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JOHANNESBURG - Capitec Bank’s share price continued to tumble on the JSE yesterday after a fund manager said it had warned the bank two weeks before the Viceroy Research group released its findings on Tuesday.

The stock dropped by more than 12percent yesterday after the Benguela Fund Managers backed the Viceroy Research findings and said it had sent a letter to Capitec’s chief financial officer, André du Plessis, on January 19, in which it raised very similar concerns by questioning its loan practices.

The release of the letter on Tuesday evening resulted in Capitec’s share price reversing some of the gains it had made towards the close of the market.

Also read: S&P Global says Capitec Bank rating not impacted by adverse Viceroy report

The stock was in red territory throughout yesterday’s trade and it dropped to R805.70 a share, from Tuesday’s closing price of R915.92 a share.

Capitec, which makes unsecured loans mainly to low- and middle-income households, was accused by Viceroy of hiding write-offs by refinancing defaulted loans with new debt.

However, industry analysts still back Capitec and accused Viceroy of publishing the report for their own gain.

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Renier de Bruyn, an investment analyst at Sanlam Private Wealth, said they viewed the Viceroy report as written maliciously, with the sole intention of profiting from a collapse in Capitec’s share price by the authors, who have taken short positions in the share prior to the report’s release.

“Analysing the report, it quickly becomes clear that the analyst not only made errors in logic, but also conveniently ignored obvious and publicly available facts that would have countered their narrative.


“Viceroy also has not tested their theories with Capitec management, which points to a clear lack of proper due diligence.

“In short, they were simply not interested in revealing the truth about Capitec, but rather to serve their own interest of benefiting from panic selling in Capitec’s share price,” De Bruyn said.

He added that it was ironic that Viceroy pretended to fight for suffering South African borrowers, who are “being abused by the so-called predatory behaviour of a loan shark”, while they themselves seek to profit by falsely attempting to create panic in a bank with systemic importance to the South African financial system.

“This is irresponsible in the simple pursuit of profit. On the other hand, Capitec’s actions have shown that the bank is committed to a sustainable industry and reducing the cost of credit for customers over the long term,” he said.

Professor Jannie Rossouw, the head of Wits University’s School of Economic & Business Sciences, said Viceroy published the report with the purpose of sending the price of the share of Capitec Bank in a specific direction.

“It is standard practice for trading and research institutions to maintain ‘Chinese walls’ between the trading desks and the researchers.

“In my opinion, Viceroy behaved unethically by disclosing the content of its research report on Capitec Bank to its traders before the report was made generally available.

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“Whether there is regulation against such behaviour, I don’t know, and the fact that Viceroy operates in another country makes matters a bit more complex,” Rossouw said.

Capitec shares closed 12.59percent lower at R800.60 on the JSE yesterday.