Business at Capitec Bank Holdings is \u201cback to normal,\u201d CEO Gerrie Fourie said, weeks after it became the target of the short seller that contributed to the scandal surrounding Steinhoff International Holdings.<\/p>\n
Despite some initial uncertainty and customer withdrawals, Capitec is signing between 6,000 and 8,000 customers a day in February<\/strong>.<\/p>\n It expects to have about 9.8 million by the end of its fiscal year, which ends this month, from 8.6 million a year earlier. While the bank\u2019s shares have pared losses since a 30 January report by Viceroy Research accusing it of concealing loan losses and underestimating bad debts, they\u2019re still down 10%.<\/p>\n Fourie said his disbelief turned to anger after he read the report.<\/p>\n The South African lender that makes unsecured loans mainly to low and middle-income households was riding high.<\/p>\n It had been one of the best-performing emerging-market bank stocks since its initial public offering in 2002. It went from a small unsecured lender in the Stellenbosch winelands into the country\u2019s second-biggest retail bank.<\/p>\n Viceroy \u201ctypically targets a company that\u2019s doing well,\u201d Fourie said in a 13 February interview. With \u201cour share rising more than 50,000 percent. That\u2019s what a short seller would look for — it\u2019s the ideal company to short,\u201d he said.<\/p>\n No Let Up<\/strong><\/p>\n Viceroy\u00a0isn\u2019t letting up. The short seller, which has taken a position in Capitec\u2019s securities to benefit from their decline, released a third note on the lender on 14 February, dismissing Capitec\u2019s rebuttals.<\/p>\n \u201cCapitec\u2019s lending practices are grossly irresponsible,\u201d Perring said in an emailed response to questions on Friday. \u201cWe are being sent evidence of people committed to pay 70 percent of their net monthly income on debt.\u201d<\/p>\n Fourie says Capitec is now focusing on its business and isn\u2019t planning any legal action against Viceroy.<\/p>\n There\u2019s hasn\u2019t been a final decision on whether Capitec will sanction an independent investigation by a consultancy or an auditor into the bank\u2019s lending practices, Fourie said.<\/p>\n Capitec is preparing for an investigation by Pretoria-based regulator, the Financial Services Board, into Viceroy for potential market abuse and breaches of the Financial Markets Act, he said.<\/p>\n Viceroy has come under criticism from analysts including those at Arqaam Capital Ltd., JPMorgan Chase & Co. and Avior Capital Markets for comparing Capitec to one-time competitor African Bank Investments, which collapsed in August 2014 after bad debts soared, it failed to increase provisions and funding dried up. Unlike African Bank, Capitec relies on deposits and other avenues for its funding rather than solely the bond market.<\/p>\n Perring said the FSB probe \u201cis purely to distract from reckless lending practices.\u201d<\/p>\n Viceroy isn\u2019t the first to criticize Capitec\u2019s lending practices.<\/p>\n The company is being sued by Summit Financial Partners, which alleges the bank has broken the country\u2019s credit laws in a court case scheduled for next month. The lender has said it will fight the allegations brought by Summit, which helps consumers work their way out of debt.<\/p>\n New Report<\/strong><\/p>\n In the latest note, Viceroy accused Capitec of exploiting customers\u2019 current accounts by ensuring their loan repayments are deducted before other debts.<\/p>\n According to rules posted on the Payments Association of South Africa\u2019s website, debit orders are processed on a randomized, non-preferential basis to ensure \u201can equal and fair opportunity to recover payments due from the account.\u201d<\/p>\n Viceroy also said Capitec is giving new loans to clients a day after they clear arrears from other loans.<\/p>\n The report was \u201cagain filled with factual inaccuracies, misleading half-truths and sensationalist statements,\u201d Capitec said in a statement on Thursday.<\/p>\n The company couldn\u2019t immediately comment on the allegation about clients taking on new loans soon after clearing arrears other than to reiterate that Capitec makes provisions for all types of clients.<\/p>\n Capitec sees a big opportunity in South Africa\u2019s small- to medium- businesses, insurance and business banking sectors.<\/p>\n \u201cWe\u2019re exploring those,\u201d he said. \u201cThe biggest area to get going in South Africa is the informal segment. It\u2019s extremely difficult, but we\u2019ve got to go to townships and understand the cash flows, the challenges.\u201d<\/p>\n
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