Capitec retaliates against Viceroy’s “loan shark” report


Capitec retaliates against Viceroy’s “loan shark” report

Published Date: 2018-01-31 | Source: Stephen Gunnion | Author: Stephen Gunnion | Comments

Capitec retaliates against Viceroy’s “loan shark” report

The Reserve Bank says as far as it's concerned Capitec is solvent, well capitalised and has adequate liquidity

After a month of speculation over which company was the next victim of Viceroy, the research firm has taken aim at mass market bank Capitec, labelling it a loan shark masquerading as a microfinance provider.

In a 33-page report entitled: "Capitec: A wolf in sheep's clothing", Viceroy accuses Capitec of predatory finance which it claims to have corroborated through on-the-ground discussions with former employees and customers of the bank, as well as individuals familiar with the business. It says its extensive due diligence and the evidence it has compiled suggests the bank will be forced to take a significant impairment to its loans, which will leave it in a net liability position.

Capitec's shares slumped as much as 25% following the release of the report, before recovering most of their losses. The stock fell 8% on Monday on speculation that it could be the subject of the report. Parent company PSG Group's shares declined as much as 24%.

Related article: Capitec's rapid expansion continues

Following a reconciliation of loan book values, maturity profiles and cash outflows, Viceroy says Capitec is either fabricating new loans and collections or refinancing loans by issuing new loans to defaulting clients. It believes its loan book is massively overstated and that the outcome of an upcoming reckless and predatory lending test case against the bank in March will be used to trigger a multi-party litigation refund.

It said the bank would have to write off R11 billion of its loan book to accurately reflect the delinquincies and risks in its portfolio.

In a statement on the JSE's news service, Capitec said it had not been approached by Viceroy for insight into its business and that none of its allegations had been discussed, tested or verified with management.

The SA Reserve Bank said it had noted the Viceroy report and said according to all information available Capitec was solvent, well capitalised and had adequate liquidity. It said Capitec met all its prudential requirements.

Capitec's shares ended 3% lower at R915.92 and PSG was 7.8% lower at R236.

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