The financial statements of a bank are similar to those of any company and typically consist of:

  1. The profit and loss account, or income statement
  2. The balance sheet, or statement of financial position
  3. The cashflow statement
  4. Notes to the accounts
  5. The auditor’s report.

The financial statements of Capitec, the South African retail bank run to more than 40 pages, as can be seen from the 2021 Integrated Annual Report.

The Profit & Loss Account/Income Statement

The profit & Loss account shows the income for the period – typically consisting of interest, fees and commissions – less all the costs incurred in earning the income.

A copy of Capitec’s Income Statement can be seen on page 151 of the Integrated Annual Report.

Capitec Annual Report of 2021, Page 151.

The Balance Sheet/Statement of Financial Position

A bank’s balance sheet is often described as a photograph of the assets, liabilities and shareholders’ funds of the business on a specific date, typically the end of a month or a year.

  • Loans are the main assets of most banks, followed by cash and investments, real estate and other assets. Loans that are considered doubtful or uncollectable are provided for and deducted from the gross value of loans
  • Deposits from customers and wholesale funding from the money markets are the main liabilities of the bank.

A copy of Capitec’s Statement of Financial Position will be found on page 150 of the 2021 Integrated annual report.

Capitec’s Financial Position, in the 2021 Annual Report.

Cash Flow Statement

Said to be the most intuitive of the financial statements in the accounts of a bank or a company, the cash flow statement provides aggregate data regarding all cash inflows from the company’s on-going operations and external investment sources. It also includes all cash outflows that pay for business activities and investments during the period of the accounts. Capitec’s 2021 cashflow statement can be found on page 155 of the Integrated Annual Report.

Capitec’s Cash Flow Statements, 2021

Notes to the Accounts

These typically set out the main accounting policies applied in the financial statements and give further detail on the components of individual items in the Profit & Loss Account and the Balance Sheet.

Auditor’s Report

The auditor’s report is provided by an independent public accounting firm that is authorised to carry out audits on company accounts and express an opinion on their truth and fairness. An audit opinion is said to be “qualified” when the auditor says it is unable to express an opinion or otherwise qualifies its report.

A bank rarely receives a qualified opinion on its accounts. A qualification could have dire consequences, including sparking a “run” on the bank concerned.

Most of the world’s banks are audited by accounting firms that are members of the “Big Four” global networks – namely Deloitte, EY, KPMG and PWC. In theory this means that the audits conducted by member firms of each network are undertaken to a common standard. However, this is not necessarily the case – as the national member firms of each network are independent organisations.

See page 142 of the Integrated Annual Report for the audit report on Capitec’s 2021 accounts.

Audit Committee’s Report in Capitec’s 2021 Annual Report