Benguela Global Fund Managers wrote to Capitec Bank Holdings earlier this month questioning its practice of rescheduling loans to clients, deepening the controversy around the South African lender after a short seller alleged it was concealing write-offs.<\/p>\n
Boutique investor Benguela raised concerns about Capitec\u2019s \u201caggressive practice of rescheduling arrear loans and advances,\u201d according to a letter dated January 19 and seen by Bloomberg. \u201cWe believe this practice has distorted the true performance of your business and warrants some review,\u201d the letter said.<\/p>\n
Capitec, which makes unsecured loans mainly to low- and middle-income households, posted its biggest-ever intraday share drop on Tuesday after Viceroy Research alleged it was concealing significant write-offs. It then recovered most of those losses after South Africa\u2019s central bank said it has no evidence to suggest the lender\u2019s stability is in question.<\/p>\n
Speaking at press conference in Cape Town late Tuesday, Capitec chief executive officer Gerrie Fourie declined to answer questions about whether it had received a letter from Benguela and said he would respond next month. Fourie also denied the allegations made by Viceroy and said the report was full of inaccuracies.<\/p>\n
Capitec spokesman Charl Nel didn\u2019t immediately respond to a message or a text message left on his mobile phone outside of office hours early Wednesday morning.<\/p>\n
In its letter addressed to Capitec senior management, Benguela said the rescheduling of loans that clients were struggling to pay distorted Capitec\u2019s performance and that since 2013 \u201carrear rescheduling has contributed to about 50 percent of reported growth in headline earnings per share.\u201d Benguela requested a response from Capitec by February 5.<\/p>\n
\u201cWe are concerned that the rescheduling process has helped shore up the performance of the executive,\u201d Benguela Chief Investment Officer Zwelakhe Mnguni said in the letter. Benguela doesn\u2019t currently hold any Capitec shares, it said.<\/p>\n
Capitec, South Africa\u2019s best performing stock of the last decade, fell as much as 25 percent in Johannesburg on Tuesday before closing 3% lower.<\/p>\n