Financial services group PSG, which took a hit on Tuesday following a Viceroy research report on Capitec, has thrown its full support behind the bank, saying that it is a world class company.
PSG Group is the largest shareholder in Capitec with a 30.7% interest, and Capitec is also PSG Group’s largest investment.
On Tuesday morning, Viceroy published the report, titled Capitec: A Wolf in Sheep’s Clothing, 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.
This, Viceroy said, was clouding Capitec’s true impairment liabilities on its loan book, which it said was sitting at around R11 billion and could push the bank to the brink of insolvency, much in the same vein as African Bank years before.
“We consider Capitec to be uninvestable,” it said, while calling for the Reserve Bank to step in and put the bank under curatorship.
Capitec has denied the claims made in the report.
Following the publishing of the report, PSG, as a major shareholder, took a hit to its share price along with Capitec. PSG’s shares were trading at R238 by 17h25, about 7% lower from its R253 opening.
PSG has positioned itself in full support of Capitec, saying that the bank has always operated with transparency and has taken a prudent approach to capital and liquidity management, adding that it was concerned about the intent behind Viceroy’s reporting.
“We concur with Capitec management that the Viceroy report is on the face of it filled with factual errors and misleading information regarding Capitec,” the group said. “PSG Group fully supports the Capitec management team and business model. Capitec’s corporate governance is undoubtedly world class.”
“(Viceroy) published their report without prior consultation with Capitec management to gain a proper understanding of their business. Viceroy’s report contains irresponsible statements creating unwarranted market turmoil.”
The financial group said it would ensure that an investigation is launched into Viceroy’s conduct, including looking into the trading of PSG Group and Capitec’s shares ahead of the release of the report.
Capitec also announced late on Tuesday that it would be approaching the Financial Services Board over the report.