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Viceroy report won't impact Capitec's rating - S&P

Feb 01 2018 12:11
Lameez Omarjee

Cape Town - S&P Global Ratings has said the Viceroy report on Capitec [JSE:CPI] won’t impact its rating of the bank.

US-based Viceroy Research on Tuesday released a report "Capitec: A Wolf in sheep's clothing", which claimed the bank is a “loan shark” and has engaged in reckless lending.

Capitec shares fell as much as 20% on Tuesday. The bank responded to the allegations made by Viceroy on Wednesday, which saw the share price firm.

Additionally, the Reserve Bank issued a statement confirming that the bank is solvent, well-capitalised and has adequate liquidity. This came after Viceroy called on the central bank to place Capitec under curatorship.

S&P has Capitec ranked at BB, or speculative, with a stable outlook. S&P said in a statement that neither the Viceroy report nor the market’s reaction to it would impact the rating.

“The market's reaction was significant, with the bank's share price losing over 20% before recovering after the South African Reserve Bank released a statement defending the soundness of the bank's capitalisation and liquidity,” said S&P.

“To date, the bank has experienced only mild funding outflows and its liquidity remains sound.”

S&P explained that the bank’s rating was influenced by the sovereign rating for the country, which is also junk. The ratings agency also considered the bank’s “strong capitalisation and conservative reserving”, adding that this is appropriate for normalised credit losses.

S&P also factored in the bank’s good earnings stability, given that it is an unsecured consumer lender.

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