Shares of Capitec Bank Holdings plunged by a record 25% in Johannesburg Tuesday after short-seller Viceroy Research said the lender may be concealing losses by refinancing loans that customers were unable to repay.<\/p>\n
Here\u2019s what traders and analysts said about the report and share move:<\/p>\n
Adrian Saville, chief strategist at Cannon Asset Managers in Johannesburg:<\/strong><\/p>\n Viceroy\u2019s data \u201cmake sense and the numbers add\u201d up. The report is \u201cimpressive and thorough.\u201d Capitec could have concealed losses \u201cas the report infers, by issuing new loans to delinquent customers. There are other ways banks could do this, but this seems to be the route pursued by Capitec.\u201d<\/p>\n \u201cIt can\u2019t be my place to speak for any regulator, but Viceroy needs to be held to account for any research it releases, just as Capitec needs to be held to account for its business practices.\u201d<\/p>\n David Shapiro, deputy chairman at Sasfin Securities in Johannesburg:<\/strong><\/p>\n \u201cI always believed the share was too pricey, but I have always liked their business model. These kind of reports can only be fed through insiders – or someone who knows the inner workings. I think we will suffer more pain when the U.S. opens. It\u2019s one of their favorite stocks.\u201d<\/p>\n Patrice Rassou, head of equities at Sanlam Investment Management Global in Cape Town:<\/strong><\/p>\n \u201cThe Capitec restructuring-of-loan issue is known and clearly disclosed. They have not been found guilty of reckless lending yet. The valuation of Capitec was very elevated and yet many sell-side analysts were positive on the stock. The quantum of a write-down will depend on whether they are struggling to collect their non-performing book.\u201d<\/p>\n Peter Takaendesa, portfolio manager at Mergence Investment Managers in Cape Town:<\/strong><\/p>\n \u201cIt\u2019s fair to say that after the Steinhoff situation, the market is quite sensitive to anything Viceroy produces.\u201d \u201cThe interesting part is that the other shares that the market suspected were targets of Viceroy, like Aspen and Resilient, are bouncing back strongly because the market\u2019s seeing that it\u2019s not these guys, it\u2019s someone else. We never thought that Capitec would be one of those companies. We thought that Viceroy would probably focus on a company with international operations.\u201d<\/p>\n \u201cTheir thesis seems to be saying that it\u2019s effectively a loan shark; they\u2019re just running short of saying it\u2019s a Ponzi scheme.\u201d<\/p>\n Michele Santangelo, a money manager at Independent Securities in Johannesburg:<\/strong><\/p>\n \u201cOn the highlights of it they basically labelled Capitec as a loan shark, with massively understated defaults masquerading as a community micro-finance provider. I can\u2019t comment on the accuracy.\u201d \u201cNone of the analysts who cover Capitec or PSG have even pulled any of these or seen any of these red flags, so it\u2019s going to be interesting to go through the report in more detail and see if everything can be substantiated.\u201d<\/p>\n On the stock\u2019s slump: \u201cThe initial reactions aren\u2019t very good. It\u2019s just the initial shock, but we\u2019ll have to see how things go. You can see that the stocks that were sold off because they were maybe a part of the Viceroy report are running up quite hard and recovering quite nicely.\u201d<\/p>\n Michael Porter, trader at Unum Capital in Johannesburg:<\/strong><\/p>\n \u201cThe problem is there was a lot of speculation,\u201d which drove down Capitec\u2019s share prices in the previous two days. \u201cI think the market is so panicked after Steinhoff, that originally you saw this over-reaction. It\u2019s not to say that Capitec is the second Steinhoff. We\u2019re going to have to see in the full report.\u201d<\/p>\n
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