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

Yes. Good morning, ladies and gentlemen, it's nice for me to be here and to present the results. It's actually quite a strange feeling. The last time I did results in front of people was in 2019. So yes, 6 years later, I know 6 years, 6 presentations later, it's actually nice to see faces and be able to enjoy interaction for the investors. We're presenting from the Capitec campus. So it's quite nice for ourselves. Just again, if you've got any questions, as I'll go through, just send through your questions, we'll answer the questions right at the end. If I look at the Capitec story for the last year, it's a story about really about a tough year, but it's also the story about building the future. How are we building the future and how are we creating a unique company that can last another 100 years. If I look at the results, there's 4 things that stands out. The first is earnings growth of 15% in a tough economy. I think we need to be proud of that. I think the other thing, a big milestone is 20 million clients. I remember when we and 2000 actually wrote the business plan, we spent 7 months, 8 months writing the business plan, and we're still executing that business plan to the teeth -- to the -- 100% to what we've actually designed. I think we've made one mistake. It's [ 1 0 ] because we said if we can get 2 million clients, we're happy, now we have 20 million clients. So I think that's a big achievement. And then in a tough times, we've actually given -- in tough times, we've also given back to our clients, and I think that's important, more than ZAR800 million we've given back. And then investing for the future, over ZAR1.4 billion that we've invested this year in the future. So let's unpack that. If I look at the ZAR800 million, where is it coming from, we've dropped some of our fees, our SMS fee enabling the client actually to go on to in-app and get his notifications in app, that cost us and we gave back about ZAR500 million. If you look at Live Better, what we've actually given back to our clients is ZAR256 million. Digital fees stayed flat for 5 years in a row. I think the one that we don't emphasize enough is that on our retail clients [ in the ] core deposits, normal banks call it, lazy deposits, they pay no interest on it. We pay -- our average interest that we paid for this year was 4%. So we paid out ZAR1.8 billion to our clients. And then to our people, who are probably the most important, our dividend because of our BEE empowerment scheme, we paid out dividends of ZAR21 million in August, September. And then on staff rebates, for example, if our staff actually does a transaction on digital is for free, we've paid back ZAR27 million. And then our social responsibility, we've paid back about ZAR180 million. So I think there is not a lot of companies that say that they can actually give back in tough times. I think investing in the future, there's a ZAR1.4 billion. Now just to put it in context, last year, we spent ZAR800 million. So it's a ZAR600 million increase that we've actually spent more this year in investing in the future. And I think the big spend comes in, if we look at business banking, insure, all the new payment solutions, the value-added services, but the big spend was actually done in the IT side on the cloud migration and bringing in new systems and processes like Salesforce and nCino Live Person, et cetera. It's quite interesting, if you look at this ZAR600 million increase in our investment, and if you say ZAR800 million that you've given back to your clients, if we didn't do that, that's about ZAR1.4 billion. And if you say ZAR100 million creates one earnings per share growth, we could have grown our earnings per share not by 15% by 30%, but that's if you don't think client and you don't think long term. And that's what the company has actually done is to really go and say, we'd rather take that money and we invested in the future, we're giving back to our clients and make certain that we've got a healthy -- healthy company going forward. I think if you look at major challenges, and I don't want to talk too much about it. I think everyone knows about load shedding and Transnet and what's happened in the world economy, but I think one needs to understand the phases. You had COVID and COVID was completely unexpected. Nobody actually really understood [ that ] COVID is going to happen and everyone pulled back. I think in the world, money was pumped in to get the economies to grow again. And I remember those days, I said, what is going to be the effect of this money that's getting pumped in, and nobody could really give me an answer. And I think we've really started seeing it in this year, whereby inflation increase, interest rates increase, suddenly we'll be talking about a recession. We've seen what is happening in America. We've seen [ what is ] in Europe. And I think then very strange was China because China has really opened up about March, April or about a month ago, and that distorted the whole supply chain. So I'm saying that if you look at this year that's coming, I think by the end of this year, we'll get back to normalization or we will start settling. But I think what is interesting is there's the economy. I think what is a big challenge is what is happening at the workplace. We all suddenly had to work from home, working from offers, what's the right thing. And I think there's big leadership challenges to make certain we lead our people in the new dynamics of a new world when we normalize from COVID. And I think then the most important is to say what is the effect of this whole transformation that took place? What is the effect on our client? And how do you make certain that you satisfy the needs of the client. And I think the big shift that we've actually seen is actually on moving to digital, moving to payments away from cash and how do you actually can get that to grow much faster. If I look at South Africa, I'm not going to unpack load shedding, et cetera, et cetera, but I think the biggest concern I've got in South Africa is what is happening in the education space because if we want to be a successful country, we need to invest in our education. We can't have a 30% metric pass rate. We need to make certain that we get people with math, science, et cetera. So I really would like us in South Africa to really start focusing on the education side and say, how can we actually make certain that we create the right skills, so that we can really face the challenges of the future. I think if you look at South Africa, our view on South Africa is firstly, we see ourselves that South Africa has got immense potential and growth opportunities. I think that's why Capitec is in South Africa, wholly, South Africa focused. We still see big opportunities in the retail space, the optimization of the 20 million clients. So we see big opportunities in business banking. We see big opportunities in insure. But I think if we really want to get it right, then we as South Africans needs to take ownership of our destiny and I'll talk about individuals. I see too many people that says the government must do this, the company must do this. And I'm not taking ownership of my own destiny by developing myself and growing myself, becoming an entrepreneur, making certain that I'm ready for the challenges of the economy. And I think if I look at the companies, I think there's a [ lot that ] companies can do, I think partnerships. If I look at education, for example, we're giving ZAR100 million, ZAR200 million a year on education. But let's put 10 companies together, suddenly, you've got ZAR1 billion, ZAR2 billion, and we're really going to make a difference. So I think it's a different mindset that we need to have. And it comes back to what I'm saying here is that there is opportunities, but you'll never find those opportunities if you're negative. And unfortunately, if I look at our -- on our media, everything is negative. So you need to make certain that's why I don't read media over the weekends, I'll focus on what is positive, preparing myself for the week. So I really want to challenge each of you yourself, take ownership, look for the opportunities and let's be positive. I think the most important thing is that we don't always realize is that we've got our own economy, 20 million clients and the [ immense ] data and insight, we've actually got out of this 20 million clients gives us a very big strategic advantage going forward. There's not a lot of companies that can say they've got a client base of 20 million clients. What is this client base looking like? Interesting, if you can compare it over the last couple of years, you will see that 62% of this client base is under the age of 40. So it's a relatively young client base. Our target from a marketing perspective is 35 years old, but you can see strong growth coming in between 41 and 60, 14% and interesting, 60 and older, 21% growth. So you can see we're starting to get insights on a big portion of the population. What is [ these ] clients actually doing? I think 11 million clients is on digital, so [ you said that ] sitting by 56%, 57% of our client base that is performing digital transactions. Our savings lines is up to 7.6 million. Our quality clients that we really drive salaries, making transactions. doing digital payments 5.1 million. And then, funeral, a very big number 2.2 million I'll impact that later on. And in our credit lines, everyone has always got those perception, all 20 million clients takes credit from ourself, but only 1.3 million clients is actually taking credit from ourself. What are we seeing from these clients? What is the economy doing? And I think we all know about interest rates and the effect of interest rates and you can clearly see what's happening here. Home loans, if I look -- if we look at the debit orders that's coming through, you can see home loans is up 20% year-on-year, that's a 3.5% repo rate that's come through. On vehicle financing 15%; personal loans 12%. Interesting cutback on education, and you can see there is pressure what the client is actually doing. It's cutting back on it. Debt collection 5%. Investments 3%, that's concerning because that is your long-term implications that you need to invest now for what comes 20 years, 30 years from now. Communication, that's data up 12%. So overall, if you look at this area, an increase of 12% year-on-year and that's the pressure that's coming through to our client base. What do we see on groceries? The people are spending only 8%. Inflation on groceries is somewhere between 12% and 13%. What's this telling you? People are buying down. They're buying differently. They are buying different products. Fuel up 16%, again, that impact of fuel. Home maintenance down 13%. So suddenly, we're cutting back on home maintenance. If you go and look at COVID, there was a big spike in home maintenance coming through. Cell phones 10%. Alcohol that's a positive one, down 9%. So there's some positive news here. But the combined effect is about 5% increase. So you see looking at that 12%, you're looking at the 5% -- 5% increase in the expenses of clients. If you look at insufficient funds, what is happening on the insufficient funds. It was in February 27.3%. It's up to 10.7%. If I look at our inflows that we're seeing, it's up 4% this year. Previous year, it was 10%. If I look at overtime and bonuses, it used to be 18%, it's now 15%, so it's dropped. So what are we seeing? You see pressure coming through in the expense side and then the income side actually coming down. And I think that the most important thing is you don't keep up with the [indiscernible] just live within your means and make certain that we can go through these difficult times. If I look at the financial results, we're going to show quickly a quick video on how the -- what happened in the full year. [ Anton ]? [Video Presentation] Yes. I think we can be proud of the year that's passed. I think if you look at a summary quickly on the financial results, we're going to go into quite a lot of detail, but I think it's important to understand. Our headline earnings is up by 15% in difficult times. I think the fact that we've paid out a dividend of ZAR42 per share. So you should have Capitec shares. ROE 26%, in line with our expectation. We're targeting 25%, but you can see right through, we actually run about 28%, 26%. So yes, I think we can be pleased with that performance. If I look at key indicators of our net income, 54% is coming from non-credit. It used to be 49%. So 54% of our income is coming from our transactional income of VAS, our insurance products, et cetera. Operating expenses. We always say that our objective to say that 100% of our OpEx needs to be covered by non-credit income, and we're now at 110%. So our OpEx is fully covered by other income. And then cost-to-income ratio 39%. We always said we're targeting around about 40% -- 40% -- 41%. I think it's a very good achievement to come in at 39%. And it's interesting, if you look at the digital journey that we went on, if you look at 2022, 1.3 billion transaction has been done on digital, this year, 1.6 billion transactions has been done. You can see cash is basically flat because remember, we've got an increase in client volumes. So you can see cash to electronic, 22% of our volumes is done by cash and 78% is done by electronics. So a big move that's taking place in our client behavior. If I look at our income statement, I think a very strong growth in our income lines, especially on our lending side for the first time we've opened up, and I think we were quite brave in November '22 to open up, and we had to close down again in June, July when Ukraine happened, the recession happened, et cetera, et cetera. So we took that chance and say we will open up. I think the [ net ] transactional income, only 8% -- up 8%, but I'll unpack it, but I think a very strong performance from that side. And then on other income, everyone will ask why the ZAR400 million dropped to the ZAR200 million. We received about ZAR200 million in insurance claims with the riots in the previous year. So you've got a ZAR200 million actually abnormality taking place in February '22. Then the one -- everyone will worry about is the credit impairments, and I'll unpack that in detail. You can see 80% growth or ZAR2.8 billion increase. But you need to look at over 4 years and actually really look and understand what COVID has done and the behavior also that's taken place, and I will unpack that in detail. And then there's the 15%. I think the interesting one is on tax. It looks like we're not paying taxes because there's only a 3% increase on tax, but your insurance taxes is deducted upfront on top and up at the bottom. So in total, our tax rate is 26%, but take that in consideration that the majority of the taxes -- or all the taxes on the credit and funeral products is upfront in the income statement. If I look at our deposits, I think a very strong performance, 9% up ZAR147 billion, and it's quite easy to lend money out, but to get confidence in people to actually invest with ourselves. It's a big number, ZAR147 billion. And you can see your transactional, call and other, that's what I referred to earlier on, where we pay up to 4% or on average 4%, where other banks pay nothing, it is [ ZAR100 billion ]. And then our fixed term savings, where people invest for a much longer period is up 12%. Gross loans and advances for the first time, you can actually see that's coming up. So that's up ZAR14 billion from ZAR84 billion to ZAR98 billion, and that's the growth in the business banking, as well as on the retail side. And the effect of that is that our average investment portfolio actually decreased. So the first time we were actually funding our lending book from our deposits, which is a healthy thing. If I look at credit life and insurance, I think overall, a tremendous performance, credit life, up 23%, in line with our growth in our lending business. Death claims down 18% and retrenchment is down 3%. I think the interesting one is the death claims and it comes back to the stabilization of COVID coming through. And then on funeral, I think important and that's [ 2021's ] market share, 34% of sum assured is our market share. 2.2 million policies about 10 million people that's been covered by funeral. Average premium policy, ZAR256. So I think from the funeral side, we had a very good, good year. If I look at the transactional side, I know in September, when we announced the half year results, everyone was surprised by the growth of 8%, now it's 9%. But actually, if you really go and look at the growth -- and you take the abnormal things away, what we've given back by SMS notification, what we've given back with Live Better, what we've done with the once-off Mastercard expenses, it's actually a growth of 18%. And you can see there on the digital and on the card side, very strong growth of 38% and 27%. So overall, we're quite relaxed on the transactional side. We see double-digit growth for this year, as the [ old ] strategy of Live Better, especially is kicking in. Now the one that we need to discuss is arrears or provisioning, making certain that we all understand it. I think if you look at that ZAR2.8 billion, the first thing that we need to understand is that ZAR1.2 billion of that -- of that ZAR2.8 billion is due to new sales, where we open up. So if we've got a new provision, new sales, we [ actually have ] upfront provision of about 8%. And then on the book quality, there's about a ZAR1.6 billion extra fee that can come through. So let's unpack that. If I look at the first one, one must understand and let's go and look at COVID over a 4-year period when we analyze that. If you can look at sales, we opened up in February '20 of about [ 2.8 ], which is in line with our normal sales, where we open up. And you can see new loans, as a percentage of our average book was 4.7%. Then COVID happened, and you can see how we cut back on the new sales. Our new sales dropped to 2.5% and the upfront provisioning only ZAR1.6 billion. Then we opened up that was just after COVID to ZAR2.7 billion, and the percentage was 4.1%. And then, you could see what we've done in this year is we've opened up until about June and that led to extra ZAR4 billion of provisioning. The new loans, as a percentage is at 5.3%. Interesting, what we've seen and [ I have ] unpacked now is we've cut back on the credit sales, but the number of applications has increased, which kept the sales actually fairly flat. So if you look at that ZAR2.8 billion, ZAR1.2 billion is due to new sales, that's accounting, you need to upfront provision on those new sales coming through. Then on the book quality, what's happened on the book quality. Again, one needs to understand what happened over the 4-year period. If I look at the migration in the book, normally, we do about ZAR4 billion. And you can see what happened in February '21, it was ZAR5.9 billion. We've rescheduled about 7.5 billion people during the COVID period, which resulted in a ZAR5.9 billion [ rose to 2 and 3 ]. Those reschedulings all came back or a big portion of that came back, and that's the reduction that took place to [ ZAR3.1 billion ]. And then what you can see now is actually the increase in debt review and our book not performing 100% in line with what we expected, and that's increased to 6.7%. But if you -- because the problem [ we're sitting ] is, your book is also growing and you add COVID, so you need to express it as percentages. So that is if you look at the February '20 percentage, it was 6.6%, now it's 8.8%, where it's normalized. So it's 2% higher than what we would like it to be. I think if we look at that, what have we've done, and I think that's quite important to look at what we've done. We've implemented in November FTC7, which is a new generation granting model using over 14,000 behaviors. So it's still very new in our book. We've made -- I must say, we've made close to 1,000 cutbacks that we've done. We've done limit decreases on our [ AF ]. Our [ AF ] has grown to [ ZAR18 billion ], and we've done limited decreases. We -- last year, we've done it, [ ZAR1.3 billion ]. We've limit decreases of [ ZAR3.5 billion ]. So if I can explain that, if a person has got an AF of ZAR100,000 and he is not performing well, we will cut that limit to, let's say, ZAR80,000 or we even cut it to [ 0 ]. We're sitting with of that [ ZAR3.4 billion ], [ ZAR2.5 billion ] of those clients were cut to [ 0 ], and that shows you just how strict we were. And then, we've made a call early in March that we discontinue access facility on the -- from 3 months to 18 months, and we'd rather provide term loans on it because if you look at the long-term performance of the product, it wasn't where we would like it to be. So I think if you look at the picture on the right, you can see what's happened is the approval rate, what percentage of loans do we approve. It's at 45%. It's at the lowest level ever in the history of the companies, and that shows how aggressive we are with the cutbacks. You can see in February '20, it was at 54%. It's normally around about 55%. So it's about a 10% cut. But then you can see what has happened with the clear applications, and I think that is the sign of the economy, but everyone is now suddenly looking for credit and you need to say no. So we've seen much more people coming in, asking for credit. I think the other things we've done is increase our living expenses because the economy, you don't cut on a certain industry or a certain company, it's right across. So our living expenses increased with 18%. So if I look at the graph on the right, the NCR give certain guidelines, and unfortunately, these guidelines hasn't been updated for the last 4 years, 5 years. We are now 3x more stricter than the NCR. [ 3x ] more living expenses that we deduct to look at the affordability. There's a major focus on collections. We've increased our capacity in the collection space of over 20%. And then the area that we really are struggling with and really are trying to find a strategy on it is debt review. If you look at debt review, it's been positioned in the market as -- that solves all your problems and unfortunately, it doesn't. There's a certain amount of clients that needs to go on to debt review because they're really in an unhealthy space. But there's a certain portion of clients that really should actually come to your bank and really come to ourselves, and we'll help them with rescheduling et cetera. What people don't realize is, you pay upfront for a debt counsellor ZAR9,000 and only then, you start paying back on their loans. So we're busy with a major campaign on that because we believe there is a space for it. But unfortunately, a big portion of debt counsellors currently is not as putting people in the debt counselling that is -- that shouldn't be. And you can see a 20% of debt review clients exit within 12 months, paying the ZAR9,000 with no change in the indebtedness. So a major challenge. And what is quite interesting is Capitec is in 70% of the cases, not the last lender, which shows that somebody else is overexposing that particular client. So that is the challenges. We've pulled back on our propensity model on debt review, as well as on our [ math takers ], and we're confident that will give us the right results. I think the other question that everyone asked is on the economic forward-looking. What have we done in the economic forward-looking. Now straightforward, if the economy looks good, you don't provide for the next 12 months, if it looks bad, you provide in very simple terms. We use BER to help us predict the economy. So you can see February '20, nobody know [indiscernible] COVID, so you can see how genuine it is. We only provided ZAR288 million, then COVID happened, and we had to provide extra ZAR2.5 billion. Then we were worried about Ukraine and the recession, we only released about ZAR200 million of it. And then given what we're seeing is and that the economy will start normalizing in the later part of this year is, we've actually released then ZAR2.2 billion. So you must offset the ZAR2.2 billion because remember, you're looking at the book, deterioration in the quality minus the economic forward-looking to get to the total charge. And I think that gives you that indication. If you look at on the book, if you look at our total charge, then it's only 11% compared to 12% in 2020. I think this gives me quite a lot of confidence if I look at our credit impairment charge, what we actually provide, we had 22.9%. So we're still much higher than what we were in February '20, so where we were at 20%. So we're still providing 2% more than what we normally would have provided in normal years. I think the other interesting one is the [ AF ] has grown from ZAR5 billion to ZAR18 billion and that people don't actually realize is that -- and 60% of our AF are utilized, 40% is not utilized. We're providing on that full facility, so you -- actually over providing. So if you look at your credit loss ratio, where it is 8% and if you adjust it for your AF, then you're at 7.7%. OpEx, I'm going to go quickly through our OpEx. It's 5% down, but that's very difficult to understand what has really happened. I think last year, we paid out massive bonuses. We had the empowerment scheme, you can see the impact of the ZAR1.8 billion that we've paid. Then you can see information technology increased 47% to ZAR1.9 billion, and that's part of the ZAR1.4 billion investment into the future. So even there, I think we're getting a stabilization after the COVID year with a reduction of 5%. If you take everything out and you just look at it normalized, our OpEx grew of 10%, which is in line with our expectation. Business Bank, the question everyone will ask what has happened in the business bank area. We were at half year at around about ZAR200 million. So we were expecting ZAR400 million plus but we've made adjustments, certain costs that we believe as part of business banking, about [ ZAR50 million ], we've moved across 2 business banking, but they came back or they're in figures about ZAR389 million -- ZAR390 million. So if you add the [ ZAR50 million ] on top of it, that gives you a true picture. But I think we're very happy with the business banking performance, what they have achieved. I think gross loan and advances up 15% -- 20% to ZAR15 billion. And then, active client base, and we haven't even started yet at 160,000. It looks more to the [ 20 million ], but it's a completely different base, but will impact business banking in totality going forward. I think the other question that everyone asks, SEG, what are we doing in the SEG space? Are we focusing on it? Is it a focus area for us? There's 17 criteria that's been defined internationally that one needs to look at. There's 10 that we are actually focusing on and the 10 is that, that has been highlighted and I must really look at those 10. If you look at our business plan of providing financial services to all people, it actually speaks to those 10 in totality. So we're quite pleased with our focus on what we're doing on the SEG space. And if I think about on the environment, social and governance, what we've done in the last year two that I -- or a couple that I would like to handle is if I look at our branches, 4 years back, we signed every single paper, every single document was a wet sign, now everything is biometric. So there's no paper in the branches anymore. So we've saved 14,000 trees out of that. And the one that I enjoy, I would like to take out all the printers [ at ] head office that we all printerless, but I think [ big guys ]. And then our carbon footprint decreased by 5%. Social, Capitec Foundation, 300 principals that we've trained, 1,200 teachers that we've trained, 1.5 million learners that we've trained. Close to 100,000 people going through financial education and ZAR19 million that we've donated for the disaster relief initiatives. And then on [ government ], on our BEE scorecard, we've missed this -- the level 1 with 1.5 points, that was not nice to us, but we were at level 4, 2 years ago, we're level 2, and we should be able to get to a level 1 in this year. I think the one thing that worries me, if I look at ESG, there's over 100 agencies that scores you on ESG. And unfortunately, those are [ net ] agencies criteria and focus areas is completely different, and it changes from year-on-year and that makes it extremely difficult to say if you're a level what -- where you are. And I think that's really that something that the investment world is going to look like and to say, how do we standardize the ESG score and make certain that these consistencies between companies when you are comparing companies year-on-year. If I look at the future, I think we've gone through the results, let's talk about the future. I think the biggest challenge is the 20 million clients, how do we unlock the potential of 20 million clients and how are we going to do it? There's a 20 million clients. And I think the way we're going to do it is using data and technology. And I think up to now, a strong technology drive, but data going forward is going to be everything. I think everyone always talks about data is the new gold. So we definitely have a big focus on the data side. And then a very strong focus on digital because even if you look at our 11 million digital clients on retail banking, business banking, complete digital, no branches. So a big focus on that side. And then, we are investing on these particular areas, business bank, Live Better, digital payments, which are all unpacked, you can fully understand what we're investing in for the future. I think the moment everyone is waiting for us to see what are we going to do with business banking. So we've put together a bit of a video just to share with you, where we are going with business banking. [ Anton ]? [Video Presentation] Carl is sitting here in front of me, so Carl good luck with your venture, that's tight, but we're there. Basically just where we are, I think what we need to understand is we bought Mercantile in 2019. We -- first year, we thought we were going to build a bank and suddenly had to manage COVID. So we have really been building for the last 2 years. If I look at January and February, we've rebranded forex, payment service and rental. So those rebrandings has taken place. And then if we look at business bank, the first 1,000 clients in April, existing clients, we've actually started moving across making certain that we test the systems, making certain that it works. And then, the first week in May, we're starting with remote onboarding app, [ the web ], et cetera, et cetera. So we want to be completed by end of July on all clients to be moved over. Everyone is going to get the silver card. So you're going to have the black card for retail and the silver card for business banking. I myself, I think that silver card looks quite nice. And then, we will go to market in August. And I think watch the space, if we're looking at pricing, I think it's quite interesting what we're doing on the pricing side. So I'm quite excited. We're there. It's just that last bit that we need to get over the line. If I look at payments, and it's interesting, why is payment so important for us? If I look at payments income myself was [indiscernible] strategic initiative [indiscernible] member that looks after payments. Myself and him was in Brazil in February, and what we're trying to do is to figure out what have they done because they've moved completely from cash to payments. And the one thing we've realized in Brazil, working with numerous companies, numerous banks is, it's a total ecosystem and you can't force a client to do one type of payment. You need to give him a variety of payments and you make it -- must make it as easy as possible. So that's the journey we've been on the last couple of years, last 2 years. And the majority of those payments are getting launched or have been launched in the last year, making certain we can create Capitec Pay and makes it into the client, whatever he prefers, he can use that to pay. If I look at card payments, it's interesting, 1.9 billion card payments has taken place, up 30%. I think the interesting one is the 29 million international payments across 191 countries. We don't ask a commission fee on those transactions, the only bank that don't ask a commission fee. We've transacted last year just over ZAR7 billion in international transactions. EFT and Pay to Cell, that's the interesting one is the fact that you can pay another Capitec person by just entering his cell phone number. And we've just done over 400 million payments that you can pay somebody else by just using his cell phone. So if you want to pay a car guard or you're playing golf or whatever use your -- just ask him what is his cell phone number because 80% of that particular market has got Capitec accounts, and you can just pay him straight away. Then Scan to Pay and Pay Me, it's for me still that amazing thing that I cannot say to somebody else, please pay me, and I'll send him a WhatsApp and a link and he just goes on QR and he pays. That's grown to 1.9 million transactions. I think the one that we not always talk about has just been launched is Capitec Pay. If you do an online payment currently, you need to go on to the Internet, you use 21 active partners, Pay@, Ozow, PayFast, but people don't understand it's actually screen scraping, that's actually taking [ plus ] what we've done is actually to put in Capitec Pay, so you could just click on Capitec Pay and you do a seamless payment, so that security and the ease of payment will come through. So you will start seeing that with all the online shops. You'll start seeing that coming through. Interesting is that on the old way, the success rates were 45%. And last month, we -- our success rate was over 80%. So quite a big improvement that we've made in that particular area. Then contactless payments, Apple Pay, Samsung Pay, Google Pay, Huawei Pay and Garmin Pay, we're just waiting for Reserve Bank authorization. I'm paying with my Garmin watch. So all those payments has gone through. And then RPP or PayShap that was part of our trip to Brazil to see how they've implemented their RPP and to say [indiscernible] what can we do here to make certain that we've got that impact. So the [ whole ] PayShap for us is a very strong strategy in the payment space, and we'll focus quite a lot on that from July when we're going live. Capitec Insure, as you all know, we've got our insurance banking license. We've got an insure company now. So there's the road map. We've built new systems and services. We are going live with the first policy being written 7 May. We've credit life being written on [ 7th ] of May. And then we're moving all the policies across on credit life. With SANLAM, we're still in negotiations. So I can't give you a road map. But as you're aware, we want to get out of that, and we want to bring funeral onto our own platform. And I think then the other one that people need to understand is IFRS 17 -- the IFRS standard. We've done all the calculations. We're busy auditing it. When we bring out our Reg 43s in May, we will make our opening adjustments. And our results in September, we will reinstate this year, and so that you can compare it with next year. So all that work has been done on IFRS 17. I've already looked at the March results, and that's including IFRS 17. So I think that team has done extremely well. Live Better, it's quite scary. You launched a product and a year [ lately ] you're sitting with 13.4 million clients that's making use of Live Better. It's also been voted the Best Loyalty Program in the Financial Services within a year, 1.5 years. I think the big driver is actually to make certain that if you can look at that 737,000 clients that is doing the [ 1,3,5 ], 1 product, 3 debit orders, 5 digital payments to get that number up, so that we could give back more to our clients. We will and we'll always be looking at that product and say, how can we actually optimize it, how can we do it better? And we'll probably make changes in August, but the focus is always going to be on the simplicity and making certain that the client understand Live better because I think the majority of loyalty programs, people don't understand at all. Value-added services, I think that's a new one for the asset managers [indiscernible]. I have always seen what we've done in value-added services. I think if you look at just the existing was prepaid, electricity and data and airtime, we've done ZAR29 billion in prepaid airtime and electricity, as well as ZAR31 billion in cash sent, where you send somebody else cash either Pick n Pay, PayShap [indiscernible] or to your -- or to our ATMs. Our contribution to our income is ZAR1.5 billion. We've created a new department that just focuses on VAS. And we've launched 3 new products in the last year, bill payments, vouchers, as well as [ Lotto ] and that already contributed about ZAR60 million to our bottom line. Interesting vouchers, and you see on the right, the app of all the different type of vouchers is. If I want to send somebody, you don't want to send cash because you don't want to make certain, he uses it for what you've sent [indiscernible] Dis-Chem there. So you send it and he actually spends the money out the voucher at this scheme. I think we've got about 15, 20 partners on board, and there's quite a lot that's onboarding later this year. So quite a lot of things that we're looking at the vouchering -- at value-added, and it will be interesting to see the road map on value-added services for our 20 million client. Then Connect, the other big launched last year, September is very straightforward. We had ZAR45 a gig straightforward Capitec style, simplistic. Your data don't expire. We're by far the lowest in the market. We're selling about 5,000 SIMs a day. So you can do the sum. We're now over 500,000. So I think the big take or the big thing here is actually people using those SIMs and activating those SIMs. We're sitting now at about a 55% take-up rate. So we're quite pleased with the product. And there's quite a lot of new products that we're working on that will come through later in this year, that we will be quite excited. So I'm very excited about this because it all goes again about data, understanding the client and offering better value to the client. Then the one that we are also doing quite a lot to transform what we're busy with is digital services. In BSC, that's our business support center, everything was agent-driven. What we've brought in there is Live Person and WhatsApp at bot to make certain we can provide better services to our clients. So you can see there, we are already handling 20% of the core volumes with bots and with WhatsApp. We're seeing a 10% more efficiency coming through on it. So that all conversational side is much more effective, and we're hoping to get to 50%, 60% by the end of this year. Speech analytics is evaluating the quality of calls because in the past, you had to have people listening to calls and say that the agent handled that client well or not. Now you can actually say, if your voice pitch has gone up, there's a problem, analyze see what's happened in that space. So all calls now are being evaluated with speech analytics, making certain we provide quality to our clients. Then in our branches, we've taken our branches basically, you've got your channel of app, but in branch, you had a cashier, that has all been replaced by DNRs, where the client actually helps himself. Then the branches has now been divided up in 2 segments, the self-service terminal, there's about 2 to 3 in each branch, where basic transactions are performed by the client. And that look and feel is exactly the same as the app, so that person can actually move out of the branch and go onto the app. We [ know ] basically 40% of transactions that used to be performed by the consultant is now performed by the SST, and the aim is by the end of this year is actually to get to 80%. Now, our aim is that your consultants are there to really sell products and informing the clients, adding value to the client rather than doing just a boring transaction and the client actually performs his own transactions. And then, client engagement 35 million we've put in Salesforce. And we just in July, launching Airship [indiscernible] us to actually do in-app communication to our clients, making certain that we can provide value to our clients and informing them on what is the best for them. And I think if you looked at the video, you can see there was live chat and call with business bankers, that's also included. Then the big journey, we started off last year was cloud. On the data side, we've got now about 50% of our data in the cloud. The aims by the end of this year is to have about 80% over in cloud. And then if I look at our core systems processes, DR site is to have all of that also plus/minus about 80% by the end of the year on cloud. That just gives us the capability to analyze our clients better, servicing our clients better, understanding our clients better. So a massive investment in the cloud side. That comes to the last, and I think I've spoken a lot about it. If you really want to look at what we are doing is we are making banking simple and transparent. We're offering value for our clients, and we're using data and technology to really optimize the value of the client and that's the journey that we are. If I look at the business banking, insure and the retail 20 million clients is how to optimize the value for that particular client. So from my side, thank you very much to all of you, to my management team, to the Board, to everyone for the year that's gone and also the years gone, so we need to start fresh. I'm looking at the year that's lying ahead. There's nice opportunities. Special word of thanks to Grant and his team from a financial side. I don't think we appreciate. We are basically a ZAR200 billion market cap organization, and to have your financial results, your Regs, your year end, everything completed [ a month and a half ] of the year end, I think that's a big achievement. So let's give Grant a big [indiscernible]. And then, we open for questions. [ Anton ], I hope is can't say many [indiscernible].

Right. Good morning, Gerrie. The first question from [ Paul Whitburn ] around the Capitec Connect customers. How many Capitec Connect customers are there after year end?

Well, we -- I said it's 5,000 clients per month per day that we're selling. So you can do a sum from there. The question is, if you look at the 20 million, can you get to 20 million clients, and you'll probably easily get to 10 million, 12 million. Question is over what period?

Are these clients porting from other networks? Or are they new customers buying secondary SIMs?

It is a combination about 20% is porting, 80% is new.

And is it the intention of Capitec Connect to offer a full suite of mobile products like handsets, airtime credit, et cetera?

Over time, yes, not now.

And how useful is the data you can collect from the MVNO compared to the data you already have?

I think it's just supporting the data because you can now see with who the client is talking and vis-a-vis we can see transactional. So you can't use the data in isolation, but is how do you use it in combination to say how do you create value for the client.

The next set of questions are from [ Jeremy Balvin ]. Prior to '22, deposit growth was north of 20% per annum, over the last 2 years deposit growth has been 11% and 9%, respectively. Please help us understand the reason for the slowdown.

Well, I think if you look at -- everything becomes relative because we've been growing with 2 million clients per year. But if you add 2 million, your percentages just getting smaller and smaller. So if you look at our client base, it's growing [ with ] 10% and 11%. 3 years, 4 years ago, it was growing with 20%. So it's very dangerous to look at percentages because if you start growing on a deposit base of [ 145 billion ], you really need to grow, if you really want to go, let's say, 20%, 30%. So I look at that deposit base how it's growing and be careful looking at percentages because percentages on a high base is completely different, as a percentage on a low base. It's like our business banking doubling its profit, but it's from a small base.

And then given the change in mix in lending, what's the normalized level of the net impairment charge relative to gross loans?

So that will -- is this working, yes. So that will, let's say, evolve over time, as that mix changes between secured and unsecured. But in the medium term, I think it's pretty stable, as you said now.

And the NIMs, how are they expected to evolve considering the lending mix and then the raising rate cycle with fixed term loans?

Again, in terms of the NIMs that will evolve, as that secured and unsecured mix changes. But in the medium term, we see that as being pretty stable.

And then the net transaction and fee income was...

I think what is just important on the NIMs is that people must understand the access facility is a floating rate, while the fixed term was a fixed rate. And we've access facility now if interest rates go up or down, that will be affected. So the book has changed quite a lot.

And then the net transaction and fee income is that expected to accelerate now with the Live Better cost being in the base.

That's -- I've said that in the presentation, we will go back to normal double-digits growth.

Then 2 questions from [ Craig Martin ]. The first one around bad debts being written-off on business banking being up 156% year-on-year. Is this related to how credit is granted in the market?

No. So not related to how credit is granted at all. There were some once-off write-offs that took place and then just a little bit that comes through from timing.

And then, secondly, Craig says that the first year -- is the first year that he notices that the cash flow from operations is negative to the tune of ZAR6.7 billion. Why is this occurring for the first time?

I think important to highlight there that our liquidity coverage ratio is still in excess of 2,000% and the regulatory minimum is, let's say, 100%. So what we've done is, we've deliberately invested our excess cash or a portion of our excess cash and grown the loan book. And as mentioned, you've seen slower growth in the deposit book, and that's really the result of what is mentioned.

And we've got Peter from -- Peter [ Crom ] from -- a question from [ Peter Cromberg ]. After successfully raising capital on the domestic bond market, can you elaborate on your short to medium term strategy in terms of raising capital on the bond market?

We will stay in the market, as we have done with, let's say, relatively small issuances, and we'll wait to see what the final regulations regarding [indiscernible] and take it from there.

I think if you go and look at the last 5 years, 6 years, we've been raising between ZAR500 million and ZAR750 million. We actually don't need it, but we've done it to keep in the market and to have that -- that was relationships, and we will keep doing that.

Then a question from [ Geraldson Roy ]. Please elaborate on the client numbers acquired post the Mercantile Bank acquisition versus the clients taken over?

Well, if you look at Mercantile, they're used to, Colin, you can help me out about 500, 600 clients per month when we rebranded it shot up to about 2,000 clients per month. But remember, there's no branding, there's no drive. It's just natural client growth. So you really need to look at those [ client ] numbers once we rebrand to see what it really does. But there's a big uptake since we've acquired Mercantile.

And then, just going on that same theme, we've got a question from [indiscernible] around the profile of the Business Bank new clients being significantly different from the old bank?

I think if you look at the profile, it's very much more in the SME space. We have a big focus on the S&M, and that's in line with our strategy to service the smaller, the S&M of the business banking environment. If you look at business banking overall, there's 2.5 million, 2.6 million SMEs, of which the majority 2 million is actually on the S&M. And I think the other question that you need to ask is, if you look at the emerging market, how big is that market, I think that 2.5 million is probably then 5.5 million in the market on SMEs.

Then 2 questions from [ Ross Krieger ]. The first one around SMS notification fee reduction. Will there be any further impact in FY '24 from this? Are there other services, which will move from paid for to free?

No. I think the biggest impact is if you look at the SMS fee, if you look at pricing we've actually increased it from [ ZAR0.25 to ZAR0.30 ]. But the big drive we're taking is how do we can take the SMS fee away and that the person uses in-app because in-app is for free. So the -- because the more we can get people to use in-app, the more we can use that as our prime. So it's not a -- it's not going to be the reduction, is more the movement of the client into in-app.

And then we've had 2 questions around the forward-looking macroeconomic provision. Are we able to give a sense of what the new forward-looking provision assumes in terms of macro variables.

So we use the Bureau of Economic Research, as economic forecasts, and they give us 3 forecasts at baseline to get into bad scenario. So those are all very well detailed in the financial statements in Note 3. I think if I start saying them here, I'm going to keep you all day. So if you just refer back to those, you'll be able to see exactly what they are [ they ].

But the BER is -- information is available. So just go and look at the BER. Yes. The BER is the basis of our economic forecast.

And a question from [ Charles Russell ]. The coverage of arrears rescheduled and NPLs has dropped from 101% to 89% over the last year with a significant drop in coverage on up-to-date retail loans, how comfortable are you with this trend given the [ current ] environment?

So the drop on up-to-date is really what we've seen happen with the forward-looking model. So we've seen [ 2.2 million ] -- [ 2.2 billion ] migrate into later stages of the book, and that's what's really driven that, let's say, drop that you see on the up-to-date. But that up-to-date coverage ratio is still very similar to what it was pre-COVID.

Then a question from [ Harry Poiter ] around the rate of book migration to Stage 3. How do we see that happening in FY '24?

So Gerrie highlighted in his presentation, we've seen that, let's say, higher migration this year, but we don't expect to see that continue at the same rate.

And then, just it looks like a final question around Capitec Connect, and we've spoken about the number of customers that we're acquiring over the -- at the moment, the current run rate, but what is the expectation over the year? Do we expect to be able to continue that?

5,000, we can definitely continue. The question is how can we accelerate it? I think that's the question. And then, what other products we can put behind it. If we -- when we started in September, we were at first the 1,000, then 2,000 and 3,000, it's actually quite interesting. Some of you do it and say these 850 branches, there's about 10 consultants per branch, 12 consultants per branch, how much consultants can sell per day. But we're quite comfortable with the 5,000. Again, the 5,000, it's the take-up rate or how much are they using?

There are no further questions.

Okay. Thank you very much. And then, we will switch off and switch to the staff discussion.