Earlier this year, Capitec customer numbers surpassed both FNB and Standard Bank — after just 22 years in the market.

So we thought it a good time to look at how they do what they do, and what the risks and opportunities are when you become SA’s (and maybe even the continent’s) fastest-growing bank.

Here’s what you need to know…

Shining some light on 🔦 

• What’s behind Capitec’s phenomenal growth?

• Rate cut bets, AI chip wars & the Temu hiccup.

• Stock update: Higgo’s Top 10 stock picks for 2024

• Earnings calendar: Who’s reporting on revenue, when

• Understanding the opportunity cost of your money.

Notes from the Capitec Playbook: Data, Diversification, and Disruption in SA Banking

As Capitec shares surged by 75% this year, making it SA’s fastest-growing bank (perhaps even on the continent), CEO Gerrie Fourie attributes its success to a focus on fundamentals – particularly return on invested capital (ROIC) and client satisfaction – rather than on share price.

But it’s significantly broadened its revenue streams and solidified its market position in recent months. Here’s what you need to know…

Data is Their Competitive Edge

At the heart of Capitec's strategy is its unparalleled use of data. The bank has amassed nearly 2 trillion data points around consumer behaviour and needs, which it used to launch new products like Capitec Connect. 

And it’s the only bank in SA with all its data stored behind the cloud, allowing for real-time insights and swift decision-making, potentially keeping it at the forefront of both customer experience and market trends.

Diversification & Disruption Where it Matters

Building on its retail banking success, Capitec is now making strategic moves into the business banking and insurance sectors, targeting underserved SMEs with simple, low-fee banking.

Similarly, it’s expanding its insurance offerings, focusing on simplicity and accessibility. And with an audience of 23 million clients (rivalling the likes of Standard Bank) and vast data insights, Capitec is poised to make significant inroads and further diversify revenue streams.

But What Does this Mean for Investors?

While Capitec’s growth story is impressive, it comes with its own set of risks and opportunities. 

The bank's $18 billion valuation means it’s closing in on Standard Bank’s $21 billion, yet Capitec is often viewed as expensive, and potentially overvalued. And they do practice unsecured lending, with credit arrears around 8.7%, introducing higher risk compared to the more conservative, asset-backed lending practices of the Big Four banks. 

That said, you can’t discount Capitec’s aggressive expansion into underserved markets and its data-driven approach presents substantial growth opportunities. Whereas the Big Four banks – Standard Bank, Absa, Nedbank, and FNB – offer more stable, dividend-focused returns with lower growth prospects, investors in Capitec are betting on continued innovation and market disruption.

Note: This is not financial advice, merely observations. For personalised financial advice, you can book to speak to a financial advisor here (powered by a registered FSP: No. 51310).

STOCKS AND ALL

🇺🇸 Equities Attract Large Inflows on Rate Cut Bets: Investors poured $15.73 billion into global equity funds, spurred by expectations of a September Fed rate cut and strong U.S. economic data. U.S. equity funds led the way with $5.97 billion in inflows, while tech and consumer staples saw significant gains and bond funds also attracted positive inflows.

📊 Chip Wars: Nvidia, the AI chip titan, faces a critical earnings report today (28 Aug) amid delays in its new Blackwell chips. While Nvidia’s stock has skyrocketed 170% this year, rival AMD sees an opportunity to gain ground with its MI300X chip, which has already hit $1 billion in sales. Analysts are closely watching Nvidia’s report, which could push its market cap toward $6 trillion, but AMD’s momentum could make this a pivotal moment in the ongoing battle for AI chip supremacy.

📈 Bitcoin Bulls Target $68,000: BTC/USD has continued its momentum, with analysts now eyeing a potential breakout to $68,000, fueled by bullish technical patterns and supportive ETF inflows. However, as noted last week, Bitcoin faces a crucial resistance level of around $62,500 – if it can sustain above this, we might see a surge toward $68,000 or beyond. But geopolitical risks and key support at $60,000 could influence its short-term trajectory.

🇨🇳 PDD Growing Challenges: PDD Holdings (Temu’s parent company)’s stock recently plunged nearly 30%, wiping out over $50 billion in market value after disappointing Q2 results due to competition and regulatory hurdles. Despite this, Wall Street remains bullish on its long-term prospects, saying things might look tough but it could just be a buying opportunity.

💰 $10M Mali Gold Raise: Toubani Resources has secured $10 million to push its Kobada gold project in Mali to the definitive feasibility study stage. The funding, backed by key investors, will support drilling, permitting, and environmental work as the company aims to make Kobada one of West Africa’s leading gold projects.

UPCOMING EARNINGS REPORTS

These companies are expected to deliver earnings reports in the next few weeks:

28 August 2024

• Bid Corp

• CrowdStrike

• Nvidia

29 August 2024

• Impala Platinum

30 August 2024

• Northam Platinum Holdings Ltd

3 September 2024

• Shoprite Holdings Ltd

WEALTH HACKER’S KIT

Opportunity Costs of Money: Spend Smart, Invest More

Are you thinking about how to better control your finances? Understanding the opportunity cost of money can help you think twice before spending and get you closer to financial independence.

What is Opportunity Cost?

Opportunity cost is the money you could have earned if you had invested instead of spent. Just like investments compound, so do opportunity costs. 

When you avoid unnecessary spending and invest that money, you let it work for you. The more you invest, the less you lose in opportunity costs.

Real-Life Examples

Consider this: You spent R50,000 on a holiday, but an investment with a 20% return would have earned you R10,000. Next year, that missed opportunity grows to R12,000. Or, imagine buying a car for R450,000. Over five years, the car’s value drops to R270,000, while investing those monthly payments at 10% growth could have netted you R743,428.42. That’s a big difference.

How to Calculate Opportunity Cost

Use your favourite investment, like the Satrix MSCI World Equity Index Feeder Fund, with a return of 13%. If you spent R10,000, you’re missing out on R1,300 in earnings every year. Over 10 years, that could grow to R33,945. 

Or, look at your home loan: Invest R10,000 into your bond and save R57,884 in interest.

The Message: Think Twice Before You Spend

Next time you’re about to splurge, ask yourself: What’s the opportunity cost? Your goal should be to convert as much of your income into investments as possible, getting you closer to financial freedom.

If you need help calculating the optimal spending and investment levels for your personal profile, you can get yourself pro personal advice right now…

THE PEOPLE HAVE SPOKEN

We asked where you see the crypto market heading, and it’s up and up…

🟩🟩🟩🟩🟩🟩 🚀 Bitcoin rockets past $62,500 and keeps climbing! (40%)

🟨🟨🟨🟨⬜️⬜️ 🛑 Bitcoin hits $62,500 and takes a break. (34%)

🟨⬜️⬜️⬜️⬜️⬜️ 💪 Ethereum steadies itself, preparing for a comeback. (13%)

🟨⬜️⬜️⬜️⬜️⬜️ 🌀 The market takes a sharp turn – anything could happen! (13%)

What you said…

Indeed, Jan, there’s too much riding on it to be flaky. 💪

Agreed, Asethemane, for now, it’s probably HODL and ride the wave. 🪂

More exciting product updates are coming your way next week Wednesday — don’t miss it!