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South Africa’s largest asset manager, Ninety One, has come out in defence of Capitec’s “expensive” share price, which hovers around R4,700, more than all its rivals combined, arguing the company is delivering well on its strategy and early investors in the lender have benefited greatly.The surge in Capitec’s share price over the past decade has seen the company surpass FirstRand and Standard Bank to be the country’s most valuable bank, valued at a mammoth R545bn.Chris Steward, sector head: financials, SA equity & multi-asset at Ninety One, said, as with all growth companies, it is essential not to look at valuations in isolation but rather in the context of the company’s sustainable future growth trajectory. (Dorothy Kgosi) “The consensus has been that Capitec is expensive. This view has been held by the market for a long time. When the share price was R700, this was seen as expensive; when it shot up to R1,000, it was again said to be too expensive,” Steward told Business Day.“At any point in time when you buy a company exhibiting very strong rates of growth, the multiples at spot valuation will appear expensive. This applies to banking stocks around the globe. If you stock on the basis of cheap valuations, you tend to do this because of [the] outlook on future returns.“If you go back in time, you find out that buying the higher-rated banks has often been the companies that give greater shareholder returns. Often, ‘cheap’ banks are cheap for a very good reason and often fail to deliver decent shareholder returns.”Capitec’s share price has surged more than 200% over the past five years, with the bank home to about 26-million customers and more than 13-million digital clients, making it the country’s largest digital lender.The Stellenbosch-based bank has not been shy to evolve and disrupt the market, having built a robust value-added services platform that has broadened its cross-appeal.The lender in the 2026 financial year reported its highest profit yet, R16.8bn. The bank has identified business banking as its next cash cow, having acquired Mercantile Bank in 2019, which it has since rebranded Capitec Business.Portfolio managers at Allan Gray in a recent podcast identified Capitec as a stock they would love to own on behalf of clients but flagged the elevated share price as a constraint. “Capitec is a business all South African investors admire. It is a business that has grown beyond most people’s expectations, despite an economy that has been very weak. They have consistently found new ways for their profit pools,” portfolio manager Jithen Pillay said.“It’s a business you have to admire. The question becomes what you are paying for it. It currently trades on quite a high multiple of future earnings. We can buy other South African banks that aren’t perhaps going to grow as quickly but where the valuation discount is much bigger. In a perfect world Capitec is a great example of a company we would like to own at the right price.”For Steward, Capitec is not showing any signs of slowing down.“Despite growing its market share by almost five times, Capitec remains the smallest bank in the country by market share of retail and business banking revenue, demonstrating the vast opportunity for the bank to continue growing its revenue base,” he said.“We believe Capitec has a compelling growth story and has consistently delivered exceptional value for shareholders despite always screening as relatively expensive. Given the company’s proven track record and long-term ambitions, we believe its growth story will continue to play out and that its earnings growth will more than compensate investors for higher valuation.”Business Day
