Growing backlash over Viceroy's Capitec report


Growing backlash over Viceroy's Capitec report

Published Date: 2018-02-02 | Source: Stephen Gunnion | Author: Stephen Gunnion | Comments

Growing backlash over Viceroy's Capitec report

The ratings agency says Capitec is well capitalised with conservative reserving, while National Treasury has also weighed in

Capitec's shares continued their volatile ride yesterday, rising after S&P Global Ratings affirmed the bank's ratings. It said it's standing with S&P wasn't affected by an investment report released by Viceroy Research on Tuesday - or by the market's reaction to the report. National Treasury, meanwhile, slated the "reckless manner" in which the US-based research firm released the report.

The research called on the Reserve Bank to place Capitec under immediate curatorships, alleging that the value of its loan book was massively overstated.

Related article: Capitec retaliates against Viceroy's "loan shark" report

S&P said Capitec said to date it had only experienced mild funding outflows and its liquidity remained sound. Treasury said the way in which the report was released was clear proof that it was not acting in the pubic interest nor in the interest of financial stability in South Africa.

Capitec's shares declined as much as 25% on Tuesday following the release of Viceroy's report but recovered most of their losses after the Reserve Bank said according to all information available the bank was solvent, well capitalised and had adequate liquidity. On Wednesday, it slumped 13% when Benguela Global Fund Managers said it too had concerns over its "aggressive arrears loan book rescheduling". It believed rescheduled arears should attract the same impairment provision as they would have in any case had they been left in arrears.

Benguela, however doesn't believe there is any reason to be concerned about Capitec's liquidity or solvency. While certain of its practices may be questionable, it says it's not a bank that is about to collapse. Even with its worst case assumptions, it says it doesn't arrive at the R11 billion impairment provision that Viceroy believes it needs to make.

Meanwhile, Capitec CEO Gerrie Fourie took advantage of the weak share price on Wednesday to buy shares worth R1.5 million at an average price of about R808.50.

Its shares gained 5.6% to R845 yesterday.

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