CAPE TOWN – The country’s fastest-growing banking group, Capitec, yesterday revised its profit growth downwards by more than 10 percent, warning that Covid-19 had impacted its operations worse than its initial projections.
The group slashed its profit forecast a further 12 percent, from the 70 percent it said it was likely to incur six weeks ago as a result of the pandemic.
Capitec said it now expected its profits to fall 82 percent on credit impairments and the decline in transactional activity during the six months to the end of August.
In July, the group flagged a 70 percent decline in its earnings.
“The board now wishes to advise that a reasonable degree of certainty exists that for the half-year to end-August headline earnings per share (Heps) will be between 458.10 cents a share and 559.90c, representing a decrease of between 78 and 82 percent, compared to the 2 545c reported last year,” the group said.
Since January, the bank has wiped nearly R40 billion off its market cap.
The bank said then that the earnings had taken a heavy hit from a loss of R404 million during the first quarter to the end of May.
It said the national lockdown had resulted in increased credit impairment charges and lower loan sales and transaction volume.
Capitec said its credit impairment charge was 145 percent higher than expected, predominantly due to R5.75bn and R236m in retail and business credit balances, respectively, rescheduled or granted payment breaks due to the lockdown.
The bank said its earnings per share were projected to fall between 458.82c and 560.78c, representing a decrease of between 78 and 82 percent compared with the 2 549c reported last year.
The poor forecast is only months after former parent company PSG Group surprised the market when it announced plans to unbundle its stake in Capitec. PSG Group offloaded 28.11 percent of Capitec, leaving it with a stake of only about 2.7 percent.
Interestingly, the Public Investment Corporation has been buying Capitec shares and, according to a notice days ago, had accumulated an 11.1 percent stake in Capitec, which was up from about 7.4 percent.
Total lending income was 7 percent below expectation at that time, due to retail and business loan sales falling 43 and 25 percent, respectively, below expectation, due to the impact of Covid-19.
Its customers, many of them low-income earners, have been unable to keep up with loan repayments during the lockdown.
The group said provision for credit impairments had increased by R3.3bn since February.
The big slide in Heps was in line with the declines reported in recent weeks by the other big banks in South Africa, such as FirstRand, which expects a decline of between 35 and 45 percent in earnings.
Nedbank reported a 69 percent drop in earnings for the six months to the end of June. Absa’s interim diluted normalised headline earnings per share were down 82 percent, and Standard Bank’s earnings fell 44 percent.
Capitec shares rose 1.35 percent on the JSE yesterday to close at R881.77.
BUSINESS REPORT