I went to the Centurion branch. Uppermarket Mall, and the branch layout is so simple that it put a huge smile om my face because I saw exactly why I was paying so little for their offering and why I will be rewarded so richly for having a savings account with an interest rate on par with money market accounts. Mostly black clients, and the couple sitting next to me was there for a micro loan. ABSA and Nedbank is right next to them. Every small town has a branch like this. It couldn't be simpler, believe me.
...apologies GarethJ....you quite correct....the FNB offering is called EasyPlan...the article was comparing the re-branded Ubank & EasyPlan to the Capitec offering...now you know which stuck and which one didn't!
- Never seen so many disciples of any other share - CPI does have some compelling buy signals, but (and there's always a but) their impairments still remain an issue and nagging doubt. Like the stock, but wont be buying in this cycle at this price - R1
back when they was R100 and historic PE was 18 .. assuming they double earnings over 3 years (that's 24% growth per year) .. that makes price R200 at 18 PE .. now assume PE goes crazy and hits 36 .. that's R400 by end 2012 ...
I dont think i would add to my position at current levels, but will definately not be selling! I think the Big 4 will have trouble getting their systems in place, that being said, they will continue to operate very well, making money for their shareholders, CPI cannot provide all the services they offer, but like John said, there's room for all to profit in the industry. They might try to take on CPI, it will take time, if at all possible, but they would require a new business from the ground up. Then when we think CPI will get lots of competition, they could move into deeper Africa, this market is mostly untapped for them, not sure how low cost banking is in Nigeria, etc? But then like we spoke about before, Brazil could be a huge opportunity, maybe they move there. this would open a huge market (larger than Africa in total!) and more growth could come. So i love CPI and will remain loyal indefinately! Always watching my charts for the earnings/shareprice corrolation, but so far so good!
All this nonsense about legacy systems hampering the "4 major crime families" in competing with Capitec. Their market size and reach will not allow them to ignore this "upstart". So , offering legacy as a reason they can't and won't compete is errant nonsense. The barriers to entry are: 1. good IT ( easy to buy that stuff - I mean these are not complex products) 2. Premises ( not a problem as we sit here) 3. Money to fund this( definitely not a problem) 4. Staff( definitely not a problem - they are trying to dump their own anyway and this is a good outlet ) They will simply ignore the legacy clients - they deal with them anyway, and all they have to do is to buy a few Capitec staff to run the business- everyone has a price...and in FinServices it seems to be a quite low threshold and - off they go.
What i find the most interesting is that the Big 4 havent thought about this idea before. as you guys say, its not really that hard to create the business, no barriers, so why are they taking so long? they operate in Africa where low costs have been around for long, i find that strange, something is stopping them... wasnt CPI funded the other way around to conventional banks, long term funding for short term borrowing, not short term funding for long term borrowing, maybe this also helps a bit?
Again, refering to the (very good) article I read on Capitec in FM or Finweek a few months back. They were essentially started by individuals from the liquor industry (not banking) who applied the same model used in that industry to the bank i.e. market segmentation, branding and service. The big retail banks have an enormous legacy in philosophy and thinking to overcome - never mind the legacy in IT...
I think whats important about this conversation is the effect competition has on future growth prospects of any listed business... the greater the growth prospects the greater the need for stronger barriers of entry for the incumbent to benifit..either through legislation (banking Licence) or structure etc..For Captitec to win they either need to "lock" in the customer with dept or convenience or attitude. If Capitec is able to start selling proper home loans linked to all these new bank accounts they will be do very well indeed....because soon you will not be able to get a home loan unless you bank with that institution..watch and see.Shopping arround for loans is going to be a thing of the past.