Viljoen doesn’t see the Capital Bank of Botswana as a major high street bank with multiple branches within the next 3 to 4 years, like the Barclays Bank of Botswana, First National Bank of Botswana, and Standard Chartered Bank of Botswana. “Obviously, as the bank we would want to expand”, but he points out, the Bank’s focus is getting return for equity, “we want to have a market share of Profit After Tax (PAT) of 5 percent against the currently estimated 2 percent.”
By his calculations, Capital Bank requires to make P100 million profit and will need assets of around P5 billion in the next 3 to 4 years. Viljoen says the driver for this growth will be transaction customers, an aspect of banking it had not focused on until 2013.
Viljoen’s role as the Principal began in earnest in Nov 2013 the year the Bank turned 5 years. It had good liquidity, good loan book and an established profit margin. But the 9 year old Bank had challenges with none performing loans. The customer base remained small and stagnated, prompting the Board to administer a new blueprint. “It’s not me, it’s really a bigger strategy but we put new tech and new people to drive business.”
Capital Bank was closely associated with Small, Medium and Larger businesses. Overtime things got murky for the subsidiary of the First Merchant Bank of Malawi, as the Bank embarked on individual saving accounts with low entry balances, while not heavily reliant on retail segment. The Bank says it would rather bank thousands of businesses as opposed to individuals.
Explaining the rationale behind fewer branches, focused on corporate commercial, Viljoen stated that “It’s about relation banking and turnaround time and trust. Those are the 3 main things.” More than 90 percent of the customer base represents businesses, according to the Bank’s estimates. The business line leans mostly on construction companies, filling stations, wholesalers and travel companies.
It’s a strategy that the Bank has been following throughout its 9 years of existence. Initially it started out as a relationship Bank expanding to a point where management had to introduce a new systems, operating models and staff focused on growing revenue. “We were very clear in terms of what we wanted to do.”
The strategy has been paying off, since Viljoen joined the Bank. He says Capital Bank has been growing, even as the banking industry lost an approximate 40 percent in revenue over 2014. The Bank’s growth is partially because it is small and has been easy to manage, observers argue.
“Our challenge is branding. People don’t know Capital Bank, they don’t know who we are, they think we are an Indian bank but we have been fixing a lot of stuff,” Viljoen says.
Capital Bank closed the financial year 2016 with Profit After Tax growing 60 percent, hitting P23, 8 million, thanks to the inclusion of banking services that includes pay rolls, loans, normal transactions of Foreign Exchange (FOREX) and payments. The growth, however could be misleading as experts argue that it’s easy to grow big numbers from a small customer base of just over 10 000.
The real success story of Capital Bank is the balance sheet growth which it feels has a higher growth rate relative to the market. Viljoen says the Bank continues to grow sales and balance sheet in excess of 20 percent. “That helped to reduce concentration risk. If you are a small bank and have one customer who gives you a huge deposit, there is a risk that if they take it away you are in trouble. But we have grown our customer base to reduce concentration risk. We don’t have a single customer that could potentially get us into trouble by taking away their funds. We have many customers who have relatively good balances.”
Further, Viljoen says the Bank resists the lure of once off big deals where there is a lot of commission and fees, in efforts to build a sustainable business month after month.
The Bank’s customer deposits have grown by 24 percent to P1, 4 billion. Loan book stands at just over 800 million, a nice gap with deposits. 2014/15 loans were lower, when the bank adjusted credit approvals structures. The Bank now sees more room for growth. “A bank needs to lend money they take from their customers.”
Interest income from loans has grown by 25 percent, in line with the loan book grown despite the downward pressure of interest rates.
Non-interest income has been steadily growing since the introduction of transactional customers from when Viljoen took over in 2013, growing by 20 percent in 2016 from 2015. “Growth is driven by increases in customer base,” Viljoen says, carrying momentum into the first half of 2017.
“The first half has been in line with what we have seen last year. Unless something happens we foresee another good year in 2017.” It’s nothing extraordinary, it’s about continue to grow customer base improve loans and controls. Viljoen says it is essentially about a secure bank where people can feel they can trust their money to be safe.
The nature of sustainably will see that the Bank will service clients with more products and more services than to use a particular product to bring in new customers. The logic, according to Viljoen, is they will bring customers on the back of the relationship, turnaround time and service, “Once they are here with us and they bank with us that’s when we start giving them loans and other products. We typically focus on existing customers.”
Capital Bank recently launched asset based finance, vehicle finance initiative after realizing that customers have been using services from competition. The bank says other products are on the pipeline.