R15.6 million which was previously netted
against the impairment provision is included in gross loans and advances. In
order to better disclose the nature of transaction fee expenses the loan fee
expenses have been disclosed separately.
The unmodified audit reports of PricewaterhouseCoopers Inc. on the annual
financial statements for the year ended 28 February 2010 and the summarised
financial statements contained herein are available for inspection at the
registered office of the company.
COMPANY SECRETARY AND REGISTERED OFFICE
Christian George van Schalkwyk: BComm, LLB, CA(SA)
1 Quantum Road, Techno Park, Stellenbosch 7600, PO Box 12451, Die Boord, 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: 2006/01587/07)
DIRECTORS
MS du P le Roux (Chairman), R Stassen (CEO)*, AP du Plessis (FD)*,
TD Mahloele, Prof MC Mehl, Ms NS Mjoli-Mncube, PJ Mouton, CA Otto,
JG Solms, JP van der Merwe
*Executive
ANNUAL GENERAL MEETING
Notice is hereby given that the annual general meeting of the shareholders of
Capitec Bank Holdings Limited will be held at Oude Libertas, c/o Adam Tas and
Libertas Roads, Stellenbosch, on Wednesday, 2 June 2010 at 12:00.
www.capitecbank.co.za
Date: 31/03/2010 07:51:05 Produced by the JSE SENS Department.
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