16Integrated Annual Report 2016

Bank better,live better

01

05

09 10 11 12

06 07 08

02 03 04Approach tointegrated reportingPAGE 4

What doesCapitec look like?PAGE 6

Key PerformanceIndicators (KPIs)PAGE 8

What value doesCapitec create?PAGE 12

Context in whichwe operatePAGE 20

Chairman andCEO ReportPAGE 30

CFO ReportPAGE 36

Strategy and howwe leadPAGE 48

What is Capitecs integrated risk management process?PAGE 58

Our employeesPAGE 84

What is Capitecdoing to give back?PAGE 104

13GlossaryPAGE 183

What are thefinancial results?PAGE 112

01

05

09 10 11 12

06 07 08

02 03 04Approach tointegrated reportingPAGE 4

What doesCapitec look like?PAGE 6

Key PerformanceIndicators (KPIs)PAGE 8

What value doesCapitec create?PAGE 12

Context in whichwe operatePAGE 20

Chairman andCEO ReportPAGE 30

CFO ReportPAGE 36

Strategy and howwe leadPAGE 48

What is Capitecs integrated risk management process?PAGE 58

Our employeesPAGE 84

What is Capitecdoing to give back?PAGE 104

13GlossaryPAGE 183

What are thefinancial results?PAGE 112

Our success story to date and why we are more than just a bank.

Approach tointegrated reporting

01Loyalty Schemes

Prestige Account

Gold Account

4 | Capitec Bank Holdings Limited

Our success story to date and why we are more than just a bank.

Approach tointegrated reporting

01Loyalty Schemes

Prestige Account

Gold Account

As a bank, numbers are important. Numbers are, however, only part of the story. This integrated report tells of our success to date and why we are more than just a bank.

This report was compiled utilising the guidance in King III, the Global Reporting Initiative (GRI) sustainability reporting guidelines and the International Integrated Reporting Council (IIRC) framework for integrated reporting. Lengthy standard disclosures have been purposely avoided to ensure that it remains relevant to Capitec and its stakeholders.

The purpose of this report is to provide simple, transparent feedback to stakeholders regarding the organisations strategy, performance, governance and prospects. This ensures that shareholders, as well as other stakeholders, can formulate a view on the long-term returns and sustainability of the group. It is concise and aims to provide stakeholders with an overview of the economic and social impact of the business operations, the material issues affecting the organisation and the manner in which these are addressed. Materiality is dependent on the responsiveness of stakeholders, especially shareholders, and determining material matters is a continuous process. The drivers of value creation, how much value is delivered and external factors affecting the ability to deliver value are questions in identifying material matters. All reports submitted to the board and executive management for discussion, any stakeholder feedback, key risk factors and strategic objectives are considered in the materiality determination process. An overarching objective of the business is sustainable profit, and our approach is reflected throughout this report.

Integrated reporting journeyThe journey starts and ends with our board that is supported by the integrated reporting project team. The project team is a collaboration of various departments contributors who understand and respond to the needs, interest and expectations of stakeholders.

This report encompasses Capitecs operations, which are conducted exclusively within South

Africa, and covers the period from 1 March 2015 to 29February 2016. Integrated reports are prepared on an annual basis and all reports published are available at www.capitecbank.co.za.

Capitec is a bank controlling company that is listed on the Johannesburg Stock Exchange. Capitec Bank, a wholly owned subsidiary, is the company in which all material operations are housed. It contributed 99% of Capitecs profit for the financial year ended 29 February 2016 (2015: 96%) and as such it is the focus of this report. There has been no material change to the products and services it offers since the publication of the previous report. The remaining subsidiaries and associate in the group are listed in chapter 2, which briefly describes their activities and contribution to Capitecs financial position and results.

Governance and assuranceThis report was prepared in accordance with the Companies Act and Banks Act of South Africa, the JSE Listings Requirements, the King III code and IFRS. The board of directors believes that it adequately addresses the material issues faced by Capitec and approved it on 29 March 2016.

Assurance regarding the annual financial statements is provided by the independent auditors report contained therein. Where considered appropriate, external sources have been used to provide independent information for elements of the integrated report other than the financial statements.

EnquiriesEnquiries regarding the content of this report can be forwarded to the company secretary by the following methods:

Telephone: +27 (0)21 809 5900E-mail: enquiries@capitecbank.co.zaPost: PO Box 12451,

Die Boord, Stellenbosch, 7600

Capitecs approach

Integrated Annual Report 2016 | 5

02We are building a bank to last more than a hundred years and are committed to providing simple, accessible and affordable banking.

What doesCapitec look like?

Capitec BankHoldingsLimited1999/025903/06Registered bank controlling companyIncorporated in RSAListed on the JSE Banks sector (since 2002)Summary of governance structurepages 59 64

Board of directors

15.1%(2015: 15.4%)

Executive management committee

2.1%(2015: 2.6%)

PSG Group

30.7%(2015: 30.7%)

Direct black ownership*

8.7%(2015: 8.7%)

Free float

43.4%(2015: 42.6%)

**Refer to page 181 for details regarding direct black ownership.

6 | Capitec Bank Holdings Limited

02We are building a bank to last more than a hundred years and are committed to providing simple, accessible and affordable banking.

What doesCapitec look like?

Capitec BankHoldingsLimited1999/025903/06Registered bank controlling companyIncorporated in RSAListed on the JSE Banks sector (since 2002)Summary of governance structurepages 59 64

100%Capitec Bank Limited1980/003695/06Retail BankIncorporated in RSAwww.capitecbank.co.za

100%Dormant companies

Keymatrix Proprietary Limited

1999/010617/07

Incorporated in RSA

Keynes Rational Corporate

Services Proprietary Limited

1999/014817/07

Incorporated in RSA

100%Capitec Properties

Proprietary Limited1998/007658/07

Property holding companyIncorporated in RSA

Products

Clients

Branches

Employees

Revenue

Profit after tax

Total assets

Funding

TransactingSavingCredit 7.3m (2015: 6.2m)720 (2015: 668)11 440 (2015: 10 261)R18.3bn (2015: R15.7bn)R3.2bn (2015: R2.5bn)R62.9bn (2015: R53.9bn)R13.6bn (2015: R11.5bn)R49.3bn (2015: R42.4bn)

Ordinary equity:

Debt:

For individuals

Integrated Annual Report 2016 | 7

We are extremely proud of our results and growth this financial year in challenging conditions.

Key PerformanceIndicators (KPIs)

03

8 | Capitec Bank Holdings Limited

Financial highlights

34%

Stakeholder highlights

Empl

oyee

sC

lient

sSh

areh

olde

rs

98average net appointmentsper month

6 941face-to-face learning interventions

31 660distance learningactivities completed

1 025 000new active clients

3.7mnumber of loans advance

52new branches

287additional ATMs

R3.2bnnet profit

1 055ctotal dividend per share

R13.7bnshareholders funds

Headline earnings (Rm)

2014

R2 017 2015

R2 547 2016

R3 222 Headline earnings per share (cents)

2014

1 7522015

2 2092016

2 787

Net transaction fee income (Rm)

2014

R1 9272015

R2 6082016

R3 020

Return on ordinary shareholders equity

2014

23%2015

25%2016

27%

Cost-to-income ratio

2014

32%2015

35%2016

Integrated Annual Report 2016 | 9

Key performance indicators2016 2015 Change (%) 2014 2013

ProfitabilityInterest income R'm 12475 10783 16 9434 7085Net loan fee income R'm 855 619 38 841 1153Net transaction fee income R'm 3020 2608 16 1927 1349Interest paid R'm (2884) (2426) 19 (2133) (1663)Other income R'm (1) 22 (19) Income from operations R'm 13465 11606 16 10050 7924Net loan impairment expense R'm (4401) (4014) 10 (3976) (2659)Net income R'm 9064 7592 19 6074 5265Operating expenses R'm (4591) (4031) 14 (3242) (2994)Non-banking operations R'm (1) 2 7Income before tax R'm 4473 3560 26 2834 2278Tax R'm (1244) (995) 25 (797) (673)Preference dividend R'm (16) (18) (11) (20) (21)

Earnings attributable to ordinary shareholders

Basic R'm 3213 2547 26 2017 1584

Headline R'm 3222 2547 26 2017 1584Net transaction fee income to net income % 33 34 32 26Net transaction fee income to operating expenses % 66 65 59 45Cost-to-income ratio % 34 35 32 38Return on ordinary shareholders' equity % 27 25 23 27

Earnings per share

Attributable cents 2779 2209 26 1752 1519

Headline cents 2787 2209 26 1752 1519

Diluted attributable cents 2773 2206 26 1740 1498

Diluted headline cents 2781 2206 26 1740 1498

Dividends per share

Interim cents 375 246 52 203 169