Viceroy hits back at Capitec again

CLAIMS CONSUMER EXPLOITATION You could drive a bus between the bad debt provisioning policies of Capitec and African Bank, with Capitec being much more conservative, says analyst.

allows Capitec to have a high “cure” rate on delinquencies, relative to its peers.

Citing an internal communication dated February 8 from the bank’s head office to its branches, it alleges that Capitec has increased the maximum number of loans to which consumers are entitled to five, comprising four term loans and one credit facility. “Capitec should disclose to its investors and borrowers why it has amended this policy, while recently stating they have adequate risk policies in place.

“If the maximum number of loans per customer has increased, we believe this will drastically increase the risk of Capitec’s loan book and corroborates our thesis that over-indebted customers finance existing loans by taking out fresh loans.”

It claims Capitec’s staff are incentivised to sell the maximum amount of credit to clients, irrespective of whether the client can make repayments.

It claims to have evidence of Capitec abusing the debit order system, such that its own loan repayments take priority over those of other lenders when clients have insufficient funds in their accounts.

Viceroy also attempts to disprove media reports that Capitec CEO Gerrie Fourie bought shares to the value of R1.5 million in the bank as a show of confidence, following Viceroy’s initial report.

An analyst at a prominent asset manager said anecdotal evidence contained in the report would likely create negative publicity for Capitec, but doesn’t prove that the bank is uninvestable, as Viceroy claimed.

“Capitec remains well-capitalised, highly liquid and has conservatively provided for bad debts in our view. You could drive a bus between the bad debt provisioning policies of Capitec and African Bank, with Capitec being much more conservative.”