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

Good morning, ladies and gentlemen. Welcome to the interim results presentation. Please put your hands together for our CEO, Gerrie Fourie.

Good morning, ladies and gentlemen. It's for me, a great privilege to present our results to ourselves. I think everyone by now knows that our earnings has grown with 36%. And I don't think there's a lot of companies in South Africa that can say they've grown about 36%. We can be extremely proud of what we've achieved. But if I actually look at the results and where we are, I actually look at the last 5 years, and we all know we had COVID and we had a world recession or uncertainty. But what we've actually done is in those uncertain times to really invest. So we've invested close to ZAR 7 billion to make certain that we can grow, we invest for the future. And we've changed our business model. The business model was be a retail banking or personal banking, and then we changed it to our whole financial services company, a company that's actually now really servicing the needs of all our clients. And that's what I want to share with yourself today. I think if we look at -- in this perspective, what has happened over the last 5 years, if I look at the economy, 2019, fairly stable, inflation was low, interest rates were low and everything was fine. And then March 2020, all hell breaks loose. COVID happened, massive uncertainty. I was chatting to somebody yesterday about COVID, what happened the decisions we've made, how uncertain you were, et cetera. I think the big thing at globally, it was very uncertain. Nobody knows exactly what's going to happen. And then you said the after effects, the shocks of COVID, you had massive high inflation, massive high interest rates, you had the Russian-Ukraine war taking place. You had the Middle East taking place, Israel taking place. So there was a massive amount of uncertainty. And then looking at this year, and you're really sitting at this year where you start feeling positive. We've got the government of National Unity, optimism coming through on what we can achieve in South Africa, if we work together and we focus on growth. And we're starting to see inflation coming down. I looked at the production price index, now at 2% lowest in many years that will show us inflation will come down and we've seen the first cut in interest rates coming down. So it was an interesting year. I think that graph clearly shows that we are basically back at 2019, but still slightly below 2019. But what have we done? If we look at 2019, we had 12.6 million clients. We had a transactional platform. We basically had our app, EFT transactions and card transactions taken place. Credit, we have term loans and credit card that's all we had, Insure we had ourselves with Guardrisk can Sanlam. And then I'll say, we had a Flexi and fixed-term savings. That was our business model, very simplistic, very straightforward. What have we done? If you look at the next slide, you can really understand what we've done in the company in the last 5 years. If I look at -- suddenly, we've got 23 million clients. We've got payments. And payments has now got QR payments, that's got PayShap, got Capitec Pay. It's got wallet payments. And the whole payment landscape has changed completely. We've brought business banking. We've rebranded business banking, give it new systems, et cetera. Our credit offering is now term loans, credit card, access facility, purpose loans, a partnership of SA Home Loans. So the credit offering has changed completely. VAS, value-added services, our vouchers, our airtime, our electricity a whole new -- game plan that's come through. Insure. We all know by now we've had our own insurance license, and we're busy putting everything on to our own insurance license. Connect. We suddenly now got going in MVNO with Cell C. And we're actually exciting to really make inroads in the mobile space. And then you're sitting with Avafin, our latest acquisition. So really, if you look at what has happened in the landscape. The landscape has changed and we're offering full value to our client base. How did we accomplish this? Question, I think we all need to ask and say, how did it happen? I think the first thing we've done is I know [indiscernible] sitting in front of me, he always -- as I said to him, we've got legacy systems, he hated that question. And we really challenged ourselves and say what is happening with our systems because all our people were actually building systems instead of building products. So what we've done is said, let's go and get the best in class, and you can see what we've done. We brought in AWS now from the 1st of September, all our data is on AWS. We brought in Amazon Connect and what is so important with Amazon Connect, it's our telephone system taking over telephone system, but that is really integrated with Salesforce, where you can then take and bring in all client history. All conversations taking place with the client is coming into your client history and we can fully understand our clients. Then you're sitting with Salesforce, we're busy now currently what we see at retail where we completed by Feb, with Microsoft company, and then everything is on SAP. What does that enable? That enabled us to really take on IT people to say, yes, your core systems that the bank runs on, but then let's go and focus on our products. And I think the one thing that will stand out if we go through the whole presentation is the number of product services that we've added to enhance the client needs of our clients. I think at the moment, the major important thing is our capability to have data and machine learning and AI to really understand our client. We're sitting with over 2.5 trillion data points that we can really analyze and really understand our client basis. And I think the most important thing is we're now on decision-making, we are 80% faster and quicker because we can get our information and we really can make decisions and be agile delivering on the client needs. That's the result of the last 6 months, given what we've done. The product what we've brought and the way we've diversified. You can see August '23, we had profit ZAR 4.6 billion -- ZAR 4.7 billion up to ZAR 6.4 billion, so ZAR 1.8 billion higher, growth of 36%. I think what is quite scary as you look at 2019, we made -- make ZAR 3 billion. So we're higher than -- more than double in a 5-year period. And I think we can be proud of what we've achieved in that particular space. Where is that coming from? I think there's the income statement. We've excluded Avafin here. So this is only as the Capitec that we know and you can see credit impairments is down ZAR 1 billion with 22% or from ZAR 4.7 billion to ZAR 3.7 billion. Remember, last year, August, we had a height of our highest impairments, given what we've experienced in the economy. Then our transactional VAS up 29%, ZAR 2 billion up on our transactional income and on our VAS products. Operating expenses up 24%. As everyone knows, our share price has gone up. Our share price has basically doubled in the last year, and so your share appreciation rights went up, your bonuses has gone up, we'll be happy with that. And we've appointed another 600, 700 people over this period, quite scary. Over this period of 12 months, we've appointed another 700 people in the bank of which the majority is IT and data people. And then the other one is just tax. Now that we've moved away from a sell to our own license, what is happening is on sell, your tax is actually at the bottom end with your credit income or your insurance income now it's actually moved down. So that's the 35%. And then if you take Avafin into consideration, we're growing with 36% Avafin contributing just over ZAR 60 million to our bottom line. So it's a good -- give you a good feeling of what we have done. I think if we look at our ratios, things that stands out for me. I think the one in the middle -- middle top is the big one, annualized credit loss ratio. You can see August '23, we were at 9.6%. We've dropped that with 2%. If you look at business bank at 1.8% and now retail or personal banking at 8.3%. So we're quite happy with where we are on the credit cycle. Then the other important one is that your other income, not credit income is 67%. It averages around about 70% of all our income is now coming from other income, transactional income, VAS, et cetera, et cetera, coming through. You can see our banking apps up because that's one way we drive the digital adoption up to 12.4 million clients that's using our app currently actively. And then our return on equity at 29%. As you all know, we're targeting 25%. So we'll have to work a little bit to see how do we get it back to 25%. But I think we can be very proud to say it's at 29%. Let's unpack our income statement and see where our income is coming from. I think if you look at Personal Banking, the contribution of that is ZAR 4.6 billion, that's coming through from personal banking. Interesting, if you look at VAS in red, it's ZAR 1.1 billion up to ZAR 2 billion, so about a ZAR 900 million that's coming through from VAS. And you can see what's happening on the transactional income that's that light blue ZAR 5.3 billion to ZAR 6.4 billion, about ZAR 1.1 billion coming from our transactional income. And that's coming through from our clients, that's actually transacting. Then we're sitting with business banking. You can see how strongly the credit side is growing as we expected. So we're quite pleased with that in line with our expectations. And then the transactional side dropping because remember, their prices were at ZAR 5 a transaction. We dropped it from the first of March to ZAR 1 a transaction. And we've cut, and I'll unpack it later on in the merchant services. We've got a completely new pricing strategy. So that's why they're basically flat on the transactional side. And then our insurance business contributing just over ZAR 1.5 billion to the bottom line, very strong growth in the funeral space, and the credit flat or a little bit down in line with what we've done in the credit space. So that gives you a feeling of the contribution. So I'm extremely excited about insurance and business banking that we really can start growing in that particular space going forward. Personal Banking. Remember now, now I'm just looking at Personal Banking. So you can -- if you look at 23 million clients, this is 22.8. So you can work out what is business banking client base. I think a couple of things that stand out. The first one is I always say the 22.8 is our potential because that's clients, that's active. We're earning an income of it, but the real client that's adding value to our bottom line is our banking clients, people that deposit their salary with ourselves and that's moved from 7.5 million to 8.5 million. So 1 million clients has actually joined us in the last year and then digital. Our total digital offer has grown from 11.7 million to 13.7 million clients. You can see that graph going up, growing very strongly. I think the interesting slide is this slide. What does our clients look like? What is the age brackets? And you can see 1.8 million clients is under the age of 20 or 19, sorry, 9.6 million clients is between 20 and 35 and then 36 to 60 is 9.2 million lines and then 2.2 million clients is over 60. What is actually interesting and working last night on the slides, I asked what is our market share on these different age groups. And I think that's the area we need to be extremely proud of because we're sitting with 8.5% in the young age bracket. But if I look at the 20 to 35, we've got a 53.6% market share. So if you walk in South Africa and you look at people between 20 and 60, we're roughly sitting with 50% of those people has got a global 1 bank account in their pocket. So I think that is -- and then if you look at over 60 because that's a market that we didn't focus in the beginning. Our focus has always been 20 to 35. You can see what's happened there. We've got 36% market share in that category. The question now is, again, how do we get them to bank with ourselves and to fully use a full product range. Credit. Normally for the last 4 years, when I had to present, I really artistic about credit. And I'm going to package credit, the slides I've got 3 or 4 slides on credit because credit was performing well. Maybe just perspective, if I look at the red line is what the NCR has done. So that's all the credit providers that provide information to the credit bureaus. You can see 45, 43, 41, basically in the last 2, 3 years slightly down, but I would say flattish. But what have we done? We opened up, you can see that 12.4 million. We've opened up. We were positive just before the Ukraine and Russia war. We didn't know about the Russia-Ukraine war, they didn't inform us beforehand. So we made the decision to open up. And you can see what we've done then we've pulled back. And you can see we've pulled back about 28% in the market and we put a tremendous amount of focus on the collection side to make certain that we could collect better. We put in a new collection system. And if I look at reschedules, we bought out new reschedules to really help us clients through this difficult time. The one that we always talk about is debt review. We believe there is a place for debt review, but a lot of people are going under debt review that shouldn't go under debt review and they don't understand the consequences of debt review. We put a tremendous amount of focus on education and pre-delinquency campaigns on it. And you can see at the bottom, we've actually brought rescheduling or alternative treatments into our app. So it's easier for the clients to be treated by ourselves. We know the client the best. And you can see how the debt review figures has actually come down. There's a credit loss ratio. We've said that when we did the results in February, we want to be at 8.5% because that's through the cycle. That's what we're aiming for. We came in 8.3%. And you can see it's starting to stabilize. So we're quite happy with the way we have handled the crisis. We're happy with how agile it was, how quickly we moved. And I think we can -- we're fairly happy with the result. What is happening now? I know the question that Anton is going to ask, are you going to open up. So yes, basically, what you can see is the dotted lines '23, we're cap out was, how did we provide credit. And then you can see '24. You can see it's about ZAR 300 million, ZAR 400 million down. It's that 28%, that is down. And then you can see -- and what we've done now is actually to open up worth August being at ZAR 4.5 billion, one of our highest figures ever because we believe there is opportunities given what we've seen with inflation with the government actions taking place. So we're opening up in the credit space. Where is our big focus on credit, 3 particular areas or 4 areas. The first 1 is our credit card. We've got about 8% to 9% market share. We believe we need to go to a 15%, even at 20% market share. So you can see we've had a 55% increase over the last 2 years. Big focus on people over 25. So there will be a big focus for us. How do we actually create better rewards, better credit card and attracting more clients to use our credit card offer. Then on purpose lending, which consists basically of vehicles, building and education. You can see the very strong growth. We financed now in the last year, 1.5 years just close to 890 vehicles that we've financed. We see big opportunities on that. Education was launched here in about January, February. And the majority of people actually take education loans here in October, November, before they go to. So it's going to be interesting to see what happens in this coming year. I think the other one that I think it's important to note is that we did our Capitec home loans through SA Home Loans, balance sheet of ZAR 3 billion. We've just approved SPV with SA Home Loans of ZAR 5 billion to enhance our offering in our home loans space. So we believe there's opportunities in the home loan space, and I think that's going to be exciting where we can really grow our book in the home loan space. And then on the digital side, on the app side and why this is important is remember that 8.5 million clients that is actually banking with ourselves, we've got all their data. Why do you have to do a credit application, you can just go into an app. We preapprove you and you can get your credit whenever you want. So that gives us the capability of optimizing our client base. Net transaction income. I've already said that our net transaction income has grown with ZAR 1.1 billion to ZAR 6.5 billion. But our #1 enemy is cash. And why is it our #1 enemy? Because when you withdraw ZAR 1,000, I don't know what you've done with the ZAR 1,000. But the moment you are doing a transaction by swiping I know exactly where you spend it, and I can really -- we can then assist you in making better decisions. So what is interesting if I look at our cash and branch transactions is now only 11% of all our transactions that we're doing. So in branch and also cash. So it's only 11%. It was 13% a year ago. So a big focus on payments. And if we actually unpack that, you can see what is happening on the cash and the branch side. Only 320 million transactions taking place on the cash and branch side. And if you look at our cost side, still the biggest 1.3 billion transactions that's actually taking place in the card space. So card is still predominantly the biggest area. You can see card-not-present the red, how that has grown, where people are starting to buy online and working from that particular area on. So very strong growth there. And then look at the other 2 areas that we're working very hard on is on PayShap and pay through cell. Both for them, you enter a cellphone number and with the cellphone number, you do a payment immediately. It's on the EFT rules. So it's not on a Guardrisk. And immediately, it's much cheaper, giving value to our clients and you can see how strong that has grown. And I think everyone knows with Capitec Pay, the success we've achieved perfect by Capitec Pay moving close to ZAR 100 million transactions on Capitec Pay. If I look at strategic initiatives, I think the nice story where we've grown. You can see on prepaid, prepaid electricity and data. We've grown with 14% send cash where people can send cash to PEP Ackermans, Pick n Pay and our branches at ATMs. That's currently 66%. Our voucher business has grown exceptionally well, and then you can see bulk payments, Lotto and Showmax growing. Just interesting, if you look at airtime, we've got now 40% market share in that space. So whenever somebody pays for data or prepaid 40% of those transactions is coming through the Capitec client base. Electricity, 24%. Vehicle license disc renewal 15%. It's interesting. We got 75,000 people that actually renewed their licenses. And it's so easy. It's 2 clicks and you've got your license in your hand. And then the one that I'm excited about is DStv Stream. We're launching that in October, where I don't have to buy the old DStv package that monthly fee of ZAR 1,000. I can go in and whatever I want. I'm in control. I can pay for what I want to watch, and I think that's going to be quite exciting, creating value to our clients. Capitec Connect, it's quite interesting. Everyone was saying to us what's happening in that space. You can see now the income has gone up from ZAR 4 million to ZAR 69 million. You can see the strong growth in 1 year. I think the important thing is what we've done is to increase our product offering. We used to have 1 gig at ZAR 45 non-expiry. Now we've got expiry and non-expiry. And you can see at the different bundles that we've created where a person can buy data for 1 day, 7 days, 30 days, and you look -- and look at those prices, how competitive that pricing is, we're about 30%, 40% lower than the market. The market loves promotions. We like transparency and simplicity. You see what you get, you know that's what you're getting and you get the best price overall. And we've got 1.2 million active -- some users of which 50% was generating revenue in the last 30 days. This is the graph that I like. A terabyte is 1 million gigabytes. So that gives you the indication, but that still means nothing that's still petabyte, sorry, that's -- this still means nothing to me. So I said to the marketing people, give me something that I can work with, and that's when they came out, that 5 petabytes is equal to streaming 1.7 million Rugby games. So I think we -- on Saturday, we were very close on a big portion of the Rugby that was streamed was coming through our data. So I'm excited about connect and the route that's going. And remember, we always said the thing about that petabytes, the 5 petabytes is the date that we've got that we can again enhance on our client offering. Savings, strong growth in the savings side, 9%, in line with the market, but we've launched in July the 7-day notice product and the 32-day notice product, and we've got ZAR 1.2 billion until the end of August. And if I look at September's figure, we were -- yesterday afternoon at ZAR 2.4 billion. So we've basically doubled that number in basically 1 month. And it just puts the client in control where you can get a higher interest rate, and you've got the ability to give notice in 7 days or in 32 days. Insurance, growing our insurance income were 14%, contributing 11% to our total income. That's -- that the group has generated. I think that's a scary number of how many lives that we insured, just over ZAR 400 billion of lives that we actually insured are we covering in South Africa. It's up 25%. And I think if you look at our funeral performance indicators, what we've done in that particular space, if you look at the sum assured 36% market share in South Africa on sum assured in funeral. And we're sitting with active policies about ZAR 3 million, but recovering about 13.6 million lives. It's a scary number. 13.6 million lives in South Africa, we cover with our insurance both and what is actually interesting that's happening is on the app side, we're always were about 18%, 19% of sales were through the app. Since we've launched life, a bigger take up on the app and you can see our app sales is now at 25% of all sales is taking through the app. Our new product that we've launched in June, our Capitec Life cover, very simplistic, very straightforward, using all our data that we've got all our transactional data, our credit data plus all our funeral, data to optimize the client experience and value. What we've done is no annual price increases. So if you've got a cover for ZAR 100,000 or ZAR 200,000 a month, it will stay forever ZAR 200,000 because that covers the rand value that you've taken. You can see -- or I'll show you now the cover that we actually granting. You've got 7 simple health questions that you need to ask and no blood test. So you don't have to be scared of blood. Cover in less than 10 minutes. And then you can -- you can decide how it's actually getting paid out. And if you go to see out how it's actually getting paid out, there's 3 options. You can have a lump sum getting paid out to our yourself, you can have monthly going to your wife or your husband. And then you can also go through your children needs for their education, you can decide how you want that money to be paid out. So I think you get a lot of flexibility where you're in control where you can actually say how the money must be spend. And interesting, if you're looking at, we've launched it in June. We're sitting close to 40,000 policies. Average premium is ZAR 221 and our average sum assured is just over ZAR 500,000 that's coming through, and we've insured ZAR 21 billion. We're very optimistic about this product because we think it's very exciting and it's creating a lot of value, especially if you can combine life and funeral and you create it as a 1 policy. Business Bank. I think the first thing is our dream is always to create a business bank that's completely digital, completely relationship based, where at any moment, you can find your banker, and you can either chat to your banker telephonically or on teams or on WhatsApp, you can talk to your banker, but your banker is available, and that's what we've actually created. If I look at our business banking, we've rebranded in March. We've reduced our prices to the same levels as a retail, which is unheard of. So whatever retail client is paying a business banking is paying. And you could see in August, our loan disbursements was ZAR 1 billion. We've opened up 69,000 accounts and our deposit balance has grown with 21% to ZAR 5.2 billion. So very strong growth in the deposit space. If I Look at what has happened. I think the first thing I'm going to elaborate is when we rebranded new systems not working together, we had a difficult time during March, April and May with system stability that's been sorted out. The system is running quite smooth. We've got a client satisfaction score of 95%. But I think what is quite interesting. If you look at -- if somebody contacts us to open a bank account, where we took 4 hours to response, we're down to 2 hours, and I think we believe we can take it to 1 hour. And we open an account for yourself, if it's a sole or a private company average currently is 37 minutes to open a bank account or quickest that we've done was 4 minutes for sole prop and 7 minutes for a private company. That's also very unheard of that you can open up a business account within a couple of minutes, depending on your complexity to provide service. So we've seen business bank now is actually to start growing and developing it. And to support the growth, what we've done is we started with the merchant side, and the acquiring side, where we started to say, but let's disrupt the acquiring side, we've dropped our prices on our print and Pro machines to ZAR 999 and ZAR 499 from 1st of September. We said we will do it to the end of November, but when all probability is going to extend to later. And it's just remarkable because if I look at -- we've sold 5,000 machines in the first 10 days. We're selling it through remotely and in our branches. And it's interesting where we used to sell about 700 devices a month, we were averaging about 400, 500 devices a day. And if you look at our branches, the branches that are doing the best is that branches like [indiscernible] it's those rural branches that's done exceptionally well. We've also said, if I look at the commission right on merchants, as always being very secretive and the commission right between the banks and the merchant. Nobody knew exactly what that rate is. Typical Capitec, we said we need to be transparent. We need to be simplified. We must make certain that clients understand it. So we've dropped from the 1st of September our rights permanently to these rates and I'm even thinking of actually reducing it even further. And you can see what's happening, I've already spoken about our take up close to 11,000 merchants in the first month. We've got 30,000 merchants -- we had 30,000 merchants by end of August, and we're already sitting at 40,000. I'm guessing, by the end of the year, we'll probably be at about 70,000 to 80,000 merchants. The important thing here, again, you're making payments affordable, accessible and from payment side, then we can score and we can assist yourself. Then Avafin. If you look at Avafin, when they showed me this map, I said, we still got a long way to conquer the world, but we're on our journey. So you can see we've got spots here and there. But that's the first step into where we want to go. And close to 200,000 active clients. Interestingly, the disbursement of ZAR 156 million so multiply that by 20 to get to the real value. Remember, they are still giving predominantly 1-month loans at an interest rate of about 30% per month, where we were in 2001, 2002, they contributed 8% of the total group interest income. And you can see how it's actually split. Poland is the biggest with roughly about 50%. Spain and Mexico, the other big with Czech and Latvia still very small. So it's beginning phases. We're very excited. If you look at where we are definitely going is the Board has approved funding for Avafin. We're just waiting for Reserve Bank approval. So we'll start funding them to grow. And then to say, typically, what we've done in the Capitec story is how do you reduce prices? How do you extend the term and how do you penetrate that particular market. So we're quite excited about the Avafin story and where it fits into our long-term strategy. OpEx because everyone is going to ask me what about the 30% OpEx, we normally say around about 15%. Just remember, if you take Avafin and you take the share appreciation rights out, then we had a 14% growth as well as you've got that extra 800 people that we've employed, but it's quite interesting if you look at our investment, again, on the IT expenses, up from ZAR 1.3 billion to ZAR 1.7 billion. So it just shows again what we're doing on the IT side and then a very big focus on the people side. So I think it's an abnormal situation that we're sitting with a 30% growth. And you also got Avafin in it. We're can very comfortable believing in our future, believing and investing. I think that's the important aspect. Then everyone is going to ask me, what is the future? What is that looking like given what is happening in South Africa? I think if we look at the first thing is where our focus is how do we optimize the 23 million clients. How do we make certain the 23 million clients is stacking up the full product range that we're offering. What is our internal market share that we've got with our 23 million clients. The second big area that we've really started to work on now is on our ecosystem. How do you bring our 23 million clients to our business plans because if you really want to ask a business person, what -- how does he want to grow? There's 2 things. He wants credit and he wants clients. We've got credit -- we've got clients and we've got the appetite for credit. So how do we assist them to actually grow this particular business? And how do you create that ecosystem between business bank and insurance and VAS and personal banking. Then the heart of our business payments. How do we enhance our payment systems? How do we make it more acceptable? How do you create 1 button for our payments. And we actually say to the client which 1 is the best option for a client to actually pay. He doesn't need to worry about Capitec Pay, QR or wallet, we create and say to them. If you choose Capitec Pay, then we will direct you to the best option. So we can make that whole effort seamless and to make certain that we've got that cater coming through. Then if I look at where we are in insurance 1st of November, which is a month ago -- a month away, we need to move away from the Sanlam platform. Then we can really start saying, are we really going to grow the business banking and the insurance side? So that is our focus for next year is to say how do we really grow those businesses -- supporting those businesses and work those businesses. They integrate a single business platform. I think everyone has probably has heard. We've got 2 banking systems. We've got the business bank, bank system, and we've got a retail business bank system. We've got a call center for business bank. We've got a call center for retail. Why do we not have 1 service platform? In principle, we've approved it. Now it's a matter of going out there and go and deliver on that and making that client experience to so much more seamless because if you develop a product, you don't develop it for business banking and you develop it for retail, you develop 1 product, and that 1 product then goes to the full client base. The one that I'm excited about is data and AI, I see [indiscernible] in front of me is how do we actually optimize our data, how do we create one client domain that we really understand our client and really add value to our client. How do we understand our client experiences because each client has got different experiences, and it's got different product needs. How do we make certain that we fully understand it and that we create that value to our clients. So that will be a big focus especially now that all our data is on AWS. And then the long-term vision is to build a global brand. I think Capitec is strong enough. So for us that dream for the next 5 to 10 years is how do we build a global brand making certain that we take Capitec international. Thank you very much. Thanks for your contribution, and I'm going to switch over to questions.

We've got a few questions on the line. Jacob Martin asks around Avafin, it represents 9% of net interest income after credit impairments. This is only for 4 months. Would it be reasonable to imply that for a full 12-month period next year Avafin to represent more than 1/3 of net interest income after credit impairments for the group?

I'll probably say it will stay at about around 1%. You can add 1 month because remember, you had all other businesses over 6 months, this is 5. And then what is very important going forward, I'm talking going forward what are we going to do with pricing because we believe that pricing is too high and what do we do with funding. And that's going to have an effect on that contribution, but definitely not a third.

Great. Thank you. I think that answers the second question that you asked as well. Then going through to some questions from Charles Russell of SPG. This question is for Grant. Why is the forward macro looking macro increased by over ZAR 0.5 billion when all the macro indicators seem to be improving. And secondly, why is the coverage of loans strengthening when the macro is improving?

Yes. Thanks, Anton. So if you look at our access facility model. It was always built on what we call through-the-cycle, which uses a lot of historical data. The term loan model was built on what we call point in time, 12 months historical data, and we've now moved that to a through-the-cycle model where we look at much more historical data. Yes, 5 years. So effectively, what happens is given that we've had, let's say, a 12-month bad history that through-the-cycle provision, base provision is lower, but that just transfers into the forward looking. So the provision stays the same. It's just movement between the 2 equal and opposite. So if you take that adjustment out, the fly has actually dropped slightly from August last year, about ZAR 120 million.

Thanks, Grant. We've got a question from -- the second question, Craig.

So if we look at why the coverage has increased, previously, when we used to write a loan off, we looked at 2 criteria. It was either that a client missed 4 consecutive payments or when they went into handover, we gave the clients a score and if it was below that particular we wrote you off. Under IFRS 9, we write up a client when there's no reasonable expectation of recovery, and we consistently monitor this. In doing so, we've actually removed the handover score piece. So we now allow the true behavior to take place for the clients to miss 4 consecutive payments before we write them off. What's effectively happened yes, it means that we have ZAR 1.6 billion additional balances on balance sheet. And these are provided at sort of 96%, 97% and the majority sit within the greater than 3-month bucket, and that's really driven, let's say, the increase in coverage.

Great. Peter, a question from Peter Cromberge. Does Capitec have any appetite for acquisitions in support of its growth for business banking and new markets?

We've never been an acquisition company. We're a growing company, growing from ourselves. It was a big debate are we going to build or buy in business banking, then Mercantile came along. So our focus is we've got enough growing opportunities in South Africa and internationally. So I don't see acquisitions as a prime focus for us. But if something comes in, that's exciting, we'll definitely look at it.

And then a question for Grant around do we have any plans bond issuances in the DCM market in the short to medium term?

No, we're not looking at any -- for the remainder of the financial year. We're waiting for the Flac regulations to be finalized, and then we'll start looking at potential issuance of Flac.

And then we've got questions from Ross Krige. Would you mind expanding on the strategy for airtime advances and the size of the opportunity and the progress made?

Well, we just launched it -- there's a big need for clients to take airtime advances. I think I'm not going to elaborate on the opportunity going to look at MTN and Vodacom's income statements and see what they're doing on airtime advances. These advances is only purely on Capitec Connect. And over time, we'll bring out advances on all suppliers. We believe there's a massive opportunity.

And then in Business Banking, what type of clients we're having the most success with measured by client revenue levels?

If you look at the client base on the lending side is probably predominantly in the ZAR 20 million and higher that's driving the credit side at this stage. We've just started really focusing on the [ 7.5 million ] and lower. So I think you're going to see a switch in the next 2 years to your smaller guys. If I took out merchant loans, merchant loans was normally about ZAR 10 million a month. Last month, we've done close to ZAR 60 million. So I think that's going to go up to about ZAR 80 million, but it gives you -- it's a small base, but it's massive volumes, that's going to come through over time.

And then a question from Mark du Toit of Oyster Catcher Investments. When do you see your focus change from South African growth to international growth? And when -- in which country or all countries at once?

For me, it's not a question of focus. We've got a very good strong team in Avafin where we believe what we're doing. We are going to look at taking 4 or 5 of our young people across to learn and to experience what's happening in that particular space. Our predominant focus, and I've said it always, for the next 3 to 4 years of South Africa. We need to optimize strategic initiative, insurance, business banking, et cetera. But we slowly but surely so we're going to start building Avafin. We haven't much said which country. But I think if you look at Poland, Czech, Spain and Mexico. Any 1 of them are very exciting prospects to go into.

Thank you, Gerrie and Grant. No more questions.

Thank you very much.