| Wed 28 Sep 2011, 7:30 | | CPI/CPIP - Capitec Bank Holdings Limited - Unaudited financial results for |
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CPI CPIP
CPI
CPI/CPIP - Capitec Bank Holdings Limited - Unaudited financial results for
the six months ended 31 August 2011
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 2011
Headline earnings per share up 53% to 520 cents
Earnings up by 72%
Interim dividend per share: 125 cents
Return on equity: 29%
Active clients: 3.2 million
Six Six Year
months months ended
August August Growth February
2011 2010 % 2011
PROFITABILITY
Income from banking
operations R`m 2 581 1 696 52 3 741
Net loan impairment
expense R`m (679) (403) 68 (988)
Banking operating
expenses R`m (1 183) (873) 36 (1 813)
Non-banking operations R`m - - - -
Tax R`m (221) (131) 69 (284)
Preference dividend R`m (10) (6) 67 (16)
Earnings attributable to
ordinary shareholders
Basic R`m 488 283 72 640
Headline R`m 489 284 72 640
Costtoincome ratio
banking activities % 46 51 48
Return on ordinary
shareholders` equity % 29 34 34
Earnings per share
Attributable cents 518 339 53 757
Headline cents 520 340 53 757
Diluted attributable cents 505 325 55 730
Diluted headline cents 507 327 55 730
Dividends per share
Interim cents 125 85 47 85
Final cents 205
Total cents 290
Dividend cover X 4.2 4.0 2.6
ASSETS
Net loans and advances R`m 13 393 7 244 85 10 071
Cash and cash
equivalents R`m 3 248 2 086 56 2 842
Investments R`m 908 1 199 (24) 989
Other R`m 676 468 44 538
Total assets R`m 18 225 10 997 66 14 440
LIABILITIES
Deposits R`m 13 678 8 599 59 10 450
Other R`m 721 463 56 539
Total liabilities R`m 14 399 9 062 59 10 989
EQUITY
Shareholders` funds R`m 3 826 1 935 98 3 451
Capital adequacy ratio % 35 35 41
Net asset value per
ordinary share cents 3 772 2 117 78 3 418
Share price cents 18 845 13 350 41 15 901
Market capitalisation R`m 17 819 11 230 59 14 850
Number of shares in
issue `000 94 554 84 122 12 93 388
Share options
Number outstanding `000 3 233 4 932 (34) 4 222
Number outstanding to
shares in issue % 3 6 5
Average strike price cents 4 283 3 470 23 3 510
Average time to
maturity months 21 25 (16) 20
OPERATIONS
Branches 474 422 12 455
Employees 6 351 4 726 34 5 331
Active clients `000 3 247 2 494 30 2 829
ATMs
Own 507 439 15 479
Partnership 1 356 939 44 1 182
Capital expenditure R`m 203 145 40 235
SALES
Loans
Value of loans advanced R`m 9 226 6 385 44 14 318
Number of loans
advanced `000 3 354 2 615 28 5 471
Average loan amount R 2 751 2 442 13 2 617
Repayments R`m 7 566 5 602 35 12 117
Gross loans and
advances R`m 14 495 7 796 86 10 916
Loans past due (arrears) R`m 649 361 80 626
Arrears to gross
loans and advances % 4.5 4.6 5.7
Provision for doubtful
debts R`m 1 102 552 100 845
Provision for
doubtful debts to
gross loans and advances % 7.6 7.1 7.7
Arrears coverage ratio % 170 153 135
Loan revenue R`m 2 596 1 728 50 3 800
Loan revenue to average
gross loans and advances % 20.4 25.8 46.0
Gross loan impairment
expense R`m 755 447 69 1 088
Recoveries R`m 76 44 73 100
Net loan impairment
expense R`m 679 403 68 988
Net loan impairment
expense to loan revenue % 26.2 23.3 26.0
Net loan impairment
expense to average gross
loans and advances % 5.3 6.0 12.0
Deposits
Wholesale R`m 5 454 3 608 51 3 954
Retail call savings R`m 4 963 3 040 63 3 933
Retail fixed savings R`m 3 125 1 874 67 2 316
Net transaction fee
income R`m 361 235 54 532
SIMPLICITY DELIVERED TRANSPARENTLY GIVES CONTROL
Capitec`s unique positioning and innovative approach to retail banking
gives clients control through transparent pricing and simplified products.
This approach has seen the number of active clients banking with Capitec
grow to 3.2 million.
Capitec`s retail footprint increased by 19 branches and 202 ATMssince
February 2011 and another 36 new branches are planned for the remainder of
the financial year.
Increases in loan revenue to R2.6 billion andnet transaction fee income to
R361 million, along with an improvement in the cost to income ratio to 46%,
resulted in earnings of R488 million, a 72% year-on-year increase.
TRANSACTING SERVICES
Net transaction fee income up 54% to R361 million
The market`s perception of South African banks, according to research
conducted by Finscope, is that technology and formsare complex, queues are
long and banking is expensive.
The reality is that clients want to feel that they have control over their
financial situation and they want their money to grow.
Capitec Bank is uniquely positioned to provide for the everyday banking
needs of every South African. Smaller branches with extended trading hours
positioned to ensure easier access provide unique service to clients.
Transacting is simplified and paperless. The product offering is easy to
understand, transaction charges are low and clients receive a return on
their savings from the first cent.
Acceptance of the Capitec solution is reflected in the increase in active
clients and growth in net transaction fee income to R361 million (August
2010: R235 million; February 2011: R297 million).
The growth in fee income exceeded growth in client numbers. The number of
clients using stop orders, debit orders and transfers grew by 47% year-on-
year and by 26% compared to the six months ended February 2011. Clients
using these transactions are also each doing a larger number of
transactions, therefore the fee income per client increased, despite the
bank not increasing these fees this year.
Income from the operation of card machines at retailers has shown
satisfactory growth in line with the 71% increase in devices in operation
since August 2010.
Transaction fee expenses, which include interchange and switch fees on ATM
and point-of-sale transactions, increased by less than gross transaction
fee income and totalled R230 million.
Net transaction fee income covered 31% of banking operating expenses
(August 2010: 27%). The target of 40% is in sight.
LENDING SERVICES
Loans advanced increased by 44% year-on-year to R9.2 billion
The South African unsecured lending market has continued to grow in 2011.
Credit disbursed during the first quarter grew by 55% to R28.5 billion.
This growth is within our expectations and meets the objective of the
National Credit Act to make credit available to consumers that did not have
access to credit prior to June 2007.In this growing market Capitec`s market
share grew to 20% (first quarter 2010: 16%).
Consumers` appetite for credit is expected to remain high as the demand for
formal housing and durable goods in an increasingly urbanised market
continues to grow. A September 2011 press release by the National Credit
Regulator indicated that enquiries on consumer credit records increased by
25.3% quarter-on-quarter and by 85% year-on-year for the second quarter of
2011.
Market conditions have led to continual increases in the term and value of
unsecured credit offered during the past 18 months. Since our 60-month
product launched in December 2010 it has contributed R3.0 billionin sales.
Loan products with terms of 12 months and longer now contribute 70% of
total sales (August 2010: 62%).
Despite the growth trend in the unsecured credit market it is still a
relatively new and unsophisticated market. For this reason weexplore the
opportunities presented by the current appetite for credit cautiously in
order to maintain a conservative risk profile and ensure that clients are
not over-indebted.
Arrears as a percentage of gross loans and advances down to 4.5%
The 86% year-on-year growth in our loan book to R14.5 billion was achieved
while maintaining the quality of the book. Loan book quality is managed
intensively and this constant focus means that trends are swiftly
identified and addressed.
Growth in the total loan book is expected to continue but should stabilise
as the loan books of our newer products mature.
The current appetite for credit along with the introduction of longer-term
products has increased the level of loan consolidations within the market
and this has further contributed to the increase in the average duration of
loans. The average term of loans advanced during the past six months was 31
months (August 2010: 21 months). Loans with terms of 12 months or longer
now comprise 95% of our total loan book (August 2010: 92%).
Strict monitoring of the loan book limited arrears at the end of August to
4.5% of the loan book (August 2010: 4.6%; February 2011: 5.7%).
The provision for doubtful debts as a percentage of the gross loan book is
7.6% (August 2010: 7.1%; February 2011: 7.7%). The increase compared to
August 2010 is attributable to the provisioning on the 60-month loan
product, which is only 9 months old. The decrease compared to February 2011
is in line with the decrease in arrears.
Net loan impairment expense increased by 68% but is down to 5.3% of average
gross loans and advances
The net loan impairment charge grew by 68% year-on-year and amounted to
R679 million. The net charge includes recoveries of R76 million which
increased by 73% year-on-year.
Our policy is to write off a client`s full outstanding loan balance if any
payment is in arrears for more than 90 days.
The gross loan impairment expense (before recoveries) grew year-on-year by
R308 million compared to book growth of R6.7 billion and by R114 million
compared to the six months ended February 2011. The table below analyses
the increases:
February August
Change compared to the six 2011 2010
months ended R`m R`m
Book growth 190 346
Improvement in book quality (55) (27)
Increased valuation of handed over book (21) (11)
Total 114 308
The netloan impairment expense as a percentage of average loans and
advances decreased to 5.3% (August 2010: 6.0%; February 2011: 6.3%).
The net impairment expense includes higher provisioning on the new and
growing loan books of the longer-term products. Although the 48 and 60-
month loan products are only extended to low risk clients and the
performance of these loan books is better than the more mature 36-month
loan product, prudent provisioning assumptions are applied. This is because
the impact of a missed instalment on a longer-term loan is more severe at
the beginning of the loan repayment period, as the full loan amount may be
at risk. The rate of provisioning on new loan products exceeds the rate at
which income is recognised at the beginning of the term of the loans.
Loan revenue up by 50% year-on-year to R2.6 billion
Interest income increased by 53% year-on-year to R1.9 billion (August 2010:
R1.3 billion; February 2011: R1.5 billion). The increase is mainly
attributable to the annuity impact of longer-term loans despite decreasing
yields due to a 1.5% decrease in the repo rate during the past 18 months.
Loan fee income increased by 35% year-on-year and by 23% compared to the
six months ended February 2011 to R820 million. Loan fee income consists of
origination fees and monthly administration fees. These fees were
positively impacted by the year-on-year increase of 28% in the number of
loans advanced.
The loan fee expense which represents the credit life and retrenchment
insurance cost borne by the bank for the benefit of its clients increased
to R96 million (August 2010: R60 million) due to the growth in the gross
loan book.
COST STRUCTURE
Cost to income ratio down to 46%
The cost to income ratio of banking activities improved to 46% from 51% for
the six months ended August 2010.
The addition of 52 branchesto the network and the increase inbranch and
support employees to 6 351 from 4 726contributed to the 36% year-on-year
increase in banking operating expenses.
Employment, premises, information technology, cash-handling and marketing
costs remain the major components of operating expenditure.
The contribution of employment costs to total operating expenditure
decreased by 2% year-on-year to 53% which is consistent with the six months
ended February 2011.Employment costs contributed R150 million to the year-
on-year increase in operating expenditure.
The cost of incentive schemes included in employment costs is reflected in
the table below:
Cost for the six August February August
months ended 2011 2011 2010
R`m R`m R`m
Share appreciation rights 76 57 64
Share options 6 6 6
Senior management (excluding strategic
management) performance bonus 16 4 13
Staff performance bonus 61 19 53
Total 159 86 136
There have been no changes to the incentive schemes since August 2009.
Share appreciation rights are cash-settled and the expense fluctuates
according to the Capitec share price. Share options are equity-settled and
the expense is therefore not subject to share price fluctuations. The
senior management performance scheme and the staff performance bonus scheme
are based on growth in headline earnings per share.
FUNDING AND LIQUIDITY
Retail funding remained on target at 60% of total funding
Retail call savings grew by 63% year-on-year to R5.0 billion. Growth
resulted from increased client numbers and a year-on-year increase of 16%
in the average savings balance per client.
Retail fixed savings grew by 67% year-on-year (February 2011: 35%) and
remains an attractive source of funding due to the lower cost. Retail fixed
savings totalled R3.1 billion at the end of August 2011 and comprised 36%
of total term funding (August 2010: 34%; February 2011: 37%).
The issuance of two bonds amounting to R1.3 billion under the Domestic
Medium Term Note Programme in May 2011 contributed to a year-on-year
increase of 51% in wholesale funding to R5.5 billion. Capital repayments
amounting to R490 million on the first two bonds issued in terms of this
programme were made in May 2011.
The remainder of the increase in wholesale funding relates to corporate
paper issued. Funding through corporate paper increased to R1.6 billion at
the end of August 2011 (August 2010: R594 million; February 2011: R842
million).
The funding strategy, as Capitec`s profile in the market continues to
improve, has been to match the duration of assets and liabilities. This
translated into the utilisation of funding instruments with more varied
maturities.
Liquidity management remained conservative
Retail call and fixed savings deposits increased substantially, in line
with the growth of the loan book. Despite difficult economic conditionsthe
bank has not experienced any volatility in its call savings base and on
average 41% of maturing fixed deposits are re-invested within two weeks.
The management of liquidity continues to take preference over the
optimisation of profitability and Capitec already complies with the two new
Basel 3 liquidity ratios: the liquidity coverage ratio and the net stable
funding ratio.
CAPITAL
Return on equity at 29%
The return on ordinary shareholders` equity remains well above target,
despite decreasing year-on-year (August 2010: 34%) as a result of an
increase of R1.1 billion in equity after a rights offer in January 2011.
The impact of the additional equity on the return on equity was softened by
the 72% year-on-year increase in earnings.
The risk-weighted capital adequacy ratio is 35% and the prior period ratios
were restated in line with standard Basel practice. We continuously review
the need for additional capital. The disclosure in terms of Regulation 43
of the Banks` Act is available on the Capitec Bank website.
PROSPECTS
Innovation is in our blood and will continue. Persistent focus should
maintain our success.
INTERIM DIVIDEND
The directors approved an interim ordinary dividend of 125 cents per share
on Tuesday 27 September 2011.The dividend will be payable on Monday 5
December 2011.
Last day to trade cumdividend Friday 25 November 2011
Trading ex-dividend commences Monday 28 November 2011
Record date Friday 2 December 2011
Payment date Monday 5 December 2011
Share certificates may not be dematerialised or rematerialised between
Monday 28 November 2011 and Friday 2 December 2011, both days inclusive.
GROUP BALANCE SHEET
Unaudited Unaudited Audited
August August February
2011 2010 Growth 2011
R`000 R`000 % R`000
ASSETS
Cash and cash equivalents 3 247 637 2 085 502 56 2 841 918
Investments designated at
fair value 907 945 1 199 274 (24) 988 664
Loans and advances to clients 13 393 174 7 244 385 85 10 071 466
Inventory 23 503 22 697 4 30 847
Other receivables 53 717 37 159 45 48 177
Property and equipment 479 977 357 073 34 375 185
Intangible assets 54 422 32 854 66 34 357
Deferred income tax assets 64 546 17 848 262 48 903
Total assets 18 224 921 10996792 66 14 439 517
LIABILITIES
Loans and deposits at
amortised cost 13 678 188 8 599 271 59 10 449 883
Trade and other payables 616 178 422 358 46 489 685
Current income tax
liabilities 88 681 28 312 213 35 033
Provisions 16 356 11 693 40 14 403
Total liabilities 14 399 403 9 061 634 59 10 989 004
EQUITY
Ordinary share capital and
premium 2 123 125 796 852 166 1 918 677
Cash flow hedge reserve (6 712) (10 882) (38) (3 469)
Retained earnings 1 450 136 994 582 46 1 276 336
Share capital and reserves
attributable to ordinary
shareholders 3 566 549 1 780 552 100 3 191 544
Non-redeemable, non-
cumulative,
non-participating preference
share capital and premium 258 969 154 606 68 258 969
Total equity 3 825 518 1 935 158 98 3 450 513
Total equity and liabilities 18 224 921 10 996 792 66 14 439 517
GROUP INCOME STATEMENT
Unaudited Unaudited
Six Six Audited
months months Year
ended ended ended
August August February
2011 2010 Growth 2011
R`000 R`000 % R`000
Interest income 1 939 554 1 267 576 53 2 808 543
Interest expense (450 856) (353 389) 28 (751 360)
Net interest income 1 488 698 914 187 63 2 057 183
Loan fee income 819 925 607 145 35 1 273 574
Loan fee expense (96 188) (59 521) 62 (121 710)
Transaction fee income 590 468 389 321 52 883 040
Transaction fee expense (229 638) (154 175) 49 (351 309)
Net fee income 1 084 567 782 770 39 1 683 595
Dividend income 727 540 35 571
Net impairment charge on
loans and advances to
clients (678 866) (403 089) 68 (988 177)
Net movement in financial
instruments designated at
fair value 6 321 (382) (210)
Non-banking income 11003 11 230 (2) 22 258
Sales 104 659 111 903 (6) 219 298
Cost of sales (93 656) (100 673) (7) (197 040)
Other income 18 2 800 251
Income from operations 1 912 468 1 305 258 47 2 775 471
Banking operating expenses (1 182 (873 214) 35 (1 812 499)
772)
Non-banking operating
Expenses (11 034) (11192) (1) (22 672)
Operating profit before tax 718 662 420 852 71 940 300
Income tax expense (220 966) (131 126) 69 (284 276)
Profit for the period 497 696 289 726 72 656 024
Earnings per share (cents)
Basic 518 339 53 757
Diluted 505 325 55 730
GROUP STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited
Six Six Audited
months months Year
ended ended ended
August August February
2011 2010 Growth 2011
R`000 R`000 % R`000
Profit for the period 497 696 289 726 72 656 024
Other comprehensive income
for the period net of tax (3 243) 4 957 12 370
Cash flow hedge before tax (4 504) 6 885 17 181
Income tax relating to
cash flow hedge 1 261 (1 928) (4 811)
Total comprehensive income
for the period 494 453 294 683 68 668 394
RECONCILIATION OF ATTRIBUTABLE EARNINGS TO HEADLINE EARNINGS
Unaudited Unaudited
Six Six Audited
months months Year
ended ended ended
August August February
2011 2010 Growth 2011
R`000 R`000 % R`000
Net profit after tax 497 696 289 726 72 656 024
Preference dividend (9 763) (6 411) 52 (15 754)
Net profit attributable to
ordinary shareholders 487 933 283 315 72 640 270
Non-headline items:
(Profit)/losson disposal of
Property and equipment 1 176 1 002 17 (638)
Intangible assets 960 476 102 476
Income tax charge (613) (413) 48 60
Headline earnings 489 456 284 380 72 640 168
GROUP STATEMENTOF CHANGES IN EQUITY
Unaudited Unaudited
Six Six Audited
months months Year
ended ended ended
August August February
2011 2010 2011
R`000 R`000 R`000
Equity at the beginning of the period 3 450 513 1727 977 1 727 977
Total comprehensive income for
the period 494 453 294 683 668 394
Ordinary dividend (193 837) (130308) (201 882)
Preference dividend (9 763) (6411) (15 754)
Employee share option scheme:
Value of employee services 6 324 5 902 11 706
Shares issued and acquired for
employee share options at cost (204 534) (118 663) (131 591)
Proceeds on settlement of
employee share options 31 131 21 184 23 255
Tax effect on settlement of share
options 46 783 26 161 27 587
Shares issued 204 534 114 690 1 385 386
Share issue expenses (86) (57) (44 565)
Equity at the end of the period 3 825 518 1935 158 3 450 513
GROUP STATEMENT OF CASH FLOWS
Unaudited Unaudited
Six Six Audited
months months Year
ended ended ended
August August February
2011 2010 2011
R`000 R`000 R`000
Cash flow from operating activities 693 663 (322777) (828 232)
Cash flow from investing activities (115 288) (38578) 85 169
Cash flow from financing activities (172 656) (119731) 1 018 393
Net increase/(decrease)in cash
and cash equivalents 405 719 (481086) 275 330
Cash and cash equivalents at the
beginning of the period 2 841 918 2566 588 2 566 588
Cash and cash equivalents at the
end of the period 3 247 637 2085 502 2 841 918
COMMITMENTS Unaudited Unaudited Audited
August August February
2011 2010 2011
R`000 R`000 R`000
Capital commitments approved by the
board
Contracted for 38 935 14 557 29 609
Not contracted for 242 914 184 871 505 768
Operating lease commitments
Future aggregate minimum lease
payments
Within one year 154 356 115 525 131 058
From one to five years 434 310 299 722 362 795
After five years 84 173 33 364 54 331
Total future cash flows 672 839 448 611 548 184
Straight-lining accrued (30 088) (22 381) (25 354)
Future expenses 642 751 426 230 522 830
SEGMENT ANALYSIS Wholesale Intra-
Banking distribution segment Total
R`000 R`000 R`000 R`000
Unaudited six months ended
August 2011
Segment revenue 3 351 223 104 659 (531) 3 455 351
Segment earnings after tax 498 341 (645) - 497 696
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
Audited year ended
February 2011
Segment revenue 4 966 768 219 298 (789) 5 185 277
Segment earnings after tax 657 273 (1 249) - 656 024
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.
UNAUDITED INTERIM FINANCIAL REPORTS
The summarisedunaudited consolidated interim financial statements are
prepared in accordance with International Accounting Standard (IAS) 34
`Interim Financial Reporting`, the requirements of theCompanies Act of
South Africa(Act No 71 of 2008), as amended, and the Listings Requirements
of the JSE Limited.The accounting policies applied conform to IFRSand the
AC500 standards, and are consistent with those applied in the previous
year. Standards, interpretations and amendments to published standards
applied for the first time during the current financial year did not have
any significant impact on the interim financial statements.The group
complies in all material respects with the requirements of the King III
Code.
The preparation of the summarised unaudited consolidated interim financial
statements was supervised by the financial director, Andredu Plessis
CA(SA).
On behalf of the board
Michiel le Roux
Chairman
Riaan Stassen
Chief executive officer
Stellenbosch
28 September 2011
COMPANY SECRETARY AND REGISTERED OFFICE
Christian George van Schalkwyk: BComm, LLB, CA(SA)
1 Quantum Street, TechnoPark, Stellenbosch 7600, PO Box 12451, Die
Boord,Stellenbosch7613
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)*, Ms RJ
Huntley, MJ Jooste, Prof MC Mehl, Ms NS Mjoli-Mncube, PJ Mouton, CA Otto,JP
van der Merwe
*Executive
capitecbank.co.za
enquiries@capitecbank.co.za
Date: 28/09/2011 07:30:14 Produced by the JSE SENS Department.
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