South Africa\u2019s Treasury called for an international probe into short seller Viceroy Research over its allegations against Capitec Bank Holdings Ltd. as the lender said its customer numbers were stable.<\/p>\n
The Pretoria-based Financial Services Board must alert regulators like the Securities and Exchanges Commission in the U.S. and the U.K.\u2019s Financial Conduct Authority to consider whether Viceroy is regulated appropriately, the National Treasury said in an emailed statement on Thursday.<\/p>\n
Authorities should check whether Viceroy \u201ctransgressed any of their market conduct and market abuse laws that aim to protect investors.\u201d<\/p>\n
Capitec\u2019s stock gained the most in two years on Thursday, ending four days of losses that wiped 25 percent off its market value as concerns over Viceroy\u2019s report eased. The three-person firm led by a former U.K. social worker and two young Australians on Tuesday accused the lender of refinancing defaulted loans with new debt.<\/p>\n
The bank described the analysis as one-sided and inaccurate and laid a complaint against New-York based Viceroy with the country\u2019s stock-market regulator.<\/p>\n
\u201cInitially, there were some jitters, but it quickly stabilized and clients are very supportive of the bank,\u201d Capitec Chief Executive Officer Gerrie Fourie said in response to emailed questions on Thursday. \u201cWe opened more than 8,000 new client accounts on the same day after the news broke.\u201d<\/p>\n
Profit Motive<\/strong><\/p>\n The \u201creckless way\u201d in which Viceroy released its report on lender Capitec is proof that it\u2019s not acting in the public interest nor in the interest of financial stability in South Africa, the Treasury said. Viceroy \u201cstood to benefit substantially from forcing the Capitec share price to fall by publishing its speculative report about the bank,\u201d it said.<\/p>\n Click here to read what money managers and analysts are saying<\/p>\n Viceroy had made a short bet on Capitec\u2019s stock, founder Fraser Perring said in an interview with Bloomberg TV on Tuesday, meaning it would profit from a decline in the share price.<\/p>\n \u201cWe welcome any lawful investigations into impropriety in our report, which is publicly sourced,\u201d Viceroy tweeted in response to the Treasury\u2019s comments. Viceroy, which doesn\u2019t have a verified Twitter account, already works with regulators in the U.S. on other issues, and welcomes \u201cthe opportunity to similarly assist the FSB,\u201d it said in the tweet. Spokeswomen at both the FCA and SEC declined to comment.<\/p>\n While analysts at Deutsche Bank AG and Arqaam Capital Ltd. have suggested Capitec allow for an independent investigation to put the allegations to rest, the lender\u2019s CEO said this isn\u2019t being considered.<\/p>\n \u2018100% Confident\u2019<\/strong><\/p>\n Capitec is \u201c100 percent confident\u201d it won\u2019t need to restate its finances, said Fourie, who bought stock on Wednesday after the price declined. The bank will respond further to Viceroy\u2019s allegations \u201cas soon as information becomes available in the next few days.\u201d<\/p>\n South Africa\u2019s central bank said this week it has no evidence to suggest the lender\u2019s stability is in question, while S&P Global Ratings said its assessment of Capitec is unaffected by the Viceroy report or subsequent market reaction.<\/p>\n South Africa\u2019s FSB confirmed it\u2019s investigating possible market abuse and breaches of the Financial Markets Act regarding Viceroy\u2019s report, Business Day newspaper said on Friday, without saying where it got the information.<\/p>\n \u201cI am not taking my money out,\u201d Alinah Letsoala, a 37-year-old Capitec client said outside a branch in Johannesburg. \u201cCapitec has been looking after me better than any other bank. I heard on the radio about the story, I think it can be fake news.\u201d<\/p>\n National Treasury is satisfied Capitec is well-capitalized, liquid and solvent. Futuregrowth Asset Management, South Africa\u2019s biggest specialist fixed-income money manager, also said Capitec is adequately provisioned and that the fund manager will continue to be one of the lender\u2019s funding partners.<\/p>\n \u2018Healthy Lender\u2019<\/strong><\/p>\n \u201cCapitec is a stable, healthy alternative lender, and our research has not caused us to be concerned about their solvency, asset quality or liquidity,\u201d the Cape Town-based money manager said in an emailed statement on Thursday.<\/p>\n While unsecured lending is \u201cinherently risky, prone to excess, and works on the boundaries of responsible lending, it is our view that Capitec has been prudent in managing its lending book,\u201d it said.<\/p>\n Separately, Capitec responded on Thursday to Benguela Global Fund Managers (Pty) Ltd., which wrote to the bank on Jan. 19 questioning its lending practices. No adjustments are required for the bank\u2019s provisions while its loan rescheduling policy isn\u2019t aggressive, profit hasn\u2019t been overstated and initiation fees weren\u2019t charged for rescheduled loans, Capitec said.<\/p>\n Flat Pancakes<\/strong><\/p>\n Viceroy didn\u2019t contact Capitec before publishing its report and hasn\u2019t been in touch since Tuesday either, according to Fourie. He said the bank has \u201can open door\u201d if investors and analysts want to talk with management.<\/p>\n Research isn\u2019t always credible when the company being written about hasn\u2019t been contacted, said Kokkie Kooyman, a director at Cape Town-based Denker Capital, which has the equivalent of $1.5 billion in assets. \u201cIt makes sense to listen to the other side: \u2018no matter how flat a pancake, there is always another side.\u2019\u201d<\/p>\n
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