Capitec Plans Insurance Offering as Credit-Card Rollout Starts

JOHANNESBURG, Capital Markets in Africa: Capitec Bank Holdings Ltd., South Africa’s fastest-growing lender by profit, said it will start offering insurance products from next year in a bid to diversify sources of income and bolster earnings.

“Right now we’re not covering insurance, but we’re working on that and will launch products next year with a partner,” Chief Executive Officer Gerrie Fouriesaid, declining to disclose details on who it will use as a partner. Having sold credit cards through its 150 branches in the Western Cape this year, “it’s all systems go for a nationwide launch in mid-October,” he said.

Capitec is building more branches and offering cheaper accounts to expand faster than South Africa’s four biggest banks, adding almost 650,000 new customers in the six months through August as the economic downturn forces consumers to cut costs. Capitec’s return on equity of 26 percent in the fiscal first half through August outstripped the 17.6 percent average of its larger rivals, while its cost-to-income ratio of 34 percent was the lowest.

“The economy, in a sense, is working for us” Fourie said. “Transaction income is making up 37 percent of income so we’re growing very strongly on the banking side. We still see big runway in client numbers.”

Capitec is pulling back on lending and seeking to sell more of its products to its 7.9 million customers following a 44 percent surge in arrears, he said. With a total capital adequacy ratio of 34 percent, the lender doesn’t need to raise funds and won’t consider selling debt until next year, Fourie said.

The stock rose as much as 2.7 percent before paring gains to trade 0.9 percent higher at 610 rand as of 10:20 a.m. in Johannesburg on Tuesday. First-half net income climbed to 1.75 billion rand ($129 million), from 1.47 billion rand a year earlier, the lender, based in Stellenbosch near Cape Town, said in a statement.

Source: Bloomberg Business News