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CAPITEC BANK HOLDINGS LIMITED - Summary Audited Financial Statements For The Year Ended 28 February 2019

Release Date: 28/03/2019 07:05
Code(s): CPI CPIP     PDF:  
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Summary Audited Financial Statements For The Year Ended 28 February 2019

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')

Summary audited financial statements for the year ended 28 February 2019

- Headline earnings per share up 19% to 4 577 cents
- Headline earnings up 19% to R5.292 billion
- Total dividend per share up 19% to 1 750 cents
- Return on equity - 28%
- Active clients - 11.4m
- Active banking app clients - 2.2m
- Active funeral policies - more than 360 000

Key performance indicators

                                                                                                                     2019/2018 
                                                                                                    2019       2018   Change %     2017     2016
Profitability
Interest income(2)                                                                       R'm      15 501     15 474          0   14 934   13 413
Net loan fee and insurance income(3)                                                     R'm       1 507      1 380          9      495      (83)
Total lending, investment and insurance income less loan fee expense(2)(3)               R'm      17 008     16 854          1   15 429   13 330
Interest expense                                                                         R'm      (4 510)    (4 184)         8   (3 552)  (2 884)
Net lending, investment and insurance income(2)(3)                                       R'm      12 498     12 670         (1)  11 877   10 446
Net transaction fee income                                                               R'm       6 464      5 127         26    3 923    3 020
Other                                                                                    R'm           3         (1)                  -       (1)
Funeral income(4)                                                                        R'm          54          -                   -        -
Income from operations(2)(3)(4)                                                          R'm      19 019     17 796          7   15 800   13 465
Credit impairment charge(2)(8)                                                           R'm      (4 450)    (5 280)       (16)  (5 121)  (4 401)
Net income(2)(3)(4)(8)                                                                   R'm      14 569     12 516         16   10 679    9 064
Income from associates                                                                   R'm           2          3        (33)       -        -
Operating expenses                                                                       R'm      (7 494)    (6 364)        18   (5 439)  (4 591)
Income before tax(2)(3)(4)(8)                                                            R'm       7 077      6 155         15    5 240    4 473
Tax(3)(4)                                                                                R'm      (1 781)    (1 685)         6   (1 434)  (1 244)
Preference dividend                                                                      R'm          (9)       (12)       (25)     (16)     (16)
Discount on repurchase of preference shares                                              R'm          (2)         -                   -        -
Earnings attributable to ordinary shareholders
 Basic                                                                                   R'm       5 285      4 458         19    3 790    3 213
 Headline                                                                                R'm       5 292      4 461         19    3 793    3 222
Net transaction fee income to net income                                                   %          44         41                  37       33
Net transaction fee income to operating expenses                                           %          86         81                  72       66
Cost-to-income ratio(2)                                                                    %          39         36                  34       34
Return on ordinary shareholders equity                                                     %          28         27                  27       27
Earnings per share
 Attributable                                                                          cents       4 571      3 855         19    3 278    2 779
 Headline                                                                              cents       4 577      3 858         19    3 281    2 787
 Diluted attributable                                                                  cents       4 562      3 843         19    3 267    2 773
 Diluted headline                                                                      cents       4 568      3 846         19    3 270    2 781
Dividends per share
 Interim                                                                               cents         630        525         20      450      375
 Final                                                                                 cents       1 120        945         19      800      680
 Total                                                                                 cents       1 750      1 470         19    1 250    1 055
Dividend cover                                                                             x         2.6        2.6                 2.6      2.6
Assets
Net loans and advances                                                                   R'm      44 515   40 927(1)         9   39 205   35 760
Financial instruments at amortised cost(5)                                               R'm      49 208   39 387(1)        25   30 605   24 989
Financial assets - equity instruments at FVOCI (Available- for-sale financial assets)    R'm         100        100          0      100
Other                                                                                    R'm       4 723      3 139         50    2 988    1 794
Current income tax asset                                                                 R'm         286        -(1)                  -       53
Deferred income tax asset                                                                R'm       1 596    1 168(1)        37      460      349
Total assets                                                                             R'm     100 428   84 721(1)        19   73 358   62 945
Liabilities
Retail deposits and wholesale funding                                                    R'm      76 443     64 030         19   55 582   47 940
Other                                                                                    R'm       2 309    2 447(1)        (6)   1 658    1 346
Total liabilities                                                                        R'm      78 752   66 477(1)        18   57 240   49 286
Equity
Shareholders' funds                                                                      R'm      21 676   18 244(1)        19   16 118   13 659
Capital adequacy ratio                                                                     %          34       35(1)                 34       35
Net asset value per ordinary share                                                     cents      18 676   15 681(1)        19   13 809   11 663
Share price                                                                            cents     130 621     83 246         57   72 500   47 400
Market capitalisation                                                                    R'm     151 033     96 255         57   83 830   54 807
Number of shares in issue                                                               '000     115 627    115 627             115 627  115 627
Share options
 Number outstanding                                                                     '000         640        777        (18)     963      868
 Number outstanding to shares in issue                                                     %         0.6        0.7                 0.8      0.8
 Average strike price                                                                  cents      50 644     38 561         31   31 755   28 520
 Average time to maturity                                                             months          18         19                  20       27

Operations
Branches                                                                                             840        826          2      796      720
Employees                                                                                         13 774     13 333          3   13 069   11 440
Active clients                                                                          '000      11 386      9 868         15    8 569    7 269
ATMs and DNRs
 Own                                                                                               2 090      1 895         10    1 653    1 236
 Partnership                                                                                       2 921      2 750          6    2 371    2 469
 Total                                                                                             5 011      4 645          8    4 024    3 705
Capital expenditure                                                                      R'm       1 141        829         38    1 000      704
Credit sales
Value of credit card disbursements/drawdowns                                             R'm       6 193      3 949         57      864
Value of term loans advanced                                                             R'm      24 775     24 343          2   26 362   24 228
Value of total loans advanced(10)                                                        R'm      30 968     28 292          9   27 226   24 228
Number of total loans advanced(6)                                                       '000       4 889      3 947         24    3 508    3 684
Average of total credit card disbursements/drawdowns                                       R       1 974      2 296        (14)   3 703        -
Average of total term loans advanced                                                       R      14 145     10 934         29    8 051    6 577
Average of total loans advanced                                                            R       6 334      7 168        (12)   7 761    6 577
Credit book
Gross loans and advances                                                                 R'm      54 879     47 642         15   45 135   40 891
Up-to-date                                                                      Stage 1  R'm      41 587    37 165(1)       12   39 076   34 527
Up-to-date with SICR                                                            Stage 2  R'm       3 765     4 401(1)      (14)
Total up-to-date                                                                         R'm      45 352    41 566(1)        9   39 076   34 527
Arrears - up to 1 month in arrears                                              Stage 2  R'm       1 087      1 003          8    1 641    1 458
Arrears - 2 and 3 months in arrears                                             Stage 3  R'm       1 389      1 697(11)    (18)   1 214      839
Total arrears up to 3 months                                                             R'm       2 476      2 700         (8)   2 855    2 297
Application for debt review within 6 months                                     Stage 3  R'm          70       108(1)(11)  (35)
Up-to-date that rescheduled from up-to-date (not yet rehabilitated(7))          Stage 3  R'm         856      1 085        (21)   1 088    1 818
Up-to-date that rescheduled from arrears (not yet rehabilitated(7))             Stage 3  R'm       1 272      1 277         (0)   1 583    1 542
Total up-to-date that rescheduled (not yet rehabilitated(7))                             R'm       2 128      2 362        (10)   2 671    3 360
More than 3 months in arrears and legal status                                  Stage 3  R'm       4 853          -                   -        -
Expected recoveries receivable(8)                                               Stage 3  R'm           -        906       (100)     533      707
Total provision for credit impairment                                                    R'm      10 364    6 715(1)        54    5 930    5 131
Net loans and advances                                                                   R'm      44 515   40 927(1)         9   39 205   35 760
Total provision for credit impairment to stage 3 (excluding expected 
recoveries receivable) and stage 2 (up to 1 month in arrears) coverage                     %         109      130(1)                107       91
Repayments                                                                               R'm      38 100     35 974          6   33 236   29 388
Gross credit impairment charge(2)                                                        R'm       4 917      6 560        (25)   6 246    5 255
Bad debts recovered(8)                                                                   R'm         467      1 280        (64)   1 125      854
Net credit impairment charge(2)                                                          R'm       4 450      5 280        (16)   5 121    4 401
Net credit impairment charge(2) to average gross loans and advances                        %         8.7       11.4                11.9     11.4
Total lending and insurance income (excluding investment income)(2)(3)(9)                R'm      14 448     15 008         (4)  14 362   12 837
Net credit impairment charge(2) to total lending and insurance income  
(excluding investment income)(2)(3)(9)                                                     %        30.8       35.2                35.7     34.3
Retail deposits and wholesale funding
Wholesale funding                                                                        R'm       5 078      6 206        (18)   7 543   10 154
Retail call savings                                                                      R'm      45 141     34 909         29   30 117   24 152
Retail fixed savings                                                                     R'm      26 224     22 915         14   17 922   13 634

(1) Transition to IFRS 9 Financial Instruments on 1 March 2018. These 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 year, under IFRS 9, interest income and credit impairment charge are recognised on a net basis for all loans classified as stage 3 (R1 073 million 
    netting reversal for the year ended February 2019)
(3) Insurance profit is received from the cell captive as a dividend after tax. The tax expense on insurance profit is included in the net insurance income line
    for the financial year ended February 2019
(4) Funeral income is received from the cell captive as a dividend after tax. The tax expense is included in funeral income
(5) Cash, cash equivalents, money market funds, term deposits and other financial investments
(6) Includes credit card. For the number of loans advanced, every month in which the credit card is utilised is counted
(7) Not yet 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
(8) Under IFRS 9, no future expected receivable is recognised post write-off. The R906 million receivable was run-down in the current year and reduced bad debts
    recovered
(9) Interest received on loans, initiation fees, monthly service fee and net insurance income
(10) Net of loans settled through loan consolidations
(11) In the transition report application for debt review within 6 months and arrears - 2 and 3 months in arrears were aggregated

Banking is about people, passionately delivering on clients' needs

We remain focused on delivering on our purpose: to enable clients to improve their financial lives. This is done with an unwavering commitment to the 4 fundamentals
that have made Capitec so successful.

Simplicity, our brand essence, permeates through the way we design our banking solutions, pricing, digital services and communication. We believe that simplicity,
delivered transparently, puts our clients in control of their money.

We are determined to deliver solutions that provide value for money to clients. Our cost-conscious culture and innovative processes and technology allow us to reduce
the cost of banking. We pass the saving on to our clients, making banking more affordable.

We continue to make banking accessible through our 840 branches (14 new) and the extended trading hours of over 300 Sunday banking branches. We however also
accelerated our digital banking development and are experiencing significant growth in this regard, with over 5.2 million clients using digital channels to access
their money from anywhere at any time.

The Capitec brand is further differentiated by a personalised, omni-channel client experience that aims to build long-term relationships with our clients. We created
441 new jobs and now employ 13 774 people focused on understanding clients' needs, and developing or delivering better experiences across our physical and digital
service channels.

The industry is experiencing a challenging economic climate in addition to the prospect of new competitors. Our strategy remains to focus on our clients with a 
combination of digital banking, a branch network, and relevant and insightful communication to help them bank better. This, combined with our ability 
to adapt to the changing needs of clients, new markets and new technology will remain Capitec's competitive advantage today and in the future.

Earnings up by 19%

Continued growth is testimony to staying true to our fundamentals. Clients trust a solution that they understand, which is reliable and transparent. This focus
resulted in an enhanced credit offering and an increase in transactions due to sustained acquisition of banking clients.

Our client base has grown by 15% to 11.4 million clients (2018: 9.9 million). On average 127 000 clients joined us per month this year.

Easy to use and always in control

Our marketing and pricing strategy promotes transacting on our self-service solutions (including the banking app, internet banking, USSD (primarily feature phones),
in-branch self-service terminals and dual note recyclers (DNRs)) which frees up capacity in branches to ensure that our clients receive more personalised service.
We therefore give our clients the freedom to decide whether they want to go to a branch or whether to do their banking at the time and place that suits them.

Self-service terminal and DNR transactions have increased in volume by 111% to 18 million and 55% to 29 million respectively at the end of February 2019. Net
transaction fee income grew by 26%. Clients continue to move from cash to card with 62% of value spent on card (February 2018: 59%).

The security of our clients' money and personal information is important to us and was considered in the design of our banking app. Over 2.2 million clients actively
use the banking app to make payments, buy prepaid or manage their accounts on a daily basis. The volume of banking app transactions has increased by 75% to 343 million
for the financial year (February 2018: 196 million). The app provides a simple, personalised user experience. We cover the cost of the data when our clients
make use of the app.

Improved processes and advanced technology increased efficiency and allowed us to make digital banking more affordable by lowering our fees. On 1 March 2019, 
transaction fees for payments made via the banking app, internet banking or USSD were reduced from R1.60 to R1.00 and the monthly administration fee of our 
Global One account was reduced from R5.80 to R5.00. By taking all the digital banking fees and the monthly administration fee into consideration, we are putting 
R360 million back into our clients' pockets. To balance this, we increased the cost of cash withdrawal fees at ATMs for amounts over R1 000. The risk of cash handling 
in South Africa has increased significantly over the last few years. As an alternative, real-time clearance is a simple solution for clients to facilitate immediate 
payment on our banking app and internet banking. This is much safer than carrying cash around. We are leading the industry by having reduced the real-time payment 
fees to the other banks from R10.00 to R8.00.

Trust in our brand

Retail deposits increased by 23% to R71 billion. Clients currently earn a minimum of 5% interest per year on any positive balance on their debit or credit cards.
During the 2019 financial year we paid out R3.9 billion in interest on retail call, fixed deposits and credit card accounts.

Wholesale funding decreased by 18% from R6.2 billion to R5.1 billion during 2019. The funding requirement of the loan book is met by retail fixed deposits, retained
earnings and wholesale funding.

One funeral plan, more cover

We identified a need for a client-centric, affordable funeral plan.

The value proposition from a pricing, benefit and service experience perspective has contributed to the market acceptance of the offering. The Capitec funeral 
plan has benefits such as the waiver of the waiting period if transferring existing risk cover from a registered insurer, and a new-born premium waiver benefit 
that celebrates additions to clients' families at no cost for up to 6 months while still enjoying cover and peace of mind.

The plan is transparent, easy to understand and is available via our 840 branches and on the banking app. 80% of the policies to date were issued in the branch. This
is further evidence of how important our branch network remains to best serve clients. At financial year end more than 360 000 policies were active. We are
pleased that we could expand on our Bank Better, Live Better principle with the Capitec funeral plan, and help our clients to manage their broader financial needs.

Credit for the right reasons

When clients understand credit, they use it responsibly. This assists them in reaching their financial goals.

We encourage our clients to match the term of the loan that they take to the purpose for which they require the loan. Consequently, 56% of the value of loans were
at shorter terms or lower values, compared to what the client qualified for.

We have also initiated a debt alleviation program to assist clients that have experienced a loss of income outside of  their control.

Extension of credit

The effect of credit optimisation strategies resulted in a decrease in the shorter term credit products and increase in longer term loans. Against the background of a
lacklustre economy, and increased credit risk-taking in the unsecured credit market, we introduced further granting restrictions. We curbed granting to clients who
exhibited tendencies to frequently borrow the maximum amount on offer and we built on our prudent approach applied in affordability assessments by increasing our
minimum living expenses threshold. Notwithstanding this, we grew and optimised our book through a focus on client quality and protecting the book from clients prone to
go under debt review.

It is our strategy to drive the price of unsecured lending lower. Those clients with positive credit behaviour receive our best interest rates and we have a lower
return on equity target for these clients. The average interest rate charged for this group was 17.5% compared to the book average of 24%. Our unsecured lending rates
go as low as 12.9% and we charge credit insurance on the actual amount of outstanding debt and not on the original amount advanced. This differentiates the Capitec
credit protection plan in the market.

Our credit card offer has been well-received by the market, with a monthly fee that remained unchanged at R35 and an interest rate as low as prime. With an average of
14 000 new credit card clients per month, disbursements increased by 57% to R6.2 billion. At 28 February 2019, the gross credit card book was R3.6 billion and
comprises approximately 3% of the total South African retail credit card market.

: Loan revenue
:
: We implemented International Financial Reporting Standards (IFRS) 9, the revised accounting standard for financial instruments, on 1 March 2018. 
: Under IFRS 9, once a loan rolls into stage 3 (non-performing book), the interest recognised on the loan is netted after deducting the related provision. This net 
: interest recognition decreased total interest received on loans and the related net credit impairment charge by R1.1 billion for the current year. This aspect of the 
: change has no impact on the overall profit, but results in increasing the cost-to-income ratio.
:
: Loan book, impairments and bad debts written off
: 
: The loan book performed well with a strict credit extension policy applied. The total net loans and advances include 87% of up-to-date loans (1 March 2018: 84%).
: Loans up to 3 months in arrears decreased by 8%. From 1 March 2018, under IFRS 9, up-to-date with a significant increase in credit risk (SICR) and total up-to-date
: that rescheduled (not yet rehabilitated) decreased 14% and 10% respectively.
: 
: At 28 February 2018, under IAS 39, the previous accounting standard, loans and advances were written off at the earlier of when they were more than 3 months in
: arrears or had a legal status. Under IFRS 9, loans can only be written off when there is no reasonable expectation of recovery. We consider this point to be when 
: a loan has a present value of future recovery of less than 5%.
: 
: A large portion of loans more than 3 months in arrears have therefore not yet been handed over or written off due to the change in write-off policy. This has resulted
: in a build-up of loans on the balance sheet that are more than 3 months in arrears, with an appropriate provision. Previously these loans were written off. 
:
: After transition to IFRS 9 our focus on maximising collections continues. We utilise a combination of cutting edge machine learning and
: regression score card techniques to complement our years of operational experience in this environment.
: 
: No receivable is recognised post write-off for any possible recoveries and any amount received post write-off will be recognised as a bad debt recovered. The expected
: recoveries receivable on 1 March 2018 (R906 million) represented the  net present value of expected future recoveries on loans that were written off previously under
: IAS 39 (the receivable). Under IFRS 9, no future expected receivable is recognised post write-off. As a result, the receivable was run-down in the current period and
: bad debts recovered were reduced by R906 million.
: 
: The table below represents the appropriate change in write-off, related movement in credit impairment and bad debts recovered under IFRS 9 compared to the prior period
: under IAS 39.
:
:                                                                                        Change %
: Credit impairment charge                                            2019       2018   2019/2018
: Bad debts written off                                         R'm  1 268      6 662        (81)
: Movement in credit impairment*                                R'm  3 649       (102)
: Gross credit impairment charge*                               R'm  4 917      6 560        (25)
: Bad debts recovered                                           R'm   (467)    (1 280)       (64)
: Net credit impairment charge*                                 R'm  4 450      5 280        (16)
: 
: * In the current period, under IFRS 9, the credit impairment charge is recognised on a net basis for all loans classified as stage 3, reducing interest and bad
:   debt written off by R1 073 million for the year ended February 2019.


The coverage of 109% for the total provision for credit impairment to stage 3 (excluding expected recoveries receivables) and stage 2 (up to 1 month in arrears)
reflects that our provisioning methodology remains conservative.

Tax

Insurance income and funeral income is received from the related cell captives as a dividend after tax. In the current year, the tax attributable to the profits on 
cell captives was deducted from the net insurance income and funeral income and excluded from the tax expense line. This has resulted in the effective tax rate, as disclosed, 
decreasing to 25.2% for the current year. Together with the tax paid in the cell captives, the effective tax rate for the bank remains approximately 28%.

Credit ratings

S&P Global Ratings affirmed Capitec Bank's ratings on 22 November 2018 with a stable outlook. We have a global long-term rating of BB and a short-term global rating of B. 
The South African long-term national scale rating is zaAA and the short-term rating is zaA-1+. Our global long-term rating is the same as the sovereign rating, as
well as those of other large South African banks.

Strong capital levels and healthy liquidity

We have sufficient capital to meet our growth requirements. At 28 February 2019 the capital adequacy ratio (CAR) was 33.9%.

The IFRS 9 transition after applying the phase-in resulted in a 0.5% decrease in the CAR based on the current year's capital and risk-weighted assets.

IFRS 16, that relates to leases, with an implementation date of 1 March 2019, will result in an estimated reduction of 1.3% to 1.5% in the CAR, 
for which no phase-in period is applicable. IFRS 16 brings operating leases onto the balance sheet as right-of-use assets with a corresponding liability.

We are awaiting regulatory approval for the acquisition of Mercantile Bank Holdings Limited. The transaction will be funded out of cash reserves and no additional
equity will be required. The impact of this acquisition on our CAR can be met by the reallocation of assets in the investment portfolio.

Investing in growth and efficiency

Operating expenses increased by 18%, in line with earnings growth. The increase was driven by information technology, security costs, an increase in employees in the
digital and credit value streams, new product offerings and salary incentives due to the 57% share price increase. We are building a new head office which we expect
to be completed in 2020. The new building will increase operational efficiencies and collaboration between the business units that are currently distributed across a
number of buildings.

We are implementing a new SAP general ledger, human resources and procurement system to establish high-performance support services capability, efficiencies and to
assist in increasing throughput.

Prospects

Our continued investment in new payment solutions, digital development and advanced data and analytics will allow us to offer retail clients easier ways to bank and
more personalised credit offers.

We regard the acquisition of Mercantile Bank Holdings Limited as a strategic move to accelerate the development of a unique business banking offer for our clients.

Changes in board composition

On 28 November 2018, Daniel Petrus Meintjes was appointed as an independent non-executive director. He has comprehensive business experience and insight. 
We welcome him to the board.

Nonhlanhla Mjoli?Mncube will retire from the board effective 31 May 2019. We thank her for her 15 years? dedicated service to the group.

Dividend

: The directors declared a final gross dividend of 1 120 cents per ordinary share (February 2018: 945 cents per ordinary share) on 27 March 2019, bringing the total
: dividends for the 2019 financial year to 1 750 cents per share (February 2018: 1 470 cents per share). There are 115 626 991 ordinary shares in issue.

The final 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 896 cents per share. The distribution is made from income reserves. Capitec's tax reference number is 9405376840.

Last day to trade cum dividend     Monday, 15 April 2019
Trading ex-dividend commences     Tuesday, 16 April 2019
Record date                      Thursday, 18 April 2019
Payment date                      Tuesday, 23 April 2019

Share certificates may not be dematerialised or rematerialised from Tuesday, 16 April 2019 to Thursday, 18 April 2019, both days inclusive.

The chief financial officer's review is available at http://www.capitecbank.co.za.

On behalf of the board

Riaan Stassen        Gerrie Fourie
Chairman             Chief executive officer

Stellenbosch
28 March 2019

Summary consolidated statement of financial position
                                                                                                                       Audited   Audited
                                                                                                                      February  February
                                                                                                                          2019      2018
                                                                                                                           R'm       R'm

Assets
Cash, cash equivalents and money market funds                                                                           29 145    25 091
Financial investments (Held-to-maturity investments)*                                                                   10 732    11 781
Term deposit investments                                                                                                 9 331     2 528
Net loans and advances                                                                                                  44 515    41 814
Other receivables                                                                                                        1 643       722
Net insurance receivable                                                                                                   236       245
Derivative assets                                                                                                            1         -
Financial assets - equity instruments at FVOCI (Available-for-sale financial assets)*                                      100       100
Current income tax asset                                                                                                   286       107
Interest in associates                                                                                                     317       134
Property and equipment                                                                                                   2 210     1 755
Intangible assets                                                                                                          316       283
Deferred income tax asset                                                                                                1 596       397
Total assets                                                                                                           100 428    84 957

Liabilities
Derivative liabilities                                                                                                      15        54
Retail deposits                                                                                                         71 365    57 824
Other liabilities                                                                                                        2 203     1 914
Wholesale funding                                                                                                        5 078     6 206
Provisions                                                                                                                  91        67
Total liabilities                                                                                                       78 752    66 065

Equity
Capital and reserves
Ordinary share capital and premium                                                                                       5 649     5 649
Cash flow hedge reserve                                                                                                    (10)      (26)
Foreign currency translation reserve                                                                                         5         3
Retained earnings                                                                                                       15 950    13 153
Share capital and reserves attributable to ordinary shareholders                                                        21 594    18 779
Non-redeemable, non-cumulative, non-participating preference share capital and premium                                      82       113
Total equity                                                                                                            21 676    18 892
Total equity and liabilities                                                                                           100 428    84 957

* Denotes classification of financial assets under IAS 39 in the previous reporting period.


Summary consolidated income statement
                                                                                                                       Audited   Audited
                                                                                                                      February  February
                                                                                                                          2019      2018
                                                                                                                           R'm       R'm

Lending, investment and insurance income                                                                                17 227    17 266
 Interest income                                                                                                        15 501    15 474
 Loan fee income                                                                                                           931       919
 Net insurance income                                                                                                      795       873
Lending and investment expenses                                                                                         (4 729)   (4 596)
 Interest expense                                                                                                       (4 510)   (4 184)
 Loan fee expense                                                                                                         (219)     (412)

Net lending, investment and insurance income                                                                            12 498    12 670
Transaction fee income                                                                                                   8 474     6 925
Transaction fee expense                                                                                                 (2 010)   (1 798)
Net transaction income                                                                                                   6 464     5 127
Credit impairments                                                                                                      (4 450)   (5 280)
Funeral income                                                                                                              54         -
Other income/(expense)                                                                                                       3        (1)
Net income                                                                                                              14 569    12 516
Operating expenses                                                                                                      (7 494)   (6 364)
Share of net profit of associates                                                                                            2         3
Operating profit before tax                                                                                              7 077     6 155
Income tax expense                                                                                                      (1 781)   (1 685)
Profit for the year                                                                                                      5 296     4 470
Earnings per share (cents)
- Basic                                                                                                                  4 571     3 855
- Diluted                                                                                                                4 562     3 843

Summary consolidated statement of other comprehensive income
                                                                                                                       Audited   Audited
                                                                                                                      February  February
                                                                                                                          2019      2018
                                                                                                                           R'm       R'm

Profit for the year                                                                                                      5 296     4 470
Other comprehensive income that may subsequently be reclassified to profit and loss                                         17       (15)
 Cash flow hedge reserve recognised during the year                                                                          5        59
 Cash flow hedge reclassified to profit and loss for the year                                                               19       (80)
 Income tax relating to cash flow hedge                                                                                     (7)        6
Foreign currency translation reserve recognised during the year                                                              1         3
Total comprehensive income for the year                                                                                  5 314     4 458

Reconciliation of attributable earnings to headline earnings
                                                                                                                       Audited   Audited
                                                                                                                      February  February
                                                                                                                          2019      2018
                                                                                                                           R'm       R'm

Net profit attributable to equity holders                                                                                5 296     4 470
Preference dividend                                                                                                         (9)      (12)
Discount on repurchase of preference shares                                                                                 (2)        -
Net profit after tax attributable to ordinary shareholders                                                               5 285     4 458
Non-headline items:
Loss on disposal of property and equipment                                                                                   9         3
Income tax charge - property and equipment                                                                                  (3)        -
Derecognition of intangible assets                                                                                           1         -
Headline earnings                                                                                                        5 292     4 461
Headline earnings per share (cents)
- Basic                                                                                                                  4 577     3 858
- Diluted                                                                                                                4 568     3 846

Summary consolidated statement of cash flows
                                                                                                                       Audited   Audited
                                                                                                                      February  February
                                                                                                                          2019      2018
                                                                                                                           R'm       R'm

Cash flow from operating activities
Cash flow from operations*                                                                                              16 383    13 674
Income taxes paid                                                                                                       (2 813)   (1 741)
                                                                                                                        13 570    11 933
Cash flow from investing activities
Acquisition of property and equipment                                                                                     (911)     (686)
Disposal of property and equipment                                                                                           9        32
Purchase of intangible assets                                                                                             (230)     (143)
Investment in term deposit investments                                                                                 (10 557)   (3 153)
Redemption of term deposit investments                                                                                   3 947     7 159
Acquisition of financial investments                                                                                   (12 611)  (12 904)
Redemption of financial investments                                                                                     13 655     6 650
Increase in short-term money market investments                                                                            (15)      (14)
Interest acquired in associates                                                                                           (179)     (129)
                                                                                                                        (6 892)   (3 188)
Cash flow from financing activities
Dividends paid                                                                                                          (1 831)   (1 545)
Preference shares repurchased                                                                                              (33)      (39)
Issue of institutional bonds and other funding                                                                             500       500
Redemption of institutional bonds and other funding                                                                     (1 119)   (1 110)
Shares acquired for settlement of employee share options                                                                  (215)     (151)
Participants' contribution on settlement of share options                                                                   63         -
                                                                                                                        (2 635)   (2 345)
Net increase in cash and cash equivalents                                                                                4 043     6 400
Cash and cash equivalents at the beginning of the year                                                                  25 070    18 670
Cash and cash equivalents at the end of the year                                                                        29 113    25 070

*  Interest received amounted to R15.3 billion (February 2018: R15.3 billion) and interest paid amounted to R4.5 billion (February 2018: R4.2 billion)

Summary consolidated statement of changes in equity
                                                                                                  Foreign
                                                                     Ordinary     Preference     currency  Cash flow   
                                                                share capital  share capital  translation      hedge  Retained
R'm                                                               and premium    and premium      reserve    reserve  earnings     Total
                                                                                              
Balance at 29 February 2017                                             5 649            151            -        (12)   10 330    16 118
Total other comprehensive income for the year                               -              -            3        (15)    4 470     4 458
Transactions with shareholders and directly recorded in equity              -            (38)           -          -    (1 646)   (1 684)
Ordinary dividend                                                           -              -            -          -    (1 531)   (1 531)
Preference dividend                                                         -              -            -          -       (12)      (12)
Employee share option scheme: value of employee services                    -              -            -          -        37        37
Shares acquired for employee share options at cost                          -              -            -          -      (225)     (225)
Proceeds on settlement of employee  share options                           -              -            -          -        74        74
Tax effect on share options                                                 -              -            -          -        12        12
Preference shares repurchased                                               -            (38)           -          -        (1)      (39)


Balance at 28 February 2018                                             5 649            113            3        (27)   13 154    18 892
Changes on initial application of IFRS 9                                    -              -            -          -      (648)     (648)

Restated balance at 1 March 2018                                        5 649            113            3        (27)   12 506    18 244
Total comprehensive income for the year                                     -              -            2         17     5 295     5 314
Transactions with shareholders and directly recorded in equity              -            (31)           -          -    (1 851)   (1 882)
 Ordinary dividend                                                          -              -            -          -    (1 821)   (1 821)
 Preference dividend                                                        -              -            -          -        (9)       (9)
 Employee share option scheme: value of employee services                   -              -            -          -        32        32
 Shares acquired for employee share options at cost                         -              -            -          -      (215)     (215)
 Proceeds on settlement of employee  share options                          -              -            -          -        63        63
 Tax effect on share options                                                -              -            -          -       101       101
 Preference shares repurchased                                              -            (31)           -          -        (2)      (33)

Balance at 28 February 2019                                             5 649             82            5        (10)   15 950    21 676

Commitments
                                                                                                                       Audited   Audited
                                                                                                                      February  February
                                                                                                                          2019      2018
                                                                                                                           R'm       R'm
Capital commitments approved by the board
Contracted for:
 Property and equipment                                                                                                    572       148
 Intangible assets                                                                                                         116        16
Not contracted for:
 Property and equipment                                                                                                    973       897
 Intangible assets                                                                                                         440       242
                                                                                                                         2 101     1 303

Property and other operating lease commitments
Future aggregate minimum lease payments under non-cancellable leases are as follows:
 Within one year                                                                                                           508       469
 From one to five years                                                                                                  1 254     1 292
 After five years                                                                                                          158       269
Total future cash flows                                                                                                  1 920     2 030
Straight-lining accrued                                                                                                   (147)     (135)
Future expenses                                                                                                          1 773     1 895

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 R44.7 billion (February 2018: 
R44.1 billion), retail deposits (level 2) was R71.6 billion (February 2018: R58.1 billion) and wholesale funding (level 2) was R5.2 billion (February 2018: R6.4 billion).
The measured fair value of derivative assets (level 2) was valued at  R0.5 million (February 2018: R0.1 million), financial assets - equity instruments at FVOCI (level 3) 
was R100 million (February 2018: R100 million) and derivative liabilities (level 2) was R14.7 million (February 2018: R54.6 million). The fair value of all other
financial instruments equates to their carrying amount. There were no transfers between the levels.

Related party transactions

Included in the wholesale funding balance is R143 million held by a related party to a significant shareholder.

Events past the date of the statement of financial position

In November 2018, Capitec Bank Limited was announced as the winning bidder for the 100% acquisition of Mercantile Bank Holdings Limited. The deal was signed in January
2019 and is subject to regulatory approval. All regulatory applications, to both the Prudential Authority and Competition Commission, were filed in the 2019 financial
year. In terms of the Share Sale and Purchase Agreement, Capitec Bank Limited has paid a deposit of R110 million to the seller and instructed a bank guarantee to be
issued to the seller to the value of R3.09 billion, secured by term deposits included in Term deposit investments. It is expected that the Regulators will provide
their feedback within the first half of the 2020 financial year.

Notes

The summary consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports, 
and the requirements of the Companies Act applicable to summary financial statements. The Listings Requirements require preliminary reports to be prepared in 
accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial 
Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, 
as a minimum, contain the information required by IAS 34 Interim Financial Reporting.

The accounting policies applied in the preparation of the consolidated financial statements from which the summary consolidated financial statements were derived 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. The impact of adopting IFRS 9 was applied as a downward adjustment to the opening retained earnings at 1 March 2018 of R648 million. This 
included a credit impairment (ECL) of R900 million on loans and advances and financial investments. The remainder of the amount related to increased tax.

In calculating the ECL for the year, key areas of significant management estimation and judgement included determining SICR thresholds, write-off being when there 
is no reasonable expectation of further recovery (5% of balance before write-off), assumptions used in the forward-looking economic model, event overlays and how 
historical data is used to project ECL.

IFRS 15 Revenue from Contracts with Customers was adopted on 1 March 2018. The accounting policy was updated to reflect the terminology in the new standard but it had
no impact on the financial information reported in the current or comparative period.

Capitec assessed revenue recognised from contracts with customers by nature, amount, timing and uncertainty of revenue and cash flows that are affected by economic
factors. Based on this assessment, revenue is appropriately disaggregated for loan fee income, transaction fee income and funeral income.

The accounting policies applied in the preparation of the 2019 consolidated financial statements are consistent with the previous consolidated annual financial 
statements, with the above IFRS 9 and IFRS 15 exception. In the current year, the cash inflow from participants to acquire shares to settle employee share options 
was disclosed separately from the cash outflow for shares acquired to settle employee share options.

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 sections enclosed by dotted lines as well as the summary consolidated statement of financial position, summary consolidated income statement, summary consolidated 
statement of other comprehensive income, reconciliation of attributable earnings to headline earnings, summary consolidated statement of cash flows, summary 
consolidated statement of changes in equity, commitments, segment analysis, fair values, related party transactions, events past the date of the statement of 
financial position and notes are audited.

The preparation of the audited consolidated financial statements was supervised by the chief financial officer, Andre du Plessis CA(SA).

Independent auditor?s opinion

These summary consolidated financial statements for the year ended 28 February 2019 have been audited by PricewaterhouseCoopers Inc., who expressed an 
unmodified opinion thereon. The auditor also expressed an unmodified opinion on the annual financial statements from which these summary consolidated financial 
statements were derived.

A copy of the auditor?s report on the summary consolidated financial statements and of the auditor?s report on the annual consolidated financial statements are 
available for inspection at the company?s registered office, together with the financial statements identified in the respective auditor?s reports.

The auditor?s report does not necessarily report on all of the information contained in this announcement/financial results. Shareholders are therefore advised 
that in order to obtain a full understanding of the nature of the auditor?s engagement they should obtain a copy of the auditor?s report together with the 
accompanying financial information from the company?s registered office. The directors take full responsibility for the preparation of the report and that the 
financial information has been correctly extracted from the underlying annual financial statements.

PricewaterhouseCoopers Inc.
Director: Michael Meyer
Registered Auditor 

Johannesburg
27 March 2019


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 (CRO)*, JD McKenzie, DP Meintjes, NS Mjoli-Mncube, PJ
Mouton, CA Otto, JP Verster
* Executive

Annual general meeting
Notice is hereby given that the annual general meeting of the shareholders of Capitec will be held on Friday, 31 May 2019. The detailed notice will be available from
26 April 2019 at http://www.capitecbank.co.za/investor-relations/shareholders-centre.

capitecbank.co.za
enquiries@capitecbank.co.za


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