Annual Results Presentation 28 February 2017 Capitec Bank Limited 1
Contents Key indicators Economic overview Banking clients Client service Credit Funding International Future
Key indicators Capitec Bank Limited 3
Key Indicators Headline earnings (R millions) 4 000 3 793 3 500 3 222 3 000 2 500 2 547 2 000 2 017 1 754 1 500 1 000 1 173 1 469 500-2014 Aug-14 2015 Aug-15 2016 Aug-16 2017 Results 4
Key Indicators Return on equity (%) 30 25 23 25 25 26 27 26 27 20 15 10 5 0 2014 Aug-14 2015 Aug-15 2016 Aug-16 2017 Results 5
Key Indicators Cost-to-income ratio (%) 37 36 36 35 35 34 34 34 34 34 33 32 32 31 30 2014 Aug-14 2015 Aug-15 2016 Aug-16 2017 Results 6
Key Indicators Net transaction fee income to operating expenses (%) 80 70 60 59 63 65 61 66 70 72 50 40 30 20 10-2014 Aug-14 2015 Aug-15 2016 Aug-16 2017 Results 7
Key Indicators Net transaction fee income to net income (%) 38 37 37 37 36 35 34 33 32 32 34 34 32 33 31 30 29 2014 Aug-14 2015 Aug-15 2016 Aug-16 2017 Results 8
Economic Overview
Economic Overview Macro economy Retrenchments and debt review High inflation Cash availability Lower real income Results 10
Economic Overview Macro economy Unexpected Volatility Results 11
Economic Overview Retrenchments and debt review 1,600 YOY comparison - Retrenchment letters 1,200 800 400 FY2015 FY2016 FY2017 - Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb YOY comparison - Debt review 5,000 4,000 3,000 2,000 FY2015 FY2016 FY2017 1,000 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Results 12
Economic Overview High inflation Inflation (Consumer Price Index: All items vs. Food and non-alcoholic beverages Source: Statistics South Africa CPI data Note: June 2016 data unavailable from Stats SA (data shown is an average of May 2016 and July 2016) Results 13
Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Economic Overview Cash availability Average account inflows per banking client (include no inflows): Inflation adjusted data (August 2015 income groups, Aug 2015 Feb 2017, n = 2.7 million) Feb 2016 R 25 000 R 20 000 R 15 000 R 10 000 R 5 000 R 20 088 R 10 543 R 5 157 R 2 221 R 22 131 R 14 002 R 7 712 R 4 035 R 18 471 R 18 210 R 10 933 R 10 562 R 5 468 R 5 303 R 2 985 R 2 921 R 19 664 R 12 626 R 7 099 R 3 937 R 15 855 R 9 661 R 4 895 R 2 780 R - R1 - R2,000 R3,501 - R7,500 R7,501 - R15,000 R15,001 - R30,000 Results 14
Economic Overview Lower real income 535 802 performing clients with inflows from February 2016 Non-Gov Gov Total Feb-16 Feb-17 Feb-16 Feb-17 Feb-16 Feb-17 More than 40% cash available % 84 70 74 70 82 70 Between 39% and 21% cash available % 10 8 19 18 11 10 Cash stress less than 20% cash available % 6 6 7 8 7 6 No inflow % - 16-4 - 14 100 100 100 100 100 100 less than R5 000 R5 001 plus Total Feb-16 Feb-17 Feb-16 Feb-17 Feb-16 Feb-17 More than 40% cash available % 83 68 82 71 82 70 Between 39% and 21% cash available % 9 6 13 12 11 10 Cash stress less than 20% cash available % 8 5 5 7 7 6 No inflow % - 21-10 - 14 100 100 100 100 100 100 Results 15
Banking Clients
Banking Clients Growing client base Opportunity in higher income segments Focus on quality Results 17
Banking Clients Growing client base ( 000) Results 18
Banking Clients Opportunity in higher income segments Source: AMPS Dec -15 South Africa Income Capitec market share >R30,000 690 000 2% R10,000 R30,000 4m 11% <R10,000 14,7m 25% Age 15-34 = 40% Age 15-34 = 54% Results 19
Banking Clients Focus on quality Potential quality Earn money (salary, entrepreneurs, informal, allowance, social grant) Spend money (accommodation, electricity, transport, cellphone, groceries, education) Capitec quality Results 20
Client Service
Client Service Distribution Self-service banking Service culture People Training Results 22
Client Service Distribution Change since Total Feb-16 Feb-17 Branches: Total 76 796 : New look 148 434 : Current (72) 362 ATMs :Total 319 4 024 : Regular 160 1 128 : Dual note recyclers 257 525 301 branches : Partnership open 7 days a week (98) 2 371 Results 23
Client Service Self-Service banking USSD clients up to 5.4 million Banking app clients up to 1.8 million Free data while using app Self Service Terminals / Cash Accepting ATMs (DNR) More capacity in branches for new clients, credit applications and better client service Lower fee income on self-help, higher volumes and efficiency Results 24
Millions Client Service Self-Service banking - transaction volume 90 80 70 60 50 40 30 20 10 0 ATM/Branch/DNR (cash withdrawals) USSD/App/Card/Internet/SST Results 25
Client Service Service Culture Client centric ethos Service and client satisfaction measurement Service recovery, systems improvement and behaviour training Accolades: SA s favorite bank according to social media sentiment (BrandsEye) Top retail bank in South Africa Consumer Satisfaction Index (SACsi) Ask Afrika Orange Index Service award Brand finance top 10 most powerful international banking brands Results 26
Client Service People Focus on client service and company values Recruit for potential and cultural fit, train for skill 1 629 new employees to 13 069 5 228 number of employees attending courses Results 27
Client Service Training Number of employees attending courses 4 000 3 000 2 000 1 000-3 632 3 607 3 157 2 638 1 659 1 883 2 016 1 605 1 661 127 240 Induction / onboarding Functional / technical Management and leadership Compliance 2015 2016 2017 296 Number of completed distance learning initiatives 17 914 9 056 10 291 10 353 11 284 10 066 11 316 13 283 6 129 1 182 2 931 4 168 Induction / On-boarding Functional & Technical Management & Leadership Compliance 2015 2016 2017 Results 28
Credit
Credit Regulatory Model criteria Loans advanced by term Collections / provisions Credit Card Results 30
Credit Model criteria Credit application (%) Nov-15 Nov-16 Applications # 318 443 410 692 Accept rate % 56 39 Taken up % 42 31 Taken up # 132 701 126 138 Results 31
Credit Loans advanced by term 100% 90% 80% 70% 60% 25% 24% 20% 30% 8% 9% 11% 35% 34% 36% 3% 13% 34% 50% 40% 30% 20% 10% 0% 25% 25% 26% 30% 27% 26% 14% 16% 7% 9% 16% 14% 14% 15% 18% 16% 11% 10% Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Credit facility and multi loan 1-12 month 13-36 month 47-60 month 61-84 month Credit Card Results 32
Credit Collections / provisions Arrears & impairment provisions of gross loans & advances Feb-16 Feb-17 Gross loans and advances R'm 40 891 45 135 Loans past due (arrears) R'm 2 297 2 855 Arrears to gross loans and advances % 5.6 6.3 Arrears rescheduled < 6 months R'm 1 542 1 583 Arrears and arrears rescheduled < 6 months to gross loans and advances % 9.4 9.8 Rescheduled from current < 6 months R'm 1 818 1 088 Arrears and all rescheduled < 6 months to gross loans and advances % 13.8 12.2 Provision for doubtful debts R'm 5 131 5 930 Provision for doubtful debts to gross loans and advances % 12.5 13.1 Arrears coverage ratio % 223 208 Arrears and arrears rescheduled < 6 months coverage ratio % 134 134 Arrears and all rescheduled < 6 months coverage ratio % 91 107 Results 33
Credit Credit card What makes it different Single card to access Global One 5.35% - 5.90% on positive balance Available in real time, active immediately Performance and growth expectations Results 34
Funding
Funding Conservative capital and funding Well capitalised Consistent, well-priced, retail deposit growth fixed and call Compliance with all Basel 3 liquidity ratios Results 36
Funding Deposits (R millions) 35 000 30 000 25 000 20 000 15 000 10 000 5 000-2012 2013 2014 2015 2016 2017 Retail call Retail fixed Wholesale Results 37
International
International Creamfinance Globally expanding online lending group Poland, Latvia, Georgia, the Czech Republic, Mexico and Denmark Sophisticated technology and scoring Early stage with big potential Gain international and digital experience Provide strategic input Board of directors seats Results 39
Future
Future Simplified Pricing Free Pay by card Transfer between accounts Access app with free data R1.50 Cash at card machine Payments on app Send statements from app R3.50 Debit order R5.00 Payments and transfers in branch R6.00 Cash at Capitec ATM R8.50 Cash at any other ATM in SA (only R2.50 more) Results 41
Future Objectives 1. Service Obtain single view of the client at all points of interaction Create a personalised, omni-channel, self-service experience Create and manage world class service levels at all points 2. Efficiency Focus on staff productivity and process optimisation 3. People Attract and retain top quality people Become the best incubator of industry leaders Build our culture of greatness and innovation Results 42
Future Objectives (continue) 4. Business Delivery Develop capacity to deliver in fast changing environment Deliver projects in reduced time Develop and maintain a client centric focus 5. Quality Clients Increase market share in higher income segments Improve quality of banking clients through stable product usage Move transactions from branch to mobile/self-service channels 6. Digital Banking Platform Develop client profiling Results 43
thank you Results 41