Viceroy comes up short on Capitec
letter to Capitec querying the matter.
Verster said the rate of rescheduling by Capitec is higher than by other lenders but this is because other banks are loath to do it. Capitec has always claimed that the behavioural consumer data it has available to it gives it the competitive edge in lending to a higher quality of customers. It is not because the customer has the assets to secure the loan but rather because of the customer’s expected behavioural propensity to continue to service the loan. This is why it is more willing to reschedule loans.
Capitec claims a key flaw in Viceroy’s assumption that its bad debt is understated is that the research does not take into account that Capitec writes off bad debts after 90 days and so comparisons with other lenders is meaningless, because they keep this kind debt on their books for much longer.
“I would be very surprised if there is a big hole in the balance sheet,” said Meintjes, adding that after African Bank’s demise, auditors are much more aware of these issues and Capitec has been much more conservative in choosing to write off debt rather than to provide for it.
While stakeholders continue to try to separate fact from fiction, speculation has abounded over Viceroy’s timing and motives for releasing the report. The company declared that it has taken a short position on Capitec and so stands to profit if the shares fall. But, given that the information on which it based its information did not appear to be from an insider, this short would appear to be legal.
The release of the report saw the price fall 15% — from R943 a share at the close of business on Monday to R800 at 5pm on Wednesday. Analysts at some large investment institutions are torn over whether the share value will move higher or lower.
Others have slammed the report. In a widely circulated release, Denker Capital’s Kokkie Kooyman said he found he report on Capitec self-seeking and malicious.
Renier de Bruyn, an investment analyst at Sanlam Private Wealth, said the report was maliciously written with the sole intent of the authors and their associates to profit from a collapse in Capitec’s share price.
“Analysing the report, it quickly becomes clear that the analyst not only made errors in logic but also conveniently ignored obvious and publicly available facts that would have countered their narrative,” he said.
S&P Global Ratings has dismissed the Viceroy report and kept its rating unchanged.
Summit Financial Partners, which is assisting over-indebted consumers in court action against Capitec, told the Daily Maverick that it did not agree with the conclusions of the Viceroy report about the health of the business.
Viceroy did not respond to emailed questions but on its Twitter page it said it was preparing a response to Capitec’s statement. It also said Capitec clients “in cyclical debt” and former employees had reached out to Viceroy en masse and corroborated its report.
“If @SAReserveBank is willing to grant protection to whistle-blowers, we would (with permission) forward emails to regulators,” Viceroy tweeted.
Verster said, although he trusts the Capitec management team, he still verifies information received with the help of other sources.
“And, at this point in time, I have not found anything to make me question the veracity of Capitec’s reported figures or business model.”
He reiterated a call for anyone with concrete evidence of wrongdoing at Capitec to get in touch with him directly on Twitter.
The Reserve Bank has said, according to all the information available, Capitec is in good health and meets all prudential requirements. Nonetheless, the Democratic Alliance has called on the central bank to investigate Viceroy’s allegations.
The National Credit Regulator said it has no comment to make on the matter.