Capitec Bank, one of South Africa’s largest banks, has warned that the impact of the Covid-19 pandemic will dent future earnings.
A large portion of Capitec’s customers are low-income earners who are likely to feel the effects of the current pandemic, and resulting lockdown measures.
The bank said in a trading statement on Friday (29 May), that the Covid-19 pandemic is impacting businesses in South Africa across the board, and generally causing increased distress in the local economy.
“We do not as yet fully understand the ultimate economic outcome of the pandemic. The national lockdown affected Capitec from the end of its first month of the 2021 financial year and the impact continues,” it said.
Capitec said that the relaxation of the lockdown restrictions enabling broadened business activity from 1 June 2020, “is imperative to facilitate economic recovery in South Africa”.
Over the period of the national lockdown, Capitec said that transaction volumes (branch transactions, cash withdrawals and point-of-sale transactions) number of funeral policies sold and credit sales were lower.
“Many clients applied for a payment holiday. It is still early days to determine the extent, but doubtful debt is expected to increase,” the lender said.
The group stressed that its liquidity and capital positions continue to be very strong.
“Capitec’s deposit base increased further and we believe this is due to clients’ normal spending habits being curtailed due to the national lockdown.”
The bank said that the potential remedial effect of the relaxation of the economic restrictions from 1 June 2020, on its interim results, will only become apparent over the second half of the interim reporting period.
It said however, that due to the impact of the national lockdown, there is a reasonable degree of certainty that its headline earnings per share and earnings per share will decline by more than 20% or more than 509 cents and 510 cents respectively, compared to the headline earnings per share of 2545 cents and earnings per share of 2549 cents for the six months ended August 2019.