Cape Town – Short-seller Viceroy may attack another South African company, said Capitec CEO Gerrie Fourie.
He was speaking at a briefing on Wednesday before the Standing Committee on Finance (SCOF) on progress regulators have made on issues related to Capitec and VBS Mutual Bank.
Fourie explained that the bank had done its part in responding to allegations made by Viceroy in several reports the short-seller released this year. Capitec particular serves the lower-income market and has recently provided an insurance offering.
Among the allegations made by Viceroy was that the bank operates as a loan shark. Capitec responded quickly to these allegations, having held media briefings to assure the market. The Viceroy report did not dampen the group’s financial results released near the end of March 2018.
Fourie said that auditors PwC, which signed off on the results, also looked into allegations made by Viceroy. Their fees were higher because of the service, he told SCOF.
Fourie told SCOF members that the bank offers credit to low income earners in a responsible way, compliant with regulations. The bank ensures the affordability of clients before issuing loans.
Responding to why Viceroy attacked the bank, Fourie said that the short-seller looks for opportunities to attack South African companies - at the time Capitec’s share price was trading well. Viceroy appeared to have credibility after it issued its report on Steinhoff, he explained. But this happened a few days after the announcement of Markus Jooste’s resignation over accounting irregularities and 80% of the content of the report was based on a German analysis release six months before.
“We believe Viceroy will attack another SA company later this week … it is not only Capitec under attack, there will be many others as well,” said Fourie.
Since releasing financial results in March, Fourie said that Capitec met up with several asset managers and analysts where they can ask Capitec questions. Capitec has met with over 120 analysts across the world since the release of financial results.
However, Viceroy, which Capitec treats as an asset manager, has not interacted directly with Capitec and only “attacks” the bank through the media, said Fourie. “We are available to explain things in detail to them if they want to talk to us.”
Fourie said in his interactions with asset managers in Boston and London, nobody could say who Viceroy was. “That is an important point and important for the Financial Services Board to understand.”
Of the lessons learned from the Viceroy report, Fourie said it is important to “respond quickly and communicate to market”. “We have done that well,” he said.
Reserve Bank Deputy Governor Kuben Naidoo also made representations, indicating that there have not been any new developments on the Reserve Bank’s side. He added that the Reserve Bank takes the allegations made in the Viceroy report seriously and has engaged with Capitec and its auditors (both internal and external) and will continue to engage with Capitec on the matter.
“At this stage we do not believe the Viceroy allegations have validity,” said Naidoo. He reassured that the Reserve Bank’s interactions with Capitec has been intensive. “We have confidence in data from the bank and confidence in audited financial statements of Capitec. The substantive allegations (of Viceroy) are not accurate.”
The National Credit Regulator CEO Nomsa Motshegare added that in reviews of Capitec’s loans, no recklessness was picked up. The NCR however flagged that many loans were issued in a short space of time which is not sustainable. Fourie said that the bank has instituted a rule that no more than four loans can be taken out by an individual in a month.
Motshegare said that Capitec will continue to be monitored closely.
The Financial Sector Conduct Authority was also present at the briefing, indicating that Viceroy wants the FSCA to fly to New York to be interviewed. SCOF chair Yunus Carrim said that Viceroy should come to account in SA parliament instead. Viceroy was invited to appear before SCOF but declined.
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