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

Good morning, ladies and gentlemen. It's my pleasure to announce our Interim Results for August '23. I think if you look at the year that's gone past or 6 months that's gone past, I think, if you sum up our results, it goes through those 3 words, it's resilient in tough times, grow, and then for me the most important, solid investing in the future. If there's any questions, we'll answer the questions afterwards. You can send it through -- to that email address. Please send your questions, hopefully, I will answer all your questions, while I'm presenting. By looking at what is driving Capitec, it's our ability to invest and innovate to meet the clients' demands. If I look at our culture, our culture is all about the client, and so every question starts with the client, is it in the best interest of the clients, are we client-centric? And I think that sums up the results. If I look at the resilience of this year, we all know we're in a challenging economic environment. I'm not going to elaborate on that, but I think everyone understands inflation, everyone understands interest rates has gone up. For me it's still interesting. If you look at interest rates, it's gone up with 2.75%. It's actually just exactly the same level before COVID. So it's not gone up higher than that, but I think food inflation et cetera has gone up, and I think the whole world economy was in turmoil. I think what we've shown is that since 2017, we've diversified our income and we've had very strong transactional performance and I'll elaborate on that. And then on credit, we are in unsecured lending. So the moment you are in unsecured lending, you need to be agile, you need to be prudent, you need to understand the market, and I think we've done well in that particular area. The second one is on the growth, if I take out our provisioning figures, then we've grown with 26%, which I think is extremely strong in this economy. And then non-lending income as a percentage of our OpEx. What percentage of our OpEx is covered with it, it's 115%. So we're starting to cover much more than 100% of our OpEx, and that figure can probably go up to 130%, 140%, 150%. And then strong capital and liquidity, our capital adequacy is at 37%. That gives us the ability to be conservative, but also to grow going forward. And then if I look at future focus, there's 5 areas we are focusing on, #1 is digital payments or the payments side, because the moment we start seeing people paying electronically, then we understand the client, we understand the business and we can score the client and we can assess the client. If you use cash, we've got no indication of what the person is doing with that particular cash. Business banking, Insure, value-added services, probably the surprise that you're going to see in our results, how we've grown in that particular environment. And then a very strong focus on investing in technology and data, making certain we are stable, but we are scalable for the future. Our headline earnings growth moved 9% to ZAR 4.7 billion. Again, if I look at inflation at 4%, 5%, I think the 9% is a very strong performance. If I look at the breakdown of that, I'm not going to go through every single line item, but you can see our net interest income has grown with 17%, transactional income of 24%, your insurance side with 33%, and that gives us income from operations of 21%. Impairments, given the economy, what has taken place in the last 6 months, and we will unpack that in detail, is on 72%, very much in line of what we're seeing in the market. And then your OpEx coming in at 14%, giving us headline earnings of 9%. So I think that sums up for us, very strong growth on the top line. We've got impairments. We believe we're at that turning point and then our OpEx at 14%, investing in the future. I think this is a very important slide, is how we've evolved. We've actually, in 2016, I told the Board yesterday, we've decided to become a financial services organization, diversify the company away from lending. And you can see our lending income in August '17 was ZAR 7.3 billion or 76% of our income was coming from lending. And then if you look at other income, it was 24%. What you see now is our lending income from the retail side is now at 52%, ZAR 9.5 billion, and our other income plus-minus another ZAR 9 billion. So our value-added services, if you add the ZAR 600 million and ZAR 500 million you're sitting at ZAR 1.1 billion. You can see what Insurance has done, and then you can see what business has done. So you can clearly see how the whole income statement is completely diversified and bringing in other income streams, which I believe will grow significantly in the future. If I look at our key ratios, I think non-lending, I've already spoken on OpEx, recovering our OpEx with 115%, and that can go up probably to 120%, 130%. Non-lending income to income from operations. So we exclude the impairment side, we've changed that ratio, it was normally on net income. It's now at 44%. So 44% of our income is coming from other income. Cost-to-income ratio at 38%. We've always said 40%. We're quite happy with the 38%. We are targeting roundabout 40%. It's interesting, I always say that to investors, any time I look at cost to income ratios actually at half-year and full-year result, because we believe we take decisions on what is right for the client, and what is right for the business. Return on equity, 24%. Our target is normally 25%. And as the impairments have dropped down to 24% and that should go back to the 24% -- 25% level. Then our expected credit loss ratio is up 1% in these tough times, 21% from 20%. If I look at our capital adequacy, a strong growth from 35% to 36%. So we're well capitalized. That gives us opportunities to grow, especially on the business banking side, and other opportunities that we are looking at. And then our dividend per share is up 9%, looking after our shareholders to ZAR 15.30, which I think is also very positive. If I now look -- go and look at retail bank and insurance, so we're moving away from Group, but we are looking at retail bank and insurance. We're going cover these 4 key themes that's coming through. The first one is on deposit growth and the trust in the brand, because you only will invest your money if you trust the brand. Our take-up of digital products, are moving away from cash, and then our credit management agility that we've shown. If I look at this, it's still frightening if I look at business bank and retail. We've got deposits of ZAR 550 billion in the Bank, so it's a big number. If you look at our total deposits, grown with 10% if you combine the 2. Interesting, just looking at the BA 900s. The BA 900s also grown with 10%. So we are 100% in line with the market. But given the static economy, we think people will spend and won't save anymore. But if you take July to -- July last year to this year, the savings has gone up with ZAR 130 billion, a 10% growth, but is showing you that people are still saving in these tough times. If I look at -- all these graphs are running in the right direction. So we're growing interest income by 13% to ZAR 7.3 billion. Just -- what is the client base looking like? It's the one number that I said when we are at 15 million clients, where are we going to end? And I said, I don't know. I still don't know where it's going to end. That's the 21 million clients. What is quite scary is that, from August '19, we have grown with 2 million clients every year. So I think we need to be proud of that, growing with 2 million clients during these periods. The 2 next ones that I'm really focusing on is our digital client base, 11.7 million clients are now digital. So they use either the app or the Internet or USSD. 10 million of that 11 million is using the app. And then our fully banked clients, we've changed that definition. So if you earn -- if there is a regular income of more than ZAR 3,500, you have taken our products off us and you're showing positive behavior. So you're not using cash, you use digital. That's the definition of that, and you can see that's grown with 12% and that's grown from 6.7 million to 7.5 million. So for us, it's all about growing that client base. So how do you optimize the 21 million clients? If I look at our saved clients, up to 8.1 million clients, our funeral clients 2.4 million clients. Interesting, funeral is growing with 400,000 clients year-on-year from 2019. And our credit clients, 1.3 million. People always think we lend to everyone, but it's only 1.3 million of the 21 million clients or 1.3 million out of the 7.5 million clients that is taking up credit from ourselves. The transactional income is up 25% in retail to ZAR 6.5 billion. So very strong growth. And what we've seen is a very strong growth away into the digital space. So if you look at digital -- the app transactions grew by 53%, 789 million transactions that's coming through and 83% of all digital transactions is now coming from the app. So very strong growth on the app side. I think the VAS products has helped the app transactions quite a lot. If I look at card, card -- it's up 28% to 1.1 billion. And a big driver of the card usage is the All Live Better program that we've introduced about a year ago. And you can see it's changing the behavior of the client away from cash and away from branch. If I look at cash, we've added another 600 ATMs. But you can see -- if you're looking at per client, the cash volumes are actually coming down. Cash is growing with 3%, but if you divide it by the number of clients, it is actually coming down and it's exactly what we are looking for, because we want to change that behavior into digital, into electronics, so that we can understand and help that client. And you can see the branch volumes are actually basically down with 4%. What is interesting in the branch, is our self-service terminals has handled now 59% of all transactions, and that is enabling our consultants to -- really focusing on selling our product range to our client base. Also exactly what we are looking. We're looking at that 59% to go up to 80% that we really take all day-to-day small transactions away, and that the consultants can -- really focusing on selling. The SST looks exactly the same as the app. So it's your first step to move from the app -- from SST to the app and to grow it from there. Where is the new products coming in? We've generated extra income of ZAR 394 million out of the new products. That's the VAS products, Connect, Capitec Pay. So I think that is a strong performance and it's going to be interesting to see where these products are growing. I think what this is showing you is just above 21 million clients. If you put the right product in the hands of 21 million clients, you see this uptake, because the majority of these products have been launched in March, and you can see the income stream that's coming through from these products. So the power of our client base and the power of our branches, [ a huge ] network of 860 branches. So existing VAS products, airtime and electricity, prepaid on volume 6% and new products on volumes, 124 million. What is it -- how is it actually broken up? Capitec Pay; Capitec Pay is where we've actually taking out screen scraping. If you go on the Internet and you want to pay a merchant, you normally enter your credit card details and then they have to go screen scraping onto the Internet and then do the payment. It was a 4, 5-step process with a success rate of about 45%. Now with Capitec Pay, it's a one-step process and its 40 seconds to do a transaction and the success rate is now close to 90%. We've got 29 partners and about 8,500 merchants that you can buy online from, and you can see the volumes coming through. We are averaging now, in the last 2, 3 months, 12 million transactions per month. Vouchers, is probably the other big success story. If I look at vouchers, the nice thing about is the Capitec Flexi voucher, which is linked to about 25 retailers. So if you buy, you can either buy a voucher for a particular retailer or you buy the Capitec Flexi voucher, and from the flexi voucher, you've got access to any one of those retailers. And let's say, you pay ZAR 100, the guy goes to pick and pay, he redeems his voucher only for ZAR 50 and he gets a new voucher for ZAR 50. So we're actually monetizing the whole voucher system, and now we've just launched now 2 weeks ago, the Capitec top-up voucher, so that you can buy data and you can top up and you can use either Vodacom, MTN, Cell C. So you can move, you don't need to stick to one telecom supplier. You can see what lotto bill payments in Capitec Connect. Capitec Connect starting to get to 5 million transactions. If I look at Capitec Connect, 8 months, 1.3 million clients. It's again that power. You can see how that sales engine is working. We've worked very hard with Cell C to improve our coverage ratio with MTN, on our quality. And there has been a massive improvement in that particular area. We are seeing a strong growth in our revenue and our active base and our client numbers. And as you all know, we've just launched the 10 gigs for ZAR 199 in the market last month -- or in this month and the uptake has been phenomenal, just showing how the clients are looking for that product range. And just that simplicity. You can see that we've got 2 prices here. ZAR 45 for 1 gig or 10 gigs, ZAR 199 and it's just coming back to what we do in Capitec [ Well ], is client focus and simplicity and transparency. No specials, no frills. What you see is what you get. I think there is a lot of work that we're currently putting into the Connect space. So it's going to be interesting to see how this program is going to evolve in the next 2 to 3 years. Insure has come a long way. As you all know, we've got our license now. We've developed our new systems and technology. We've already written [ 250 ] policies onto the new system, and that's all credit life policies that we've written. So the old Guardrisk cell-captive runoff process is in progress and we should complete that by about May-June next year. So then we will have all the credit life policies on our book. And then, we're still in negotiations with Sanlam to take over the funeral product range, and that arrangement of Sanlam expires in November '24. So it just gives you a feeling of what's happening. We're quite happy with that. And we're also working on new products that will go into that particular space. So it would be interesting to see what happens there. Just credit life insurance, grew 20%, ZAR 900 million -- ZAR 912 million that came out of it. And what we are insuring is close to ZAR 750 billion. It's quite a scary -- ZAR 74 billion -- ZAR 74 billion that we are actually covering. So it's quite a big amount that we are covering on the credit life space. Retrenchment claims, interesting, and it shows you -- if you ask of what's happening in the economy, retrenchment claims are dropping with 8% year-on-year. You would expect in this economy that it actually will increase. We're starting to see the mining companies now, saying that they are going to start retrenching. What we have seen is the very small companies just closed their shops. So the person just becomes unemployed, but the medium-sized companies, the bigger companies, we've definitely seen a drop in insurance claims. If I look at funeral plan, it's grown by 59%. I think what is important, and that's the first, it has gone from ZAR 400 million to ZAR 636 million income on it, it's grown by 59%. In our sense, there is a proper detailed explanation of that. The growth on -- if you are purely looking at the growth in the policies, that's about a 20% growth and the other 30%, I'm going to call it as accounting and also moving it from investments to the cell and the insurance space, but you can go through that in detail. I think if you look at it and the policies that we've written, the middle column, the present value of those policies that we've written going forward in the 6 months shows growth of 9% -- 11%, and then the net income of that is 9%. So we're very positive about the funeral market and the insurance market in total, and I think there's a lot of opportunities for Capitec in that space. Now the one that everyone is looking for and wants the answers on, retail credit. I think I'm going to start with the Reserve Bank stats. When everyone is always talking about, the clients are completely over-indebted and they are in a debt spiral. But if I look at this stats and now looking at debt-to-income of our -- all clients in South Africa, it's quite interesting. If you look at March '19, you were around about 62%, 63%. Then you can see that massive spike that happened in COVID and that was because all income level has actually fallen away. And then you can see now, we are back at -- you can see at probably at about 62%. So your debt levels has gone slightly up in March '23, but we are still very much in line with what we were pre-COVID. So I think it just gives us a different perspective. Now if you look at the cost of credit, the red line, I remember what I said is interest rates went up with 2.75%, and interest rates are actually -- exactly the same as where they were before COVID. And if you look at that red line, you can see where it was in March '19 compared to March '23. I think a lot of people just got used to that 2.75% lower interest rate and increased their spending. What is definitely hurting the client, is the inflation rates, and especially the food inflation rates and the petrol price and exchange rate, that for sure has got an impact on the client and we've seen it, especially in the retail space. And I think this is actually showing the strain that's taking. What we're looking at here, and it's Experian data, is that clients that's never been defaulted -- they never defaulted and they have defaulted in the last 3 months. And you can see that's gone up from about 1.5%, 1.6%, suddenly to 2.5%. So you're definitely seeing that strain coming through in the last couple of months. And like I said, I think a big portion is the cost of living that has increased quite a lot. And I think the good thing about it, if we've all seen what inflation and these things are doing, is coming down. This is an interesting slide. If you look at the number of applications, and that's probably also showing strain in the economy. The blue line is the number of applications, and you can clearly see what it's done. It's gone -- and this is NCR data. So it's all the credit providers. It's gone from quarter 4, 2020, let's say, 11 million applications to [ 16 million ] applications, and [ 50 million ] in the last quarter. And then you can see what's happening on the take-up rate -- not the take-up rate, the approval rate. The approval rate has gone up from roundabout 45% to 30%. Now the big question here is, if you actually use this, you will see the number of clients that are approved is basically the same, but the take-up rate is now the interesting question. Just to give you a feeling on what we're doing in Capitec, our approval rate is 40%. So we will approve 40% of clients that comes into the branch, but the take-up rate is only 20%. So what's the difference between approval rate and the take-up rate? We will offer a client -- let's say, he wants ZAR 100,000 but we are only offering him ZAR 50,000. So we will approve him for ZAR 50,000, but he wants ZAR 100,000. So he won't take it up. So the approval rate is 40%, our take-up rate is 20%. But you can clearly see people are shopping around and people are looking for credit, and just looking at the TransUnion report this morning, what they're saying, people are going more to store cards, retail cards and into the micro lenders. Short-term loans, the average loan size has dropped. So there is, for sure, some stress in the economy. What have we done? I think it's important to note that we have made our loan sales and disbursements decreased year-on-year with 9% to ZAR 24 billion. We had brought in very stricter criteria of your installment, your income, lowering that particular percentage. We've made 421 different credit changes. And we decreased the excess facilities, we've decreased that with about 300%. So we've given you a facility of, say, ZAR 100,000. We see the stress that you are under and we will reduce that facility to about ZAR 80,000. So those are all changes that was made. And the impact of that is that, if you look at the credit facility here, and that's that light blue, or middle blue column, we've cut the facility component. We've cut to 62%. So very strong focus on the credit side, making certain that when we grant credit, we grant to the right client. And the max takers, people that's always taking max, we were very strict on those particular areas and made our criterias much more stricter in that areas. Have we turned the corner? That's the $1 million question everyone is asking. And I don't want to look into the future, and say I know exactly what's going to happen in the future. But this is for us, it's an early stress indicator. So what we're doing is if we grant you a loan 3 months ago, we look at -- are you under stress now? So if you look at that August '23, that was loans that was granted in June '23, and then we are saying 7.6% of those clients either go in arrears or reschedule or has gone in debt review. There's about 2%, 3% of those clients, is that they mostly have paid out and they rehabilitate and they come back. So it's not the whole 7% coming through. But it's just an early stress indicator. And you can see the 7.6% is back on the August '19 levels. So we believe that's turned the corner. Interestingly enough, this was a June granting. We've made big changes still in July and August to further reduce our risk. So we expect that 7.6% to lower in the next couple of months. A big focus on collections, because that's the other side. A client is under stress, I do make certain that you work with the client. We've increased our treatment channels. You're making certain that you can be treated, not only with our agents phoning yourself. So there's WhatsApp, there's SMSes. In-app, you can look at treatments. And then also involving the branches. Interesting, because they know where the clients are and it's interesting, the stats that we looked yesterday at the credit committee is, whoever used the branches, the success rate is about 61% compared to all the other channels at 20%. So you can really see a strong focus on the different channels. We brought in a rewarding system. So if you do a full catch-up, you can get up to a ZAR 500 discount if you repay in that 6-month period. So rewarding the client for the right behavior. We've increased our number of call center agents. We've brought in another 40, 50 people to help us through this period, and we've increased the number of treatments that we offer our clients. So you can see rescheduling -- if you compare August '21, 6.1%, and now to 6.7%. There will be an increase because your book of Stage 2 and 3 has increased, so you will see more treatments and then it will normalize over time. Here's our expected credit loss coverage ratio, ECL. You can see a very -- and this is retail and what I showed previously was Group. It's gone up from 23.5% to 24.5%. So a very big coverage ratio. So we're very happy with our coverage ratio and how prudent we are. The question everyone is asking again, as we turn the corner, I think those last 2 bullets actually shows that in our roll from 2 to 3 -- stage 2 to 3, that has dropped 35% from ZAR 2.8 billion to ZAR 1.8 billion. So there is a ZAR 1 billion drop, lesser people going to Stage 3. So there is a big improvement coming through if I look at quarter 1 versus quarter 2. And then our provisioning, how did we provide. You can see there is a drop from ZAR 2.4 billion to ZAR 2.2 billion. So we believe, given our cutbacks in our granting, our collection strategies that we implemented, we will start normalizing in the next 6 months, which will drive a positive impact on our results. Business banking; I think if I look at business banking, we've actually rebuilt everything in the Old Mercantile. Somebody asked me this morning -- one of the new media people asked me, should we call it now Capitec Business? And I said, for sure, it's Capitec Business. Mercantile is dead. So we built a completely new online banking platform, so online, where the client can go online and on the Internet, have good -- full access to his client base. If you go on to the Capitec app now, you can actually choose either personal or retail, and it's just swipe left, swipe right. We've opened in August a record 4,500 new clients, but for us, more importantly, is 40% of those clients were opened remotely. The sole props, and if you -- simplistic company with, let's say, one Director, we can open you remotely. And that whole online opening of account is now on average about 30 minutes. The average in the market is more like 3, 4, 5 days. So I think it's remarkable that we can open up an account in 30 minutes. So we still need to get that down. [ Cole ] said to me the quickest time that they had was 4 minutes. So that's what we're aiming for. We've basically re-platformed our systems, moved everything to AWS to give us scalability. And then we've implemented Salesforce and nCino right through the business banking to be able to give us that scaling opportunity. So where are we? We've implemented all the systems, it's the whole thing. If you've got 4, 5 systems talking to each other, there is always a glitch here and there, we're making certain all those glitches are sorted out. We need to handle the volumes over the November-December period and then from next year that's a big focus for us to drive Business Banking going forward. What was the performance of Business Banking? They grew 20%, and net profit of ZAR 242 million. So very strong growth. Active clients grew over 14%. Loan sales and disbursements up 16% to ZAR 37 billion. Our book has grown to ZAR 16 billion and our transaction income has grown by 5%. Now everyone is asking why is retail growing with 24% and Business Bank with 5%, and it's purely that we've moved our merchant base from a rental model to a buying model. In the past, we would rent a machine out for ZAR 400, ZAR 450 per month. Now the person buys it outright from us between ZAR 1,000 and ZAR 3,000, and then operates from there on. So it's a much better client-centric model, and that had a big impact on our transactional income. And then if I look at impairments, up with ZAR 165 million. The biggest driver there was rental finance, up ZAR 32 million and that's a small business, renting a fax machine -- not a fax machine, that's old time. Printers et cetera, et cetera. We've seen stress there, we've cut back, and we're quite happy where we are there. And then if you grow your book, you will see the upfront provisioning that we need to bring in, was equivalent to ZAR 41 million. And then we see a major change from mortgages to overdrafts coming through in the book. Actually for me the surprise there was, 1 or 2 people have fallen over, but I think overall the business bank book and our businesses are very resilient and it's actually operating very strongly. And that's actually -- I think the one message in South Africa, people ask me what is happening in South Africa. I think the client has seen stress, but the stress is starting to come -- starting to get lower, but the businesses overall, they've made a plan and they are coming through in these difficult times. So we're very excited about the old business bank and where that is going. Everyone always ask me about OpEx, where is OpEx going, where we are spending our money. So I'm trying to answer that question. If you look at our OpEx, up 14% to ZAR 6.6 billion. So if you just multiply that by 2, we're talking here ZAR 13 billion that we're going to spend on OpEx. 54% of that is salaries. So there is a big component into salaries that's going through. But you can see salaries, up 11% -- salary increase is 5%, 6%. If you look at IT-related, that's 36%. So there is a massive increase in the IT side. And then premises, gone up with 13%. If you look at that premises, it's our expansion of our branch network and upgrading of our branch network. Interestingly, we've opened about 10 branches in the last 6 months and we're planning to open up another 14 branches. We've got about 80 branches as what we call deep breath. So they are under tremendous strain and we need to create capacity for those branches. So we actually stream up, where everyone is closing branches, we are still looking at branches and say, we believe it's an important part of our future, it's an important part of our sales channels. So you can clearly see how that has increased. And I think the very important thing is, all our branches are now on lithium batteries. If we go to a Stage 6, we can operate properly in our branches with our ATMs, and we can clearly see the income streams that we're getting from that. So overall, our expense is at 14%. I think everyone is asking where is the IT side going through, and that's a little bit of what I'll call our investment in the future, because if you look at our IT spend, basically for the last 4, 5 years, it has gone up with, round about 30%. You can see what's happening on the salary side, you can see what's happening on the other. And then a new one that's coming through is cloud, how we're switching to cloud. If I look at the company, everyone always asks legacy systems. I think that's a big word, and we deliberately, about a year, year and a half ago said to ourselves, we need to make certain that we haven't got legacy systems and we're switching all of our infrastructure -- we're switching to cloud, Salesforce, Microsoft, SAP. So our client interaction, we will own and we will manage ourselves, but all of the rest we are outsourcing to the base now in the world, making certain that we are agile and that we can scale going forward in the future. Where are we with cloud? We've now migrated about 75% of our data to cloud. We should be completed 100% by February next year. Our banking app is -- and Business Bank is completely in the cloud. Payments channels are moving by February '24. So by about February -- October, November next year, we will basically -- everything that should be in the cloud will be in the cloud. That will be about 80% of our systems, and Salesforce will be implemented then throughout the whole business. Business bankings are running on Salesforce. BAC is about 40% now in Salesforce. We will complete that whole rollout into the BAC side. So I'm looking forward to the journey and making certain that we can handle the volumes and then we are scalable and we are flexible to deliver on the client needs. Future focus, what are we doing about the future? Now we thought long and hard, and Francois came up with actually 3 rugby balls, because it's Rugby World Cup. So we will unpack it from there. I think the most important thing is the 21 million clients. I've shown you the power of that 21 million clients, but it's how do you optimize that 21 million clients, how do you make certain that we create value to ourselves. How do we grow that client base? The 866 branches, we just see everywhere we -- how important is that selling capability of our branches. It's plus minus about 10,000 consultants that can sell a product. And we can see, whenever we put that product in a market, they understand how that product was actually scaling. And what has happened quite a lot with our call centers and our chat centers now, 24% of our calls coming in is now on chat, so you don't talk to a human, you are talking to a chat. So that whole ability to chat to clients has just improved tremendously. If I look at what we're building around of that is our technology and cloud, I explained it previously. And then how do you -- we're going to sit [ November ] February with all our data in the cloud, and that gives us a massive amount of agility to better understand our client and offer better value to our clients. And the challenge is actually, how do we actually become a data company going forward? Then we're sitting with GlobalOne and personal banking and business banking. I think importantly, if I look at GlobalOne, full-service banking for all. We offer the full product range. The only one that we've not offered is secured vehicles. But every other product that we believe is valuable for a client, we are offering and vehicles will come over time. We're the leading digital bank. Payments is for us extremely important and you've seen how we're innovative with Garmin Pay, Google Pay, Apple Pay, Samsung Pay. I can't remember when last did I actually had cash in my wallet. I feel sorry when I go to a car guard and I'm trying to give him a -- pay him on the cell phone or send him a voucher, starting to change that behavior. And then we've created a self-service credit. So you can actually now go into the app and actually get your credit and you don't need to interact with anyone. Business Banking, a single solution for Business Banking, but we have a very strong relationship suite that we've built that you've got -- basically you've got a banker 24 hours available to yourselves. And then the other companies that is lying also -- or divisions that's lying under Business Bank, rental and finance and payments and ForEx. I think on top of that is Insure. We've got credit life and funeral, and then there is definitely looking at future products that we will definitely put on to our license from early next year. And then the areas that we are focusing on, and I think you have seen the results coming through, is Live Better Rewards, Capitec Connect, Partners on VAS, creating that financial ecosystem for the clients to support them. So I really believe what we're building in the next 4, 5, 6 years is helping people to live better through a simplified personal business banking, insurance and value-added service. So I'm very optimistic, I'm positive about the future. It's the one thing I've learned, if you are negative you can't see opportunities. I think we've got a bunch of people that just see opportunities in this and we're growing the business. The one thing I forgot is our fundamentals of simplicity, affordability, accessible and personal service, just bringing back that whole client experience. From my side, thank you very much. We'll open up now to questions. So Anton, so I'm going to leave it to you. If there's any questions that's come through, then Grant or myself will answer the questions.

I've got one question at the moment from -- or 2 questions from Harry Botha of Anchor. The first one is to speak about the credit impairment trends in the retail bank by client income category?

It's the normal situation, where you're sitting in -- your lower incomes are taking the most strain, inflation and petrol has got the major impact on people earning less than ZAR 10,000. That's also where we cut back the most, on your lower income people. And then if you look at businesses, the area that we've cut back is the small businesses. If you are the medium-sized business, you typically sit in that [ bolt-on ] shop around the corner. They are struggling in these particular times. So we've seen very strong strain in that really small businesses with 2 or 3 people. But on income levels, it's predominantly on the lower end. And then on the top end -- it's the one concern for me in South Africa is that people are not disciplined enough and they are not living within their needs and they want to keep up with the challenges. And I think that's a culture thing that we also need to create. It's not only a credit thing, it's that whole thing that we all take ownership of our future and that we are tightening. But predominantly in those areas that I've mentioned.

Thanks, Gerrie. And there's another question from Harry. Can you provide any color on the opportunities other than the Business Bank that you're looking at to deploy excess capital?

Well, there is opportunities. We need to pay Sanlam somewhere. There is the whole Business Banking and then there is 2 or 3 other opportunities that I can't talk about now. But we're not worried about the 36% -- 37%. For us it's a positive thing. It gives us that opportunity to be conservative. It helped us through difficult times. If I just look at COVID, the whole Viceroy saga, it just shows us how conservative it is and how resilient we were through these periods. But yes, we need to pay Sanlam and there's big opportunities in the Business Banking side. If you're looking at a ZAR 16 billion book, it's half a share -- it's not even 1%. So how do you grow that? And we've built the platforms, we've built it to scale. So it's now go and scale it and do it.

We have got another question [ from Gerald, from Roy ]. We've seen strong growth in spending on IT infrastructure and scaling for the future. Please shed some light on the refreshing cycle, constantly replacing or upgrading IT equipment due to wear and tear, obsolescence and to keep up with technological advancements?

Well, I think that's the whole purpose of the presentation. Where I have shown is that we've relooked at all our IT side and we've basically come up and said, we are replacing everything and made it completely new, taking it to the cloud, using Salesforce, using the latest technology going forward. So this shows you that we do not -- we don't -- because it's interesting, everyone asked me about legacy. Legacy is like a new car that you buy. The moment it goes out is legacy, because a car within 6 months, that is new technology coming in. So you need to have a mindset to make certain that you are upgrading and keep abreast. And if you use outside companies like -- international companies, you are upgrading all the time. Then it's for us to make certain that on the client service side, we upgrade our front-ends and our apps and those things the whole time. So there is a massive drive to make certain that we don't [ build ] legacy and that we can scale.

Maybe just add to that. I mean, moving to the cloud removes the need to consistently invest in databases. So we will be moving to AWS and they have the latest technologies in place and you're consistently seeing that coming through by doing it.

And we've got a third question from [ Peter Cromberge ] who asks about, when Capitec is next likely to raise funding in the debt capital markets?

We have an issuance planned on November 26. And yes, it will be communicated further as we get closer to the date.

And looks like we've got one person that snuck in at the end there. Kurt Baldeo has said that, seeing that Capitec services 21 million active clients, which is roughly a third of South Africa. We currently have the least amount of employees of all the Big 5 banks, which causes issues. Is there any way that we will be able to deal with this in the future?

I didn't understand the question. Is he referring that we are servicing 21 million clients with 15,000?

Yes, correct. Yes.

Let's just -- making certain that our model is efficient and we can then reduce our transactional fees. If you go and look at everything we're doing, we are 30%, 40%, 50% lower than the market, and it's just our model that's completely different. So we definitely are saying, how do we service the market and how do we create value for the client. It's not for us the number of people you need to employ, but to increase your base, and how do you use technology to create better value for our client base.

That's all the questions. Thanks very much.

Thank you.