Capitec, South Africa's largest bank by customer numbers, has doubled down on its strategy to gain further market share in the multibillion-rand airtime advance market. The bank's airtime advance product, initially capped at R10, attracted a R1 transaction fee and saw significant demand from customers. Having observed customers' ability to repay, Capitec has increased the maximum airtime advance to R100. This move positions Capitec to compete with telecommunications giants in the airtime advance market.
The bank's airtime advance product is part of its value-added services (VAS), which have become a significant contributor to revenue from South African financial services for mobile providers. Capitec has been using its digital channels to push sales for products such as airtime, data, and electricity. Mobile operators and power utility Eskom pay a commission to Capitec for driving such sales. The bank's VAS net income grew to R3.5bn from R2.7bn, driven by growth in digital transaction volumes and demand for everyday services.
Capitec's growth in VAS is also attributed to its mobile virtual network operator (MVNO) business, Capitec Connect. MVNOs lease network infrastructure from mobile operators to sell data and voice services to their customers. Capitec Connect's net income grew to R284m from R165m, with the number of active clients reaching 1.8-million, up from 1.1-million. The bank's client base has grown, with 26.6-million customers, a 7% increase in active clients.
The bank's financial performance for the six months to end-August showed earnings growth of almost a fifth. Headline earnings rose 19% to R9.5bn, while operating profit before tax increased 21% to R12.6bn. Net interest income grew 7% to R12.7bn, driven by 21% growth in loan disbursements. Credit card disbursements were the primary driver of the 20% increase in personal banking loan disbursements.
Capitec's personal banking headline earnings increased 17% to R6.3bn, including VAS and Capitec Connect. The personal banking gross loan book exceeded R100bn for the first time. The number of clients using VAS increased 14% to 13.5-million, with the volume of transactions increasing by 26% to 1.1-billion. Clients are moving away from traditional cash withdrawals to electronic "send cash" transactions, with net income growing by 32% to R906m.
The bank's insurance business also showed strong performance, with headline earnings increasing 22% to R2bn. Business banking's headline earnings increased by 52% to R609m. Capitec CEO Graham Lee highlighted the bank's focus on creating value for its clients, which in turn creates value for employees, shareholders, and South Africa at large. The bank serves almost 5-million young people between 18 and 25 and 686,000 business owners.
Capitec's growth strategy focuses on providing value-added services to its clients. The bank's diversified business activities have maintained strong momentum, driving growth in earnings and client base. With its increased airtime advance limit and competitively priced smartphones, Capitec aims to gain a bigger share of the multibillion-rand airtime advance market.
Key points
- Capitec has increased its airtime advance limit to R100, competing with telecommunications giants.
- The bank's VAS net income grew to R3.5bn from R2.7bn, driven by growth in digital transaction volumes.
- Capitec's headline earnings rose 19% to R9.5bn, with operating profit before tax increasing 21% to R12.6bn.
