Capitec Bank Holdings Limited · JSE:CPI
Capitec Bank — FY2023 Earnings Presentation
48 slides from Capitec Bank's earnings presentation, February 2023
Slide 1: Building the future
Building the future Financial results February 2023
Slide 2: Hello
Hello Please send any questions to: [email protected] Questions will be answered at the end of the presentation.
Slide 3: Growth and investment in tough economic times
Growth and investment In tough economic times 15% Potential of >R800M R1.4bn Growth in a tough economy 20M savings Invested for clients to clients the future
Slide 4: Relief for clients and employees
Relief for clients and employees Savings in fees, interest and rewards
Slide 5: Relief for clients and employees
Relief for clients and employees We remained client- and employee-centric despite the challenging times More than R800 million in savings for our clients • R510 million reduction in SMS fees and free in-app messages • R256 million Bank Better behavioural benefits • R106 million in Spend Better partn
Slide 6: Investment in future growth
Investment in future growth Opex impact in current period with long-term future earnings potential
Slide 7: R1.4bn investment in future growth
Investment in future growth R1.4 billion investment in people and technology that will drive future business growth Capitec Business New payment solutions Capitec Insure R1.4bn Value-added Services (VAS) pre-tax (70% opex) Tech, Cloud and data solutions Capitec Connect (MVNO) Solar and backup electr
Slide 8: Major challenges
Major challenges Social, political and economic challenges worldwide
Slide 9: Major challenges worldwide
Major challenges worldwide Radical change and collaboration needed for post-COVID solutions COVID Post-COVID Normalising Tough reality in South Africa • Impact of global economy • Eskom / Transnet / Water boards • Failing infrastructure • Municipalities and local governance Biggest long-term challen
Slide 10: Addressing South Africa
Addressing South Africa We still believe in the immense potential and growth opportunities in SA As individuals and companies, we need to: Take ownership Seek opportunities Be positive 10
Slide 11: Economy of the Capitec client
Economy of the Capitec client 20 million retail clients across all segments provide rich data and insight into South Africa
Slide 12: Retail clients - Age distribution
The economy of 20 million clients Age distribution of our retail bank clients indicate strong future potential 15 +7% 62% of our retail 12 clients are below Retail clients - Age distribution (‘ million) the age of 40 10.9 9.1 9 +14% 6.7 5.8 6 4.5 3.2 +21% +15% 3 1.5 1.7 1.0 1.2 0.7 0.8 - 20 and youn
Slide 13: The economy of 20 million clients
The economy of 20 million clients Clients move to digital banking with 26% growth in the banking app 25 20 18 20.1 20 Active 16 clients 18.1 up 11% 14 15.8 Total active clients (million) 15 11.4 12 13.9 10.1 Banking app 11.4 8.6 up 10 26% 7.6 10 7.0 8 6.7 5.9 5.4 5.1 4.6 5.1 Funeral 6 clients 4.2 3.
Slide 14: Average annual spend per debit order category
The economy of 20 million clients Interest rate hikes impact cost of debt and reduces disposable income Average annual spend per debit order category +20% +15% The weighted average growth for all categories combined is 12% +12% -15% +5% +3% +12% -1% Home Loans Vehicle Financing Personal Loans Educat
Slide 15: Average annual spend per category per client
The economy of 20 million clients Significant increase in cost of living affects middle- to lower-income clients the most Average annual spend per category per client +8% The weighted average growth for all categories +16% combined is 5% -13% +2% +10% -9% +7% +2% +36% -30% Groceries Fuel Home Clothi
Slide 16: Insufficient funds as a % of total transactions
The economy of 20 million clients Insufficient funds transactions* increase driven by declining inflows, lower bonuses and less overtime 12% 10.7% 9.8% 10% Insufficient funds as a % of total transactions 8.6% 8% 7.6% 7.3% 6% 4% Feb 19 Feb 20 Feb 21 Feb 22 Feb 23 *Insufficient fund transactions measu
Slide 17: Financial results
Financial results Growth in tough economic times
Slide 18: FY23 Highlights
©) FY23 Highlights
Slide 19: Headline earnings increased by 15% to R9.7 billion
Headline earnings increased by 15% to R9.7 billion Our performance reflected resilience during tough economic times 5-year CAGR Total dividends per share: 12 16% 4 200 cents (up 15%) ROE: 26% 10 ROE: 26% Headline earnings (R’ billion) 8 ROE: 28% ROE: 6 28% ROE: 17% 9.7 4 8.4 6.3 5.3 4.6 2 - Feb 19 F
Slide 20: Key performance indicators
Key performance indicators Diversification of income driven by digitalisation, expansion of operations and introduction of new products Feb 23 Feb 22 Net transaction and commission, net foreign currency and funeral plan income to: - Net income 54 49 - Operating expenses 110 92 Cost-to-income ratio 3
Slide 21: Group income statement
Group income statement Income from operations up 12% driven by strong balance sheet growth and impact of repo rate changes Feb 23 Feb 22 Change Change (Rm) (Rm) (%) (Rm) Net lending, investment and credit life insurance income 17 174 15 107 14 2 067 Net transaction and commission income 11 461 10 51
Slide 22: Balance sheet – solid deposit and book growth
Balance sheet – solid deposit and book growth Resulted in our average investment portfolio being flat when compared to the previous year Total deposits up 9% to 150 R147 billion, in line with the active client base growth Deposits, gross loans and advances and investment portfolio 120 +8% +16% Total
Slide 23: Credit life and funeral insurance income
Credit life and funeral insurance income Better claims experience, consistent growth and improved collections +23% 1 889 Net credit life insurance: 2 000 Credit life insurance income 1 540 • Average insured book grew by 15% 1 500 • Number of claims settled was stable around 28 000 (R’ million) 981 9
Slide 24: Net transaction and commission income increased 9% to R11.5 billion
Net transaction and commission income increased 9% to R11.5 billion Growth impacted by our digitalisation journey, Live Better rewards and SMS fee changes 15 YOY growth impacted by the following factors: - SMS notification fees reduced and introduction of free in-app notifications (R510 million) +18
Slide 25: Retail credit impairment charge increased by R2.8bn (86%)
Retail credit impairment charge increased by R2.8bn (86%) Driven by new loans and advances, and the book migration Net credit impairment charge by component Feb 23 Feb 22 Feb 21 Feb 20 (R’ million) New loan sales net of settlements 4 060 2 745 1 637 2 852 Book quality 4 522 2 957 8 431 4 297 Migrati
Slide 26: Retail credit impairment charge increased by R2.8bn (86%)
Retail credit impairment charge increased by R2.8bn (86%) Driven by new loans and advances, and the book migration Net credit impairment charge by component Feb 23 Feb 22 Feb 21 Feb 20 (R’ million) New loan sales net of settlements 4 060 2 745 1 637 2 852 New loan sales net of settlements /Average g
Slide 27: Retail credit impairment charge increased by R2.8bn (86%)
Retail credit impairment charge increased by R2.8bn (86%) Driven by new loans and advances, and the book migration Net credit impairment charge by component Feb 23 Feb 22 Feb 21 Feb 20 (R’ million) New loan sales net of settlements 4 060 2 745 1 637 2 852 Book quality 4 522 2 957 8 431 4 297 Migrati
Slide 28: Book migration: risk deterioration
Book migration Decisive action: Risk deterioration Next-generation 4 318 972 unique 56% 4,5 00 4 051 granting model granting changes (FTC7) 54% 4,000 54% made in response 3 541 implemented to employment 52% 3,500 using over 14 000 risk 2 875 behaviours 50% 3,000 48% 48% 2,500 46% Limit decreases Dis
Slide 29: Book migration: indebtedness deterioration
Book migration Decisive action: Indebtedness deterioration Minimum Living Expense: Capitec vs NCR +18% Major focus on Increased collections minimum living 3.25 Debt educational 2.75 expenses by 18% campaigns 2.13 2.50 2.50 #SpeakToYourBank Feb 19 Feb 20 Feb 21 Feb 22 Feb 23 20% of debt review Balanc
Slide 30: Retail credit impairment charge increased by R2.8bn (86%)
Retail credit impairment charge increased by R2.8bn (86%) Driven by new loans and advances, and the book migration Net credit impairment charge by component Feb 23 Feb 22 Feb 21 Feb 20 (R’ million) New loan sales net of settlements 4 060 2 745 1 637 2 852 Book quality 4 522 2 957 8 431 4 297 Migrati
Slide 31: Expected credit loss coverage ratio remains healthy
Retail credit impairment charge increased by R2.8bn (86%) Expected credit loss coverage ratio remains healthy 100 30 26.9 90 23.6 25 80 Prudent ECL coverage 20.5 22.9 70 20 • Ratio trending towards pre-COVID ratio 60 of 20.5% 50 15 Stable credit loss ratio 40 82.3 71.2 • Credit loss ratio reduces fr
Slide 32: Operating expenses decreased 5% to R11.9 billion
Operating expenses decreased 5% to R11.9 billion Cost-to-income ratio lowered to 39% (Feb 22: 47%), in line with pre-COVID levels Employee costs (excl. incentives) grew 11% due to the following: • Headcount increased 5% to 15 451 (Feb 22: 14 758) • Inflationary salary increases Incentives decreased
Slide 33: Business bank profit nearly doubled to R389 million
Business bank profit nearly doubled to R389 million Increase in profitability reflects the opportunity for scale in the SME market Profitability during the H2 2023 was impacted by the following: • Realignment of operating expenses between divisions Key financial performance indicators: • Gross loans
Slide 34: Environmental Social and Governance
Environmental Social and Governance Ensuring sustainable and meaningful impact
Slide 35: Environmental, Social and Governance
Environmental, Social and Governance The UN Sustainable Development Goals (SDGs) is intrenched in our core business strategy Environment Social Governance • R13 million invested to install solar • Capitec Foundation reached over • B-BBEE status: Moved to level 2 panels at our Head Office and to 300
Slide 36: Future
Future Unlock the potential of 20 million clients to create better value and growth
Slide 37: Investing and strategies for future growth
Investing and strategies for future growth Business Capitec Bank Insure Data and Technology Potential of 20M Live Capitec Better Connect Rewards clients Digital Service Value Digital Added Payments Services 37
Slide 38: Introducing Capitec Business
Introducing Capitec Business
Slide 39: Capitec Business
Capitec Business Personalised banking that leads financial inclusion and growth for SMEs in SA Our vision is to provide personalised business banking in a digitally scalable way that leads financial inclusion and growth for SMEs. Market potential: 2.6 million SMEs contribute approx. 40% to GDP Rebra
Slide 40: Payments
Payments 5.1 million digital payments every day reduce cash and gain valuable behavioral data Card payments Capitec Pay • SA’s first bank-endorsed payment API • 1.9 billion card payments up 28% • Simpler, secured client experience – no screen scraping • Biggest growth sectors: food delivery, streami
Slide 41: Capitec Insure
Capitec Insure Insurance based on the Capitec fundamentals of affordability, simplicity and accessibility Roadmap • Building new systems and services • Existing Credit Life policies will be transferred by section 50 transfer • New Credit Life policies will be issued from May 2023 • Funeral plan nego
Slide 42: Live Better
Live Better Best Loyalty Programme in Financial Services 2022 13.4 million clients registered at the end of Feb 2023 u Bank Better cash back drives digital banking behaviour 737 000 clients got R256 million paid back into Live Better savings accounts Save Better tools change savings behaviour 8.5 mi
Slide 43: Value-added services
Value-added services Better value for our clients – generated 841 million transactions to the value of R60 billion 8.4 million clients make use of value-added services Existing products • R29 billion prepaid airtime, data and electricity (up 11%) – over 30% m/s • R31 billion cash sent (up 78%) – ove
Slide 44: Capitec Connect
Capitec Connect Disrupting the prepaid market with a simple, transparent and affordable solution Launched in Sep 2022 • Aligns with our fundamentals • Promotes inclusion in digital economy • Provides better behavioural data Better value for our clients • 84% of mobile subscriptions in SA are prepaid
Slide 45: Digital service
Digital service Better client experience and improved efficiencies Conversational banking on WhatsApp and Facebook Messenger • Introduced chat-based banking service and support in Oct '22 • 10 times more efficient and better client experience than call • Already handling 20% of client care volumes –
Slide 46: Data and technology
Data and technology Leading international technology and Cloud services enable agility and scalability Cloud data infrastructure (AWS) • Ensure agile development and scalability • Single view of across the group • Data modelling and machine learning • Client insights and behavioural banking Recruiti
Slide 47: Our purpose
Our purpose We remain committed to our purpose of using data and technology to make banking simple, transparent and affordable and help people and businesses live better. 47
Slide 48: Thank you
Thank you Send questions to: [email protected]