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Johannesburg - Capitec Bank [JSE:CPI], a provider of unsecured credit to low-income earners dropped the most in more than seven years after the government suggested capping interest rates and fees on loans.
Capitec fell more than any other lender in Johannesburg trading on Tuesday, dropping 7.8% to R425 by the close, the lowest since March. The decline was the steepest since May 2008 in volumes exceeding 160% of the three-month daily average of shares traded.
In early trade on Wednesday Capitec's share price was down 1.41% at R419.01.
In a notice published in the Government Gazette on July 3, the Department of Trade and Industry (dti) proposed cutting the maximum interest rate on unsecured credit to 24.78% from 32.65%.
“Research studies and statistics show that South Africa has a worrying high level of over-indebtedness,” the department said.
“The dti is currently scheduling sessions with affected stakeholders as part of the consultative process during the month of July.”
Rival African Bank Investments [JSE:ABL] collapsed last year as bad debts rose and funding dried up, leaving Capitec as the largest surviving lender of loans not backed by assets.
While it has increased market share and profit since African Bank failed, lower interest rates and fees on consumer loans could curb the profit Capitec makes from lending.
Almost two-thirds of the analysts who cover the stock have a sell rating on Capitec.
UBS AG’s Johannesburg-based banks analyst, Stephan Potgieter, cut his target for the lender’s share price on Monday.
Capitec has advanced 86% in the past 12 months, compared with a 14% gain in the benchmark banks index.
