Capitec in move to calm bank's clients
JOHANNESBURG - Capitec, South Africa’s biggest bank by customer numbers, moved to calm its clients yesterday, saying the business had strong fundamentals after the stock plummeted more than 30percent in early trade on the JSE before clawing back the losses to close 14.69percent weaker at R682.50.
The bank said the sharp decline was because international shareholders were impacted by the continued weakening of the rand which motivated the disposal of its shares.
“The algorithms applied by professional traders enforce disposal of a share when the price of that share declines below a certain limit,” said the company.
Capitec said there was speculation in the market it would be severely impacted by the coronavirus due to the market on which it focused and its unsecured credit business model. However, it said only 1.1 million of its 12.6 million active clients had credit.
The group said an increasing number of its client base came from the middle and higher income segment. “81percent of credit granted in August 2019 was to clients with a gross salary of more than R10 000per month, and 47percent to clients with a gross salary of more than R20000 per month,” it said.
The share price fell 28percent on Wednesday to R800. The market is valuing Capitec at R92billion.
Asief Mohamed, the chief investment officer at Cape Town-based Aeon Investment Management, said the slump in Capitec shares more than halved its recent high last November.
“At these levels Capitec Bank offers good value, as the price earnings multiple has dropped from 22 times to just less than 9 times earnings. The possible reason for the drop is that leveraged speculators may have been forced sellers of Capitec due to margin calls,” said Mohamed.
The banking sector was not spared from the market volatility on the back of the coronavirus and the bleak global and domestic economic outlook. Rand Merchant Investment Holdings declined 0.25percent to R19.99, Nedbank 15.78percent to R94, and FirstRand closed 7.88percent lower at R33.90.
Absa also fell 15.54percent to close at R79.83.
The overall banking index eased 9.46percent to close at 4661.87points.
Banking Association South Africa managing director Cas Coovadia said that the banking sector was not unique in experiencing a drop in stock prices.
Coovadia said the Covid-19 crisis was having a significantly negative impact on all sectors of the economy, and on society.
“We await pronouncements from our primary regulator, the South African Reserve Bank, on initiatives they will put into place to cushion banks as banks act to enable customers to manage their way through this crisis.
"The banking sector is committed to assist customers, but will do so in a manner, and in concert with regulators, that does not compromise the soundness of banks,” said Coovadia.
Nesan Nair, a senior portfolio manager at Sasfin Securities, said most of the banking stocks were down.
“Capitec’s slide just came a little later, so was more dramatic.
"I think all the banks are sufficiently capitalised and have no doubt that the SARB will aid if there’s a shortfall in liquidity,” Nair said.