Capitec: Viceroy sticks to its guns

STEELING ITSELF: MORE ATTACKS COMING, SAYS BANK

Capitec dismisses Viceroy’s latest report, questioning its reporting and lending practices and Reserve Bank support of it.

Initial report is ‘fundamentally flawed, misleading’.

Capitec has dismissed Viceroy’s latest report, in which its reporting and lending practices and the SA Reserve Bank’s (Sarb’s) support for the lender are questioned.

“Shareholders can expect the release of fresh attacks and false allegations over an extended period. Capitec consequently advises shareholders to use caution when reacting to such allegations,” the group stated on Monday.

The Sens statement follows a new Viceroy report, which suggests Sarb has yet to perform an “adequate regulatory inspection of Capitec”, after Sarb affirmed the safety and soundness of the lender last week.

Viceroy’s initial report on Capitec recommended it be placed under immediate curatorship and caused its shares to fall almost 25% in intraday trade. Sarb then stated: “… 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.”

Almost a week later, the researchers have questioned Sarb’s show of support for Capitec. To Viceroy, Sarb’s use of “according to all the information available” suggests it has yet to perform an “adequate regulatory inspection of Capitec”.

Sarb “has a responsibility to determine whether the information provided to them – and on which they base their regulatory decisions is accurate. We do not think it is. The Sarb has, at this point, a responsibility to perform a full regulatory inspection of Capitec. Viceroy remains firm in its belief that this will result in [the] Sarb placing Capitec into curatorship,” it said.

Viceroy alleges that Capitec’s balance sheet, income and solvency numbers are unreliable and that it is underrepresenting losses “to pretend that uncontrollable loans are collectable and still accruing income”.

Capitec pointed out flaws in Viceroy’s methodology, calculations and data use. It said Viceroy’s estimates that 1.3% of its 61- to 84-month clients are in arrears is too low should, taking the group’s strict write-off policy into account, be 6.3%. Of the 6.3%, 40% were rehabilitated by February 28, 2017, it added.

One analyst at a prominent asset manager said Viceroy’s latest report “draws the wrong conclusion based on a wrong calculation and selective data”. The analyst’s calculations, shared with Moneyweb before Capitec’s statement, supported that of the bank.

Earlier on Monday, the bank issued another Sens statement, labelling Viceroy’s initial report, which claimed that its loan book is “massively overstated” and that it’s fabricating new loans and collections, as “fundamentally flawed and misleading”.

Capitec categorically denied and provided evidence against Viceroy’s allegations that its loan book is irreconcilable and misrepresented and refuted allegations of an overstatement of R11 billion, stating that no adjustment was required. It has also denied that it rolls unpaid loans and charges initiation fees when rescheduling loans.