Capitec expects earnings jump as share price continues recovery after Viceroy hit

Capitec Bank says it expects to report a jump in earnings for the year ended 28 February 2018, despite facing recent criticism over its lending practices.

The bank said it expects headline earnings per share will be between R38.06 and R39.04 per share, representing an increase of between 16% and 19% compared to the R32.81 per share reported in the prior year.

It said that it expects earnings per share will be between R38.02 and R39.01 per share, representing an increase of between 16% and 19% compared to the R32.78 per share in 2017.

Capitec has bounced back from a damning report put out at the start of the year by the same group that exposed Steinhoff, which led to a 25% slump in its share price.

Viceroy Research Group’s report, titled Capitec: A Wolf in Sheep’s Clothing, made damning claims against the micro-lender, calling the bank a loan shark headed for insolvency.

The research report said that its analysis pointed to predatory lending practices from Capitec, where clients would be pushed to take out new loans to pay off the old ones, while being charged initiation fees and incurring other costs.

Viceroy – which makes money by shorting a company’s stock and then releasing damning reports on those groups – said that Capitec was ‘cleaning’ its loan customers by immediately granting loans to clients who had taken out other loans to repay their previous Capitec loans, without a ‘cool down’ period.

Capitec denied the claims calling the report “flawed and inaccurate”.

In midday trade on Monday, Capitec’s share price gained 3.6% to R870.70, still some way off the R1,069 it traded at before the report was published.

Capitec CEO Gerrie Fourie recently said that business at the bank is “back to normal,” following the Viceroy incident. Despite some initial uncertainty and customer withdrawals, Capitec is signing between 6,000 and 8,000 customers a day in February.

It expects to have about 9.8 million by the end of its fiscal year, which ends this month, from 8.6 million a year earlier.

The financial results for the year ended February 2018 are expected to be published on 27 March 2018.

Read: Capitec opens its doors to Viceroy