Capitec's financial division, which includes value-added services such as prepaid airtime, data, electricity, and money transfers, along with the Capitec Connect mobile service, contributed to the group's total revenue of R2.7 billion for the first six months ending August 31, according to internal company reports.
This contribution accounted for approximately three-quarters of the total revenue of R3.5 billion generated from personal banking business, excluding the fintech sector, which is higher than the less than two-thirds figure from the previous year. Capitec reported in its preliminary interim results published on Wednesday that the fintech contribution increased from R2.1 billion, and the personal banking figure increased from R3.3 billion.
The group's total revenue grew by 19% to R9.5 billion, and the interim dividend was increased by 19% to 3110 cents per share. Net income from non-interest operations was 70% of operating income after loan write-offs, which is higher than the previous level of 65%.
Growth in Value-Added Services and Capitec Connect Revenue
The combined net income from Value-Added Services (VAS) and Capitec Connect increased by 32% to R3.8 billion. The net income from VAS alone grew by 30% to R3.5 billion, as the number of customers purchasing prepaid airtime, data, electricity, and other services increased by 14% to 13.5 million. VAS transactions rose by 26% to R1.1 billion.
Net income from the 'send cash' electronic money transfer service, which Capitec notes is an increasingly popular alternative to cash withdrawals, grew by 32% to R906 million, serving 6.8 million users. Capitec Connect, which operates as a virtual mobile network operator selling mobile services through the Cell C network and competes with FNB Connect, increased net income by 72% to R284 million, which is almost two-thirds of the R442 million earned in the entire previous financial year. The number of active customers in the last three months grew from 1.1 million to 1.8 million.
Data usage more than doubled, reaching 34.3 petabytes, and voice minutes increased by 84% to 573 million.
Free Calls and Airtime Advances
During the reporting period, Capitec introduced free Capitec-to-Capitec calls and increased the maximum airtime advance from R10 to R100. Customers utilized Capitec Connect advances totaling R96.8 million, compared to R36.1 million previously.
Digital payments also showed rapid growth. The number of customers using Apple Pay, Google Pay, Samsung Pay, and Garmin Pay increased by 68% to 2.4 million, and their spending rose by 87% to R52.1 billion. Users of the banking app reached 16.5 million compared to 13.9 million. The group's corporate payment platform, Capitec Pay, processed 182 million payments worth R45 billion for 12.5 million customers, with net income increasing by 51% to R365 million.
Capitec did not increase fees for the second consecutive year; however, total net income from transactions and fees increased by 20% to R12.2 billion amid a 14% rise in transaction volume. Part of this growth was due to volume discounts rather than customers: in the Personal Banking segment, terminal expenses decreased from R625 million to R128 million, and Capitec noted that higher discounts contributed to a 67% growth in net income from card payments. The removal of the international charge for card payments led to a 10% decrease in net income from international card transactions to R285 million.
Credit costs also saw an increase. The group's annual loss rate—the ratio of net loan write-offs to average unsecured loans—rose to 8.4% from 7.9%. Capitec attributed this to the conflict between the US and Iran, which, it said, contributed to inflation and an increase in the repo rate by 25 basis points in May, to 7%. Predictive macroeconomic provisioning in Personal Banking increased to R664 million from R290 million in February, although it remained below the R831 million reserved the previous year. Excluding the provision, the loss rate in Personal Banking was 8.5% instead of 9.2%.
Business Banking revenue grew by 52% to R609 million. The loss rate in this segment rose to 3.4% from 2.1%, as the growth in unsecured lending approved via scoring, which has a loss rate of 13.7%, reached 175% and amounted to R4.2 billion.
Operating expenses increased by 5% to R10.5 billion, and the cost-to-income ratio decreased to 36% from 40%. Technology expenses, excluding salaries, grew by 8% to R1.7 billion, driven by a 27% increase in cloud charges and a 20% rise in outsourced technology resources.
Furthermore, in July, Capitec agreed to sell Capitec Rental Finance, a leasing business it acquired from Mercantile Bank in 2019, to a subsidiary of Sasfin Holdings. This deal has not yet been finalized.