International Subsidiary Positioned As Future Growth Engine
Capitec’s international subsidiary, Avafin, may currently contribute modestly to the group’s earnings, but analysts are optimistic about its potential to become a significant growth driver. The new CEO, Graham Lee, shared during Capitec’s interim results presentation that Avafin has more than doubled its contribution to headline earnings.
In the six months ending 31 August 2025, Avafin generated R121 million in earnings and disbursed loans totalling €303 million (approximately R6.1 billion), marking a remarkable 94% increase compared to the same period last year. Active clients also surged to 250,000, reflecting a 27% year-on-year growth.
An equity analyst noted that Capitec views Avafin as an “early Capitec” in some respects, suggesting that it presents similar growth opportunities to those Capitec experienced in its early days, albeit in different geographical markets. Capitec acquired a majority stake in Avafin in May 2024, and the subsidiary operates in Poland, Latvia, Czechia, Spain, and Mexico, focusing on online, short-term, high-yield consumer lending.
Although Avafin’s performance has not yet made a significant impact on Capitec’s overall results, it is growing rapidly. An investment analyst remarked that while it may not currently be a major profit driver, its strategic positioning in Eastern Europe and Latin America could yield substantial returns in the medium term.
During the review period, Avafin expanded its loan portfolio across all regions. In Latvia, it transitioned from a short-term lending model to a longer-term, near-prime approach, adjusting pricing in May 2025 to attract lower-risk clients. In Mexico, the focus is shifting from single-payment loans to term loan products, setting the stage for broader growth and a more sustainable client base.
The management team guiding Capitec’s international strategy brings a wealth of experience, with former CEO Gerrie Fourie actively involved in Avafin’s operations. Analysts are confident that the knowledgeable leadership will facilitate substantial growth, drawing parallels to Capitec’s successful track record in South Africa.
For the six-month period reviewed, Capitec reported a 26% increase in earnings, achieving the upper end of its guidance, while return on equity (ROE) rose to 31%, up from 29% the previous year. This growth was achieved despite a challenging economic environment and intense competition within the domestic market.
Looking ahead, there are questions about whether Capitec can maintain this momentum. Analysts expect solid earnings growth to continue, with projected compounded growth in the high teens over the next three years. Even if top-line growth slows, Capitec’s shift towards capital-light, fee-based revenues is likely to sustain returns at the higher end of the sector.
Capitec’s diversified operations and continuous market share gains are seen as key strengths. The company’s extensive data collection also aids in product development and market entry decisions, suggesting that its return on equity is not only sustainable but positioned for further growth in the future.