Capitec Bank Holdings Limited (CPI) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. It's a pleasure for me to announce our interim results for August. We're going to start with a video of what our employees say. What we've done is we're busy with strategic sessions now, thinking about the way forward. And you can't actually visit branches and understand what's happening. So we thought it would be good to actually share what -- or have a video on our branch people and what they have experienced. They're actually the unsung heroes of COVID because, if you look at our call centers, they work from home. Head office work from home, but our branch people was up servicing our clients. So let's hear up what they've got to say. [Presentation]

If you look at the Capitec reflecting on the first 6 months, I think the one thing that stands out, it was a tough environment from a credit perspective. But then from a transactional income side, we did exceptionally well. Our income from operations is up 10%, which I think is exceptionally good. But then, yes, at the moment you bring in the credit side, we've taken the whole COVID provisioning upfront. So we've provided an extra ZAR 4.2 billion for COVID. And that reflects then into our net profit, that's down 79% at ZAR 650 million. We're seeing a very strong growth in clients, still up 2 million from last year. But I must say, in the last 6 months, it actually surprised us, but we've picked up quite a lot of the social grants that's been paid out, the so-called ZAR 350 that's been paid out. About 60% of the clients that we acquired was for the ZAR 350, but I think still very strong client number growth. Client income impacted by lockdown, I'm going to elaborate on that later on. But what we're definitely seeing is that your lower-income people has been affected more than your higher income. But on the credit side, we're seeing basically about the same levels of income than we saw before the lockdown. The industries are definitely starting to recover. I think the one that's still under severe pressure is the whole travel and hospitality industry. And then very strong digital adoption. And I think if you look at our digital side, our digital transactional volumes is up 52% from last year. So I think that tells you that people are actually starting to switch to digital. But cash is still -- people are making use of cash. We're at the same levels as last year. And the one that surprises to a certain amount is that there's still a very strong savings culture. Our savings growth is still there but a very subdued appetite for credit. I looked at TransUnion numbers this morning, where they looked at unsecured, and said that the number of applications year-on-year is down 47%. So we're definitely seeing that same. We're definitely operating at about 35% less on the credit side. And I think it's a function of people are scared to take credit. And then we must remember, if you look at all the payment breaks that's been given by the industry in totality, that had a major impact on the need for credit. And remember, if a person has taken a payment break, he can automatically qualifies for credit for a 12-month period. So that has got to impact. But I think, overall, if you look at our results, I'm actually -- given COVID, I think we've done well. There is our results, a profit of ZAR 750 million (sic) [ ZAR 650 million ]. But if you look at our 31 May, we actually said we made a ZAR 400 million loss in the first 3 months. So we've recovered with ZAR 1 billion in the second half. And I think what is very important is that, from a COVID perspective, we've taken provisions upfront the best to our ability, to make certain we are covered. So you should see a normal performance going forward. But I think everyone is still worried about what is going to happen in September, October and November and then next year. Interesting, if you look at the different key ratios, the one that for us is very pleasing is that our net transactional fee income plus funeral income covered 97% of our operating expenses. We've cut back on our operating expenses. I will allude to it in the next slide. But yes, I think we've always said we want to cover 100% of our OpEx. We want to cover both transactional income. And then transactional fee and funeral income to net income, if you leave the impairment charge in, then it's 87 -- 86%. If you take that out, 47% of our income is coming from transactional income. And it just shows, again, the very strong transactional base we've built, and our dependency on credit has gone down over years. Cost-to-income is straightforward at 40%. Retail has operated at 38% and business banking is at 56%, giving you an average of 40%. So I think, yes, in line with our expectations. And the capital adequacy, the drop from 34% to 31% is purely when we bought Mercantile. And the difference between 31% and 30% is purely a rounding, the one is 30.4% and other one is 30.5%. So I think the message here is that we've got a very strong capital adequacy ratio, and we've got sufficient capital. That is just looking at the income statement. If you look at what we've announced, our group results for August 2019 doesn't include Mercantile. So we're just under comparison that you can look at the group versus retail, 2019 versus 2020. So you can see, if you leave Mercantile in, income from operations is up 10%, but income from -- if you compare like-for-like, we're up 4%. And then you can see the COVID impact of ZAR 4.2 billion and then the extra ZAR 190 million that we've brought in from Mercantile, which I will lead later on. And then from a retail perspective, we've brought in -- our OpEx was 2% down. We basically, when COVID happened, we've actually stopped all recruitment of people, and we've only started opening up now in September onwards. So we're again starting to employ people we had to bring into our call centers and our branches. We're bringing in about 200 people, given the need and client numbers that's growing. And then on our specialized fields, on data science and on digital and on credit side, we're employing people. But I think if you take out the credit impairment charge for COVID, I think a relatively strong performance, given the economy and what's happened. And given that if you look at Capitec, these results are basically 100% in COVID because it actually covers the period from March to August. And as you all know, COVID started in the third quarter of March. So I think a strong performance from there. If I look at the retail growth, yes, it's nice to talk about the 14.6 million active clients. Remember, active clients, our definition is that this person is earning us income. But what really drives it is the 3.8 million banking clients, which is what we call quality. So that is -- clients has got a stable inflow, has got remote banking. They use the app. They've got card purchases and debit orders. So that's our definition. And then, I think, very promising is that 46% of our clients is in a young age group, which has potential for the future. 5.5 million of our clients are savings clients. And then on the insure side, we're basically at active -- close to 1 million active clients on insure and funeral. And the credit lines dropped slightly, and that's purely because of the fact that we, when COVID happened, we actually cut back credit of about 20%. So your credit clients will be down from that perspective. But I think this is actually the real client growth that we actually are monitoring, and that is actually driving the transactional income. What we've seen definitely in COVID is that the lower-income segment were much more severely affected. If I'm taking -- talking lower, it's people earning less than ZAR 7,500. The people that are earning ZAR 20,000 plus, we're seeing basically the same levels as before. We've seen a strong reduction in overtime and bonuses. Basically, everything is being stopped. But it's quite interesting. If you look at overtime, for example, talking to some of the owners of construction companies and other businesses, what they have done is they have cut salaries to, let's say, 80%. And then now that we've reverted back, the people is actually catching that up with the overtime and bonuses because that gap between 80% and 100%, that 20% was of interest-free loan that was given to the people. And now it's been catch-up with overtime and bonuses. Casual and contract workers were severely impacted. Wherever there's casuals or contract workers, that's been cut. We see it when we talk to the SMEs, especially your medium and bigger-sized companies. What they've said is they -- their turnover is down 20%, but they've cut their expenses with 20%, and that's normally casuals and contracted workers that went out first. And I think that is why we're seeing a big driver in the 2 million people that has lost their jobs in the last 6 months. And on the SMEs, what we've seen is the people that's earning less than 6 -- less than 10 people, they were the hardest hit in COVID. And they're really struggling. They have either just closed down or scaled down to 3 or 4 people. So yes, I think it's a tale of two sides. You've got your high-income people. That is a positive or basically in the same level. Your medium has been affected by about 5% down, and then your lower-income levels has been severely impacted. If I look at our transactional volumes, and this, I think, gives you a very good indication of COVID. You can see here, digital, the dotted line is last year, solid line is this year. You can see how strong digital has grown. And digital here is the app, USSD plus the Internet. You can see we're up 52%. So very strong growth on the digital side. You can see on card purchases, we're up on last year. We're on ZAR 82 million compared to roughly about ZAR 80 million of last year, but we're still down on ZAR 91 million for March. And I think that's purely your travel and leisure industry that hasn't really started in that particular side. Interesting, if I look at our merchants, our merchant base is at higher levels in August than what they've traded in March, which is quite positive. And then on the cash side, you can see the dip in April, and then we're basically back to normal levels. And then branch, a big drop in branch levels. And that is in line with what everyone is saying that people are moving to digital. And I think what is important to highlight on the branch side, what we've included here is purely transactions from a financial -- where there's financial income. So if a person does an inquiry or balance inquiry, that is not included in the volumes, but we're still sitting with 4 million or 5 million clients that's coming into our branches every single month. But it gives you a good indication of what is happening in the economy. This is just our swipes so that you can see what's happening in the different industry. The interesting one for me was restaurant and takeaways, which is on 96% level of March this year. I think that sells the whole deliveries and people eating from home, ordering food. It's probably why the 96% is actually coming so strongly. I think there's basically no cash payments. So that is actually purely swipe payments. And I think you could see that's where the restaurant and takeaways has actually made a plan and actually recovered back to normal levels. We can see the April level at 5%, a hit on themselves. Telecommunication, up 9%. Groceries, interesting for me was April, up 5% on March. So you can see the spending patterns went to the grocery side. And the one that stands out is home maintenance. And that correlates with when I spoke to the CEOs of Cashbuild, CTM, et cetera, et cetera, that they're having record months, is very strong growth in home maintenance, do-it-yourself. I think everyone has realized to work from home, you suddenly need to upgrade your home. You need to look at your office. You need to look at certain things that was always wrong. So very strong growth in the home maintenance side. If I look at our digital clients, you can see now we've got 7.3 million digital clients in totality. But it's made up of 4 million active bank clients, our app clients; and USSD, 5.2 million active clients. So in total, we've got 9.2 million clients that is making use either of banking app and USSD. The 7.3 million is where a person -- because they're some of the people that's both using the app and the USSD. Then we've launched send cash in May 2019 with Shoprite-Checkers. And in this year, in March, we've launched a whole -- where you can do send cash to ATMs and also Massmart. And in October, we're launching it with Pick n Pay. So you can clearly see strong growth in cash payment. And that just shows you the need for people to actually send cash to friends and relatives. This is all in South Africa. So it's not sending cash to Zimbabwe or Lesotho. But very strong growth in this particular area, just satisfying the needs of the clients. And then the one that excites me is card-not-present, and that's the future of payments where you pay with QR, et cetera, et cetera. Close to 1 million clients that has actually made use of card-not-present in the last 6 months, and 4 million transactions that's been performed. And that's a big focus for us going forward, to make certain that we play in the payment space, the e-commerce space and the digital payment space. Yes, the savings or deposits, right? What for me is interesting, and that's why I put the slide in like this, is that you can clearly see what happened in April. People couldn't spend money and suddenly, our deposits, our retail core went up from what, ZAR 55 billion to ZAR 62 billion. And then it dropped back as people were starting to spend again to ZAR 60 billion and has gone up to ZAR 62 billion. On the fixed-term savings side, we're seeing growth of going from ZAR 33 billion to ZAR 35 billion. But the growth rate is slower than last year this time. Anyone can expect it, given the pressure that there is on the economy and people making use of their -- saving money to survive if income levels are lower. The funeral plan is still growing very strongly. Our average sales last year was about 100,000 per month. In COVID, we've dropped to 70,000. But we're back in August and September, back to normal levels of 390,000 and 100,000. You can see the strong growth in our people that's active, from 641,000 to close to 1 million, 979,000. The drop is purely because of very little sales that went through. And then on the collections side, we're seeing very strong. We've implemented the Mercantile payment collection system, where our collections has actually gone up from 80% to 90%. So that's been very strong. And very interesting also, the average premium, that's moved up from ZAR 190 to ZAR 210. So we're still very happy with this product. The product is going very strong. And I think the only interesting one is, if you look at death claims, we actually saw a spike in June and July on death claims. No claims coming in in April and May, and then dropping back in August and September to normal. But if you look at the credit side, our death claims is far below our expectations. We actually saw the opposite. So we believe there's still very strong growth in the funeral side. I think the question that everyone has got is retail credit. If you look at retail credit, the way we've handled retail credit is we've broken it up into 3 phases. We set the initial shock, that was that March, April, May. And the aftershock, how do we manage the aftershock? And then the recovery. And the recovery is actually understanding what is happening, not only in South Africa, but also internationally. What impact internationally has got on our clients? Are we exporting? Are we importing? All of those factors are being brought into consideration when we look at the recovery phase. I think the point that I want to highlight, which I believe we did very well, is that we're very agile on our credit risk management. We were actually basically, on a daily basis, monitoring exactly what's happening on the credit side. And we've made changes to our credit policy, our appetite on a continuous basis as we see what is happening in the economy. We're analyzing the economy in totality, internationally as well as local. We're looking at the industries. We're looking at employers. We're looking at clients. We're looking at income levels. We're looking at behavior. So we're going through the whole client profile in totality. In the first one, initial shock, I think the first thing we did is to cut our credit policy with 20%. Certain industries were cut more than other industries but, on average, about 20%. Our branches was actually operating at a 50% capacity at that particular stage, which, of course, of level 5, which impacted your sales. And then we focused completely on giving payment relief to our clients so we could give payment breaks as well as the overall rescheduling to our clients. While phase 2 was in, basically, about July, we actually understood better. We went to level 4. We opened up slightly. Our branches was operating at 70%. And then we launched the access facility in early May, and I will allude to the access facility. We understood that we actually have -- help our clients with emergency loan. An emergency loan is purely that the person has lost his income in April. So what do you do? You need to look at 3 months' income and then we had to average things and actually exclude April. So we launched that loan to help our particular clients. We've granted about ZAR 25 million in that. And we've discontinued that particular loan. And then what we focused on very strongly, and I think where we differentiated from all other banks, is bringing in behavioral incentives on our payment breaks and our variable rescheduling. And I will allude on that later in more detail. We've made further -- we relaxed further in September, and I think it's in line. We're currently looking again at -- to look at making changes in October and November. But that will be based -- because there are certain places where it's going better and certain places that's getting worse. And then I think what is important, we've seen lag in the travel and hospitality industries. Those people are still under pressure, and we have limited relief campaigns, especially on those industries. I think this gives you a very good indication of the ways we've managed COVID. And I'm going to start with government municipalities and parastatals. That gives you our exposure to government municipalities and parastatals, so that's 45%; manufacturing, 18%; and mining, 11%; and travel and leisure, 2%. Then we did, as I explained, we're looking at the economy in totality. We look at the industries. We took a risk view. And on our normal PDs, we've added extra PDs, probability of default, on those particular industries. So if I take mining, we've -- in our 1 April forecast, we added 10%. And in the August forecast, we dropped that to 8%. And these percentages and risk profiles was used to determine our COVID provisioning, to understand our risk, and that's been brought in. So if I think the easiest one is on travel and leisure, you can see that drop of 10% as we're understanding and we're seeing better performance coming through. This gets updated, basically, on a weekly basis. And then on monthly, we make calls, to say, "Do we have to adjust this or no?" Because [ they didn't also ] get brought into our provisioning models, to adjust our provisioning models, where necessary. This was the interesting slide on client inflows. Remember, we stated before that we're actually taking -- we've actually moved away from the lower-income segments as well as the small and tiny companies. That's where we saw the biggest risk. And I think that's also reflected in the income levels here. You can see what's happened. On average, people are earning -- our credit lines is earning 95% what they have earned in March. Government is basically about 100% the same. And then you can see travel and leisure, that's dropped to 68% in July, but it's slowly -- it's coming up to 72%. And that percentage will probably climb. And that will also -- if you go to the previous slide, you will see the impact on our probability of default that will probably improve as this is going -- coming through. This is the way we grant, and that is in line with our strategic decisions. You can see, if you add up the below ZAR 10,000, and this is gross salaries and it's gross advances, our -- what we're currently granting is only 14% -- is for people earning below ZAR 10,000 and below, and that's gross salaries. And then you can see how strongly we've grown in the ZAR 20,000-plus to 52%. So that brings you just -- gives you a feeling of our credit risk and how we've managed the credit risk. On the COVID relief, we've given in total ZAR 6 billion on -- no, ZAR 5.5 billion on payment breaks. And then on the reschedulings, we've given basically ZAR 2 billion. I think what is important, directly affected, that is where a person has lost part of his income or a majority of his income. We've given a payment break. And where people has been indirectly affected, they've lost income in the household, we've given variable rescheduling. And then just to explain how the payment breaks works is that, if you grant in April a payment break, April, May, June, you will pay nothing. And then July, you will pay 60% of your installment; in August, 80%; in September, 100%, and exactly the same on the variable rescheduling. So you see variable rescheduling, you immediately start paying a smaller portion and you ramp up quicker to 100%. And payment break, we give you a 3-month break and then it's slowly but surely building up to 100%. If I look at the behavioral incentive that we've given the client, I think this is where we're completely different to what is happening in the industry. We've basically said that if you pay your installments after your payment break or variable rescheduling for the first 6 months, we will give you 50% off of your first 3 months of interest. And if you do it for 12 months, you'll get 100% off. I think what is important here, in all the models that we've run, we're trying to change the behavior of the client, that he focus on repaying Capitec. And then if he repays, there's a benefit for him. We're losing a bit on insurance -- on interest, but we're gaining on provisions. So the net effect, if this works the way we think it is going to work, it will actually have a positive impact on our income. And it's also got a very positive relationship with that client, and you build that client for the future. We've always said that we want to have a relationship with our client over a very long period. There was a very comprehensive client communication journey where we're communicating. Still now, we're communicating on a frequent basis to those clients, to inform them and to make certain that they understand it. If we look at the payment breaks, the success. The first payment success on payment breaks is round about 82%, very much in line with our expectations. And on the second payment, it's 93%. The question is why is the 93% versus the 83%? The people on 83% that hasn't paid actually falls off and moves into arrears and is handled normally as arrears. And then 93% of the 83% has been paying. And you can see variable rescheduling, we're running at about 92%, very strong performance. Both of these are in line with our expectations. Why is payment break at 83% versus variable at 92%? It's purely because in the payment break, we've given it to people that has lost their income or has a big reduction in the income, while variable rescheduling is for people that's lost income in the household. So that's the difference. Both these are performing 100% in line with our expectations. Then the question on retrenchment risk. I'm going to kick off by saying on death, we struggle to get cover. But we managed to agree with our reinsurers to reinsure our death risk from the 1st of August. It's interesting that death percentages that we settled on was -- actually, the premiums were lower than last year. So that, to us, is positive. We just didn't want to take the risk on COVID. Currently, the death claims are lesser than last year, with about 20%. Then on retrenchment, you can clearly see here the claims that we've paid in 2020 and then in 2021. So if you look at that, the ZAR 381 million versus the ZAR 248 million. But you can see what has happened. We saw basically very little claims coming in in March, April, May, and it spiked in June and it's definitely coming down. So we're seeing a downward trend in our claims. And then we give you a breakdown of what has been paid by the reinsurers and what has been paid by ourself. You could see what we're paying currently is about ZAR 60 million per month, I must just mention. And it's in the sense that there's an IBNR of ZAR 213 million, and that has been audited by Guardrisk and accepted by Guardrisk, and it's straightforward, basically, a provision on future retrenchments that is in our figures. So, so far, retrenchments are performing actually much better than we anticipated, but I think it will be very important to see what happens in September, October and November. If I look at our provisioning, you can see there's a 5% growth in book. And then you can see the 39% growth in provisioning. I think what is important is just over ZAR 4.2 billion that we've provided. I think, overall, if you look at our percentages that we provided last year, it was 20% and this year at 28%. And I think if you look at the up-to-date, it's increased from just over 6% to 8%. So we believe we've got a very conservative provisioning model. And as I mentioned to yourself, we are updating this the whole time as we're getting better information. Then the one that I'm really excited about is the new access facility that we've launched in May. It's exceeding all expectations. I think what is important, it's a lifetime facility. So if you keep -- you're up-to-date and you're repaying it, then you never need to go back to a branch. And so from that perspective, you can see the interest rate of 17%, but you're taking out the cost of going to a branch and reassessing the clients. The product range is 3 -- from 3 months to 60. For me, what is quite nice is that for the monthly clients, the 1 to 6 traditional short-term loans that you can charge up to 60%, we're out of that market now, that's been replaced by the access facility. The only people that we're providing the 1- to 6-month loans for is still our weeklies and fortnightlies. What is also important is that if a person doesn't use the credit, he doesn't pay any monthly fees. And what is happening is, let's say, you've got access facility of ZAR 100,000, and you don't withdraw on it, then you pay -- don't pay interest. So if you draw ZAR 10,000, you'll pay interest under ZAR 10,000. If you withdraw ZAR 20,000, you'll pay interest under ZAR 20,000. With term loans, it's completely different, since -- the moment you've taken out that loan, you start paying interest on it. So I believe this is a much better product, and we're [ exciting ] about it. We've really got a book of ZAR 2.5 billion that's taken it up. The usage of that is about 50%. The September figure is already standing at close to ZAR 3.2 billion. So this product has really taken up, and we're actually very excited about this product going forward. If I look at business banking, I think everyone has seen it. We've made a loss of ZAR 47 million on the business banking. We've increased our provisions quite a lot. The total provisions is up ZAR 260 million, of which ZAR 190 million was COVID. I think what is important is we looked at our whole book. And if you look at the securities that we've got against the book, we've taken certain haircuts on it. So if we look at commercial property, we'll probably -- we would have taken on the normal valuation. We will take a higher haircut than, for example, on individual mortgages. So we went through that book like that. We've classified it in high, medium, low risk. We've looked at who's taken payment breaks. We've taken -- who's taken a COVID loan. And all those factors were taken in consideration in that provisioning, so we're fairly happy with that. The lower lending income, investment income, is purely because of the economy. What is interesting is that if we look at our overdraft that we have given people, the normal usage in March was 65%. I thought that will go up, and we actually asked the team to look at it. So we're always -- we were scared that if you start getting to 100%, that you're under pressure. What is interesting is the average overdraft usage now is 45%. And you can see how people are not -- don't want to use credit and how the payment breaks is actually used. And then I've given you also then just a feeling of the client base. What is, for us, very encouraging is that we're still having, every month, record months of new clients actually joining us. On average, we're doing now about 3,000 clients per month joining the Mercantile Group. So we're very still -- very positive. And on the deposit base, we saw a growth of 5%, up from February. Still very strong. The COVID loan scheme, I think everyone is criticizing on it. But I think it's a function of the payment breaks that's been given in the industry. We've got ZAR 1 billion from the Reserve Bank. We're up-to-date, or we've given ZAR 500 million, and our best estimate is we will probably move up to about ZAR 700 million to ZAR 750 million. We've given ZAR 4.2 billion in COVID relief and payment breaks to people -- to close to 3,000 accounts. On the first-payment success, we are on a 77%, which is very encouraging. And then there's about 8% that we actually helped the second time. That's, for example, on the travel and hospitality industries. So about a 4%, 5% of those people are actually in arrears. And credit impairments, I think I've alluded to ZAR 265 million; and COVID, specifically, ZAR 190 million. You can see the credit loss ratio, because of how conservative we were -- we are in the figures, we've gone up to 5% compared to 1.1% in February this year. I think one area that we've done exceptionally well is focusing on our people and also on the community. We've implemented new group structure successfully. So we've got Karl Kumbier that is heading up the Mercantile division. And then we've got Hendrik Lourens heading up retail, and we've created a shared services to focus on shared services for both sides. Flexible or remote working. People are working from home. I think our biggest challenge now is actually getting -- get people back to work at the office. I see Anton Friend is smiling here next to me. Yes, I think that's a challenge. Our belief is that you will have to find a balance because if you want to build culture, you want to build teamwork, you want to motivate people, you want to bring in new people, you need to work at the office. And if you're really focusing, then it's fine to work at home. So that's the challenges going in. I think the same with virtual learning and [ leadership ]. We've changed our firm foundation program, where it was 100% with all people had to come down to Stellenbosch. We had to do it virtually. And we still trained. In this whole period of COVID, we've trained 1,600 people. And then the one that worked very strongly for us is our Live Better Talks. We had every Thursday morning for an hour, we had our senior leaders and middle management just talking about what's happening in the business and what's taking place. And then town halls, where the functional areas -- we're actually talking to the people, up to 500, 600 people attending. I addressed quite a lot of these town halls, making certain that we communicate, communicate, communicate during COVID. And then 320 people that we've actually moved from branches to help us in other areas like in our call centers, collection centers, in our risk areas. And that actually gave us a very good indication of where we need to go, and I'll talk about it later, is that our people should be flexible and should be able to work in different departments and different areas. And we've completed a full engagement survey during the last 3 months. And overall, we scored 84%. So we're happy with the engagement and the commitment of our people. Social responsibility, that's where our staff people and overall has come up. You all know that we've given funds to Gift of the Givers and Solidarity. But what we've changed is our employee voluntary program because we believe it's very important that we're part of the community. So every staff member is getting 3 days extra leave if they're part of a community program. And then for every ZAR 1 they collect, the company gives ZAR 2. And what is definitely -- I can show you many pictures of where our people was involved in a community, helping the community and supporting the community. And then financial education, we've launched the Live Better Academy. And now with digital learning, it's 5 courses. Before, we've actually gone above the line advertising it. We've already got 18,000 people on the platform, encouraging our clients and our staff to actually get more financial educated. And that's also where the Livin' It Up, the game that you actually play and you complete a certain level and then you go to a higher level. It's a big driver for us to actually get our financial education levels up of our client base and even our own staff. Future focus. I think I'm not going to go through all of these trends. But I think what has happened in the past is completely going to change. And we need to understand the change in our client needs. I've already mentioned the whole move from e-commerce, digital learning. I think there's a massive opportunity in South Africa. I still don't understand why a school is operating from 8:00 to 1:00, and why, if you're sitting with a top-end school, that that particular teacher can be recorded. And digitally, we can actually send that out right across South Africa. So for me, there's a big opportunity in South Africa to actually, instead of spending money on salaries and infrastructure, actually to spend money on data and iPads, et cetera, et cetera, and actually make certain our children learn. Because if we want to grow South Africa, that's where it all lies. I think health is going to change completely. And the old way of sending everyone to a hospital doesn't work. And I think if you look at all of us that's got smart watches, I think one who needs to use that information much better to actually make certain that you get the right [ eyes ]. The one to unlock look is traveling, and I've got a mixed feeling. I was traveling about 6, 7 times a year abroad, but I'm really enjoying staying at home. So it's that mixed feeling. And I think that's the whole thing about connecting with people. So one will have to get that balance. But for sure, traveling up to Joburg every week, that's for sure, going to be out, and we will travel much less. So that will have a big impact. And I think what this -- the one thing that's actually really come out is -- with COVID is how important family and community is a difference, a way of life and the values, again, that is important rather than being looking at material things, buying things, rather spend quality time with your family, friends and then in nature, I think that is very important. Why I've put this up, we're spending a lot of time understanding this, talking to our clients, talking to our staff and all our strategies that we're busy formulating will focus on these particular areas. If I look at the business bank, the Section 54 will be completed by November. So then Mercantile won't be a company anymore, but then will be a division and then will slot in. That was in line with our strategy that we're building a new digital bank that we can scale based on the Capitec fundamentals. In the moment, we're happy with that. We estimate about 24 months, then we'll launch it under the Capitec brand. So then you will have Capitec Retail, and you will have Capitec Business Banking. And I'm -- we're excited about what we're building and where that is going. If I look at -- the core for retail is understanding the client needs. We believe very strongly on e-commerce and digital banking. In the payment space, how do you make it seamless? Paying by QR codes. So that is a very big focus for us. Making certain that your business experience of our merchants is slick and it's integrated. It's -- they've got valuable information available to themselves. And that we inspire our 14.5 million clients to actually look for the business banking clients of ourselves and to make that experience slick. Credit -- you all know that we're busy with purpose lending on the vehicle side that we will roll out to other segments. And then on the self-service credit side, about 80% of our Capitec banking clients. We use machine learning with a 99% accuracy. We will launch very early in the new year, we'll launch people to have self-service credits. So you can go on your app and you actually can get your credit for free -- not for free, but you can get it automatically. So you don't need to call Capitec, or you don't need to go to a branch. And I think the other area is your end-to-end client service. I think you're making a big mistake if you're just looking at product specific. You launch a product and say, that is unique. You need to look at your end-to-end client experience in branch, on your digital side as well as on your call centers. So that is a very big focus for us going forward. And then the people side, I've spoken about flexibility and multi skilling. Micro jobbing, I believe, is going to be very, very important. So there is going to be a completely new way of work. And where we need to challenge on ourselves is, how do you motivate your people to work completely different? And how there's a massive opportunity to develop people, because a person can work in this department this week and another department the next week, getting different skills. And I think the most important thing is, how do you lead the people in this new way of work? How do you inspire the people? How do you motivate the people? So that's where our focus is, is to make certain we'd do that. We're still investing heavily in data science and data architects. We've got agreements with the University of Stellenbosch and UCT, where we've made a ZAR 20 million investment to make certain we've got the right people and the right skills going forward. I think the nice thing about skills now is it doesn't matter where you sit, you can still work for us. We had our first -- where a person decided to move abroad, but is still working for ourself. So it opens up the whole job market. So it's going to be very interesting to see how you move in this area. And I think -- I believe there's a lot of opportunities. And then, like, lastly, is on delivery side. If you want to deliver on your client needs on your people side, I think there's only 2 words that stands out, and it's to deliver in an agile manner very quickly, very fast. Because the world has changed and has changed dramatically, offset that -- if I look at COVID, why did COVID force us to make massive changes? Why were we not agile and ahead and change South Africa and the world and the way clients operate much quicker? So I think that's a challenge for leadership going forward, is how do you stay and understand what your client needs is 5 to 10 years from now and to be agile and quick. Thank you very much. We will open up now to questions.

Right. So the first question this morning is Capitec has 14.6 million active customers. Stats is a published 14.1 million employed people. What percentage of our clients are unemployed or in the informal sector?

Well, it's that very difficult to determine. If you look at our quality banking clients, we're saying to yourself that there's 3.8 million quality clients. Remember the definition that I've given. And you're sitting with 5.5 million clients that is saving and saving on a permanent basis, and you've got 1.1 million clients that's credit lines. So there is -- I'll probably estimate there's a good 6 million, 7 million clients that's in an informal market. All, like I said, mention social grants. The money is coming in, the ZAR 350 gets paid in and then get withdrawn immediately. So I think if you look at our client base, if we look at it from income, if I look at it from age, it basically represent South Africa.