In its quarter of a century of life, Capitec has achieved far more than most 25-year-olds, and indeed more than most of its competitors, even the weary old centenarians in the banking business.
Today, “it’s arguably the best bank in the world”, says Kokkie Kooyman, executive director at Denker Capital. It’s high praise, but everything about the bank looks stellar.
Consider the numbers: it has 25-million banking clients, a third of the South African population; a return on equity of 31% in its latest results, far above its peers; and its shares trade on a p:e of around 33, indicating how much higher it is rated than the other banks. By contrast, Absa trades on a p:e of 7.9 and Nedbank only 7.42.
Capitec was formed after several new ventures took on the traditional banks in the late 1990s. Many of these were microlender-type ventures — Unifer, for instance — but there were also more established players, such Saambou and African Bank, that were growing rapidly.
By the time the Tier 2 banking crisis broke in 2001, there were enough casualties to scare investors off any ambitious venture aimed at taking on the big four — FNB, Standard, Absa and Nedbank. Some really big names sank, including BoE and Saambou.
Capitec was formed in 2001. By the time it listed in 2003, the backers (PSG) and management (led by Michiel le Roux and Riaan Stassen as well as the underappreciated Carl Fischer) had witnessed the missteps of all the other small banking players. They steadfastly avoided these reckless fast-growth pitfalls.
The market was hugely sceptical. The share went as low as 80c, despite Capitec being a dividend payer from the start. But seeing it was the only player with capital (aside from the minuscule Finbond and African Bank) that was tapping the underbanked market, Capitec started mopping up market share. And it did not have to take the risk of stretching the loan books dangerously.
Now, 25 years on, a persistent debate among analysts and investors is whether Capitec’s premium valuation is justified. What began as a seemingly high-risk, unsecured microlending business has evolved into an expansive financial ecosystem that investors increasingly view as a fintech platform rather than a traditional bank.
With millions of active app users, the bank has built a thriving digital infrastructure. But CEO Graham Lee points out that “by the definition of the word, all banks are fintechs”. He says Capitec is merely evolving to be more “embedded” in serving its clients. Every time Capitec introduces a new product, it can distribute it to a huge user base at a near-zero marginal cost.
Ninety One portfolio manager Chris Steward remains slightly more cautious about adopting pure tech valuations, pointing out that platform companies often use metrics such as price-to-revenue because they don’t actually generate a profit. By contrast, Capitec is incredibly profitable, generating a return on equity (ROE) higher than 30%. Because of the bank’s highly lucrative returns, “we don’t need to come up with alternative valuation methodologies right now”, Steward says.
“The bank’s valuation is something that has put investors off Capitec for most of its listed history, saying it’s too expensive. It was too expensive at R600, and it’s still too expensive at R4,500. At some stage in the future, it will be too expensive at R5,000 as well.”
Market expectations suggest Capitec will continue to grow at 18%-20% over the next few years, according to Steward, significantly outpacing its peer group, which is expected to see growth in the high single digits.
Historically, Capitec aimed for a 25% ROE. However, as Steward points out, the bank’s explosive success in generating nonlending revenue has blown past those early expectations. Because these alternative revenue streams are naturally accretive to ROE, that original target has been abandoned. “Today, Capitec’s diversified ecosystem allows it to consistently deliver returns in excess of 30%.”
Looking at Capitec’s origins, its leadership was very attuned to the risks of running small banks. While the management of South Africa’s big four banks were typically risk-averse corporate “lifers”, Capitec’s founders were maverick outsiders.
Stassen and Le Roux applied fast-moving principles from their earlier careers in the liquor industry, treating the unbanked masses as a retail opportunity rather than a credit risk. Stassen famously drew inspiration from Ferrari’s Formula One pit crews to drastically reduce client transaction times and championed a vision of making banking as ubiquitous as Coca-Cola.
Le Roux, who forfeited millions by resigning from Boland Bank over its “archaic” practices, championed an egalitarianism where even the CEO’s office was the same size as an entry-level manager’s. Jannie Mouton also provided crucial financial scaffolding through PSG Group, an empire he built from scratch after being fired from his own stockbroking firm at the age of 48.
From the start Capitec adopted an intentionally cautious and conservative approach to both capital and liquidity.
It maintains a strict stance on liquidity, according to Steward. While traditional heavyweights recycle short-term current account deposits into longer-term lending products to maximise their margins, Capitec intentionally sacrifices that extra profit for safety. Virtually all the bank’s retail call money is reinvested into cash and liquid assets with an equivalently short duration.
Coronation asset manager Sarah-Jane Alexander argues that “the near-term Capitec metrics are high, but they are deceptive of the long-term potential of what the bank can earn.”
She points to the underlying mechanics of the group’s expansion, specifically its ambitious foray into business banking. By tracking the division’s volume metrics and observing the highly efficient way the cost base is responding to that, she predicts Capitec will cultivate “a very profitable business bank”.
“The strategy is centred on making banking simple, affordable, and accessible at scale,”
— Timothy Olls
Timothy Olls, investment analyst at Laurium Capital, says: “The strategy is centred on making banking simple, affordable, and accessible at scale.” From the beginning, Capitec focused on banking the swathes of the population that were unbanked and ensuring that its costs to bank were far lower than those of its competitors.
Capitec did some obvious things — like opening branches at train stations, bus kiosks and transport corridors to catch commuters. It extended opening hours to allow workers, who might only have a precious 30-minute lunch break, the chance to bank after working hours.
Dedication to having low banking fees cemented its reputation as “the people’s bank”. But Capitec also built its success on internal cost discipline, and ensuring it had an operating leverage on the competition. As of 2026, Capitec’s operating expenses grew just 12%, while revenue growth grew 19%. The cost-to-income ratio was 39%, while comparable ratios at incumbent banks generally exceed 50%, according to Olls.
Capitec’s hi-tech, low-cost architecture has also given it a huge boost over the competition, which are burdened with legacy software systems. Stassen has said it cost the bank R120m to build its entire software system, whereas many of the big banks spent about R3bn over a three-year period on the same infrastructure.
Digital-first engagement has also been huge for Capitec’s success. Its banking app clients grew 19% to 15.3-million people as of this year. FNB has the next highest number of banking app clients, at 7.4-million.
Capitec’s huge offering of digital value-added services (VAS) such as prepaid data and electricity, alongside its simple-to-use banking app, means millions of South Africans are drawn to it for ease of access. “We’re seeing Capitec’s transactional revenue per client increase year after year, even as it continues to lower the unit costs for its clients,” says Olls.
Clearly, Capitec has been shooting the lights out in terms of growth so far. But for the bank that changed the banking game forever, what could come next?
“I think they’ll certainly continue growing faster than the other banks, because they are better and their market share isn’t that dominant yet,” says Kooyman. But once Capitec hits that 30%-35% of the banking pool, “then naturally you can’t continue that growth”.
Every company’s dream is to achieve “exponential growth”. Even as the market celebrates Capitec’s leaps and bounds, the question silently lingers as to whether it has run out of road to grow.
“The bank itself has probably slowed down a bit,” admits Vincent Anthonyrajah, MD of Differential Capital. “But you’ve got to remember that the insurance component has really taken off.”
Capitec’s insurance business makes up 27% of group earnings, with nearly 16-million clients. Its insurance products include funeral cover, life cover and credit life insurance. “Capitec’s funeral and life insurance products are offered seamlessly via its banking app to the client,” Olls notes, “which materially lowers acquisition and servicing costs.”
“They’ve just been cleaning up the easy competition,” Anthonyrajah says, noting how “lazy” the traditional insurers have become, losing their competitive edge to Capitec’s fiery new business.
He does, however, note that while Capitec’s insurance premiums are low, the claim rates are also “very, very low. Are the buyers of those insurance products properly aware of the benefits? Are your claims rates low because people don’t know about them?”
Lack of communication has been a widespread complaint made against Capitec’s insurance services, and clearly investors have noticed that the wonderfully low claim rates might not be as faultless as the bank makes out.
Business banking will be Capitec’s new major avenue of growth. In my mind, it’s our biggest opportunity
— Graham Lee
Luckily for Capitec, it has several other strands to pick up on to expand its growth. Lee acknowledges that Capitec can see the “ceiling” in personal banking. For now, business banking is a relatively small contributor to Capitec’s success, accounting for only 5% of group earnings. But Lee sees it as a major new avenue of growth. “In my mind, it’s our biggest opportunity,” he says.
“Business banking is a large profit pool in South Africa, estimated at roughly R25bn, and Capitec’s share is still low, likely only in the low- to mid-single digits,” Olls says.
The experts agree that Capitec’s approach to business banking — that is, to mirror its retail strategic playbook in the business banking sphere — will certainly be a success. SME funding, for instance, “is something the legacy banks have really neglected”, says Anthonyrajah.
Alexander says the bank’s SME strategy centres on a fixation on building something that is robust and scalable at a low cost. Even though Capitec’s business offering is in the early days of its lifecycle, the foundations are strong. “We like the competitive fees, we like the focus on growing the scale, we like the low cost to serve,” says Alexander.
To entice not only SME owners but individual entrepreneurs, Capitec has aligned its business banking transaction pricing to match personal banking pricing. Capitec introduced the entrepreneur account in December 2025, which is a free add-on to the retail offering, targeting mainly sole proprietors. Since then, its business banking base has climbed to nearly half a million clients.
So much of Capitec’s success is because of its fintech. The purchase of the payment solutions company Walletdoc in December 2025 underscores this commitment.
Capitec’s primary fintech programmes are its VAS portfolio and Capitec Connect, a mobile network operated by the bank, offering free monthly data bundles for banking app users, as well as free phone calls between two Capitec SIM cards. The expansion of fintech offerings “supports Capitec’s strategy of diversifying away from pure lending towards a broader, platform-style business model,” Olls says.
Growing fee income from its various fintech businesses is a major opportunity for the bank. Capitec Connect and VAS grew 38% in 2026 to add R6.1bn to revenue.
“They invest a lot in their data science,” says Anthonyrajah. Capitec’s expansive datasets on consumers allow it to tailor fintech services and lending products to the mass market.
The eventual goal is to leverage this expertise in new international markets. Though it’s small, Capitec’s Avafin fintech lending service is not only another avenue into the fintech space. It might be less than 1% of earnings now but owning Avafin gives Capitec access to lending spheres in Poland, Latvia, the Czech Republic, Spain and Mexico.
In five years’ time, when South Africa’s growth rate plateaus in line with the economy, then the offshore [business] will be great for growth
— Kokkie Kooyman
Kooyman reckons it will take about five to 10 years for Avafin to really take off. “But in five years’ time, when South Africa’s growth rate plateaus in line with the economy, then the offshore [business] will be great for growth.”
Analysts point to a few examples of possible competitors.
In terms of personal banking, Anthonyrajah thinks retailer Pep “is going to be a force to reckon with. That’s one I’d watch out for. A machine like Pep has a lot of data, a brand, physical presence. It could provide the competition Capitec has been lacking”.
Olls agrees that Pep’s national store footprint, as well as its pre-existing lending business, set Pep up for success. But he cautions that successfully building a bank remains a difficult execution challenge.
One genuine challenger in the field is GoTyme, formerly TymeBank, which boasts 12-million customers and became the first digital-first African bank to turn a profit, premised on its super-low transaction costs and the fact that its back-end rests on a cloud-based infrastructure.
But GoTyme has been building for years and is only now beginning to encroach on Capitec’s market share. So Pep might take several years to get to the level where it stands a chance as a real threat. Still, Kooyman thinks these challengers shouldn’t be underestimated. “Compared with the new up-and-coming players, Capitec’s technology is already old.”
This isn’t just true of the bankers, but the fintech companies challenging Capitec. Anthonyrajah sees the JSE-listed Optasia, the global AI-driven credit lender, as being a potential threat to Capitec’s credit fintech products.
Optasia’s “material scale” means it has the data capability to take on Capitec’s famed dataset, which it uses to assess clients for credit risk. Kooyman notes that the current AI wave will see several AI-driven fintechs come up to challenge Capitec in the lending space.
Still, given what it has achieved so far, experts have faith in Capitec’s ability to be agile and responsive to shifting technologies. As it is, Capitec has the lion’s share of the fintech banking space and is far ahead of everyone else.
So why were the big four — FNB, Standard, Absa and Nedbank — not able to adapt, to stop Capitec from eating their lunch? The incumbent banks did try to respond to Capitec, says Olls, but “they were constrained by legacy systems, higher cost bases and more complex organisations.” Capitec had the advantage of building a simpler model without having to overhaul any legacy tech system, which made it “easier to innovate and lower costs without disrupting an existing franchise”.
For Kooyman, Capitec was crucially ahead of the other banks in three areas: culture, technology and size. He agrees with Olls that the bank’s “fresher” systems helped it to turn clients who were “long seen as unprofitable” into a hugely profitable market. Embracing this base and creating a truly client-centric culture was a first too: the other banks struggled to adjust to a more retail-focused banking playbook.
For most banks, Kooyman says, retail banking still makes up only 20%-40% of their profitability, whereas for Capitec it was “almost 100%” for a long time.
Capitec’s growth was also quite sudden. It hid from the limelight beneath banks such as African Bank (which took the market by storm, only to collapse due to its high-risk unsecured lending model and poor partnership deals). By the time Capitec was gaining a million new customers every year, the legacy banks were too far behind. Kooyman puts it aptly: “They never saw them as a threat until it was too late.”
Stress Tested
Capitec’s journey of dominance has not been without its trials. The bank’s lofty valuations and aggressive growth models have historically drawn sceptics. None, however, was more hostile than the US-based short-selling firm Viceroy Research.
In 2018, riding high on its earlier takedown of Steinhoff, Viceroy dropped a report titled “Capitec: A Wolf in Sheep’s Clothing”. The short-sellers accused Capitec of being a predatory “loan shark”, alleging that the bank systematically understated its bad debts and pushed struggling clients into new loans merely to pay off old ones.
The market reaction was swift and brutal. In a single day of panic-selling on the JSE, Capitec’s share price plunged by more than 20%, wiping roughly R25bn off its market cap in a matter of hours.
Management fought back with transparent defences of their risk models and lending practices, opening their books to prove the short-seller wrong. The Financial Sector Conduct Authority (FSCA) launched an intensive investigation that vindicated the bank. Years later, the FSCA slapped Viceroy with a R50m administrative penalty for publishing false and misleading statements. Crucially, tribunal records detailed that Viceroy was operating on a monthly retainer with a foreign hedge fund, taking a 12.5% cut of the profits made from shorting Capitec’s tanking stock, netting an estimated R10m.
In addition, Intellidex had accused Viceroy of “substantially plagiarising” its celebrated Steinhoff report from an analysis produced by Portsea Management six months prior. The findings suggested that Viceroy had effectively “cut and pasted” verbatim tracts of text and financial estimates.
Capitec recovered almost as swiftly as it crashed, backed by the Reserve Bank’s public guarantee that the institution was solvent, well-capitalised, and liquid. Within days, the bank’s share price rebounded.
The unemployment debate
In 2025, when former CEO Gerrie Fourie suggested South Africa’s real unemployment rate was closer to 10% rather than the official 32%, he predictably ruffled feathers at Stats SA. Grounded in Capitec’s vast data on the daily financial habits of millions, Fourie was highlighting a reality that formal statistics might be missing: a thriving, unmeasured cash economy.
Ninety One portfolio manager Chris Steward suggests that if 32% of the working-age population really had no form of income, the country would have a much worse socioeconomic crisis. The survival of so many people points to a thriving, unmeasured informal cash economy.
Capitec CEO Graham Lee notes that the disconnect often comes down to the semantics of how South Africans define employment. “People will tell you, ‘I work, but I don’t have work,’ because having work means a formal job,” he says. It means many more people are productively creating some value for their families than formal statistics are capturing.
Stats SA has confirmed it is potentially including a separate register of informal businesses to supplement its current labour surveys. Over the next few years, with the support of the National Treasury, the agency will be undertaking methodological trials and accessing other data sources to improve its labour market indicators.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.