Capitec repudiates scathing report

CAPITEC Bank has denied the scathing report by Viceroy Research released yesterday, which has claimed that the bank would meet the same fate as African Bank Investment Limited (Abil), which went bust in 2014 amid record losses and a lack of funding.

Capitec Bank said its operations were significantly different to those of African Bank.

“Capitec Bank is a fully fledged retail bank and has different sources of income, not only credit. Its transactional business continues to contribute materially to its earnings as reported in our first half of 2018 results. In addition, Capitec Bank has a significant retail deposit book, unlike African Bank. The result of this is that Capitec has a low reliance on wholesale funding,” Capitec said.

Capitec Bank also said it had a far more conservative approach to providing credit than African Bank. “The provisioning of Capitec Bank is market-leading and significantly more conservative to that of African Bank, as well as other unsecured loan books,” the bank said.

Abil, the country’s leading microlender, has been described as one of South Africa’s most high-profile corporate failures.

In its damning report Viceroy Research said there were similarities between Capitec and Abil.

“We believe Capitec’s concealed problems largely resemble those seen at African Bank Investments prior to its collapse in 2014… We see no operational difference between Capitec and its ill-fated predecessors, including African Bank,” said Viceroy Research.

Abil’s shares were suspended on the JSE in August 2014 and the underlying business was put under curatorship by the South African Reserve Bank (Sarb).

Sarb stepped in with a plan to rescue the business and appointed Tom Winterboer as an administrator to separate the good loans from the bad, and plan for an initial public offering for the so-called performing assets.

Abil was placed into business rescue in June 2015 following the failure of its subsidiary, Ellerine Furnishers, to repay loans to large South African banks for which Abil was the guarantor. It listed last February as the good bank from salvaged Abil assets.

It was reported last year that the serious economic unit of the Hawks was investigating possible charges against those involved in Abil’s collapse.