By Tuesday morning, the share price had risen to R1 084.31 a share on the JSE and recovered from the R860 mark.
Capitec shares closed 1.79 percent up at R1 076.96 on the JSE yesterday.
After the Viceroy report was issued, the bank shed around 25 percent on the damning report, which accused the bank of reckless lending practices.
Capitec hit back in a detailed statement against the allegations and was then backed up by the SA Reserve Bank (Sarb).
Sarb refused Viceroy Research’s invitation to place Capitec under curatorship at the time, saying that the bank met all "prudential requirements”.
Viceroy again accused Capitec of misleading investors in May.
In April, Sarb in its Financial Stability Report hit out at the short-selling strategy of Viceroy Research, saying the strategy had the potential to create financial instability.
The central bank said the common traits of a short selling strategy included influencing market participants’ perceptions by extensive use of social media platforms, sensationalist language and an ongoing campaign against the targeted entity.
Deputy Governor of the Sarb, Francois Groepe, said this type of “short selling” strategy had the potential to create financial instability, especially if the targeted company is a deposit-taking institution.
“Although a decline in a bank’s share price does not necessarily create systemic risk, there may be a risk to financial stability.
"The negative feedback loop can exacerbate the circumstances, even if the trigger event was based on inaccurate information,” Groepe said.
“In the Capitec case, statements by the Sarb and appropriate responses by Capitec calmed fears and led to a recovery in Capitec’s share price,” he said.
Almost 10 months after the report, Capitec shares have bounced back.
Nesan Nair, a senior portfolio manager at Sasfin Securities, said the share price had shaken off the negative publicity from Viceroy.
“Solid earnings growth of 20 percent plus and an enviable and sustainable return on equity has led to the rally,” Nair said.
In the six months to end-August, Capitec reported a 20percent increase in headline earnings to R2.5 billion, with return on equity up by 27 percent.
Nair added that having addressed the issues in the Viceroy report, and with the Reserve Bank and rating agencies having given their endorsements, the market was taking Viceroy with a pinch of salt.
“Nobody can say with certainty whether the Viceroy allegations are true or not. However, from the Capitec results it seems that they are still growing their transactional revenue, which is making a bigger contribution to the bottom line than their lending business - the latter being where the most fuss is about,” he said.
The rally of the share price continued to November when Capitec was given a much-needed boost by receiving the nod to acquire 100percent of Mercantile Bank for R3.2bn.
Nair said the expected transaction had had a positive impact on the bank.
“I think it is a positive sign for the bank, though I feel that Capitec’s success over the past 16-plus years has been their organic growth ability.
"It remains to be seen how good they are with acquisitive growth,” he said.
Capitec is not the only South African company that has been targeted by Viceroy.
The list includes Steinhoff International, which lost more than 95percent of its share price and is yet to recover in the wake of the discovery of accountancy fraud.
Towards the end of November, Viceroy also caused a decline of more than 13percent on NEPI Rockcastle shares after the short sellers accused the Johannesburg and Amsterdam-listed real estate fund of overstating its profits from Romania.
Kokkie Kooyman, a portfolio manager at Denker Capital, said Capitec had totally recovered from the Viceroy bad publicity as the share price continued to gain momentum.