Capitec Bank, which makes unsecured loans mainly to low- and middle-income households – has defended its lending practices on Tuesday after research group Viceroy accused it of being a ‘loan shark’.<\/p>\n
Shares in the bank tumbled as much as 20% before settling at R821 in mid-morning trade on the JSE, still 13% lower than its opening.<\/span><\/p>\n “Based on our research and due diligence, we believe that Capitec is a loan shark with massively understated defaults masquerading as a community microfinance provider. We believe that the South African Reserve Bank & Minister of Finance should immediately place Capitec into curatorship, Viceroy said in a statement, following the release of a report.<\/p>\n It said that while Capitec is a South Africa-focused microfinance provider to a majority low-income demographic, it out-earns all major commercial banks globally including competing high-risk lenders.<\/p>\n “We don\u2019t buy this story. Viceroy believes this is indicative of predatory finance which we have corroborated with substantial on-the-ground discussions with Capitec ex-employees, former customers, and individuals familiar with the business,” the research group said.<\/p>\n “Viceroy\u2019s extensive due diligence and compiled evidence suggests that indicates Capitec must take significant impairments to its loans which will likely result in a net-liability position. We believe Capitec\u2019s concealed problems largely resemble those seen at African Bank Investments prior to its collapse in 2014.”<\/p>\n “We think that it\u2019s only a matter of time before Capitec\u2019s financials and business unravel, with macro headwinds creating an exponential risk of default and bankruptcy,” Viceroy continued.<\/p>\n Capitec put out the following statement on social media on Tuesday: “We have taken note of the Viceroy report on Capitec Bank. We are currently in the process of investigating the report in detail and will respond appropriately.”<\/p>\n Andre du Plessis, Capitec\u2019s chief financial officer, however, told Bloomberg that the allegations are \u201ctotally unfounded\u201d and he\u2019s not worried about them. He said he hadn\u2019t seen a copy of the report.<\/p>\n \u201cIt\u2019s very surprising that someone writes a report who knows nothing about us,\u201d he said in an interview. \u201cThere\u2019s a total lack of understanding of what we do.\u201d<\/p>\n