Capitec down 12% as it moves to soothe clients

Cape Town - Capitec Bank on Wednesday moved to soothe clients and investors, rejecting what it called "the key allegations and the inaccurate statements" in the Viceroy report.

The bank's share price took a beating following the release of the report "Capitec: A Wolf in sheep's clothing" by Viceroy Research, a US-based research house consisting of three short sellers.

The report was made public on Tuesday at 10:00, following weeks of speculation about which SA firm Viceroy had in its sights. 

Capitec CEO Gerrie Fourie told clients on Wednesday that “your money is safe with us – nothing has changed in our business". He said accusations about delinquent loans and bad debt included in the report "do not only hurt Capitec, it also damages our economy”.

Capitec's share price closed 3% down on Tuesday. On Wednesday it continued its slide, closing 12.59% weaker at R800.60 a share on the JSE.

In the report, the three short sellers who in December claimed to have exposed accounting irregularities at Steinhoff said they believed Capitec was a "loan shark with massively understated defaults masquerading as a community microfinance provider".

Capitec said that Viceroy had released its report about the bank’s finances and operations without contacting it for input. Viceroy has also publicly admitted that it was set to benefit from a drop in Capitec’s share price, the lender said.

Fourie said on Wednesday the bank decided to respond to the key allegations "in the interest of transparency and full disclosure".

Fourie said in addition to the Reserve Bank's confirmation that Capitec is "solvent, well-capitalised and has adequate liquidity", many of the bank's 9.5 million customers had jumped to its defence on social media.

Viceroy had tweeted on Tuesday evening that it was “preparing a response to Capitec's recent statement”. It has not yet released the statement, however.

Read Capitec's unedited responses below: 

Allegation one: Capitec is a reckless lender  

This is not true. We are very conservative in our client assessment to make sure that customers can afford to repay their loans. We value a long-term relationship and always aim to do what is in the best interest of our clients. We consider various factors before granting a loan, including past credit behavior on the credit bureaus, stable income validated by a pay slip, monthly expenses and the ability to pay back loans as assessed on client’s bank statements.

Allegation two: Capitec reschedules clients’ loans to make extra money

This is incorrect. Capitec only reschedules loans to assist its clients who cannot afford their repayments due to unforeseen circumstances, by re-negotiating the terms of the loans. A full credit and affordability assessment is done again, and rescheduling is only granted to clients after a strict review. No additional fees are earned by Capitec when the loans are rescheduled.

Allegation three: Capitec Bank is selling a product – multi-loans – which is not permitted by the National Credit Regulator   

This is not correct.  Capitec discontinued its multi-loan product when the NCR regulations changed in 2015. Our credit facility operates similarly to a credit card, except that clients repay the full outstanding amount every month and have to re-apply every 9 months. It is completely different to the past product.

Allegation four: Capitec Bank is the same as the failed African Bank and is a risk to investors and clients

Once again, this is devoid of truth. Capitec is a fully-fledged retail bank and has different sources of income; we don’t only grant loans, we also have transactional clients who deposit and save their money with Capitec Bank. This means we have various sources of income.

Fourie said in addition to the Reserve Bank's confirmation that Capitec is "solvent, well-capitalised and has adequate liquidity",  many of the bank's customers jumped to its defence. Capitec has more than 9.5 million clients, the bank said.

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