The country’s largest retail bank by customer numbers, Capitec, last month reported that its net transaction income crossed the R10 billion mark for the first time. This is the income from fees charged to banking clients, with the retail bank reporting a 21% increase in net transaction income to R9.8 billion. The remainder will be from its business bank (formerly Mercantile Bank).
Previously the bank highlighted its progress in ensuring that an increasingly greater portion of its operating expenses would be covered by net transaction income. Five years ago (for FY2018), these comprised 81% of the bank’s operating expenses. For the most recent financial year (to end February 2022), this number was 92%. However, it now includes income from the sale of funeral plans (R906 million) as well as net foreign currency income (R144 million, from its associate Cream Finance).
This effectively means it is able to cover almost all its operating expenses without its profits from lending.
Net transaction income (including funeral plans and foreign currency income) is now 49% of total income, from 41% five years ago.
For the first time, the bank disclosed how it has successfully managed to grow its average income per client per month. Five years ago, the bank would’ve been netting an average of R43 in fees from each customer. Fast forward to 2022 and that figure has grown to R48 (on average) per client.
Over the same period, its number of customers grew by 82% – from 9.9 million to 18 million.
Its monthly administration fee is R6.50, meaning the average customer is doing a lot of transactions each month (to average out at R48).
Comparison with other banks
How does the average transaction fee at Capitec compare with income from anything other than lending at other retail banking rivals?
|Banks||Non-interest revenue||Number of customers||Average income per customer per month|
|Capitec Bank (transaction income only)||R10.515 billion||18 million||R48|
|Capitec Bank, incl loan fees, insurance, funeral plan||R13.876 billion||18 million||R64|
|FNB||R9.829 billion1||13.63 million||R120|
|FNB, excl eWallet||R9.829 billion1||7.68 million2||R213|
|Absa||R19.97 billion||9.6 million||R173|
|Nedbank||R12.783 billion||6.5 million3||R164|
|Standard Bank (SA)4||R12.905 billion4||10.179 million4||R106|
2 Excluding commercial customers
4 For Consumer & High-Net-Worth (South Africa) segment
It is clear that full-service banks will have higher non-lending income for a multitude of reasons.
First, the so-called ‘big four’ full-service banks have pushed hard to ensure that they continue to move retail customers onto bundled pricing options which tend to be clustered around the R110, R200 and R400 a month mark for accounts targeting middle- to higher-income clients.
ALSO READ: ‘Remarkable’ Capitec gaining 200,000 customers a month
These banks also charge higher-margin monthly fees on their lending products. In most cases, this monthly service fee is as high as R69 – the maximum amount under the National Credit Act. This is not strictly ‘transaction income’ but is categorised by the full-service banks as “non-interest revenue”.
In Capitec’s case, it would therefore be fair to include loan fee income and net insurance income as well as funeral plan income because the other banks include all these types of income in their non-interest revenue lines.
This would mean Capitec Bank’s average income per client per month (excluding only interest income) would be around R64 – significantly higher than the R48 it derives from transactions only.
It must also be noted that because WesBank is operated separately from FNB at FirstRand, its non-interest income on vehicle and asset finance is excluded from the above comparison.
One trend that is clear from the above is that FNB’s average non-interest income per customer per month is dragged down significantly by the 5.95 million eWallet customers it has.
Because of how the bank discloses its segments, one can see this impact. One can consequently derive that Standard Bank’s InstantMoney users have a similar impact on its average.
This article first appeared on Moneyweb and was republished with permission. Read the original article here.