Wealthier clients boost profit at Capitec Bank

Capitec Bank reported a 25 percent rise in first-half profit on Tuesday after bringing in more new customers with higher salaries who helped boost its fee income.

The bank added 902,000 clients in the six months to the end of August from a year earlier to hit a total of 6.7 million. About 3 million use Capitec as their primary bank and their transactions helped lift its fee income by 18 percent.

Capitec Chief Executive Gerrie Fourie told Reuters the bank was adding 75,000-80,000 clients a month. He said new customers were increasingly better off, rather than clients just looking for unsecured loans.

"We've seen strong growth in the middle- to high-income market," Fourie said, adding that South Africans were shopping for lower bank fees which was helping Capitec gain market share from established lenders.

Capitec, which is known for lending to borrowers without asking for collateral, has intensified efforts to attract more depositors and increase its income from transaction fees.

In general, banks in South Africa are struggling to boost lending growth as customers battle with high personal debt levels and rising prices thanks to the weakness of the rand currency.

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Despite opening 23 new branches and installing more than 200 ATMs in the period to attract primary customers, Capitec's main draw remains credit not backed by assets.

Capitec earned 6 billion rand ($427 million) from interest, four times its income from transaction fees.

Still, the bank granted smaller loans for shorter terms than a year ago as rising interest rates and a feeble economy made credit tougher to afford for consumers.

Rival unsecured lender, African Bank Investments Limited , known as Abil, crumbled under a mountain of bad debt in August last year, forcing the government to appoint external administrators to oversee its restructuring.

"With Abil's failure, competition in the category for loans longer than 60 months just about disappeared, but because it was a new market ... we also pulled back there," Fourie said.

Fourie now sees opportunities in this sector, saying that Capitec has started making adjustments to grant longer-term loans to the more well-to-do.

Headline earnings per share, the main profit measure in South Africa and which strips out certain one-off items, increased 25 percent to 1,271 cents.

Shares in Capitec, up 42 percent so far this year, climbed 1.54 pct at 484.95 rand by 1026 GMT, compared to a 0.13 percent rise in the All-Share index.

- Reuters