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CPI CPIP
CPI
CPI/CPIP - Capitec Bank Holdings Limited - Unaudited financial results for the
six months ended 31 August 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
UNAUDITED FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2010
- Headline earnings per share up 58% to 340 cents
- Interim dividend per share: 85 cents
- Return on equity: 34%
- Active clients: 2.5 million
- Shareholders` funds: R1.9 billion
Six Six Year
months months ended
August August Growth February
2010 2009 % 2010
PROFITABILITY
Income from banking
operations Rm 1 696 1 163 46 2 556
Net loan impairment
expense Rm (403) (258) 56 (548)
Banking operating
expenses Rm (873) (637) 37 (1 368)
Non-banking operations Rm - 2 2
Tax Rm (131) (84) 55 (193)
Preference dividend Rm (6) (8) (15) (14)
Earnings attributable to
ordinary shareholders
Basic Rm 283 178 59 435
Headline Rm 284 178 59 437
Cost to income ratio
banking activities % 51 55 54
Return on ordinary
shareholders` equity % 34 28 32
Earnings per share
Attributable cents 339 215 58 525
Headline cents 340 215 58 527
Diluted attributable cents 325 211 54 509
Diluted headline cents 327 211 55 511
Dividends per share
Interim cents 85 55 55
Final cents 155
Total cents 210
Dividend cover x 4.0 3.9 2.5
ASSETS
Total assets Rm 10 997 6 536 68 9 488
Net loans and advances Rm 7 244 3 680 97 5 225
Cash and cash
equivalents Rm 2 086 2 234 (7) 2 567
Investments Rm 1 199 282 325 1 306
Other Rm 468 340 38 390
LIABILITIES
Total liabilities Rm 9 062 5 031 80 7 760
Deposits Rm 8 599 4 699 83 7 360
Other Rm 463 332 39 400
EQUITY
Shareholders` funds Rm 1 935 1 505 29 1 728
Capital adequacy ratio % 32 36 37
Net asset value per
ordinary share cents 2 117 1 627 30 1 896
Share price cents 13 350 5 500 143 8 200
Market capitalisation Rm 11 230 4 564 146 6 805
Number of shares in
issue `000 84 122 82 983 1 82 983
Share options
Number outstanding `000 4 932 5 412 (9) 5 322
Number outstanding to
shares in issue % 6 7 6
Average strike price cents 3 470 2 837 22 2 888
Average time to
maturity months 25 29 (14) 24
OPERATIONS
Branches 422 371 14 401
Employees 4 726 3 804 24 4 154
Active clients `000 2 494 1 762 42 2 122
ATMs
Own 439 385 14 417
Partnership 939 668 41 821
Capital expenditure Rm 145 61 138 149
SALES
Loans
Value of loans advanced Rm 6 385 3 684 73 8 645
Number of loans
advanced `000 2 615 1 793 46 3 861
Average loan amount R 2 442 2 054 19 2 239
Gross loans and
advances Rm 7 796 3 958 97 5 607
Loans past due (arrears) Rm 361 299 21 350
Arrears to gross
loans and advances % 4.6 7.6 6.2
Provision for doubtful
debts Rm 552 278 99 382
Provision for
doubtful debts to
gross loans and advances % 7.1 7.0 6.8
Arrears coverage ratio % 153 93 109
Loan revenue Rm 1 728 1 175 47 2 603
Loan revenue to average
gross loans and advances % 25.8 32.7 58.9
Gross loan impairment
expense Rm 447 294 52 620
Recoveries Rm 44 36 22 72
Net loan impairment
expense Rm 403 258 56 548
Net loan impairment
expense to loan revenue % 23.3 22.0 21.1
Net loan impairment
expense to average gross
loans and advances % 6.0 7.2 12.4
Net loan impairment
expense to repayments % 7.2 7.2 6.6
Deposits
Wholesale deposits Rm 3 608 2 157 67 3 669
Retail call savings Rm 3 040 1 582 92 2 346
Retail fixed savings Rm 1 874 800 134 1 148
Net transaction fee
income Rm 235 126 87 295
CAPITEC BANK PROVIDES SIMPLIFIED EVERYDAY MONEY MANAGEMENT
Capitec Bank provides innovative transacting, saving and lending products to
serve the needs of all South Africans. During the six months to 31 August 2010,
our business has continued to grow as we gained more clients. Capitec Bank now
operates 422 branches situated throughout South Africa and services 2.5 million
active clients.
RESULTS SUMMARY
Earnings for the six months increased by 59% to R283 million.
Income from banking operations increased by 22% from the six months ended
February 2010 to R1.7 billion and by 46% compared to the six months ended August
2009.
The value of loans advanced increased 73% to R6.4 billion compared to the six
months ended August 2009. This is an increase of 29% compared to the six months
ended February 2010. Sales of products with terms longer than 12 months account
for 75% of the increase in the value of loans advanced compared to the six
months ended August 2009. Sales of these products comprise 54% of total sales
compared to 39% for the first six months of the 2010 financial year. The 48
month loan product which was launched in November 2009 was a major contributor
to sales growth.
Net loan revenue increased to R1.7 billion compared to R1.4 billion for the six
months ended February 2010 and R1.2 billion for six months ended August 2009.
Loan revenue consists of interest, origination fees and monthly administration
fees net of loan fee expenses. The 47% growth in loan revenue compared to the
six months ended August 2009 is lower than the growth in sales. This is expected
as the sales of longer-term, higher-value loans increase because yields on these
loans are lower. The shift to sales of longer-term products does however have a
positive effect on the annuity income derived from interest and loan fees. As a
result, interest revenue on loans has grown 65% compared to the six months ended
August 2009.
Net transaction fee income increased by 87% compared to the six months ended
August 2009 to R235 million. This represents a 39% increase compared to the six
months ended February 2010. Net transaction fee income covered 27% of banking
operating expenses for the six months compared to 20% for the six months ended
August 2009. As the number of banking clients continues to grow transaction
volumes increase.
The cost to income ratio declined to 51% from 52% for the six months ended
February 2010 and 55% for the six months ended August 2009. The increase of 46%
in income from banking operations exceeded the 37% increase in operating
expenses for the six months compared to the six months ended August 2009. The
cost benefit of the technology and innovative processes employed in the business
are continuing to manifest. Increases in operating expenditure resulted from
growth in the branch network from 371 branches at the end of August 2009 to 422
branches at the end of August 2010. Employment costs comprise 55% of operating
expenses compared to 51% for the six months ended August 2009 (refer to the
employee costs section below).
LOAN BOOK, ARREARS AND BAD DEBTS
The gross loan book grew by 39% compared to February 2010, and by 97% compared
to August 2009, to R7.8 billion. Loans with a term longer than 12 months
comprise 83% of the gross loan book compared to 72% at the end of August 2009
and 78% at the end of February 2010.
While the gross loan book has grown by R3.8 billion since August 2009 loans past
due (arrears) have only grown by R62 million. Arrears to gross loans and
advances declined from 7.6% at the end of August 2009 to 6.2% at the end of
February 2010 and further to 4.6% at the end of August 2010 due to continued
focus on credit granting criteria and collections and also because longer-term
loans generally have a lower risk of arrears.
The impact that the recent strikes by government and other labour unions will
have on default rates in the coming months is a concern that has been addressed
by the strengthening of the incurred but not reported (IBNR) impairment
assumptions. Management has also addressed the impact of the significant growth
in the longer term products, where limited historical data is available, through
the application of prudent impairment provisioning assumptions. The provision
for doubtful debts as a percentage of the gross loan book amounted to 7.1%
compared to 7.0% in August 2009 and 6.8% in February 2010.
The net loan impairment expense for the six months increased to R403 million
compared to R258 million for the six months ended August 2009. Recoveries
increased from R36 million to R44 million. Recoveries should continue to show an
increasing trend as the value of handed over amounts increases with the loan
book and higher loan values.
The gross loan impairment expense (before recoveries) for the six months
increased to R447 million from R294 million for the same six months of the 2010
financial year. The increase includes R321 million due to loan book growth. The
gross loan impairment expense before book growth decreased by R163 million due
to an improvement in default rates and by R5 million due to the additional
valuation placed on handed-over loans.
The gross loan impairment expense (before recoveries) for the six months
increased R121 million compared to the expense of R326 million for the six
months ended February 2010. This increase includes a R222 million increase due
to loan book growth. The gross loan impairment expense before book growth
decreased by R96 million due to an improvement in default rates and by R5
million due to the additional valuation placed on handed-over loans.
The loan impairment expense as a percentage of repayments, by product, compared
as follows against last year:
August February August
2010 2009
% % %
1 month 1.2 1.4 1.7
3 month 3.1 3.8 3.3
6 month 4.1 5.2 6.1
12 month 9.2 10.9 11.7
18 month 10.4 10.8 12.0
24 month 12.3 11.5 12.4
36 month 13.2 14.4 19.4
48 month 40.3 50.8 -
Weighted average 8.0 7.5 8.2
Recoveries (0.8) (0.9) (1.0)
Net bad debts 7.2 6.6 7.2
The impairment charge is calculated by using the historical data that is
available on 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 predictable 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 34 months old but the
average age of loans on this book is only 22 months. The average age of the 48
month loan book is 6 months although the product is currently 10 months old.
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.
EMPLOYEE COSTS
Employment costs contributed R156 million (66%) of the increase in operating
expenses compared to the six months ended August 2009 and have increased by R124
million compared to the six months ended February 2010. Employee numbers
increased by 922 (24%) since August 2009 and have grown by 572 (14%) since
February 2010. The increase in remuneration includes an accrual for an incentive
for all Capitec Bank employees in terms of a scheme based on growth in headline
earnings as well as management incentives and share-based payments.
In financial years prior to 2009 executive and senior management participated in
a share option scheme that was equity-settled. Since the 2009 financial year the
scheme consisted of cash-settled share appreciation rights and share options in
equal proportions. From the 2010 financial year the scheme was restricted to
strategic management while senior management qualify for a cash-settled
performance bonus scheme. This scheme rewards managers based on the growth in
headline earnings and in order to foster a long-term approach by management the
amount is paid out over a three-year period.
Management incentive schemes contributed R63 million to the increase in
remuneration costs. The share appreciation rights expense accounts for a
significant portion of this increase. This expense increases in line with the
increase in the share price which has moved from R55.00 per share at the end of
August 2009 to R133.50 at the end of August 2010. The share option expense is
equity-settled at group level but has increased significantly in Capitec Bank
where it is cash-settled.
FUNDING
Retail call savings deposits increased to R3.0 billion from R1.6 billion at the
end of August 2009 and R2.3 billion at the end of February 2010. The increase
reflects the growth in client numbers as well as an increase in the average
savings balance.
Retail fixed savings increased to R1.9 billion, an increase of 134% on the
balance at the end of August 2009. The balance increased R726 million from
February 2010. Retail fixed-term funding comprised 34% of total (retail and
wholesale) term funding compared to 27% at the end of August 2009. Retail fixed
savings terms extend up to 60 months at competitive interest rates.
Wholesale deposits increased by R1.5 billion year-on-year to R3.6 billion.
Between August 2009 and August 2010 wholesale funding was obtained through
Domestic Medium Term Note Programme issues in the amount of R1.2 billion as well
as foreign and local bilateral funding agreements. The term of the funding
obtained varied from three years to 12 years.
The mix of funding available to the business makes it possible to manage
liquidity conservatively and ensures that funding is not a constraint on growth.
As at 31 August 2010 and on average throughout the six months it would have been
possible to repay all deposits due within one day.
The growth in funding resulted in a year-on-year increase of R149 million in the
interest expense to R353 million. Surplus funding is invested in treasury bills,
debentures and money market instruments in order to minimise the net carrying
cost. This resulted in the increase in investments to R1.2 billion from R0.3
billion in August 2009. Interest received on cash and investments increased by
R25 million compared to the six months ended August 2009.
CAPITAL
The risk-weighted capital adequacy ratio is 32% compared to 36% at the end of
August 2009 and 37% at the end of February 2010. The decline in the capital
adequacy ratio is principally due to the increase in risk-weighted assets that
resulted from the growth in the loan book. The capital adequacy ratio remains
well above the required minimum level. The disclosure in terms of Regulation 43
of the Banks Act is available on the Capitec Bank website.
The return on ordinary shareholders` equity increased to 34% compared to 28% for
the six months ended August 2009 and 32% for the year ended February 2010.
PROSPECTS
We will continue to open new branches, acquire more clients and grow our
advances book while managing our capital requirements.
INTERIM DIVIDEND
The directors approved an interim ordinary dividend of 85 cents per share on 29
September 2010. The dividend will be payable on Monday, 6 December 2010.
Last day to trade cum dividend Friday, 26 November 2010
Trading ex dividend commences Monday, 29 November 2010
Record date Friday, 3 December 2010
Payment date Monday, 6 December 2010
Share certificates may not be dematerialised or rematerialised between Monday,
29 November 2010 and Friday, 3 December 2010, both days inclusive.
GROUP BALANCE SHEET
Unaudited Unaudited Audited
August August February
2010 2009 Growth 2010
R`000 R`000 % R`000
ASSETS
Cash and cash equivalents 2 085 502 2 233 903 (7) 2 566 588
Investments at fair value
through profit or loss 1 199 274 282 169 325 1 306 298
Loans and advances to clients 7 244 385 3 680 300 97 5 225 139
Inventory 22 697 23 466 (3) 26 067
Other receivables 37 159 28 206 32 41 127
Property and equipment 357 073 247 697 44 281 610
Intangible assets 32 854 28 567 15 22 211
Deferred income tax assets 17 848 11 757 52 19 183
Total assets 10 996 792 6 536 065 68 9 488 223
LIABILITIES
Loans and deposits at amortised
cost 8 599 271 4 698 761 83 7 360 325
Trade and other payables 422 358 254 566 66 358 352
Current income tax liabilities 28 312 77 487 (63) 34 452
Provisions 11 693 - 100 7 117
Total liabilities 9 061 634 5 030 814 80 7 760 246
EQUITY
Ordinary share capital and
premium 796 852 682 219 17 682 219
Cash flow hedge reserve (10 882) (21 127) (48) (15 839)
Retained earnings 994 582 689 553 44 906 991
Share capital and reserves
attributable to ordinary
shareholders 1 780 552 1 350 645 32 1 573 371
Non-redeemable, non-cumulative,
non-participating preference
share capital and premium 154 606 154 606 - 154 606
Total equity 1 935 158 1 505 251 29 1 727 977
Total equity and liabilities 10 996 792 6 536 065 68 9 488 223
GROUP INCOME STATEMENT
Unaudited Unaudited
Six Six Audited
Months months Year
Ended ended ended
August August February
2010 2009 Growth 2010
R`000 R`000 % R`000
Interest income 1 267 576 780 310 62 1 763 966
Interest expense (353 389) (204 581) 73 (490 636)
Net interest income 914 187 575 729 59 1 273 330
Loan fee income 607 145 480 498 26 1 038 905
Loan fee expense (59 521) (20 510) 190 (52 706)
Transaction fee income 389 321 212 314 83 507 438
Transaction fee expense (154 175) (85 868) 80 (212 064)
Net fee income 782 770 586 434 33 1 281 573
Dividend income 540 485 11 519
Net impairment charge on
loans and advances to
clients (403 089) (257 718) 56 (547 731)
Net movement in financial
instruments held at fair
value through profit or loss (382) (50) 664 1 011
Non-banking gross profit 11 230 10 789 4 20 750
Non-banking sales 111 903 108 866 3 208 604
Non-banking cost of sales (100 673) (98 077) 3 (187 854)
Other income 2 41 (95) 43
Income from operations 1 305 258 915 710 43 2 029 495
Banking operating expenses (873 214) (637 138) 37 (1 368 324)
Non-banking operating
expenses (11 192) (8 419) 33 (18 815)
Operating profit before tax 420 852 270 153 56 642 356
Income tax expense (131 126) (84 429) 55 (193 132)
Profit for the period 289 726 185 724 56 449 224
Earnings per share (cents)
Basic 339 215 58 525
Diluted 325 211 54 509
GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited
Six Six Audited
months months Year
ended ended ended
August August February
2010 2009 Growth 2010
R`000 R`000 % R`000
Profit for the period 289 726 185 724 56 449 224
Other comprehensive income
for the period net of tax 4 957 2 746 81 8 034
Cash flow hedge before tax 6 885 3 814 81 11 158
Income tax relating to
cash flow hedge (1 928) (1 068) 81 (3 124)
Total comprehensive income
for the period 294 683 188 470 56 457 258
RECONCILIATION OF ATTRIBUTABLE EARNINGS TO HEADLINE EARNINGS
Unaudited Unaudited
Six Six Audited
months months Year
ended ended ended
August August February
2010 2009 Growth 2010
R`000 R`000 % R`000
Net profit after tax 289 726 185 724 56 449 224
Less preference dividend (6 411) (7 586) (15) (14 163)
Net profit attributable to
ordinary shareholders 283 315 178 138 59 435 061
Non-headline items
Loss on disposal of assets 1 478 214 2 287
Income tax charge (413) (47) (640)
Headline earnings 284 380 178 305 59 436 708
GROUP STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited
Six Six Audited
months months Year
ended ended ended
August August February
2010 2009 2010
R`000 R`000 R`000
Equity at the beginning of the period 1 727 977 1 406 201 1 406 201
Net profit for the period 289 726 185 724 449 224
Cash flow hedge net of taxation 4 957 2 746 8 034
Ordinary dividend (130 308) (91 281) (136 921)
Preference dividend (6 411) (7 586) (14 163)
Share-based employee costs 5 902 5 040 12 186
Shares issued and acquired for
employee share options at cost (3 973) (11 243) (12 591)
Realised loss on settlement of
employee share options less
participants` contributions 21 184 14 693 16 538
Tax effect on settlement of share
Options 26 161 982 (506)
Share issue expenses (57) (25) (25)
Equity at the end of the period 1 935 158 1 505 251 1 727 977
GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited
Six Six Audited
months months Year
ended ended ended
August August February
2010 2009 2010
R`000 R`000 R`000
Cash flow from operating activities (322 777) 1 010 700 2 504 635
Cash flow from investing activities (38 578) (193 422) (1 302 307)
Cash flow from financing activities (119 731) (97 364) (149 729)
Net (decrease)/ increase in cash
and cash equivalents (481 086) 719 914 1 052 599
Cash and cash equivalents at the
beginning of the period 2 566 588 1 513 989 1 513 989
Cash and cash equivalents at the
end of the period 2 085 502 2 233 903 2 566 588
COMMITMENTS
Unaudited Unaudited Audited
August August February
2010 2009 2010
R`000 R`000 R`000
Capital commitments approved by the
board
Contracted for 14 557 30 314 41 510
Not contracted for 184 871 142 161 287 961
Operating lease commitments
Future aggregate minimum lease
payments
Within one year 115 525 98 621 105 086
From one to five years 299 722 255 406 267 967
After five years 33 364 21 423 18 566
Total future cash flows 448 611 375 450 391 619
Straight lining accrued (22 381) (17 050) (19 778)
Future expenses 426 230 358 400 371 841
SEGMENT ANALYSIS
Wholesale Intra-
Banking distribution segment Total
R`000 R`000 R`000 R`000
Unaudited six months ended
August 2010
Segment revenue 2 264 990 111 903 (406) 2 376 487
Segment earnings after tax 290 239 (513) - 289 726
Unaudited six months ended
August 2009
Segment revenue 1 473 648 108 866 (320) 1 582 194
Segment earnings after tax 183 514 2 210 - 185 724
Audited 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
The group has two operating segments which conduct business within the Republic
of South Africa.
- The wholesale distribution segment`s contribution to depreciation,
amortisation, interest expenses and other non-cash items is not material.
INTERIM FINANCIAL REPORTS
The abridged consolidated interim 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.
On behalf of the board
Michiel le Roux
Chairman
Riaan Stassen
Chief executive officer
Stellenbosch
29 September 2010
COMPANY SECRETARY AND REGISTERED OFFICE
Christian George van Schalkwyk: BComm, LLB, CA(SA)
1 Quantum Street, 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 (FD)*,
TD Mahloele, Prof MC Mehl, Ms NS Mjoli-Mncube, PJ Mouton, CA Otto,
JG Solms, JP van der Merwe
*Executive
www.capitecbank.co.za
Date: 29/09/2010 07:05:01 Produced by the JSE SENS Department.
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