Reserve Bank praises Capitec model

Short-seller Viceroy’s attacks on Capitec have no validity, Reserve Bank deputy governor Kuben Naidoo said.

The central bank had confidence in the lender’s audited financial statements and that it was prudent in setting aside money to cover potential defaults, Naidoo, who is also the registrar of banks, said in Parliament on Wednesday 30 May.

Capitec’s share price plunged earlier this year after Viceroy issued a report accusing the bank, which caters mainly to lower-income consumers, of reckless lending, inadequate provisioning for bad loans and the artificial inflation of loan repayments and new loans through loan rescheduling.

The share price has since recovered after regulators backed Capitec, which has accused Viceroy of using its research to drive the shares down. Shorting involves selling borrowed shares and then buying them at a lower price.

The Reserve Bank believed that Capitec’s provisioning model was prudent, given the nature of its business and that rescheduled loans were a relatively small proportion of its overall loan book.

It was solvent and well capitalised and had adequate liquidity, Naidoo said.

“We have confidence in the data we get from the bank, we have confidence in the audited financial statements.

“In our view, the substantive allegations raised by Viceroy are not accurate,” he said.

The National Credit Regulator (NCR) did not pick up reckless lending by Capitec, though it was concerned that the bank may be issuing too many loans to some consumers, CEO Nomsa Motshegare said.

No instances of noncompliance with the law had been uncovered.

The NCR had also raised concerns about the ATM loans issued by Capitec, which has since ended the practice.

Finance committee chairman Yunus Carrim urged the NCR to do more in its regulation of the credit market.

The committee was also addressed by Capitec CEO Gerrie Fourie. He said the bank refused to communicate with Viceroy through the media and would deal with it as it did with all other analysts and asset managers.

Fourie said that the bank’s auditors, PwC, had fine-combed all the transactions of the bank going back four years to assess the veracity of the Viceroy allegations but did not find anything and had signed off the bank’s financial statements.

He said an analysis of loans granted by Capitec over the past four years demonstrated that the average number of loans taken out by clients was 1.4 per person compared with an industry average of 3.5 loans per person. Clients were not limited in the number of loans they could have but were limited in terms of affordability criteria. He emphasised that Capitec’s provisioning for loans was very conservative.