Capitec: ‘We are not African Bank’

CityPress - - News - NOKUTHULA MANYATHI news@city­

Capitec Bank is ask­ing its cus­tomers not to panic af­ter a two-notch rat­ings down­grade re­lated to the melt­down of its peer African Bank.

The two banks are of­ten lumped to­gether as the coun­try’s two largest un­se­cured lenders.

Capitec’s fi­nan­cial direc­tor, An­dré du Plessis, lashed out at the “knee­jerk” re­ac­tion, say­ing: “At this point in time, the down­grade will not af­fect our level of ser­vice or the cost of credit to our clients.”

Credit rat­ings agency Moody’s said on Fri­day that, af­ter a re­view of Capitec, it would down­grade the bank’s de­posit rat­ing, mean­ing the like­li­hood it can pay its de­pos­i­tors their money back.

The main rea­son was that the SA Re­serve Bank’s res­cue plan for African Bank had in­volved giv­ing all bond­hold­ers a “hair­cut” - mak­ing them ac­cept that they would only get back 90% of what they are owed.

Ac­cord­ing to Moody’s, Capitec’s old rat­ing in­cor­po­rated the as­sump­tion that the au­thor­i­ties would give de­pos­i­tors bet­ter pro­tec­tion if things ever went hor­ri­bly wrong.

The re­serve bank at­tacked this im­plicit crit­i­cism of its bailout, say­ing the small hair­cut was ac­tu­ally bet­ter than the mar­ket ex­pected.

In Moody’s eyes, Capitec and African Bank are very sim­i­lar com­pa­nies.

Both Capitec and the re­serve bank put out state­ments crit­i­cis­ing Moody’s and ar­gu­ing that Capitec is in fact a far sounder bank.

But Moody’s also said it is con­cerned with the grow­ing in­her­ent risks of un­se­cured lend­ing. While Capitec does a lot of un­se­cured lend­ing, it was prac­ti­cally all that African Bank did.

Du Plessis said Capitec “com­pletely dis­agrees with the down­grade”.

Ac­cord­ing to him, the re­view came as a sur­prise be­cause in May, Moody’s had eval­u­ated the bank and it had scored at a higher level.

“We are very dif­fer­ent from African Bank. African Bank was a lend­ing in­sti­tu­tion. We are a lend­ing, de­posits and trans­ac­tion bank. This is a knee­jerk re­ac­tion by Moody’s.”

Capitec has fur­ther high­lighted the dif­fer­ences, ar­gu­ing it had a more di­verse source of fund­ing.

We are dif­fer­ent from African Bank ... This is a knee­jerk re­ac­tion


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