The phenomenal South African bank with an innovative culture

Grant Nader from Benguela Global Fund Managers said Capitec is a phenomenal bank with an innovative culture, which is why it trades at high multiples.

Capitec released its annual results for the year ended 28 February 2025, revealing headline earnings per share growth of 30% and a 34% dividend increase.

It expanded its product and service offerings, resulting in Capitec growing its active client base to 24.1 million. This makes it the largest bank in South Africa by customers.

This growth has not come at the expense of shareholder capital. Capitec has improved its return on equity to 29%, driven by its expanding value-added services business.

The bank has also benefited from a declining credit-loss ratio as financial pressure on consumers eases and its efforts to improve client affordability pay off.

Investors loved the performance, and Capitec’s share price increased by over 8% following the release of its annual results.

Capitec, with a market cap of R399 billion, trades at a price-to-earnings (P/E) multiple of 31, significantly higher than other South African banks.

Nader explained that this should be expected. “High quality and growth do not come cheap. This stock will never be cheap if they continue to deliver,” he said.

“It is a phenomenal company with an incredibly innovative culture that continues to deliver excellent results.”

He explained that Capitec has created a platform rather than a bank, which allows it to continually offer new services to its 24 million clients.

For example, Capitec has ambitious plans to grow its mobile network service from 1.6 million clients to 10 million in the next two to three years. This would make Capitec Connect one of South Africa’s largest mobile operators.

“The way Capitec’s management sees the business they have created is very different from that of traditional banks. The other banks are now trying to play catch-up,” he said.

“Capitec is doing a tremendous job. Delivering a 29% return-on-equity leaves huge room for reinvestment into the business.”

He said Capitec is a great success story and advised people looking to invest in the company to do it now rather than wait.

“It is a company you should have in your portfolio. Growth is hard to achieve in South Africa. If you identify a growth company, you should own it,” he said.