Capitec hits sweet spot

Capitec Bank received more than twice as much in new deposits as it handed out in loans in the six months to the end of August.

The bank is trying to reduce its reliance on unsecured lending in the aftermath of the collapse of rival unsecured lender African Bank.

Capitec is mopping up some of African Bank's customers, Capitec CEO Gerrie Fourie told The Times yesterday.

"We have seen strong growth in applications for loans since August and some of them are certainly former African Bank clients, whereas others were probably prospective [African Bank] clients," he said.

African Bank - which did not take deposits, funding most of its loans from bond sales - was placed under curatorship last month after announcing massive losses. The owner of furniture chain Ellerine Holdings, its lending practices are now under investigation by the Reserve Bank.

As it became clear that African Bank's bondholders would face a haircut of 10%, and that its shareholders stand to lose everything, Capitec was downgraded two notches by credit ratings agency Moody's on the grounds that it was in the same business.

Fourie would not comment on the downgrading yesterday but hinted that the end of the platinum sector strike and above-inflation wage increases for many of its clients since Capitec's last conversation with Moody's should count in the bank's favour.

It has been increasing its primary client numbers and deposit base aggressively.

The number of active clients grew by 418000 to 5.8million in the six months to the end of August, boosting the bank's transaction fee income by as much as 34% compared to a year ago.

"We consider clients who make regular deposits [mostly salaries] into their Capitec Bank accounts as a key client category. These clients amounted to 2.5 million by August 2014," the company said. This is up by 600,000 on a year ago.

Capitec now holds 14% of the retail banking market, compared to 9% a year ago. Retail deposits grew by R3-billion; the gross retail loan book by only R1.4-billion.