Capitec moves to calm investors


Capitec moves to calm investors

Published Date: 2020-03-20 | Source: Stephen Gunnion | Author: Stephen Gunnion

Capitec moves to calm investors

The mass market bank and lender has defended the resilience of its business model following a sell-off of its shares this week.

Capitec Bank tried to calm shareholders after its shares continued tumbling yesterday on growing disquiet over the impact the Covid-19 could have on its operations. Concern over its highly-rated shares and its unsecured lending book have sent its shares 43% lower this week.

In a statement, the bank said it believed international investors had been big sellers of its shares, partly due to the continued weakening of the rand, while professional traders may also have dumped the stock due to stop-loss selling. Banks that were counterparties to collar transactions (options strategies) were also inclined to sell the underlying shares when contracted limits were breached, it said.

While there was speculation that Capitec would be severely impacted by Covid-19 due to the market on which it focuses and its unsecured credit business model, it said only 1.1 million of its 12.6 million active clients had credit with the bank. It maintained that its business model was well diversified and income was strengthened by transaction fee income and sales of funeral cover - which contributed a combined 46% of net income. The move to include more middle and higher-income clients had resulted in 81% of credit granted in the first six months of its financial year going to clients with a gross salary of over R10,000 a month. It said it was also supported by a strong retail deposit base.

Capitec said its liquidity position remained strong, with key ratios in line with previously published numbers.

In a trading statement earlier this month, the bank said earnings per share (EPS) for the year to end-February would be between 18% and 21% higher than the R45.71 reported last year. Headline EPS would rise by the same margin, up from the R45.77 reported previously.

Capitec's results are scheduled for release on 14 April. Its shares closed 15% down at R682.50 yesterday. The JSE's Banks Index dropped 23%.

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