Wrap Text
Unaudited Financial Results For The 6 Months Ended 31 August 2018
Capitec Bank Holdings Limited
Registration number: 1999/025903/06
Registered bank controlling company
Incorporated in the Republic of South Africa
JSE ordinary share code: CPI
ISIN code: ZAE000035861
JSE preference share code: CPIP
ISIN code: ZAE000083838
("Capitec" or "the Company" or "the Group")
Unaudited financial results for the 6 months ended 31 August 2018
+20% to 2 128 cents
Headline earnings per share
+20% to R2.461 billion
Headline earnings
+20% to 630 cents
Interim dividend per share
27%
Return on equity
10.5m
Active clients
25%
Transaction volume growth
Key performance indicators
IFRS 9
6 months ended adjusted Year ended
August Change % 1 March(1) February
2018/
2018 2017 2017 2018 2018
Profitability
Interest income(2) R'm 7 606 7 759 (2) 15 474
Net loan fee and insurance income(3) R'm 693 640 8 1 380
Total lending, investment and insurance income(2) R'm 8 299 8 399 (1) 16 854
Interest expense R'm (2 187) (2 015) 9 (4 184)
Net lending, investment and insurance income(2) R'm 6 112 6 384 (4) 12 670
Net transaction fee income R'm 3 147 2 386 32 5 127
Other R'm 25 18 39 (1)
Income from operations(2) R'm 9 284 8 788 6 17 796
Net provision for doubtful debts charge(2) R'm (2 542) (2 811) (10) (5 280)
Net income R'm 6 742 5 977 13 12 516
Income from associates R'm 9 - 3
Operating expenses R'm (3 500) (3 156) 11 (6 364)
Income before tax R'm 3 251 2 821 15 6 155
Tax(3) R'm (792) (767) 3 (1 685)
Preference dividend R'm (5) (7) (29) (12)
Earnings attributable to ordinary shareholders
Basic R'm 2 454 2 047 20 4 458
Headline R'm 2 461 2 046 20 4 461
Net transaction fee income to net income % 47 40 41
Net transaction fee income to operating expenses % 90 76 81
Cost-to-income ratio(2) % 38 36 36
Return on ordinary shareholders equity % 27 26 27
Earnings per share
Attributable cents 2 122 1 770 20 3 855
Headline cents 2 128 1 769 20 3 858
Diluted attributable cents 2 118 1 765 20 3 843
Diluted headline cents 2 124 1 764 20 3 846
Dividends per share
Interim cents 630 525 20 525
Final cents 945
Total cents 1 470
Dividend cover x 2.6
Assets
Net loans and advances R'm 41 888 40 619 3 40 927 41 814
Financial investments(4) R'm 46 169 36 210 28 39 387 39 400
Available-for-sale financial assets R'm 100 102 (2) 100
Other R'm 4 030 3 749 7 3 139
Current income tax asset R'm - 52 - 107
Deferred income tax asset R'm 1 438 404 1 168 397
Total assets R'm 93 625 81 136 15 84 957
Liabilities
Retail deposits and wholesale funding R'm 71 983 62 406 15 64 030
Other R'm 2 022 1 600 26 2 447 2 035
Total liabilities R'm 74 005 64 006 16 66 065
Equity
Shareholders' funds R'm 19 620 17 130 15 18 244 18 892
Capital adequacy ratio % 36 35 36
Net asset value per ordinary share cents 16 876 14 695 15 16 241
Share price cents 100 275 90 050 11 83 246
Market capitalisation R'm 115 945 104 122 11 96 255
Number of shares in issue '000 115 627 115 627 115 627
Share options
Number outstanding '000 691 837 (17) 777
Number outstanding to shares in issue % 0.6 0.7 0.7
Average strike price cents 48 795 37 950 29 38 561
Average time to maturity months 23 23 19
Operations
Branches 832 811 3 826
Employees 13 710 13 532 1 13 333
Active clients '000 10 522 9 184 15 9 868
ATMs and DNRs
Own 1 987 1 775 12 1 895
Partnership 2 925 2 506 17 2 750
Total 4 912 4 281 15 4 645
Capital expenditure R'm 457 467 (2) 829
Credit sales
Value of credit card disbursements/drawdowns R'm 2 686 1 742 54 3 949
Value of term loans advanced R'm 12 000 12 397 (3) 24 343
Value of total loans advanced R'm 14 686 14 139 4 28 292
Number of total loans advanced(5) '000 2 354 1 871 26 3 947
Average of total credit card disbursements/drawdowns R 1 910 2 521 (24) 2 296
Average of total term loans advanced R 12 667 10 504 21 10 934
Average of total loans advanced R 6 239 7 556 (17) 7 168
Credit book
Gross loans and advances R'm 51 359 46 544 10 47 642 47 642
Up-to-date Stage 1 R'm 39 641 40 764 6 37 165 41 674
Up-to-date with SICR Stage 2 R'm 3 485 4 401
Total up-to-date R'm 43 126 40 764 6 41 566 41 674
Arrears - Up to 1 month in arrears Stage 2 R'm 911 1 358 (33) 1 003 1 003
Arrears - 2 and 3 months in arrears Stage 3 R'm 1 517 1 140 33 1 697 1 697
Total arrears up to 3 months R'm 2 428 2 498 (3) 2 700 2 700
Application for debt review within 6 months Stage 3 R'm 70 108
Up-to-date that rescheduled from up-to-date
(not yet rehabilitated(6)) Stage 3 R'm 963 1 049 (8) 1 085 1 085
Up-to-date that rescheduled from arrears
(not yet rehabilitated(6)) Stage 3 R'm 1 373 1 396 (2) 1 277 1 277
Total up-to-date that rescheduled
(not yet rehabilitated(6)) R'm 2 336 2 445 (4) 2 362 2 362
More than 3 months in arrears and legal status Stage 3 R'm 3 001
Expected recoveries receivable Stage 3 R'm 398 837 (52) 906 906
Total provision for doubtful debts R'm 9 471 5 925 60 6 715 5 828
Net loans and advances R'm 41 888 40 619 3 40 927 41 814
Total provision for doubtful debts to Stage 3
(excluding expected recoveries receivable) and
Stage 2 (up to 1 month in arrears) coverage % 121 120 130 115
Total provision for doubtful debts to Stage 3
(excluding expected recoveries receivable)
and Stage 2 (including SICR) coverage % 84 70
Repayments R'm 18 322 17 116 7 35 974
Gross provision for doubtful debts charge(2) R'm 3 333 3 395 (2) 6 560
Bad debts recovered R'm 791 584 35 1 280
Net provision for doubtful debts charge(2) R'm 2 542 2 811 (10) 5 280
Net provision for doubtful debts charge(2) to average
gross loans and advances % 5.1 6.1 11.4
Total lending and insurance income (excluding investment income)(2)(7) R'm 6 998 7 378 (5) 15 008
Net provision for doubtful debt charge(2) to total lending and insurance
income (excluding investment income)(7) % 36.3 38.1 35.2
Retail deposits and wholesale funding
Wholesale funding R'm 5 769 7 005 (18) 6 206
Retail call savings R'm 41 048 33 523 22 34 909
Retail fixed savings R'm 25 166 21 878 15 22 915
(1) Transition to IFRS 9 � Financial Instruments on 1 March 2018. The figures as at 28 February 2018 were adjusted accordingly. Please refer to the
audited transitional report on our website that illustrates the impact of implementing IFRS 9 on 1 March 2018.
(https://resources.capitecbank.co.za/Capitec_-_IFRS9_transitional_report.pdf)
(2) In the current period, under IFRS 9, interest income and net provision for doubtful debts charge are recognised on a net basis for all loans classified as
Stage 3 (R442 million for period end August 2018). Refer to table 2: IFRS 9 income recognition impact
(3) Insurance profit is received from the cell captives as a dividend after tax. The tax expense on insurance profit is included in net insurance income
and deducted from the tax expense line for the period ended August 2018: R142 million (August 2017: R109 million, February 2018: R245 million)
(4) Cash, cash equivalents, money market funds, term deposits and other financial investments
(5) Includes credit card. For the number of loans advanced, a month in which the credit card is utilised is counted
(6) Not rehabilitated - Clients are deemed to be rehabilitated once they have made contractual payments for 6 consecutive months. Once rehabilitated, the loan is
classified as up-to-date
(7) Interest received on loans, initiation fees, monthly service fee and net insurance income
Strong client growth drives performance
Our focus on delivering simple, affordable, accessible solutions through personal service to our clients, and unlocking the full potential of our team, generates
shareholder value and improves clients' financial lives.
We continuously improve efficiencies to ensure clients receive the best service and are able to be in control of their money. We attracted 109 000 additional active
clients every month for the last 6 months.
Our digital innovation remains focused on offering clients convenience and security. Self-service banking transactions (including the banking app; internet banking;
unstructured supplementary service data or USSD, which is mostly used by clients who do not have smart phones; in-branch self-service terminals and dual note recyclers)
have increased in volume by 27% to 295 million at the end of August 2018 (August 2017: 231 million). For the 6 month period ended August 2018, 146 million transactions
had been performed via our banking app. The app was used by 1.8 million clients � an increase of 62% from August 2017.
Continuous refinements to our credit strategy resulted in an improvement in the quality of the loan book. Arrears up to 3 months decreased by 10% and bad debts
recovered increased by 14% for the 6 months since 1 March 2018.
We have expanded our product offering and introduced funeral insurance from 21 May 2018. The performance to date is in line with expectations and we are
pleased with the market acceptance.
Earnings up 20%
Client centricity and a team dedicated to operating efficiently has resulted in a return on equity of 27%. Headline earnings increased by 20% to R2.46 billion for
the period ended August 2018 from R2.05 billion for the comparative 6 month period ended August 2017.
Net transaction fee income growth of 32%
Net transaction fee income (non-lending) increased from R2.4 billion to R3.1 billion. Net transaction fee income now comprises 47% of total net income and
covers 90% of operating expenses.
Total transactional volume, including self-service banking transactions, increased by 25% due to increased usage and a 15% increase in active clients. Of all
possible transactions that can be performed in a branch or through self-service banking channels, clients elected to perform 84% through self-service banking
channels for the 6 month period ended August 2018 (August 2017: 74%). Self-service banking increases efficiency, saving our clients time and money.
Conservative lending growth
The value of loan sales grew by 4% compared to the period ended 31 August 2017. The net loan book growth of 3% is in line with sales growth. Our credit
granting strategy resulted in loan sales with a product term between 73 and 84 months increasing by 121%, and loan sales with a product term between
1 and 12 months decreasing by 10%. Credit card sales increased by 54% with the lowest credit card interest rate now being 10% per annum. As shown in table 2 below,
the 1% increase in total lending and insurance income, excluding investment income, on a gross basis, is driven by sales of longer-term loans with lower interest rates.
In the prior period, we communicated improvements to our credit solution. Last year we strengthened our credit solution to allow clients to choose either the
amount that suits their purpose, monthly instalments that suit their cash flow or an option that gives them the best interest rate. The stricter granting criteria applied
since the prior period also resulted in extending loans to better quality clients.
We continue to improve our understanding of clients� behaviour and risk profiles. This allows us to price loans accordingly and achieve a healthier, more
sustainable loan book.
Improved quality credit book, prudent provisioning retained
August 2018 compared to August 2017
The total up-to-date book growth was 6% from 31 August 2017. The arrears loan book at 31 August 2017 can be compared to loans up to 3 months in arrears on
31 August 2018. Total arrears up to 3 months decreased by 3%.
The coverage of total provision for doubtful debts to Stage 3 (excluding expected recoveries receivables) and Stage 2 (up to 1 month in arrears) is comparable to the
prior year coverage ratio of provision for doubtful debts to arrears and all reschedules within 6 months. In the current period, this coverage was 121% compared
to 120% in the prior period. We continue to be prudent in our approach to provisioning.
August 2018 compared to 1 March 2018
The up-to-date book growth was 7% from 1 March 2018. Up-to-date loans with a significant increase in credit risk (SICR) decreased by 21% from
1 March 2018 to 31 August 2018. This was due to improved behaviour scores and maintaining a strict credit granting strategy during this reporting period.
Loans up to 1 month in arrears decreased by 9% and loans 2 and 3 months in arrears decreased by 11% from 1 March 2018 to 31 August 2018.
Up-to-date loans that rescheduled from up-to-date (not yet rehabilitated) decreased by 11% and loans that rescheduled from arrears (not yet rehabilitated) increased
by 8% when compared to 1 March 2018.
The improved up-to-date, SICR and loans up to 3 months in arrears is a direct result of the credit granting strategy applied.
The improved quality of the book and better behaviour scores of clients in arrears have resulted in more clients being approved for rescheduling, according to
our policy, during the last 6 months. This is due to improved performance of loans that rescheduled, rehabilitated and rolled back into up-to-date.
The coverage of total provision for doubtful debts to Stage 3 (excluding expected recoveries receivables) and Stage 2 (up to 1 month in arrears) decreased
from 130% at 1 March 2018 to 121% at 31 August 2018. This is largely due to the change in our write-off policy, as discussed in the IFRS 9 section below.
IFRS 9
We prepare financial statements in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
IFRS 9 is the revised accounting standard for financial instruments and was implemented to address perceived deficiencies that were believed to have contributed
to the magnitude of the financial crisis of 2008. The new provision model under IFRS 9 addresses criticism of the provision models previously used, which only
recognised credit losses once incurred. Under IFRS 9, however, credit losses are recognised on default events projected over the next 12 months or over the lifetime of
the asset. Application of this new standard enhances consistency across credit providers� financial statements and disclosures.
We transitioned to IFRS 9 on 1 March 2018. We announced the publication of the audited IFRS 9 � Financial Instruments Transitional Report as at
1 March 2018 on SENS on 16 August 2018. The report can be viewed at https://resources.capitecbank.co.za/Capitec_-_IFRS9_transitional_report.pdf. The report
illustrates the impact, provisioning methodology and revised accounting policies following the implementation of IFRS 9. As previously disclosed, the final impact
on the retained earnings opening balance on 1 March 2018 was R900 million pre-tax, and R648 million post-tax.
The 6 month period ended 31 August 2018 is the first period during which the IFRS 9 provision methodology was applied. Comparative information was not restated,
as permitted by IFRS 9.
Loans previously written off were not written back. By 31 August 2018, a large portion of loans more than 3 months in arrears had not yet been handed over or
written off due to the change in accounting write-off policy. This has resulted in a build-up of loans on balance sheet that are more than 3 months in arrears,
with an appropriate provision at 31 August 2018. Previously, these loans were written off. Table 1 below shows the proportionate change in write-off and
appropriate provision raised under IFRS 9 compared with the prior period.
Table 1 6 months ended August Change % August
2018 2017 2018/
Net provision for doubtful debts charge IFRS 9 Illustrative 2017
Net Gross Difference Net Gross
Bad debts written off R'm 1 029 1 029 - 3 400 (70) (70)
Movement in provision for doubtful debts charge R'm 2 304 2 746 442 (5)
Gross provision for doubtful debts charge R'm 3 333 3 775 442 3 395 (2) 11
Bad debts recovered R'm 791 791 - 584 35 35
Net provision for doubtful debts charge R'm 2 542 2 984 442 2 811 (10) 6
Under IFRS 9, once a loan rolls into Stage 3, the interest is recognised after deducting the related provision charge. On a gross basis (illustrative),
the total provision for doubtful debts charge (bad debts written off and movement in provision) increased by 11% on a 10% growth in gross loans and
advances in the current period.
The impact on interest and provision for doubtful debt charge on a gross, and net basis and the effect on related key performance indicators, are presented
in table 2 below:
Table 2 6 months ended August Change % August
2018 2017 2018/
IFRS 9 income recognition impact IFRS 9 Illustrative 2017
Net Gross Difference Net Gross
Interest income R'm 7 606 8 048 442 7 759 (2) 4
Total lending, investment and insurance income R'm 8 299 8 741 442 8 399 (1) 4
Net lending, investment and insurance income R'm 6 112 6 554 442 6 384 (4) 3
Total lending and insurance income
(excluding investment income) R'm 6 998 7 440 442 7 378 (5) 1
Net provision for doubtful debts charge R'm 2 542 2 984 442 2 811 (10) 6
Earnings attributable to ordinary shareholders
Basic R'm 2 454 2 454 - 2 047 20 20
Headline R'm 2 461 2 461 - 2 046 20 20
Cost-to-income ratio % 38 36 36
R66 billion in retail deposits
The total retail deposits increased to R66 billion by the end of August 2018 (August 2017: R55 billion). Retail call savings increased by 22% and retail fixed savings
by 15%. The consistent, growth within the current period is confirmation of continnued brand confidence from retail depositors.
Wholesale funding decreased by 18%, to R5.8 billion (August 2017: R7.0 billion). The requirement for wholesale funding is low as loan growth was moderate in relation
to fixed-term retail deposits and internal capital generation growth. Strong support from the market was again confirmed during our bond issuance in May
2018 where we received bids totalling R1.9 billion versus R500 million that was required and issued.
Robust capital and low liquidity risk retained
Our capital adequacy ratio was 36% at 31 August 2018. Should we re-allocate funds in the investment portfolio to lower-risk-weighted government instruments, the ratio
could be increased by 4%. The bank is well positioned for growth from a capital perspective.
At 31 August 2018, our liquidity coverage ratio (LCR) was 1 923% and our net stable funding ratio (NSFR) was 205%. These market-leading ratios are the result of our
conservatism when managing liquidity.
Credit ratings
S&P affirmed all of the credit ratings of Capitec Bank on 13 September 2018. The long-term global rating is 'BB' and the short-term global rating is 'B'. The outlook
is stable. The South African national scale ratings are affirmed as 'zaAA' long term and 'zaA-1+' short term. Our global long-term rating is the same as the sovereign
rating as well as those of other large South African banks.
Cost of operations up 11%
Our operating costs increased from R3.2 billion to R3.5 billion in the current period. Our cost-to-income ratio remained at 36% on an illustrative gross basis (38%
under IFRS 9) comparative to the 6 month period last year.
Growth in staff, branches and investment in our IT infrastructure are the main drivers for the increase in costs.
The client growth created job oppurtunities and 377 employees have joined our team since February 2018. We hire for potential and train for competence, which resulted in more
learning and training interventions over the past 6 months. The investment in IT infrastructure, increased up-take of self-service banking and more branch staff, unlocks
the capacity to cross-sell and ensures our clients receive the best personal service.
We make use of cell captives for insurance and receive the profits in the cell captives after tax in the form of dividends. In the current period, the tax
attributable to the profits on cell captives of R142 million was deducted from the net insurance income line as opposed to including it in the total tax expense line.
This has resulted in the effective tax rate decreasing to 24.3% for the current period.
Prospects
We plan to expand our product offering to include business banking. This may include the acquisition of Mercantile Bank Holdings Limited, for which we submitted a
formal bid on 31 August 2018. We await the outcome.
We completed the 2nd tranche investment in Cream Finance Holdings Limited (Creamfinance) which included existing shareholders exercising their option on
10 September 2018. This takes our shareholding to 40.25%. The 3rd tranche is expected to be invested early in the next financial year.
Our 2020 financial year strategy and budget review started earlier this month and will factor in the implementation of IFRS 16, which is effective from 1 March 2019.
IFRS 16 impacts operating leases whereby a lessee is required to recognise a leased asset for the right of use and a related liability as the present value of
future lease payments. Our branches and ATM operating lease arrangements will be affected from 1 March 2019 under the new accounting standard.
Interim dividend
The directors declared a gross interim dividend for the 6 months ended 31 August 2018 of 630 cents per ordinary share (31 August 2017: 525 cents) on Tuesday,
25 September 2018. The dividend will be paid on Monday, 22 October 2018. There are 115 626 991 ordinary shares in issue.
The dividend meets the definition of a dividend in terms of the Income Tax Act (Act 58 of 1962). The dividend amount, net of South African dividend tax of 20%, is
504 cents per share. The distribution is made from income reserves. Capitec's tax reference number is 9405376840.
Last day to trade cum dividend Tuesday, 16 October 2018
Trading ex-dividend commences Wednesday, 17 October 2018
Record date Friday, 19 October 2018
Payment date Monday, 22 October 2018
Share certificates may not be dematerialised or rematerialised from Wednesday, 17 October 2018 to Friday, 19 October 2018, both days inclusive.
On behalf of the board
Riaan Stassen Gerrie Fourie
Chairman Chief executive officer
Stellenbosch
26 September 2018
Summarised consolidated statement of financial position
Unaudited Unaudited Six months Audited
August August August February
2018/
2018 2017 2017 2018
Notes R'm R'm % R'm
Assets
Cash, cash equivalents and money market funds 28 988 23 906 21 25 091
Financial investments* 12 186 6 701 82 11 781
Term deposit investments 4 995 5 603 (11) 2 528
Net loans and advances 1 41 888 40 619 3 41 814
Other receivables 1 254 1 585 (21) 722
Net insurance receivable 257 - 245
Derivative assets 26 64 (59) -
Financial assets - equity instruments at FVOCI** 100 102 (2) 100
Current income tax asset - 52 107
Investment in associate 305 104 134
Property and equipment 1 920 1 725 11 1 755
Intangible assets 268 271 (1) 283
Deferred income tax asset 1 438 404 397
Total assets 93 625 81 136 15 84 957
Liabilities
Derivative liabilities 11 74 (85) 54
Current income tax liability 73 - -
Retail deposits 66 214 55 401 20 57 824
Other liabilities 1 897 1 484 28 1 914
Wholesale funding 5 769 7 005 (18) 6 206
Provisions 41 42 (2) 67
Total liabilities 74 005 64 006 16 66 065
Equity
Capital and reserves
Ordinary share capital and premium 5 649 5 649 5 649
Cash flow hedge reserve 1 (34) (26)
Foreign currency translation reserve 40 - 3
Retained earnings 13 823 11 377 21 13 153
Share capital and reserves attributable to ordinary shareholders 19 513 16 992 15 18 779
Non-redeemable, non-cumulative, non-participating preference share capital and premium 107 138 (22) 113
Total equity 19 620 17 130 15 18 892
Total equity and liabilities 93 625 81 136 15 84 957
* Reclassification: Held-to-maturity assets were reclassified as financial investments under IFRS 9
** Equity investments has been designated at fair value through OCI under IFRS 9
Summarised consolidated income statement
Unaudited Unaudited Six months Audited
August August August February
2018/
2018 2017 2017 2018
R'm R'm % R'm
Lending, investment and insurance income (1) 8 429 8 628 (2) 17 266
Interest income (1) 7 606 7 759 (2) 15 474
Loan fee income 455 482 (6) 919
Net insurance income (2)(3)(5) 368 387 (5) 873
Lending and investment expenses (2 317) (2 244) 3 (4 596)
Interest expense (2 187) (2 015) 9 (4 184)
Loan fee expense (4)(5) (130) (229) (43) (412)
Net lending, investment and insurance income (1) 6 112 6 384 (4) 12 670
Transaction fee income 4 084 3 234 26 6 925
Transaction fee expense (937) (848) 10 (1 798)
Net transaction income 3 147 2 386 32 5 127
Net provision for doubtful debts charge (1) (2 542) (2 811) (10) (5 280)
Other income/(expense) 25 18 39 (1)
Net income 6 742 5 977 13 12 516
Operating expenses (3 500) (3 156) 11 (6 364)
Share of net profit of associates 9 - 3
Operating profit before tax 3 251 2 821 15 6 155
Income tax expense (3) (792) (767) 3 (1 685)
Profit for the period 2 459 2 054 20 4 470
Earnings per share (cents)
Basic 2 122 1 770 20 3 855
Diluted 2 118 1 765 20 3 843
(1) In the current period, under IFRS 9, interest income and net provision for doubtful debts charge are recognised on a net basis for all loans classified as
Stage 3 (R442 million for the period ended August 2018)
(2) Net insurance income relates to profits attributable to the 3rd party cell captive credit life insurance for loans granted after 6 May 2016
(3) Insurance profit is received from the cell captive as a dividend after tax. The tax expense on insurance profit is included in net insurance income and
deducted from the tax expense line for the period ended August 2018: R142 million (August 2017: R109 million, February 2018: R245 million)
(4) Loan fee expense relates to the credit life insurance expense under the 1st party cell captive for loans granted prior to 6 May 2016
(5) Loans and advances after 6 May 2016 under the 3rd party credit life insurance cell captive forms a greater portion of the credit book. Loans and advances
under the 1st party credit life insurance cell captive prior to 6 May 2016 forms a smaller portion of the credit book
Summarised consolidated statement of other comprehensive income
Unaudited Unaudited Six months Audited
August August August February
2018/
2018 2017 2017 2018
R'm R'm % R'm
Profit for the period 2 459 2 054 20 4 470
Other comprehensive income that will be reclassified to profit and loss for the period 27 (33) (15)
Cash flow hedge reserve recognised during the period 49 (21) 59
Cash flow hedge reclassified to profit and loss for the period (11) (25) (80)
Income tax relating to cash flow hedge (11) 13 6
Foreign currency translation reserve recognised during the period 37 11 3
Total comprehensive income for the period 2 523 2 032 24 4 458
Reconciliation of attributable earnings to headline earnings
Unaudited Unaudited Six months Audited
August August August February
2018/
2018 2017 2017 2018
R'm R'm % R'm
Net profit attributable to equity holders 2 459 2 054 20 4 470
Preference dividend (5) (7) (29) (12)
Net profit after tax attributable to ordinary shareholders 2 454 2 047 20 4 458
Non-headline items:
Loss/(profit) on disposal of property and equipment 8 (1) 3
Income tax charge - property and equipment (1) - -
Headline earnings 2 461 2 046 20 4 461
Summarised consolidated statement of cash flows
Unaudited Unaudited Six months Audited
August August August February
2018/
2018 2017 2017 2018
R'm R'm % R'm
Cash flow from operating activities
Cash flow from operations 9 867 8 512 16 13 674
Income taxes paid (1 350) (746) 81 (1 741)
8 517 7 766 10 11 933
Cash flow from investing activities
Purchase of property and equipment (385) (409) (6) (686)
Proceeds from disposal of property and equipment 2 4 (50) 32
Purchase of intangible assets (72) (59) 22 (143)
Investment in term deposit investments (4 936) (2 551) 93 (3 153)
Redemption of term deposit investments 2 446 3 549 (31) 7 159
Acquisition of financial investments* (6 583) (4 927) 34 (12 904)
Redemption of financial investments* 6 268 3 553 76 6 650
Acquisition of available-for-sale financial assets - (2) -
Movement in money market unit trusts (11) (6) 83 (14)
Acquisition of interest in associates (125) (93) 34 (129)
(3 396) (941) (3 188)
Cash flow from financing activities
Dividends paid (1 097) (932) 18 (1 545)
Preference shares repurchased (6) (13) (54) (39)
Issue of institutional bonds and other funding 500 505 (1) 500
Redemption of institutional bond and other funding (500) (1 034) (52) (1 110)
Realised loss on settlement of employee share options less participants' contributions (121) (128) (5) (151)
(1 224) (1 602) (24) (2 345)
Net increase in cash and cash equivalents 3 897 5 223 (25) 6 400
Cash and cash equivalents at the beginning of the period 25 070 18 670 34 18 670
Cash and cash equivalents at the end of the period 28 967 23 893 21 25 070
* Previously classified as Held-to-maturity investments
Summarised consolidated statement of changes in equity
Unaudited Unaudited Six months Audited
August August August February
2018/
2018 2017 2017 2018
R'm R'm % R'm
Equity at the beginning of the period 18 892 16 118 17 16 118
Transitional adjustment for IFRS 9 (648) - -
Total comprehensive income for the period 2 523 2 032 24 4 458
Ordinary dividend (1 092) (925) 18 (1 531)
Preference dividend (5) (7) 29 (12)
Employee share option scheme:
Value of employee services 16 19 (16) 37
Shares acquired for employee share options at cost (171) (184) 7 (225)
Proceeds on settlement of employee share options 52 56 (7) 74
Tax effect on share options 59 34 74 12
Preference shares repurchased (6) (13) (54) (39)
Equity at the end of the period 19 620 17 130 15 18 892
Commitments
Unaudited Unaudited Six months Audited
August August August February
2018/
2018 2017 2017 2018
R'm R'm % R'm
Capital commitments approved by the board
Contracted for:
Property and equipment 698 156 148
Intangible assets 166 27 (30) 16
Not contracted for:
Property and equipment 799 1 311 (39) 897
Intangible assets 186 255 (27) 242
1 849 1 749 6 1 303
Property operating lease commitments
Future aggregate minimum lease payments
Within one year 494 452 9 469
From one to five years 1 305 1 285 2 1 292
After five years 202 288 (30) 269
Total future cash flows 2 001 2 025 (1) 2 030
Straight-lining accrued (140) (125) 12 (135)
Future expenses 1 861 1 900 (2) 1 895
1. Impact of IFRS 9 on loans and advances
Stage 1 Stage 2 Stage 3
More than
Up-to-date 3 months
loans in arrears,
with SICR Re- Re- legal
and scheduled scheduled statuses
applied from from and
for debt Up to 2 and 3 up-to-date arrears applied for Expected
Up-to- review 1 month months in (not yet re- (not yet re- debt review recoveries
R'm date >6 months in arrears arrears habilitated) habilitated) <6 months(1) receivable Total
Balance at 31 August 2018
Gross loans and advances 39 641 3 485 911 1 517 963 1 373 3 071 398 51 359
Cumulative provision (2 880) (902) (543) (1 244) (431) (646) (2 825) - (9 471)
Net loans and advances 36 761 2 583 368 273 532 727 246 398 41 888
Provision % 7.3 25.9 59.6 82.0 44.8 47.1 92.0 18.4
Stage 1 Stage 2 Stage 3
More than
Up-to-date 3 months
loans in arrears,
with SICR Re- Re- legal
and scheduled scheduled statuses
applied from from and
for debt Up to 2 and 3 up-to-date arrears applied for Expected
Up-to- review 1 month months in (not yet re- (not yet re- debt review recoveries
R'm date >6 months in arrears arrears habilitated) habilitated) <6 months(1) receivable Total
Balance at 1 March 2018
Gross loans and advances 37 165 4 401 1 003 1 697 1 085 1 277 108 906 47 642
Cumulative provision (2 675) (1 033) (558) (1 311) (462) (609) (67) - (6 715)
Net loans and advances 34 490 3 368 445 386 623 668 41 906 40 927
Provision % 7.2 23.5 55.6 77.3 42.6 47.7 62.0 14.1
(1) Includes loans that are currently up to 1 month in arrears that were previously rescheduled but have not rehabilitated
Re- Re-
scheduled scheduled
from from
Up to 2 and 3 up-to-date arrears Expected
Up-to- 1 month months in (not yet re- (not yet re- recoveries
R'm date in arrears arrears habilitated) habilitated) receivable Total
Balance at 31 August 2017
Gross loans and advances 40 764 1 358 1 140 1 049 1 396 837 46 544
Cumulative provision (3 386) (697) (927) (172) (743) - (5 925)
Net loans and advances 37 378 661 213 877 653 837 40 619
Provision % 8.3 51.3 81.3 16.4 53.2 12.7
Segment analysis
The group reports a single segment - retail banking - within the South African economic environment. The business is widely distributed and has no reliance on any
major clients. In addition, no client accounts for more than 10% of revenue.
Fair values
In terms of IFRS 13 'Fair value measurement', the fair value determined for disclosure purposes of loans and advances (level 3) was R43.2 billion (August 2017:
R43.8 billion), retail deposits (level 2) was R66.4 billion (August 2017: R55.7 billion) and wholesale funding (level 2) was R5.9 billion (August 2017: R7.2 billion).
The measured fair value of derivative assets (level 2) was valued at R25.9 million (August 2017: R63.5 million), available-for-sale investments (level 3) was R100 million
(August 2017: R102 million) and derivative liabilities (level 2) was R11.4 million (August 2017: R73.5 million). The fair value of all other financial instruments
equates to their carrying amount.
Unaudited interim financial statements
The condensed consolidated interim financial statements were prepared in accordance with International Accounting Standard (IAS) 34 �Interim Financial Reporting�,
the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards
Council and the requirements of the Companies Act, Act 71 of 2008, as amended.
The accounting policies applied in the preparation of these interim financial statements are in terms of IFRS, including IFRS 9 Financial Instruments, which was
effective from 1 March 2018. Capitec elected as permitted by IFRS 9, not to restate comparative financial statements, with the impact of IFRS 9 being applied
retrospectively as an adjustment to the opening retained earnings of 1 March 2018. The accounting policies applied are consistent with the previous consolidated
annual financial statements, with the above IFRS 9 exception.
All other standards, interpretations and amendments to published standards applied for the first time during the current financial period did not have any significant
impact on the financial statements. The Group complies in all material respects, with the requirements of the King IV Report on Corporate Governance for South Africa
2016. Basel disclosures, in terms of Regulation 43 of the Banks Act, Act 94 of 1990, are available on the Capitec Bank website.
No event that is material to the financial affairs of the Group, has occurred between the reporting date and the date of approval of the condensed consolidated interim
financial statements.
The condensed consolidated interim financial statements were not reviewed or audited by the Company�s auditors.
The preparation of the condensed consolidated interim financial statements was supervised by the chief financial officer, Andre du Plessis CA(SA).
Company secretary and registered office
YM Mouton
1 Quantum Street, Techno Park, Stellenbosch 7600; PO Box 12451, Die Boord, Stellenbosch 7613
Transfer secretaries
Computershare Investor Services Proprietary Limited (Registration number: 2004/003647/07) Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg 2196;
PO Box 61051, Marshalltown 2107
Sponsor
PSG Capital Proprietary Limited (Registration number: 2006/015817/07)
Directors
R Stassen (Chairman), GM Fourie (CEO)*, LA Dlamini, AP du Plessis (CFO)*, MS du P le Roux, K Makwane, NS Mashiya*, JD McKenzie, NS Mjoli-Mncube,
PJ Mouton, CA Otto, JP Verster.
* Executive
capitec.co.za
enquiries@capitecbank.co.za
Date: 26/09/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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