Capitec is killing it in South Africa

Capitec has seen a massive jump in its profit metrics, as the bank’s active client base and branch numbers increase.

In its financial results for the year ended 28 February 2025, Capitec noted that several additions to the group over the last five years have expanded its active client base.

This includes business banking, value-added services (VAS), its mobile offering Capitec Connect and acquiring its insurance licence to complement its personal banking products.

The expansion of the product and service offering resulted in continued growth in its active client base from 22.2 million in the prior year to 24.1 million.

The group’s branch network also expanded to 880 branches over the period, adding 16 new branches to the group. 

The adoption of digital transacting continued to grow as active app clients grew by 15% to 12.9 million.

Headline earnings jumped by R3.1 billion or 30% to R13.7 billion. The group’s ROE also increased from 26% to 29%, partly due to a decrease in the credit loss ratio.

Net interest income contributed R2.7 billion to the growth in headline earnings, while interest income from investments grew by 18%.

Interest expense growth was less pronounced than interest income growth due to the 75 basis point decrease in the repo rate since September 2024, which reduced the average rate paid on deposits.

Interest income on lending increased by 17%, as credit-granting criteria were eased for specific client segments during the year, leading to a 28% increase in loan disbursements.

Business banking loan disbursements also grew by 29%.

Despite the 12% growth in gross loans and advances, the credit impairment charge on loans and advances also dropped by 6%.

The group’s credit loss ratio dropped from 8.7% in FY24 to 6.9% in FY25, excluding AvaFin. When including AvaFin, the group’s credit loss ratio was 7.5%.

This contributed R973 million to the growth in headline earnings before including the AvaFin impairment.

Net non-interest income, which jumped by 22%, contributed R3.1 billion to the increase in headline earnings. Net transaction income and commission, including VAS and Capitec Connect, jumped by 25%.

Digital transactions and card payments (including VAS and Capitec Pay) accounted for 90% (2024: 88%) of transaction volumes, excluding system-generated transactions.

The group’s net insurance result contributed R437 million to the increase in headline earnings, with credit life insurance income growing by 1% and funeral and life cover results growing by 44%.

Operating expenses grew by 30%, with a 7% point increase due to the inclusion of AvaFin operating expenses that were absent in 2024.

The increase in employee incentives due to high headline earnings growth added another 9% points to costs.

The board also declared a final gross dividend of 4,425 cents per ordinary share, bringing the total dividend to 6,510 cents.

The annual dividend payout ratio was amended from 50% to 55% amid the higher ROE, returning more headline earnings to shareholders.