Interim results presentation 2017
Contents Key indicators Operating environment What differentiates us Highlights Bank Save Credit Continued focus
Key indicators
Key indicators Earnings 4 000 3 500 3 000 2 500 2 000 1 500 1 000 23 2 017 25 1 173 25 2 547 26 1 469 27 26 3 222 1 754 27 3 793 26 2 046 28 26 24 22 20 18 16 14 500 12-2014 Aug-14 2015 Aug-15 2016 Aug-16 2017 Aug-17 Headline earnings (R'millions) Return on equity (%) 10 Interim Results Presentation 2017 Capitec Bank Limited 4
Key indicators Cost-to-income (%) 37 36 35 34 34 35 36 34 34 34 36 33 32 32 31 30 2014 Aug-14 2015 Aug-15 2016 Aug-16 2017 Aug-17 Interim Results Presentation 2017 Capitec Bank Limited 5
Key indicators Net transaction fee income to operating expenses (%) 90 80 70 60 59 63 65 61 66 70 72 76 50 40 30 20 10-2014 Aug-14 2015 Aug-15 2016 Aug-16 2017 Aug-17 Interim Results Presentation 2017 Capitec Bank Limited 6
Key indicators Net transaction fee income to net income (%) 45 40 35 32 34 34 32 33 37 37 40 30 25 20 15 10 5-2014 Aug-14 2015 Aug-15 2016 Aug-16 2017 Aug-17 Interim Results Presentation 2017 Capitec Bank Limited 7
Operating environment
Operating environment Improving economy Lower inflation Food: 11.3% to 6.8% All items: 5.9% to 4.6% Lower interest rates GDP up to 2.5% from last quarter Stable exchange rate Interim Results Presentation 2017 Capitec Bank Limited 9
Operating environment Retrenchments 1 600 1 400 1 200 1 000 800 600 400 200 0 Retrenchments Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb FY2016 FY2017 FY2018 Interim Results Presentation 2017 Capitec Bank Limited 10
Operating environment Employment challenges Unemployment rate 27.7% Q2 2017, highest rate observed since September 2003 (STAT SA) Youth unemployment rate 55.9% (STAT SA) Total employed increased ( 000) (STAT SA) April June 2016 April June 2017 Movement (%) Total Employed 15 545 16 100 4 Formal sector (non-agricultural) 10 917 11 193 3 Informal sector (non-agricultural) 2 507 2 761 10 Agriculture, hunting, forestry and fishing 825 835 1 Private households 1 296 1 311 1 Interim Results Presentation 2017 Capitec Bank Limited 11
Operating environment Growing account inflows Average account inflows per banking client (same clients tracked over time) (Aug 2016 - Aug 2017, n = 1.9 million) Sep 16 to Aug 17 % change 6% 6% 11% 16% Interim Results Presentation 2017 Capitec Bank Limited 12
Operating environment Cash availability 627 077 same clients Non-Government (%) Government (%) Total (%) Aug-16 Aug-17 Aug-16 Aug-17 Aug-16 Aug-17 More than 40% cash available 77 65 77 76 77 67 Between 39% and 21% cash available 9 8 16 12 10 8 Cash stress less than 20% cash available 6 5 6 6 6 6 No inflow 8 22 1 6 7 19 100 100 100 100 100 100 Interim Results Presentation 2017 Capitec Bank Limited 13
Operating environment Global One net loan book clients Total book* Aug-16 (%) Aug-17 (%) More than 40% cash available 75 80 Between 39% and 21% cash available 14 10 Cash stress less than 20% cash available 6 6 No inflow 5 4 40% cash available clients per salary band Aug-16 (%) Aug-17 (%) R15 000 plus 33 40 R10 001 R15 000 28 29 R5 001 R10 000 29 24 R1 R5 000 10 7 * Clients where we collect their loan instalment from their Global One account Interim Results Presentation 2017 Capitec Bank Limited 14
Operating environment Debt review Cost to the client Effect on client Aggressive marketing Interim Results Presentation 2017 Capitec Bank Limited 15
What differentiates us We help our clients bank better, so that they can live better. By offering simplified banking that is transparent, easy to access, affordable to use, and delivered through personal service, we put our clients in control.
personalised credit interest rates from as low as 12.9% 190 000 credit card clients pay R35 per month Highlights clients saved over R165 million by banking with their remote app or phone 82% of employees are less than 35 years old 95% clients waited for less than 15 minutes to be served
Bank Total Capitec clients as a % of SA population South Africa South Africa Capitec % 0-14 16 786 222 1 15-19 5 104 411 8 20-34 15 038 4 375 29 35-54 12 226 3 292 27 55-64 3 547 652 18 65 plus 2 952 232 8 Source: STAT SA- census 2016 and internal data Total 55 653 9 184 17 Interim Results Presentation 2017 Capitec Bank Limited 18
Bank Banking client market share 30% 4 074 4 500 25% 20% 2 852 3 526 22% 25% 4 000 3 500 3 000 15% 10% 1 610 12% 2 150 14% 18% 2 500 2 000 1 500 5% 1 000 500 0% Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 0 Capitec share of employed population Banking clients Source: Labour Force Survey 2017 Q2, 2016 Q2, 2015 Q2, 2014 Q2, 2013 Q2; Capitec internal data Interim Results Presentation 2017 Capitec Bank Limited 19
Bank Client and transaction growth Quality banking clients up 21% Transaction fee income up 29% Cellphone and internet transaction growth up 39% Total number of transactions up 27% 71% of possible transactions done on self-help devices Interim Results Presentation 2017 Capitec Bank Limited 20
Bank Transaction growth Transaction volumes ( '000) Channel Aug-16 Aug-17 Growth (%) Cellphone* 158 746 220 753 39 Point of sale 173 805 228 181 31 ATM 140 126 163 025 16 DNR 3 136 7 844 150 Self service terminals 116 2 899 2 401 Branch 27 976 27 001 (3) SMS and debit orders 502 346 625 603 25 * USSD, internet banking and app Interim Results Presentation 2017 Capitec Bank Limited 21
Bank Distribution Change since Feb-17 Total Aug-17 Branches Total 15 811 New look 91 525 Previous layout (76) 286 ATMs Total 257 4 281 Regular 12 1 140 Dual note recyclers 110 635 Partnership 135 2 506 Interim Results Presentation 2017 Capitec Bank Limited 22
Save Help clients manage their money Brand acceptance and trust Consistent, conservative approach to liquidity Well-priced retail deposit growth fixed and call Interim Results Presentation 2017 Capitec Bank Limited 23
Save Deposits (R millions) 35 000 32 500 30 000 27 500 25 000 22 500 20 000 17 500 15 000 12 500 10 000 7 500 5 000 2 500-2013 2014 Aug-14 2015 Aug-15 2016 Aug-16 2017 Aug-17 Retail call Retail fixed Wholesale Interim Results Presentation 2017 Capitec Bank Limited 24
Credit Credit market Unsecured and short term credit granted (R 000) 30 000 25 000 20 000 19 943 26 960 Total market Advances 22 093 Capitec Advances 26 449 23 076 15 000 10 000 5 000 25.2% 27.8% 25.7% 27.1% 26.4% - 2015Q1 2015Q4 2016Q1 2016Q4 2017Q1 Source: NCR Interim Results Presentation 2017 Capitec Bank Limited 25
Credit Credit market unsecured Rand value by term Quarter 1 Products 2015 (R m) 2016 (R m) 2017 (R m) 0-12 Months 4 484 4 966 4 845 13-36 Months 5 234 5 446 4 917 37-60 Months 9 287 10 267 11 428 61-84 Months 938 1 414 1 886 Total 19 943 22 093 23 076 Source: NCR Interim Results Presentation 2017 Capitec Bank Limited 26
Credit Credit market unsecured credit Rand value per income category Quarter 1 Salary band 2015 (R m) 2016 (R m) 2017 (R m) R0 - R5 500 2 300 2 926 2 154 R5 501 - R10 000 3 790 3 901 3 436 R10 001 - R15 000 3 981 4 076 4 138 R15 000 plus 9 872 11 190 13 348 Total 19 943 22 093 23 076 Source: NCR Interim Results Presentation 2017 Capitec Bank Limited 27
Credit Regulatory Debt relief Credit life insurance Interim Results Presentation 2017 Capitec Bank Limited 28
Credit Improved solution Reduced pricing 1.5% interest cut, 6 months term reduction Cut back on small and tiny companies / lower income More personalised credit offer Better interest rate options based on affordability Interim Results Presentation 2017 Capitec Bank Limited 29
Credit Loans advanced by term Interim Results Presentation 2017 Capitec Bank Limited 30
Credit Application 6 months ended Aug-16 (%) Feb-17 (%) Aug-17 (%) Applications Decline Rate 47 60 67 Application Approved: Not Taken up 12 8 6 Applications Taken Up Rate 41 32 27 Total 100 100 100 Interim Results Presentation 2017 Capitec Bank Limited 31
Credit Collections/provisions Arrears & impairment provisions of gross loans & advances Aug-16 Feb-17 Aug-17 Gross loans and advances R'm 42 812 45 135 46 544 Loans past due (arrears) R'm 2 561 2 855 2 498 Arrears to gross loans and advances % 6,0 6,3 5,4 Arrears rescheduled within 6 months R'm 1 645 1 583 1 396 Arrears and arrears rescheduled within 6 months to gross loans and advances % 9,8 9,8 8,4 Rescheduled from up-to-date within 6 months R'm 1 535 1 088 1 049 Arrears and all rescheduled within 6 months to gross loans and advances % 13,4 12,2 10,6 Provision for doubtful debts R'm 5 874 5 930 5 925 Provision for doubtful debts to gross loans and advances % 13,7 13,1 12,7 Arrears coverage ratio % 229 208 237 Arrears and arrears rescheduled within 6 months coverage ratio % 140 134 152 Arrears and all rescheduled within 6 months coverage ratio % 102 107 120 Interim Results Presentation 2017 Capitec Bank Limited 32
Credit Credit card Consistent growth in clients Overseas travel Adjusted pricing Interim Results Presentation 2017 Capitec Bank Limited 33
Continued focus
Continued focus Cream Finance Improved service People development and leadership Business delivery and throughput Growing quality clients Developing digital banking platform Interim Results Presentation 2017 Capitec Bank Limited 35