Capitec’s public relations company said the bank might choose to respond or not to these allegations at a later stage.
Kokkie Kooyman, a portfolio manager at Denker Capital, said he was not surprised that Capitec did not see fit to respond to the latest report.
“I think it is more a case of if you continuously defend yourself then people think you are guilty.
"The big risk to them was that depositors will get frightened and we have 'a run on the bank', but if Viceroy hasn’t scared depositors by now they won’t any more,” Kooyman said.
In the latest report published yesterday, Viceroy claimed that numerous former Capitec staff and five prominent debt counselling firms with proprietary datasets on South African unsecured lending support its thesis that Capitec uses a “curing” method to hide the disastrous underlying performance of its loan book.
“If a borrower in arrears is able to beg or borrow the funds from a secondary lender to pay down their arrears and make themselves 'current', Capitec immediately offers them a new, larger loan. The borrowers use this new, larger Capitec loan to pay off the secondary lender used to cover the arrears,” Viceroy said.
The New York-based group said since its last report Capitec had disclosed that an extraordinarily large portion of its subprime, highly indebted customers who miss payments on their loans are somehow able to find the money to “catch up” or “cure” their arrears. The group said this on its own is suspicious.
Viceroy also claimed that well over half, that is between 70percent and 80percent, of Capitec consumers in debt counselling were issued with new loans prior to repaying their existing loans.
Kooyman said it was clear that Viceroy had no understanding of how Capitec worked and most importantly it had no clue of how the South African banking industry worked.
“In South Africa there is a bank supervision department whose responsibility is to visit banks at least twice a year. They are independent and if there was a problem with Capitec, they would have long ago raised concerns and informed Capitec and the SA Reserve Bank,” Kooyman said.
He added: “The Viceroy Report contains misinformation and misses the point of how well capitalised and reserved Capitec is.”
Kooyman said the fact that Viceroy took a short position on the share price before the first report is enough evidence that it produced the report for its own selfish ambitions.
Graeme Körner, of Körner Perspective, said yesterday he differed with Viceroy as he believed Capitec had adequate liquidity and its investment holding company, PSG, was able to capitalise it if necessary.
However, he said there were practices that were questionable or that could be in breach of the National Credit Act. “African Bank Limited (Abil) was not a problem until it was a problem,” he said.
Körner also said that the Capitec management had handled previous notes by Viceroy.
“Behind the scenes, the South African Reserve Bank and the Registrar of Banks are engaging Capitec for an in-depth research on the company,” said Körner.
Asief Mohamed, the chief investment officer at Aeon Investment Management, said Viceroy Research was grasping at straws in its latest note on Capitec.
“They are driven by greed, and are interested only in making money. They want to put the South African banking system at risk,” Mohamed said.
When Viceroy published its first report on Capitec at the end of last month, the bank moved swiftly to deny the accusations.
Capitec responded to the allegations by Viceroy in the first report published on January 30 and clarified its standpoint on the loans they issue to their clients. They went as far as responding to Benguela Global Fund Managers who had shared Viceroy’s sentiments.
Benguela have since written back to Capitec, stating that they are happy with the explanation given by the bank on how it handles its loan book.
When the first report emerged, Capitec’s share price declined by 25.31percent in one day, while the recent report failed to paint a negative picture on the bank.
The share price yesterday closed 3.74percent lower at R813.26 on the JSE yesterday.
Viceroy received a backlash from the market with the SA Reserve Bank and National Treasury at the forefront of defending Capitec.
The Reserve Bank went as far as stating that “according to all the information available, Capitec is solvent, well capitalised and has adequate liquidity, adding that the bank meets all prudential requirements”.
The Reserve Bank yesterday failed to respond to requests for comment.