Capitec slams Viceroy, expects further attacks

CAPITEC Bank has slammed the report by US researcher Viceroy that it was “a loan shark with massively understated defaults masquerading as a community microfinance provider” as a campaign that will continue for the foreseeable future.

Last week, Viceroy said it had done extensive due diligence and compiled evidence suggesting Capitec must take significant impairments to its loans, which would likely result in a net-liability position.

Shares in Capitec Bank tumbled after Viceroy said the South African Reserve Bank (Sarb) and the minister of Finance should immediately place the bank into curatorship because its loan book was overstated as a consequence of refinancing delinquent loans.

Instead, the Sarb vouched for Capitec, saying that according to all the information available, Capitec is solvent, well capitalised and has adequate liquidity.

The National Treasury said Viceroy’s “reckless manner” in releasing its report showed it was not acting in the public interest, nor in the interest of financial stability in South Africa, adding that the Viceroy report provided no basis to put any bank under curatorship.

Capitec said that only 7.3% of its credit clients currently qualify for loans in excess of 60 months, with only 3.6% qualifying for 84-month loans, and that portfolios are naturally weighted to the larger amounts, and consequently the longer-term and lower risk clients.

The bank said it has a sophisticated pricing for risk model that quantifies the reduction in risk when low-risk clients, that qualify for long-term products, take up loans with a shorter duration.

“Viceroy Research Group refers to the loss rates on ‘ US prime credit cards’ but shows aggregate credit card losses. Viceroy infers that it is impossible for the average American credit card holder to have similar credit risk as the top 7 percent of Capitec’s clients. We have extensive history and sophisticated models to support our results,” Capitec said.

Capitec said it believed that the campaign would continue for the foreseeable future, and advised shareholders to use caution when reacting to such allegations. – African News Agency (ANA)