JOHANNESBURG - Capitec bank and the South African Reserve Bank (Sarb) on Tuesday reassured customers that the bank's finances are in order.
It comes after Viceroy Research, the US-based fund manager that identified failings in the financial management of the Steinhoff group, released a report in which it describes the bank as a "loan shark with massively understated defaults masquerading as a community microfinance provider."
Viceroy called on Sarb and the finance minister to place Capitec into curatorship immediately.
The fund manager said it believes that Capitec is "approving loans to delinquent customers" in order to facilitate them in repaying existing loans, and "engaging in reckless lending practices".
"We basically compared around the sector and looked at its competitors and then we found some glowing differences in terms delinquency rates and how they treated their customers. The rest of the sector is in a severe default mechanisms. Capitec seems to be outperforming everyone including international banks so it gave us significant concern,” Viceroy's Fraser Perring told Bloomberg News.
We have taken note of the Viceroy report on Capitec Bank. We are currently in the process of investigating the report in detail and will respond appropriately.— Capitec Bank (@CapitecBankSA) January 30, 2018
In a statement, Capitec said it had not been approached by Viceroy for insight into its business or to discuss, test or verify the allegations with the bank's management.
"We believe our corporate governance is strong and our communications and disclosures are, and always have been transparent, clear and to the point. On the face of it, the report is filled with factual errors, material omissions in respect of legal proceedings against Capitec and opinions that are not supported by accurate information."
"Capitec received a copy of the Viceroy research report on Capitec at 10am this morning. Shareholders are advised that Capitec has not been approached by Viceroy for insight into our business and none of their allegations have been discussed..." https://t.co/JdS8rKBt4G— Capitec Bank (@CapitecBankSA) January 30, 2018
Tha bank said it is reviewing Viceroy's report and will respond in more detail later on Tuesday.
Meanwhile, Sarb said it noted the report.
"As part of our mandate, we monitor the safety and soundness of all banks, including Capitec Bank Limited (Capitec). According to all the information available, Capitec is solvent, well capitalised and has adequate liquidity. The bank meets all prudential requirements."
Some economists and analysts questioned the Viceroy report.
Wits School of Economics and Business Science's Professor Jannie Rossouw suggested Viceroy could have a hidden agenda.
“We must also keep in mind that Viceroy did get into hot water with Steinhoff… It doesn’t mean that Viceroy is the saint of the financial market… This is the company we know very little about… We should understand their motives. In this instance, it is very clear that one of their motives is to make money of the decline in the Capitec share price.”
Ashburton Portfolio Manager Wayne McCurrie said the Viceroy Research group will have to produce substantive evidence against Capitec.
“I do think it’s important to point out that the Viceroy report is just a report. We will need to do our research on what their claims are. And the company will address their concerns in the report. And Capitec clients don’t have to worry because we do have our Reserve Bank which backs our banks if there’s an issue.”
Sasfin deputy chair, David Shapiro, said Viceroy’s Capitec report will have a hugely negative impact on the bank.
"Clearly it will have a negative effect on the share. When you come to do analysis and look at companies you come to a conclusion as to what you think is the right investment stance to have on a company. That’s exactly what Viceroy has done.”