Good morning, ladies and gentlemen. It's me a great privilege to present CapEx results for the year 2021. I think if we look at the year that's gone past, I think the two words that's come out in the CapEx way is agility and digital. It's been an interesting year. I think nobody predicted the year, nobody thought the year is going to end the way it's ended, but I think overall Capitec had a very good year and to share with that, we will share that with you during the whole full presentation.
Just at the end, we will allow you to ask questions. So if you've got a particular question on a particular slide, just post your question to that particular e mail address, so that we can myself and Andre will answer it at the end. We're going to share a video with you, which we've done, which is I think is a very good summary of the year that's gone by.
2020 saw Capitec Unlocking its full potential with a range of exciting new products, while remaining true to our 20 year legacy of simplified banking and the dedication to improving our clients financial lives so they can live better. We focused defining our culture, building brand love and becoming future fit. By March 2020, Our new head office was completed and some of our teams started moving in. But then, the global COVID-nineteen pandemic hit South Africa. As a bank, we had to quickly adapt to new ways of work.
Branch employees donned masks and face shields disinfectant in hand as we offer Kyan's personalized service in a time when Smiles were hidden behind masks. Our power branches remained open and operated at 50% capacity. Our campus based employees were required to quickly adapt to working remotely despite connectivity issues And occasional bouts of load shedding. Bank from home was our immediate response to the pandemic, Informing our clients of the safest way to bank. We saw an opportunity to create hope in these uncertain times and collaborated with artists including J Something and K O To create a song of hope entitled Rainbow, which shot to the top of the charts.
Our commitment To developing and aiding our communities remain strong during the pandemic. Monthly Live Better Talks We're speaking to our employees, providing them with insight and inspiration. After reporting a loss of ZAR404 1,000,000 for the quarter ended 31 May 2020, a strong recovery of over ZAR1 1,000,000,000 in the 2nd quarter resulted in headline earnings of ZAR650 1,000,000 for the 1st 6 months of the financial year. As Capitec is always looking to the future, we were able to reprioritize and introduce new products that fit the COVID world. Our house of credit campaign showcased our credit card, the access facility for which clients can apply online and introduced our new home loan offer to the market.
We added a scan to pay functionality, A virtual card and the disruptor in the share portfolio market use the equities as a widget on our new app, making it easy and affordable for our clients to start building and managing their own investments. Remote onboarding, which offers the option to open an account by taking a selfie was also recently added. When COVID hit, all banks offered their clients 3 month payment holidays. But Capitec also introduced a rebate, which helped our clients By refunding them this interest, paying out more than ZAR211 1,000,000 to those clients. We once again showcased our Live Better the better.
As lockdowns ease, we started coming back into the office, developing a hybrid work environment that incorporates remote working and planned office collaborations. We were able to ensure the job security of our employees, paying Full salaries and granting annual increases during a time when many people were retrenched or had to take salary cuts. In spite of the difficult year, we still created new job opportunities and continue to appoint people to the Capitec family. Our commitment to financial health continued with a budget champs card game, financial health Podcasts, the launch of the Live Better Academy and a new focus on our successful Living It Up game. Capitec became the proud Sponsor of the Insider S.
A, a perfect platform to share all the initiatives and products that we offer existing and future clients. Brand Finance, a global brand research group, ranked Capitec as the strongest banking brand in South Africa and the 3rd Strongest banking brand in the world for the 2nd year in a row, something we can all be proud of. COVID also brought new opportunities with it, such as helping our clients move to digital banking. At the end of the financial year, our digital banking clients had increased by 25% to 8,600,000, doing over 86,000,000 transactions in the last month of the year. Our full year earnings decreased by 27% in the wake of COVID With the second half showing strong recovery of 18% growth compared to the same period the previous year.
At the
end of the financial year, we had 15,800,000 clients calling Capitec MyBank. And we celebrated 20 years of simplified banking. What
yes, I think it's been a been actually a very interesting year, but a very good year. And actually the video ended up with us celebrating our 20 years. That 20 years was a big occasion. And to celebrate that, we were over 40 people that actually were there that actually was there from day 1. So it was actually quite a experience to have all of the people there.
If I look at the year, the year basically for us consists of 2 halves, March to August. I remember March when COVID started. I was actually in Joburg and a friend of mine he phoned me and said to me, what are you going to do with people that's overseas and if they come back? At that stage, we didn't have a policy, we didn't know what we're going to Andre and myself quickly sat down and we decided on a policy there within an hour or 2 and then the COVID actually started. I think the biggest priority for us was at that stage was our clients and then our staff, what we do with our staff.
I still remember we were thinking how we're going to get people to work at the office and then suddenly 2 weeks later, everyone was working from home and a complete new work environment started. Then the whole COVID, how big is the potential of COVID? What is the impact of COVID? How many jobs is going to be lost? We spent hours and hours and hours trying to understand the impact, I remember the first forecast we did for this year said that we will make a profit of just over SEK 1,000,000,000 and that was quite a shocker.
So it was interesting times just to understand the COVID taking high road, medium road, low road. And then we started in May and we said we need to look at our strategies, we need to re budget. I think there we did well because the message out to our team was go in, go hard, that we finish it and then we know exactly where you are and then we can focus. And then the second half actually started with when we said we're going to focus on growth. We need to make certain that we satisfy our client needs, we need to be able to work flexible from home and from the office.
And then we started to produce new products and and it's actually quite remarkable in a COVID period, we actually introduced 6 new products in the last part of the year. I think the important thing for me was in the middle. We maintained service delivery throughout the years by opening branches, closing branches, adjusting the hold time and being agile the whole time. So I think overall, a very good set of the results. If I look at the results itself, I think everyone has seen it now, 17% ROE, profit of CHF3.9 billion in the last 6 months.
When we communicated to the market in September, we still said what we're aiming for is that we'll make the same profit in the 6 months than what we would do in the last 6 months. So that was the aim. And as you could see, we've come in with 18% stronger and I'll unpack that. I think the other important thing is, if you look at our ROEs, at 30% ROE in the latter part, so it's roundaboutthat27%, 28 percent ROE that we've achieved. If I unpack the year, you can see there's a year we're down 27%.
But if I look at that last column, because that impacts the last 6 months, you can see on the credit side, we're down 222,000,000 and that's purely because we've cut back on the credit side. In the beginning, we were down about 30% of our credit appetite where we've cut back. Then on the transactional side, that's done extremely well. We've always said that we need to be diversified. We need to have other income streams and I think given the tight year on credit, our transactions have come very strong in at €950,000,000 up.
And then funeral, we were up €650,000,000 or the profit of funeral was €650,000,000 But interesting in the last 6 months, we were actually down 6 €1,000,000 and that's purely due to death claims here in December, January, February, but it's normalized and it's coming back to track. Then the impact of the provisionings, you can see the movements in the provisionings and then the OpEx that come in at a 10% growth, I think what is important is that in the last 6 months, Mercantile was in for 4 months, for the whole year Mercantile is in for 4 years, so you don't do a full comparison. If we do at our key performance indicators, the 2 that stands out for me is our where our transactional income and funeral income cover our OpEx. We've always said we want to be at 100%. On group level, we're at 99%, but for retail, we're at 102%.
So we covered basically all our OpEx with our transactional income. And then on the transactional income versus the credit income or the net income, our transactional side, 61% of our income is coming from transactional side and it's purely because of the growth that we've seen in that particular area and then on the credit side that we've pulled back as well as on the provisioning side, cost to income at 40%, 100% in line with where we are. And then capital adequacy, I think a very impressive 37%. As you know, we didn't pay a dividend last year, so your return to earnings was kept. We had very strong growth in our deposit side and we invested in government bonds.
So I think a very good performance on the capital adequacy. So overall, if you look at all the key indicators, a very strong performance. We spent the last 3, 4 years tremendous amount of time on culture because we believe culture enables us to drive our performance. It's also interesting when COVID actually took place and we actually said how do we and managed COVID, what are we going to focus on? We quickly decided it's the 3 components.
We need to focus on our clients, we need to focus on our people and we need to be focused on how do we deliver to them. So the whole time whenever we were deciding on some things, we were actually focusing and say, but what is happening to our client? What is happening to our people? And what's happening to our delivery side? And I think that passion for our client, what can we do for our client, what can we do better, how can we do things completely different to satisfy his needs.
And I think the big focus is there, simplicity and transparency, making certain that the client fully understand what he's experiencing. And then people, I think people was very interesting during this time. And I'll share the next slide with you, you can see what we've done on the people side. The first thing is, we froze in all appointments for the first up to June, July and then we've opened up and in total we've appointed 820 people. But it's quite easy to say you appoint 820 people.
As people all know, we've got a firm foundation. A firm foundation is that where every single person that gets appointed in the country gets flown down and and actually comes to the material, I'll tell you at the back end, we spent 2 weeks with the person here. We couldn't do it. Suddenly, we had to do it virtually. So that was an adoption in a very short period of time to adapt everything that we're doing to a virtual component.
And you can see there 55,000 training engagements that we've done and then also to enhance our leadership of our senior managers, 182 attended different Harvard mentor programs to develop them, to lead them and to enable them to manage their people, we've also engaged with Duke University, 10 or no, 11 of our senior managers is on executive program, where they will be working with Duke on international exposure and will have exposure with China and the East in the next year or 2, that was all developed during this year. Then I think the one thing is if you are in and the changing environment, uncertainty is very high. And then it's all about communicate, communicate, communicate. The one thing I've learned during COVID is make decisions and communicate. If it's a wrong decision, correct it and communicate again.
We had '18 virtual of Better Talks, that's where we actually brought our senior managers in and actually sat down for an hour and we handled various topics from digital to what's happening in the branches, what's happening with COVID to enlightening our people. And then we've had all our ex group people had monthly town halls. For China, for us, is where we actually bring all our people in a department together. It was all done on teams and then a particular agenda and we discuss things and where the company is going, where the company is hitting half addressed, a big portion of our town halls and there could be easily 600, 700, 800 people in those town halls attending it. We spend a lot of time on the employee well-being, because mentally it was tough just going through, am I going to be sick, what is going to happen, friends, family that's been affected.
So we spend a lot of time on our people side. And then I think on the community side, a very big plus, where we've actually said to our people, be involved in the community. If you're involved in a community project, you get 3 days extra leave off plus if you contribute ZAR1, the company will contribute ZAR2. So quite a lot has happened in the community side and on the financial education side. This is the graph that actually, I think, explains how we've moved from just being purely dependent on credit to digital and to transactional.
What is quite interesting is 5 years ago, we had 7,300,000 clients, of which 2,700,000 was digital. Now we're sitting with 15.7 and we ended March with 15,900,000, we're probably now anytime now over 16,000,000 clients. But it's quite interesting to see what it's we've done in the last 2 years where we've increased our client numbers from 11.4 to 15.7, that's 4,200,000 extra clients that we actually brought in, but you can see what it's done on that blue line on the digital side, where it's increased from 5.4 to 8.6. You can only clearly see the uptake and that's taken in the last 2 years, the 5.4% to 6.7% and then the 8.6%. This gives us scalability.
It gives us a lot of opportunities to grow. And then you can see on the banking clients how solid our banking clients is growing with that 5.9 because they are actually driving the transactional side, CHF 4,000,000 of our clients are savings clients, fixed term savings clients and then your credit clients is at CHF $1,000,000 $1,100,000 decline and that's purely effect of if you look at the last couple of years, we've cut back and with COVID, we've cut back and that's a number that we actually need to grow going forward. Digital, what is happening in the digital space? I think the 2 components I want to highlight on this graph, as you can see, these are the volumes as at end of February. So it's not the year volumes, but it gives you an indication how volumes has grown in 2 years.
So digital has gone from CHF2.9 million to CHF86.4 1,000,000, so it's about 4 times more. Just to give you another indication is on digital, there was about 5,000,000 people in February on our app and over 6,000,000 close to 7,000,000 people in March as people are engaging more and more and more. And you see that swap to card payments, tap and go, dollars 24,000,000 to $79,000,000 And then cash still growing, but you can start seeing this, we're making a dent to the cash side. And then there's this perception that the app is actually there for the younger generation, people with higher incomes. And you can clearly see what's the take up is actually we're starting to see lower incomes, people earning less than 7.5% start using the app very strongly and we can see people over 40 years are starting to use the app very strongly.
So the acceptance of app and technology is a very positive trend. What's happened during COVID? Interesting if you look at the green, you can clearly see when COVID hit, our card payments came down and slowly but really starting to come back to normal levels. But you can see what's happened with digital. That blue line just kept on growing, growing, growing, growing, and that helped also the adoption of people moving to a digital platform.
And then cash flow is growing, but it's fairly flat. This is number of transactions. I think if you work on value, then cash is still much stronger because you can see there on cash, we're talking ZAR663 ZAR3 per transaction versus card of ZAR304 transaction. On funeral, we had a very good year on funeral, for me very encouraging is the 2 market share stats, 30 7% of all new policies issued are now Capitec policies, sorry, everything new in the market, we control now 37% of the market and our market share in totality is 16%. What is quite interesting is our coverage per policy is ZAR96000 per policy, it's the highest in the industry.
And then for every ZAR we cover ZAR 530 we cover and that's a 38% higher than anyone else in the markets and that just shows again are we offering value to our client? I remember when we worked with Sunnamb, my brief to them was we need to be we need to differentiate and we need to differentiate with 30%. And it's interesting, we're coming out to 38%, so very close to that 30%. Policy sold, dollars 1,000,000 collection rate was 85 it actually went up to 90%, 92%. And then I've mentioned previously that the book persistency with COVID in October, November, December, we saw an uptick, but we're coming back to normal levels.
Then on the deposit side, 18% growth, dollars 207,000,000,000 We've got now, if you include Mercantile, we've got now a 9.4% market share, close to a 10% market share. We've had very strong growth. I think the one thing that surprised all of us it's the growth during the COVID period because everyone thought that people will withdraw the money, they will live off the money, but we actually saw the opposite. We actually saw more COVID cash into the system. So we saw very strong growth and yes, we're still offering very competitive rates even after the repo rate was reduced to 3%, we're still offering 2.25% on your core account and we've paid over 4,100,000,000 out on interest.
New products that we've launched, same cash, same cash was last year, only available at Shoprite Checkers and Pick n Pay, now it's also available at our own ATMs and as well as Pick n Pay and Massmart. You can see the number of transactions, how it's increased and this gives you the capability to actually send cash to a friend wherever that Pearson is and he gets a code and he goes into our ATM or pick and buy or Shoprite and he actually picks up the rand value that you've sent through to him, you can see we've moved 6,100,000,000 of value that was being created. The one that I'm very excited on is the scan to pay functionality on your app. What we've done is we've integrated Zappa, SnapScan and Masterpass into 1. So any one of those QR codes, if you see it, you can actually just open up your app and the inkling scan to pay comes up and you can actually pay and that's a big focus for us though.
Qmar, QR digital payments are where we came. Virtual card we launched in November and that's that capability to have a virtual card that you don't need to have your own card as well as as you do online shopping, you've got much more a secured environment. And then also with the next one is with remote onboarding, we've launched in March. The person has remote onboarding by just downloading the app. We immediately take a facial recognition from yourself.
We verify that with the Department of Home Affairs. So we do a full FICC on you and you're up and around and you can transact as well as you've got a virtual card, so you can do transactions. At this stage, you must still go and fetch your card at a branch. But from May, we will actually remotely deliver your card to yourself. And then CapEx home loans, we always said we had that whole partnership with Essai Home Loans, we marketed Essai Home Loans product.
We weren't happy with it. So we changed everything and we actually created a Capitec Home Loan and partnered with Essai Home Loans, so I think it's working very well. We had only over 24,000 applications in the 1st 3, 4 months, we've approved about over 300 loans. What is quite interesting is you can ply in 4 steps and within 5 minutes and then you can track your whole process of when your house is validation is done in your house, your bond is registered, etcetera, etcetera, you can actually track the whole process on where you are, which is quite unique. I think what everyone is asking about is credit.
So I'll unpack all our different strategies and what we've done. If I look the first thing is what has happened in the market. I was hoping that NCR stats would come out for December because this is until the end of October, it's still not out. But I think the repo reduction have definitely seen a lot of people taking up mortgages and taking up vehicle finance. You can see mortgages up from SEK43 1,000,000,000 to SEK49 1,000,000,000 and basically we are flat and then unsecured plus credit card and facilities, you can see how it actually has dropped.
And that's what we're seeing in the market. There's a perception in the market. I've read a couple of articles over the weekend in the last a couple of weeks, our debt counselors are saying everyone is now certainly taking up unsecured lending. That's not what we've seen. We're still seeing everyone cautious, but people are slowly but surely starting to open up.
If I look at our credit strategies, I think critical assessment has always that's helped us quite a lot, critically assessing daily on what is happening. We had a nice robust challenge with COVID and then agile implementation, I think those four words sums up the way we manage credit. What is interesting is I think nobody predicted COVID. What we looked at was the economy that's going to be under pressure. And we said we need to reduce risk.
And that's basically what we've done before COVID for 2 years, we've actually moved away from high risk areas, lower income levels, making certain that we are strong enough in an economy which is under pressure. And the one thing we didn't understand completely and is essential services, but at the end of the day when COVID happened, we had a 60%, 65% book exposure to essential services that actually helped us quite a lot. If I look at in the COVID, the first wave, and that's basically what we've done is the first thing we did is to say what is our appetite, how we're going to grant, are we going to evaluate all the different industries, employers, household incomes and we had to pull back the first time that in April or very early in April, we bought back with about 30%, reacting very quickly and I think making very critical decisions. Then we said we had an existing business, we need to protect our existing business, how are we going to help them, we had to bring in digital rescheduling and payment breaks options that had to come in, which we didn't have. And we had to look at behavioral incentives.
I think that's the one area that we were completely different to the market, everyone was giving a payment break or some other form of structuring, while we actually said to our clients, if you behave well, we will incentivize you and I'll impact that. And then brave enough, we launched the access facility 1st May. And the whole purpose of access facility is the fact that the person will be assessed from a credit perspective and if he's up to date, he doesn't need to come to a branch again. So that takes again the safety component into consideration. With increased provisions and then the big debate was in April, everybody wanted to reinsure us from a retrenchment point of view.
Everyone was scared and we had to take it on the chin. So we had to manage that process. We had to increase prices. Then in the second half, what we see is saw very clearly as how is the payment brakes outperforming? And as I said in September, we saw very good performances coming through.
We looked at the inflows and I'll unpack that. And we went to go and look and see how the variable incentives has performed and looked at retrenchment and death on that performance and I will impact that with yourself in the next couple of slides. I think the question now is economic recovery, the outlook. I'll put those 4 components in there, 3rd wave, when is the 3rd wave going to hit. I see with machine learning this morning, they say it's not going to hit us in the next 2 weeks, I think everyone speculates, nobody really knows.
But if we look at the students in Stellenbosch, it's definitely going to hit us somewhere. If I look at the vaccine rollout, are we going to have, are we not going to have? I think everyone knows those questions. Very interesting enough, 2 weeks ago, for the first time during COVID, I actually went out
to the
branches and I spent a lot of time in Pretoria, Soweto and the Vaal Triangle and just a couple of scary thoughts. The first one is talking to our branch managers, the pressure that the government is because they haven't got laptops and infrastructure for their people to actually really work from home. And secondly, all the process is predominantly paper based. So that's extremely difficult to operate in this particular function. So I think that's a nice challenge for them and a worry, but I must say from a positive side, I went I spent all day in Soweto and I was extremely impressed with the neatness, the neatness to buy the economy, the informal sector, talking to the people, I saw a very positive vibe in the Soweto area.
And then the Vaal Triangle, you always that's the area that's economically always under pressure. And clearly, the branch managers, all of them gave me indications. People are getting full salaries. People are being paid bonuses. We're starting to employ.
So I've picked up something else in the market, our people is this weak in the market and it will be interesting to see what happens in this period. What did we see with COVID, the blue is actually just our balance at risk. So if I look at government, it's 45%, government, parastatals, municipalities and travel and leisure only 2% of our books. So that gives you the book exposure. Now I think let's use manufacturing.
Our PD estimates is what would our PDs be higher due to COVID. So if if you look at when we did it in April, we said for manufacturing, we would be 22% higher on our PDs. Then in August, we did a reevaluation. We do this every month, we dropped to 17% and now we're at 8%. So you can clearly see how the economy is picking up and now we're reading things, we're adjusting our models and then we're opening up and making certain that we utilize the in our models and then we're opening up and making certain that we utilize the market opportunities there is.
And you can see on travel, all those PDs has actually gone up given the stress that there is in those particular areas. This will be an interesting a slide, what has happened with the income levels, this is our credit lines, the flows that's coming through, you can see travel and leisure has taken a big beating. They're roughly 25% down. Government is basically flat 100%. We all know that government has been fully paid.
And then you can see all the other industries, you can see the impact in May, June, July, where they've been down to, let's say, 95% 92% and then coming back to a 98% level. So we're seeing positive trends in our credit clients, remember this is credit clients, so that's the 1,000,000 clients out of the 15,600,000 to 15,700,000 clients. How is the payment relief been working? As I said, we've given SEK7.5 billion. I just want to get some water.
We've given SEK7.5 billion in payment reliefs. Of that SEK7.5 billion, SEK3.9 billion is completely rehabilitated and settled. That's that light gray bar. And you can see we got the brakes we've given here in May, June, July and now that the performance is actually coming through. Then the blue and the light blue is actually the SEK1.7 billion that's not yet rehabilitated.
That light blue is SEK1.3 billion. Those are payment breaks, that's again being rescheduled, and one will have to see and monitor what their performance looks like. And then you're sitting with the red, and the red is what is in arrears or what is worse, have been written off. So this is all built into our models to actually show you what's taking place. If I look at the question is, is the variable incentive working?
In total, we're saying that we're going to pay out about €410,000,000 out to our clients, are we and it's 187 clients that's been helped. Maybe just again explaining the variable incentive, if you've been variable rescheduled or payment break and you pay your 1st 6 months on a repayment, you get 50% off off your interest, if you pay for a full year, you get 12% you got 100% off. This is just a comparison between historical resale schedule performance and people on the variable incentive and you can clearly see there's a good 20%, 15% gap in the performance, we actually had for the first time people phoning our collection department and said, hey, you haven't collected and you must please collect because otherwise I'm going to miss my incentive. So you've changed the behavior around that the client is actually taking responsibility to say, but I need to make certain that I'm in front. There's our provisioning.
I think the critical figure there is the SEK 2.9 ZAR1 1,000,000,000 which we see the forward looking on COVID, that is all what we're looking at the economy, the performance of our DKK7.5 billion or that DKK1.7 billion, we believe we've provided well enough. So we're quite happy. And I think if you take that out, you can see what it's done to your credit loss ratios, where it is now 6.2% versus the 11.3% versus the 6.8%. So actually, strictly speaking, if you take COVID out, our book has actually performed quite well. Credit Life Insurance, just unpacking Credit Life Insurance, I think that was the $1,000,000 question, what's going to happen with Credit Life Insurance?
If you look at our net premium written, that's actually increased from SEK1.5 billion to SEK2.5 billion. We've received extra SEK400 1,000,000 because we've increased our prices when we saw there was extra risk. We've increased our prices, that's at SEK2.4 versus the SEK2.8 and then our premium spike to our reinsurance, they dropped with €400,000,000 to €500,000,000 and then the claim by, the $1,000,000 question, what's going to happen there, you can see that increase coming through of 85%. I think the net effect going through the whole year, basically our income from Credit Life is actually flat. I think that's a tremendous performance.
There is what you can see what's happened on retrenchment and death. Our retrenchment is up 100 percent from CHF 500,000,000 to CHF 1,000,000,000 We've seen a spike in retrenchments taking place in June, July, August, September and it's actually come down and is now in normal levels, it's all going to depend on what it's going to do, if there's going to be another wave, wave 3, but we think it's fairly come back to normal levels. Interesting always retrenchments were severely impacted in the last 3, 4, 5 years by the mines. And as you all know, the mines are doing extremely well currently. On death, you can see that increase and that increase came through basically in the latter part of the year with level 2 where we picked up quite a lot of death claims, but that has also stabilized.
I'll give you the number of claims paid. It's interesting to see that death as number of claims is only up 27%, but the value is going up 64%. This gives you an indication of the value per client that's claimed. And yes, this is the granting side, what has happened in the granting side, you've seen our granting has come from SEK 39,000,000,000 to SEK 29,000,000,000 where we've cut back, but a big focus on quality clients or higher income clients, people earning more than ZAR20000 per month is now 55% of what we're granting. If we unpack that 10000 to 20000, that drop is actually predominantly in the 10000 to 15000.
The 15000 to 20 1,000 it's basically flat or slightly up. But you can see in the lower income segments, we've cut back and that's in line with our policy or our strategy that we've actually started in 2018. And then the new access facility, I think a wonderful product, we're extremely really pleased with this product. It was launched in May. We've already sold limits of 8.6 1,000,000,000, there's just over ZAR6 1,000,000,000 that's been taken up.
It's interesting, 54% of the sales that's going out is for people earning more than ZAR15000 a month. And the nice thing about this product is for term loan product, if you take that term loan product, pay fully on that amount. So if you take ZAR100000, you pay full interest on ZAR100000. On the access facility, you only by when you use it. And if you don't use it, you don't pay any monthly fees and your pricing is very competitive because it's priced at a facility rate and it comes in around about 17%.
So very strong growth in this product. And I think the other big thing is it's it's actually taken us out of the traditional 1 to 6 month market. So the old 1 to 6 microloaning cash loan market, we're not in that market anymore, and we're actually operating only in the term loan market. Business Banking, if I look at business banking, what has happened? I think we thought we're going to build a bank after we've acquired the bank and then you suddenly realized that you had to manage COVID.
So basically for the 1st 6, 7, 8 months, it was all COVID and how is your SMEs performing. We assisted just over 1,000 business clients with payment breaks up to $4,200,000,000 and you can see of that, only 46 clients is in arrears with a balance of $3,000,000 So outstanding is $3,600,000,000 but overall, it's actually performed extremely well and we're happy with that performance. The Saab loan guarantee, I think that's the one question everyone saying it's not been working, and I think it's a question that the private sector or the banks were just too quick helping the clients with all the payment breaks, etcetera, etcetera. If you look at our total contribution, it was over CHF 12,000,000,000 that we assisted clients, if you take Business Banking and Retail Banking into consideration. I said it's been extended for another 3 months, but I think refocusing and say actually how can we actually assist our clients ourselves going forward, we've provided our we believe on a very conservative basis with a provision coverage of 6%.
Where are we? We've brought in Mercantile now as a division of a bank from the 1st December. So they haven't got a banking license anymore. We're basically focusing on 2 areas. The one area is actually building a very unique client variance for our business clients and new credit models for them and then you need to integrate the support services from AML fraud accounting side, you need to bring that in.
So we're busy with those integrations and working that through. You can see we've appointed 134 new employers that's predominantly in the building the bank side and we've it's a con at 81 retail people to Polterbank. And maybe just come back to what I've said now is that to align systems, as you know, we've gone live on SAP on the retail side last year March, and that's gone very well with the whole year end. We actually celebrated SAP's 1st birthday about 2, 3 weeks ago and they're going live now on SAP and should be half year should be fully on SAP. But the big focus lies on the whole service model that we're building and the scalability.
So we're still on track. Like I said, we're still looking at Capitec Business Banking for next year and that whole process is taking place, maybe the only thing that I need to highlight here is we've launched a franchise solution in the market. We brought in about 7 or 8 people that's focusing on franchises, because what we've seen is on the franchise side, you're picking up quite a lot of information, you've got quite a lot of history to actually support your strategy. If I look at the future, I think the future we can focus on those four area people, scale, digital and data. On people, I think that's where the biggest challenges and the biggest opportunities are because I'm not a fan of working from home the whole time, I think it's a combination.
If I look at our Exco team, we're probably 80% of the time in the office. We've just seen if you brainstorm, if you're creative, if you're innovative, you need to have people around you, you need to have those serious debates. So we're really encouraging our people in a responsible manner to come and work from home, work from office. So we're spending quite a lot time and then we're working on a lot of new models where you've got complete scalability, flexibility, multi scaling. To give you example, with our systems and things that we've implemented, our direct lending business normally had only the people that was working indirect lending that could assist with loans, now people in branches seamlessly can switch over and can assist.
So is that cross functional multi skilling? I'm challenging the HR department to say, I think we need to throw away all job descriptions and just think and say what is the opportunity and let's go and do things. The human touch is still for us important. Everyone talks about branches and digital, I believe a very critical aspect of the CapEx winning recipe is those three sites, we've got a very strong branch infrastructure, we've got a very strong digital offer and then a very strong client engagement side and that branch side is that human touch. If there's an issue, a problem, I want to understand the product better, I want to engage, that's where the branch is critical.
And we see that when we launch a new product and that's coming out, that understanding that human touch is critical. We've budgeted to a point close to 500,000,000 500 people and all of those people are basically IT, digital, signs, etcetera, coming through. So it's a very strong focus on where we're going. Then on scale, I think it's quite nice to sit with 15,000,000 well, let's call it 16,000,000 clients. How do we leverage that client base?
How do you optimize that client base? What products do you launch in that client base to make certain that you can optimize it, but for the focus of simplicity and efficiency and transparency and then to create efficiencies, as you scale and as you grow, there's always opportunities for efficiencies and do things better. So that will be a very strong focus. And then partnerships, I think if you look at what we've done with Esa Homelom, Sunnem, etcetera, etcetera, we'll continue looking for partnerships and working with people to create value for our clients, I think if you look at fintechs, it's critical that banks work with fintechs and that we partner and we solved those client solutions. Digital and data, big focus areas is then the payment side, the QR side, changing the behavior, changing behavior from cash to payments and the whole digital e commerce side, the whole ability to move everything to the cloud, just interest sake is that the business banking data infrastructure is all in the cloud and we're seriously moving retail into the cloud.
We'll probably complete that in the next year. But all of that is that ability to actually understand your client better, to have better insights of your client and to be able to react quicker because all it goes about is understanding your business, making decisions much quicker and to be able to do that, you need to have data available. So that's a very big project for us. We're spending over €250,000,000 on that in the next 12 to 18 months. And and then protect our client data and trust Poppy is coming in 1st July.
I think if I look at it, for me, it's not so much about Poppy, but where the world is going with social media, etcetera, etcetera, is you need to make certain that you create value for your clients because if you create value for your client, that client is going to say, I'm going to trust you with my data, and then you can use that data to actually create value for himself. So our focus is not a compliance or regulatory focus, but more a client side and so I mentioned that we're adding value to the client. And then Business Banking, I think I've actually addressed this. We're on track with a 20 months 24 months development plan for mid next year. And yes, it's looking at all processes, client interactions on a digital basis that we do it seamlessly.
So I must say, if I look at the future, what we are busy for the next 2 to 3 years, I'm very excited. I think it's an exciting opportunity to actually sit with 16,000,000 clients, close to 9,000,000 digital clients and instead of working a business bank that you can and that you're building up and if you combine that, I think we've got a very strong future. Thank you very much. We will now hand over to Anton that's and I'll handle the questions and I'll join Andre and then you can ask any questions you want. Thank you very much.
The first question we have this morning regards the number of the client growth rate. So what is the current client growth rate, if the average growth last year was $160,000 per month.
Well, there was 1 month that had negative growth and that was right in the heart of COVID. Thereafter, Barr, for 2 months, we had a consistent growth in the growth of clients and at the moment it's roughly about 200,000 per month. 200,000.
The next question relates to transaction fee income. What drove the increase in transaction fee income? People expected that the transaction activity was going to be lower during COVID.
I think your biggest lever,
there is the number of clients because
if you look at
the we've added 4,000,000 clients in 2 years. That is about, if you kind of look at and we haven't increased prices for 3 years and we've grown very strongly in digital. So like I've shown in there, with COVID, the digital transactions kept going and even point of sale transactions kept going later on. So I think it's the fact that you're moving away from cash, but very strongly is the $4,000,000 because remember if you look at 2 years, that $2,000,000 didn't give you a full income for that year, that's partial and the $2,000,000 you brought in this year is also not full, it comes in actually the full effect actually comes in the year after. So your ability to have that client base, I think is a big driver.
Like I said, 8% of that growth is coming from a number of clients.
I actually specifically look and it's across the board, even in cash transaction. I have to say that the business bank came in for 12 months, although it was only there for 3 months previous year, but their numbers are very low compared to the CapEx number and the drive is really to move away from cash into point of sale, so it could very well be that someone in the past could have taken one withdrawal and now they're doing 10 point of sale transaction or payment on I think
investors must always remember, move from branch to digital, digital is R1 transaction, branches, let's say R4, R5 transaction. So you need to do much more digital transactions to make up for that. And that's just a time growth on the digital side that's coming through.
Then what is the current demand for credit in business banking? Is the demand starting to pick up Or is it still weak?
Well, generally, there's always demand for credit, but we do find that companies are very cautious at the moment. Even at the government loans that were supplied, a lot of companies did not want to take that because they want to wait and see what happens in future. So people are quite cautious at this point in time, especially for large developments.
It's interesting if you look at the retail applications because that we measure very clearly, in your retail applications in January February, it was roundabout 35% to 40% down. And suddenly in March, we picked up very strong applications again. So I don't know if people are starting to say they're looking for credit again, given the economy has opened up, but generally on the retail side, we were for the year or let's take it from July, we were about 20% to 25% down on number of applications where people I think were just more cautious.
Then moving on to the slides, we had a question around the banking clients that total SEK4 1,000,000. How do we define the banking client?
It's €5,600,000 the €4,000,000 is the savings clients. So people that size with it, the €5,900,000 is the if I can remember now correctly. But the banking client is actually a client where actually deposits his salary with
us. Okay.
We mentioned stable inflows, app usage, swipe usage and debit orders. And then we've got various definitions within the bank in order to manage that because we are trying very hard to manage the behavior away from cash and to use more digital and card transactions.
Then around the home loans, we had applications of 24,000, but approvals of 300,000, why is that It's
just that remember, you do application, it gets approved. Now you need to go and do evaluation of the house, then you need to go through the bond registration process. So it just takes much longer. And our bond office or deeds office was also not 100% capacity, so it's just a normal process that takes place.
Right. Then What is the average value of the home loans granted? You have that.
I think the average, and I'm talking a little bit of correction, was just under SEK1 1,000,000. It was about 9.50.
And are we targeting a specific home loan book and can this be as large as the unsecured book?
Remed, this book is on SA Hormelands balance sheet, so it's not on our balance sheet. So we're not targeting a specific size. What we are doing is just offering value to our clients because CapEx never had a mortgage product. So if a person joined us, let's say, 20 and he's now 30 years old and he wants to buy a house, he had to go to 1 of the 4 traditional banks. Now we can actually get a Essar Home Loan, which is underwritten by Essar Home Loans.
So it's not our product, it's not on our balance sheet.
What is the key drivers for the cost growth given that there was only a small increase in staff and lower branch numbers?
There was a 10% increase on OpEx and remember, Mercantile was only in the previous year for 4 months and now it's in for 12 months. And then there was an investment always on IT and digital.
That's where the major investment is from certainly the center
is
to streamline IT and develop new products.
Has there been any commission charge this year on loan originations?
Yes, we do, but it's just a small charge that we do to effectively cover our costs for the initial capturing of the transaction, but it's really very small.
What are the increasing costs for e commerce distribution?
Well, it's really the IT development. IT development and the app development, so there's a full team that look at that and also we make use of extensively of machine learning and that's all factored into that. So it's not a physical cost, it's more on the development cost and then to get clients to get used to it and roll it out. So there's marketing cost attached to that as well.
What would have been the NIR to OpEx retail coverage if we excluded funeral?
Well, there's a huge fixed cost into the branches and 86% of all funeral policies are actually sold in branch. So I suppose one would have to look at it and say, if we did not have funeral, we would in all probability have been able to decrease the headcount in branches, it's not that straightforward. We've computed a specific amount, which we charge as part of the funeral cover, in future, the funeral cover will furthermore be moved to a fellow subsidiary of the bank, because we'll do all our insurance products from there and then we will have a charge to the bank. But I don't believe that that's going to be that significant because as I said, there's a huge fixed cost component in the branches.
I think that's the nice thing what digital does, you create capacity in branch, so you can sell products HELLO branch. So that gives us a major advantage because the fact that we've got over, let's say, 840 branches gives us a very on distribution footprint plus then the 15,700,000, 15,800,000 clients, gives you massive opportunities to bring out new products and sell that properly.
And what is the strategy around wholesale funding? It looks like the book is being run off completely and will Capitec remain active in the whole Self funding market.
Well, the idea was always to presence in the market. I would say fortunately for ourselves, but probably unfortunate for the wholesale providers, we just have so much funding. I mean, we've got significantly more in our money in our investment portfolio than in the retail and business book. So the intention is to stay in the market and even start issuing some debt again in future, but at this point in time, our need for wholesale funding is still quite low.
And we have a question around credit. 'twenty one financial year has been heavily distorted by the increased credit charge. In the first half, the pre provision operating profit was up 11.5% and then just this decrease to 5% in the second half, given a full year figure of 8%. Can you comment on the slowdown in the second half and comment on the outlook for the next financial year?
Well, to start with, as Kari said earlier on, on the growth of the book, we were obviously very cautious. There are some industries that are still having problems like the travel industry. So obviously, we can't be bullish there at all. There's a lot of questions still on the 3rd wave and maybe 4th wave. So generally we are very cautious.
So there's been a very significant slowdown in the first half and as we said earlier on, gradually we are increasing that as well and also by providing good priced products and products like the access facility that clients really enjoy, we will see growth going forward. As for the provisions, we guided our best shot in the first half of the year to make sure that we deal with it and as Henry said earlier on, we're updating that on a monthly basis and we do find pockets where we feel that provisions are not required to be as severe as we thought about it in the first half, but hopefully, it will be so good that we can't release all the provisions at this point in time, going forward, but that's very unlikely. The one thing that we try to do is to deal with the pandemic, so that we don't linger on it forever. So even at this point in time, we spend hours and hours and hours again at year end to make sure that our economic forecast and everything is in line with what we believe a reasonable number is going forward.
That's it. No more questions. Thank you very much.