Evaluate the financial performance of Capitec Bank

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Table of Contents


Page Number



General information about the company






Ratio analysis


Cash Flow statement







This report is on Capitec Bank. Capitec is a bank controlling company that is listed on the Johannesburg Stock Exchange. Capitec Bank, a wholly owned subsidiary, is the company in which all material operations are housed. It contributed 99% of Capitec’s profit for the financial year ended 28 February 2014 (2013: 95%) and as such it is the focus of this report. This report will show the success of Capitec Bank to date and why Capitec is more than just a bank. The purpose of this report is to provide simple, transparent feedback regarding the organization’s financial statements and monitoring the bank’s share price.

The Banking sector in South Africa is very competitive and has many high – performing Banks. These include:

  • Standard Bank.
  • ABSA Bank.
  • FNB.
  • NedBank.

African bank was a player in this field but have had cash flow difficulties in recent months.

This report will contain:

  • General information about the company.
  • Directorship.
  • Auditors.
  • Ratio Analysis.
  • Cash Flow Statement.
  • Conclusion.

General Information about the Company

The name of the company is Capitec Bank Holdings Limited.

Capitec Bank Holdings Limited is a registered bank controlling company incorporated in RSA, it is listed on the JSE- Banks sector since 2002.

Capitec Bank financial year-end is on 28 February 2014.

Capitec Bank next AGM is on Friday, 30 May 2014, at Nooitgedacht Estate, Koelenhof.

In the Financial report the Bank has mentioned the following programmes: Banking has been accessible to communities including those in rural areas by opening 69 more branches; Capitec’s CSI programme focus on three main areas, high school education, financial literacy, and community support. Capitec Bank believes in giving back, they have aligned and focused on their CSI programmes to: Address the needs of the communities they serve, address their core business objectives with programs that will improve math performance of high school learners and financial life skills programs to increase the level of financial literacy among their clients and, ensure compliance with SA socio-economic and regulatory requirements. The CSI programmes they have in place are: Awarding Bursaries to learners who are steady performers despite financial difficulties, Inkamva Youth helps equip disadvantage communities with the necessary skills and resources to access tertiary education, Post grad diploma in management practice, Financial life skills programme and Donations.


The board of directors consist of:

- Non-executive directors: Michiel Scholtz du Prè le Roux (64) Chairman of the board and the directors’ affairs committee; Petrus Johannes Mouton (37) Chairman of the social and ethics committee; Riaan Stassen (60).

  • Independent non-executive directors: Reitumetse Jacqueline Huntley (51); John David McKenzie (67) Chairman of the risk and capital management committee; Nonhlanhla Sylvia Mjoli-Mncube (55) Lead independent director; Chris Adriaan Otto (64) Chairman of the human resources and remuneration committee; Gerrit Pretorius (65); Jacobus Pieter van der Merwe (65) Chairman of the audit committee.

Riaan Stassen was the bank’s managing director in 2000 and was appointed Chief executive officer of Capitec and Capitec Bank effective March 2004.

The three items I found interesting in the Director’s report is: Share Capital, Dividends to Shareholders and Review of Operations.

The Directors’ Report is included in financial statements because, it gives the background information that makes the figures more relevant and understandable to the average stakeholder. It also reveals future plans which would be interesting to current and future investors. The directors are running the business on behalf of the shareholders so it is important that they give a comprehensive report.


The auditors are appointed at the AGM and Capitec have appointed Pricewaterhouse Coopers Inc.

In an Auditor’s Report the auditor expresses an opinion on the fair presentation of the annual financial statements.

It is also stated that the accounting policies complies with the requirements of the Act, the JSE Listing Requirements, the King III Code and IFRS. The committee is satisfied with the report. For Capitec Bank they audit the balance sheets and Income statements, statements of comprehensive income, statements of changes in equity and statements of cash flows for the year ended, and the notes, comprising a summary of significant accounting policies and other explanatory information.

Companies have to have their financial statements audited because the shareholders need an independent and unbiased person to express an opinion on the financial statements to indicate whether the financial statements are reliable or not, as do the other stakeholders who will be reading the financial statements.

Ratio Analysis

Although two figures are shown in an Annual report, they are not easy to interpret e.g. in the case of trends. So the following ratios are used to analyse the bank’s performance.

Return Ratios:

  • Earnings per Share (EPS)

Earnings per Share = Net Income/Average number of shares

= 1 752 000

  • Return on Capital Employed (ROE)

Return on Capital Employed = Net profit before tax and interest on loans/ Average Shareholder’s Equity *100

= 66.48%

  • Dividends per share (DPS)

Dividends per share = Dividends paid and declared/ Number of issued shares *100 cents

= 1 752 cents

Earnings per share for the year ended February 2014 will exceed the EPS of February 2013 by between 12% and 16%. The return on capital employed for 2014 is 66.48% which is quite high and I think the shareholders will be satisfied with that. The dividends per share went 15% up from last year’s DPS.

At the moment Capitec share price is at R238.05, I would buy these shares because the price isn’t as high as I expected.

Capitec’s share price has gone up by 0.82%, FNB’s has gone up by 2.62%, Standard Banks has gone up by 0.62%, Nedbank has gone up by 0.94% and RMB Holdings has gone up by 2.31%. FNB is the strongest at the moment followed by RMB Holdings, Capitec is doing better than Standard banks, which is one of the biggest banks in South Africa, but Nedbank is doing slightly better than Capitec only by 0.12%.

Capitec’s NAV per ordinary share is: Ordinary shareholders equity/ Number of issued shares *100 cents = 8433 cents. The market price of the share is at R238.05, so therefore the market price is higher than the NAV, which is good for the company.

Capitec’s Solvency ratio is 1.3:1, their acid-test ratio is also 1.3:1. With the acid-test ratio Capitec’s liquidity is in a good liquid position, the standard ratio is 1:1, so they have the ability to meet its current debts without being forced to sell its stock under pressure from business creditors.

The ROCE is 66.48%, which makes it favourable for Capitec to borrow funds. Therefore the gearing for Capitec Bank is good

Cash Flow Statement

The money that Capitec has spent is mostly from: Income taxes, purchase of property and equipment, purchase of intangible assets and Acquisition of investments at fair value through profit or loss and money market unit trusts. The company’s management of cash is very organized and user friendly and most of their income has increased. Capitec obtains most of their funds from loans, clients, and shareholders.

I think the way they have managed their cash in a fair way, in all material aspects.


Capitec Bank is one of the newest banks in South Africa and having that in consideration, I believe that it is doing very well. At 2014 3.5 million people were banking at Capitec bank and the numbers are growing. The brand is growing and I feel like shareholders are satisfied with how the bank is doing most of the time. They are offering more services and increasing the number of ATM’s. Capitec is proving to be a strong competitor and shaking up the banking industry e.g. its working hours are longer that its competitors (08:00 am to 18:00).

I think over time the share prices will increase to a higher rate, because, Capitec is now becoming one of the biggest competitors of the four main banks in South Africa (FNB, Standard bank, Absa and Nedbank). Their clients or consumers are constantly growing and they have branches in most malls and in the biggest cities.

I would definitely invest in Capitec bank.


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