Capitec share price drops on credit regulator probe
CAPITEC Bank Holdings, SA’s second-largest provider of unsecured loans, yesterday dropped to its lowest this year after it said the National Credit Regulator (NCR) had referred a probe into the bank’s alleged contraventions of credit laws to a tribunal.
The stock fell as much as 3.5% to R183.31, the lowest since December, and closed 1.31% down at R187.51. The share was a darling of the market this time last year when it struck a one-year high of R230.
The regulator has not disclosed details of the probe. In its initial notification on February 22, Capitec said the notice it received alleged contraventions of the National Credit Act, “including in relation to initiation fees charged on one product”.
“On May 28, a notice was received from the NCR referring the matter to the National Consumer Tribunal,” Stellenbosch-based Capitec said in a statement yesterday. “It remains impracticable to estimate its financial effect or the amount of any possible outflow,” it said, without disclosing how much the regulator may want to fine it.
African Bank Investments Limited (Abil), the largest provider of loans not backed by assets, said in February the regulator wanted to fine it R300m for fraud carried out at one of its branches. Abil, like Capitec, is disputing the allegations.
Capitec is also defending itself against allegations in the media that assumed it had migrated to longer-term loans in the past few months. “The bank has adjusted its credit criteria significantly since July 2012 in anticipation of a weakening credit market. Loan tenure has not been increased since this date,” said Capitec in the response on its website.
It said the decline in sales of credit at Capitec had been directly comparable to the decline in sales at Abil over the six months from last September to March.
Capitec received its notification in February, 15 days after Abil warned shareholders it faced a fine from the regulator. After receiving the notification from the regulator in February, Capitec said it had engaged its lawyers as it disputed the allegation and hoped to resolve the issue through “due process”. Capitec CEO Riaan Stassen told Business Day in March the matter related to initiation fees on one-month loans. Its marketing and corporate affairs executive, Carl Fischer, said in March the bank offered a monthly loan product that a customer would repay after a month. The client could tap into the monthly loan product after repaying the full amount. However, an evaluation process had to be done every time the client renewed the loan. Bloomberg, with Evan Pickworth and Phakamisa Ndzamela