Cape Town – National Treasury has spoken out against Viceroy Research, labelling its report on Capitec as reckless.
Viceroy released a report on Capitec this week, labelling the bank a "'loan shark" and alleged the bank "engaged in reckless lending".
In a statement released on Thursday afternoon, Treasury said: “Until two weeks ago, Viceroy operated anonymously and opaquely, and the reckless way in which it has released its report is clear proof that it is not acting in the public interest nor in the interest of financial stability in South Africa.”
Treasury went on to say that the report does not provide a basis to put any bank under curatorship.
“Viceroy is not regulated in South Africa, and by its own admission, has been trading [short selling] in Capitec shares ahead of the release of its report, and stood to benefit substantially from forcing the Capitec share price to fall by publishing its speculative report about the bank,” Treasury said.
Treasury has been in contact with the Registrar of Banks since the report was released, and said it is satisfied with the Reserve Bank’s decision not to place the bank under curatorship.
The Reserve Bank on Tuesday responded to the report with a statement, saying that Capitec is solvent, well capitalised and has adequate liquidity.
Treasury also called on market regulator the Financial Services Board (FSB) and the JSE to consider initiating a market abuse investigation into Viceroy, and to determine if it is regulated appropriately.
Further, the FSB should alert relevant overseas regulators, US Securities and Exchanges and the Financial Conduct Authority in the UK, to consider whether Viceroy is regulated appropriately and to determine if Viceroy has transgressed market abuse laws.
Earlier on Thursday, S&P Global Ratings issued a statement indicating that the report and the market reaction would not have a negative impact on Capitec’s credit rating, currently at BB, or speculative grade.
S&P explained that the bank’s rating was influenced by the sovereign rating for the country, which is also junk. The ratings agency also considered the bank’s “strong capitalisation and conservative reserving”, and its good earnings stability as an unsecured consumer lender.
Renier de Bruyn, investment analyst at Sanlam Private Wealth, has called the Viceroy report “malicious research” serving the group’s own self-interest.
Capitec has said that the report is filled with factual errors and material omissions. The report saw Capitec lose 20% of its share value. However, shares have since firmed.
Capitec’s share price pulled back strongly on Thursday following a vote of confidence from S&P and now the Treasury statement. By 16:39 the shares were changing hands 5.36% firmer at R843.54 after reaching an intraday high of R869.91.
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