Executive Summary

·        In this report, we will look at the full year 2025 results:

o   Headline earnings leaped 30% to reach a record high of R13.7 billion.

o   Net interest income increased by 23% to R20.2 billion, up from R16.5 billion.

o   Net interest income after credit impairments increased by 54% to R11.9 billion and contributed R2.7 billion to headline earnings growth for the year.

o   Gross loans and advances grew by 12% to R116 billion with business banking growing by 22% and the private banking sector by a lower 7%.

o   Net non-interest income increased by 22% to R23.9 billion. Net transaction and commission income, including VAS and Capitec Connect, increased by 25% to R18.5 billion, accounting for 78% of net non-income (FY2024: 76%). Digital transactions and card payments accounted for 90% of transaction volumes and grew by 17% and 20%, respectively.

o   Credit impairments decreased by 5% to R8.3 billion, despite the inclusion amount of R830 million of credit impairments from AvaFin.

o   Operating expenses increased by 30% to R18 billion, of which 7% is attributable to the inclusion of AvaFin, 9% to increased employee incentives from higher earnings growth, 8% due to higher employee headcount, and 6% from employee increases.

·      Capitec’s results showcase the continued growth in market share, with a 24 million active client base and growth in sectors across the board, reaffirming the investment case. The company outlook remains positive, with possibilities in new revenue from the current client base and additional services to gain further market share.

·      The intrinsic value has increased by 8% from R2 890 to R3 110 with earnings anticipated to grow by 14% for FY26. The P:E ratio in the base case remains unchanged with a positive outlook for consumers on a lower interest rate environment and no VAT hike taking effect, but global economic uncertainty around tariffs and the effect on the local economy remain a concern.

Analyst thesis

•   A risk to the investment case is the expectation that the historical high growth rate will be maintained with a diminishing untapped market share that can still be captured. To maintain the status of a high-quality bank, Capitec needs to seek future growth from alternative products and services that can be provided to the current client base as an add-on service.   
•   Capitec stands out as a peer-leading bank, with a ROE of 29% reported in FY25 (10-year avg: 25%) and a 5-year EPS CAGR of 17%. Its strong, stable profitability, expanding client base, and growth in banking, insurance, and potential new verticals support a compelling outlook for sustained, above-peer growth.
•   We view the active client base of 24 million as an asset for add-on services to the current offered banking suite to stimulate future growth and to improve profitability with economies of scale. 

Results

Valuation

Table 3: Valuation

 

Source: PSG Wealth research team