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Capitec Bank Holdings plans R1 billion empowerment share scheme for its employees

Capitec Bank Holdings' share price slipped by up to 3.4 percent yesterday after it announced a R1 billion employee share scheme, the price of which could shave more than 10 percent off its next diluted headline earnings figure. Picture: Armand Hough/ANA/African News Agency

Capitec Bank Holdings' share price slipped by up to 3.4 percent yesterday after it announced a R1 billion employee share scheme, the price of which could shave more than 10 percent off its next diluted headline earnings figure. Picture: Armand Hough/ANA/African News Agency

Published Jan 20, 2022

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CAPITEC Bank Holdings' share price slipped by up to 3.4 percent yesterday after it announced a R1 billion employee share scheme, the price of which could shave more than 10 percent off its next diluted headline earnings figure.

The parent of South Africa's biggest bank in terms of customer numbers plans to issue shares worth R1bn to 10 000 of its employees to improve its B-BBEE ownership status, the bank said in a statement.

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However, the market did not appear to react favourably. Capitec's share price traded lower at R2 030.86 early yesterday afternoon – its market capitalisation of R243.16bn makes it the second biggest of the major South African banks in terms of market capitalisation. The share price later in the day closed at R2 015.32 on the JSE yesterday.

The Financial Sector Charter ownership targets require subsidiary Capitec bank to have at least 25percent black ownership, and the current level of black ownership per the B-BBEE scorecard for the 2021 financial year is 19.39 percent.

The share issue aims to improve Capitec's broad-based black economic ownership status while also giving participating employees the opportunity to become shareholders.

On a pro forma basis, the bank said the share issue would result in a 13.3 percent decline in headline earnings per share to 2 995 cents for the six months to December 31, 2021, compared with the unaudited results for six months to August 31, assuming the shares were issued at R1 074.50 per share and that 465 333 shares were issued.

“Aligning employees' interests with those of shareholders will further incentivise employees to serve the best interests of the Capitec group of companies.

“The specific issue, if fully taken up, will contribute an additional 1.5 points to Capitec Bank's score under the ownership element of the B-BBEE scorecard,” the bank said in a statement yesterday.

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The newly issued shares would be restricted from being traded for five years to ensure the bank benefited from the increase to its B-BBEE ownership score for an appropriate period.

Eligible employees were those permanently employed with the group, and were employed on or before January 1, 2019, and continued to be employed on the date on which the shares were issued, and excluded Capitec directors or anybody who was a beneficiary of the Capitec Bank Holdings Share Trust.

The new shares would be issued after applying a discount in an amount equal to 50 percent of the opening price.

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The issue price payable would be funded through loans to be advanced by Capitec to participating employees.

Capitec would retain 50 percent of dividends payable to the participating employees to settle the employees' interest and capital portion of the loans.

The remaining 50 percent of dividends payable to the participating employees will be paid to the participating employees.

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