- Capitec has revised its expected headline earnings and earnings per share declines from 70% to anything between 78% and 82%.
- This will make Capitec the second biggest loser in terms of earnings declines after Absa.
- The bank will detail what contributed to the declines on 30 September.
Capitec is now warning that it will post much bigger profit declines than it initially forecasted in July with both headline earnings per share and earnings per share set to plummet by as much as 82%.
The country's largest bank by customer numbers warned early in July that the lockdown had increased credit impairments and some consumers were unable to service their debts. On the other hand, social distancing which prevented people from transacting frequently or visiting bank branches as usual before Covid-19 saw the bank collect lower bank charges and sell fewer loan products.
As a result, between March and May, Capitec incurred a loss of R404 million for the quarter. At the time, Capitec's credit impairment charge was already 145% higher than its expectation.
In Monday's trading update, Capitec said now that it is busy finalising results for its half year ended on 31 August, there is "...a reasonable degree of certainty" that the earnings will decline by more than the 70% it forecasted in July."
The bank expects headline earnings per share to be between R458.10 and R559.90 per share. This would represent a decrease of between 82% and 78% compared to August 2019. Earnings per share will also decrease by between 78% and 82%.
Capitec, whose shares are down more than 40% this year, will detail what contributed to the additional declines on 30 September when it presents its interim results.
All big banks that have reported their results had recorded more than double the credit impairments they had in the first half of 2019. Capitec's expected declines are however still better than Absa's which reported a 93% drop in headline earnings last month after choosing to make credit impairment provisions for the rest of 2020 upfront.