Capitec rating receives thumbs-up from S&P Global

TUMISANG NDLOVU:  There’s been continued reaction to Viceroy accusations against Capitec of underhand businesses practices, and alleged reckless lending. S&P Global has come out saying that its ratings of Capitec are not affected by that recent investment report published by Viceroy. The report accuses Capitec of underhand business practices. The Reserve Bank has since come out in Capitec’s defence.

Now Matthew Pirnie, representing S&P Global, joins us for this topic. Welcome.

MATTHEW PIRNIE:  Hello. Thanks very much for having me.

TUMISANG NDLOVU:  What does S&P Global make of the Viceroy report on Capitec?

MATTHEW PIRNIE:  We’ve read the report and we considered that there was nothing in the report that would lead us to review the ratings. So we looked at the numbers, we looked at some of the legal stuff, and we believe that we can reconcile the numbers firstly, and the legal stuff we have looked at before. So we were just happy to release a short bulletin saying that the ratings appear good.

TUMISANG NDLOVU:  Should there be truth to any of the claims made against Capitec, would S&P adjust its position?

MATTHEW PIRNIE:  It depends on the scope of the claims. If there were a material understatement or overstatement then there would be a problem. But the numbers we have, which have been audited, and we’ve checked with the detailed information, then we are happy with the numbers represented in the rating that we currently have.

TUMISANG NDLOVU:  For the sake of background now, talk us through the status of Capitec’s rating by S&P Global.

MATTHEW PIRNIE:  It’s currently on a BB stable. It’s reflective on the positive side of strong evidence of capital, good levels of provisioning against bad loans. They also have strong earnings stability. On the negative side it is a monoline consumer lender, so it has some revenue concentrations exposed to inherently high risk costs. So if you balance those things together then we are happy with the BB rating.

TUMISANG NDLOVU:  Lastly, Matthew, in a case where S&P makes its ratings, what element is used or what criteria are used to formulate a rating?

MATTHEW PIRNIE:  We have very public, transparent criteria which anyone can access through our StandardandPoors.com, and you can see the criteria. We look at a mixture of the business position and the capital earnings, the risk position, the funding liquidity, and the kind of environment which the bank operates in. We have this on a global basis, and all the above ratings are globally accurate. We believe also you can check them across all the globe and ensure they are similar.

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