Social media has been ablaze after Viceroy released a damning report on Capitec calling the micro-lender a loan shark headed for insolvency. This led to a massive sell-off in its share price on the stock market on Tuesday, 30 January.
1. Viceroy claims that Capitec’s loan book is sitting at R11 billion
The report says the micro-lender’s predatory lending practices pushes clients to take out new loans to pay off the old ones, while being charged initiation fees and incurring other costs. The report also states that the bank is at the brink of insolvency, just as African Bank was years before. Capitec responded saying: “With reference to the reconciliation of the loan book, we can confirm that the estimate in the Viceroy report does not accurately calculate client repayments.”
Capitec: A wolf in sheep’s clothing. Viceroy’s latest report is now live. $CPI #JSE @SAReserveBank @CapitecBankSA
Fraser Perring of Viceroy Research will appear on Bloomberg @business at 8:30am GMT to discuss the report.https://t.co/5A0n53OEbb pic.twitter.com/v8qnXvuMnP
— Viceroy (@viceroyresearch) January 30, 2018
2. Capitec’s share price tanked by 25%
Capitec’s share price fell off as much as 25% when the news broke. By 5pm on the day, the bank’s share price was back to just under R900, down only 4.7% from its opening price of R920. Some analysts claim the report was purposefully released to manipulate the share price value.
Capitec's share price over the past 6 months. Falling today in high volumes post Viceroy report. pic.twitter.com/qmimBcTL6a
— Renee Bonorchis (@Reneebon) January 30, 2018
3. Capitec denies claims made by the report
Capitec CEO Gerrie Fourie vehemently denied the claims made in the report, saying that Viceroy got a lot wrong in their report. They also responded to a number of the allegations made by Viceroy and have said they will take it up with the Financial Services Board (FSB). They held a media briefing on Tuesday 30 January and here’s what they had to say:
4. The Reserve Bank released that Capitec is solvent
The SA Reserve Bank released a statement which said that Capitec was solvent, well capitalised and has adequate liquidity.
The SARB notes a report by a US based fund manager. According to all the information available, Capitec is solvent, well capitalised and has adequate liquidity. The bank meets all prudential requirements. https://t.co/tReQqMqN5O
— SA Reserve Bank (@SAReserveBank) January 30, 2018
5. Capitec has also reassured customers that their money is safe
They reassured their customers that they are solvent with adequate liquidity and that they are committed to transparency and full disclosure.
We want to reassure our customers that we are open for business and we welcome the statement from the Reserve Bank that we are solvent with adequate liquidity. Capitec Bank remains committed to transparency and full disclosure.
— Capitec (@CapitecBankSA) January 30, 2018
6. Boutique investor Benguela has also questioned Capitec’s practices
Boutique investor Benguela Global Fund Managers has also questioned Capitec about their “aggressive practice of rescheduling arrear loans and advances.” According to a letter dated 19 January and seen by Bloomberg, Benguela said: “We believe this practice has distorted the true performance of your business and warrants some review.”
Since 2013 “arrear rescheduling has contributed to about 50 percent of reported growth in headline earnings per share.” Benguela, which doesn’t own @CapitecBankSA shares, requested a response from Capitec by Feb. 5. https://t.co/eK5k1Jxrm2 https://t.co/WusIEyZmb8
— Aly-Khan Satchu (@alykhansatchu) January 31, 2018
During the media briefing, Capitec said that they are in the process of responding to allegations made by Benguela Global Fund Managers.
