Capitec Delivers 26% Profit Growth, Boosts Dividend

Capitec Bank (CPI) has reported a solid financial performance for the six months ending August 2025, delivering strong double-digit growth across all key profitability metrics. The bank achieved a 26% increase in headline earnings to R8 billion, driven by strong growth in its client base, loan disbursements and strong performance in its non-interest income divisions. This outstanding performance has enabled the board to declare a significantly higher interim dividend, up 26% from the previous year, reinforcing the bank's growth trajectory and commitment to shareholder returns.

Key Financial Metrics

●     Headline earnings: Increased 26% to R8 billion – This is the most important measure of the bank's core, repeatable profitability. The strong 26% growth is a sign that its fundamental business operations, lending, transactions, and insurance, are not just healthy but expanding. It proves the bank's strategy is successfully driving bottom-line profit.

●     Dividend per share: Increased 26% to R26.20 – This shows the direct cash return to the company's owners. By increasing the dividend in line with its earnings growth, management is signalling confidence that its current level of profitability is sustainable and is directly rewarding shareholders for the company's success.

●     Return on equity (ROE): Improved to 31% – ROE is a critical measure of how efficiently the bank uses its shareholders' capital to generate profit. An ROE of 31% is high for a bank and indicates superior profitability and operational efficiency.

●     Net interest income after credit impairments: Grew 27% to R7.1 billion – This metric represents the profit from the bank's core lending business after accounting for bad debts (credit impairments). The 27% growth shows that Capitec is successfully growing its loan book and earning more in interest than it is losing to defaults, indicating both strong loan growth and effective risk management.

●     Net non-interest income: Increased 19% to R13.4 billion – This is all the income the bank earns from fees and other services that are not related to lending, such as transaction fees, value-added services and insurance. The 19% growth highlights Capitec's strategy of diversifying its income away from just lending is working well, making its earnings less dependent on credit cycles.

●     Value-added services (VAS) & Capitec Connect income: Increased 40% to R2.9 billion – This is a specific, high-growth part of the bank's non-interest income, including services like selling airtime, electricity and its mobile network (Capitec Connect). The 40% increase highlights that Capitec is successfully transforming from just a bank into a broader digital and financial ecosystem, creating new, fast-growing revenue streams by offering more services to its large client base.

●     Banking app clients: Grew 13% to 14 million – This metric measures the adoption of the bank's most important digital channel. The growth to 14 million active app users is crucial because digital clients are typically more engaged, transact more frequently and are cheaper to service than branch-based clients. This strong digital adoption is essential for the bank's future efficiency and its ability to sell more value-added services.

Analysis & Outlook:

Looking ahead, Capitec's strategy is clearly focused on deepening client relationships through "purposeful innovation." The company continues to invest heavily in new products designed to meet a wider range of customer needs.

Key initiatives to watch include:

●     Expansion of credit offerings: The launch of an improved secured home loan product and new accessible, low-limit credit cards is designed to capture a broader segment of the lending market.

●     Enhancing digital & payment services: The introduction of cross-border money transfers and the continued push of "send cash" options highlight a focus on capturing more of the payments and remittance market.

●     International growth: The successful integration and funding of the international fintech company, AvaFin, represents a step in diversifying the bank's operations beyond South Africa and opening new avenues for long-term growth.

The bank has reaffirmed its commitment to its core principles of simplicity, affordability and a client-obsessed culture. With a strong capital and liquidity position providing a solid foundation, the bank is well-equipped to continue executing its growth strategy, aiming to solidify its position as a leading digital-first financial services provider.

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** This article was prepared by BROKSTOCK analyst Maboko Seabi