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Capitec reels on new Viceroy report

Jan 30 2018 10:41
Jan Cronje

Cape Town - Viceroy, the group that exposed accounting fraud at Steinhoff, has struck again.

After weeks of speculation about which South African firm it had in its sights, the group on Tuesday published a report on Capitec [JSE:CPI] - and the unsecured lender is feeling the heat.

Capitec’s shares were trading down 7.8% on Tuesday at 10:30, after earlier trading down 10%.

Viceroy came to prominence for local investors after it released a report into Steinhoff shortly after the Stellenbsoch-headquartered firm’s share price tanked. 

In its new 33-page report, published and uploaded to its website, the short sellers said they did not buy Capitec’s 'good news story'. 

“Capitec Bank Holdings Limited is a South Africa-focused microfinance provider to a majority low income demographic, yet they out-earn all major commercial banks globally including competing high-risk lenders,” the group wrote.  

“We don’t buy this story. Viceroy believes this is indicative of predatory finance which we have corroborated with substantial on-the-ground discussions with Capitec ex-employees, former customers, and individuals familiar with the business.”

Capitec did not immediately reply to a request for comment. 

The bank tweeted at 10:50 that it has "taken note of the Viceroy report on Capitec Bank. We are currently in the process of investigating the report in detail and will respond appropriately".

Viceroy Research employees step forward

In its new report, Viceroy Research alleges that Capitec has been engaging in what it called "reckless lending practices". 

"Legal documents obtained by Viceroy show Capitec advising and approving loans to delinquent customers in order to repay existing loans. These documents also show Capitec engaging in reckless lending practices as defined by South Africa’s National Credit Act. This corroborates Viceroy’s loan book analysis." 

Capitec has been one of South Africa's best performing bank shares in recent years, and has won numerous awards. In September it overtook Nedbank [JSE:NED] to become the country's fourth-largest lender by value. 

When Viceroy Research released its report into alleged irregularities at Steinhoff in early December, its founders were still anonymous. But two weeks ago, in an interview with Bloomberg, the three employees at the short seller stepped forward. 

More to follow

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