Cape Town - 101011 - Banking Fees - CAPITEC Bank has been found to have the lowest fees. Photo: Matthew Jordaan

Johannesburg - The Reserve Bank has disputed credit rating agency Moody’s Investors Service’s downgrade of Capitec Bank, saying it disagreed with the rationale behind the two-notch rating cut for the local lender.

Moody’s cut the financial strength rating of the lender to D from D+ on Friday and its deposit ratings to Ba2/NP from Baa3/P-, citing concerns about its exposure to risky consumer lending.

“While the bank respects the independent opinion of rating agencies, we do not agree with the rationale given in taking this step,” Hlengani Mathebula, a spokesman for the Reserve Bank, said in a statement at the weekend.

“The Moody’s statement justifies the rating action further on the basis that Capitec follows a similar business model to African Bank. This is incorrect; the two lenders do not share the same business model.”

Capitec also disagreed with Moody’s downgrade, with its financial director, Andre du Plessis, calling it “unfair and inappropriate” on Saturday.

“Capitec Bank does not agree with the downgrade and would like to place on record that the business is healthy, growing according to plan, and its loan book is performing within its risk appetite,” Du Plessis said.

Capitec said that unlike African Bank, which depends almost exclusively on high-margin but risky unsecured loans, it had diverse revenue streams that included more than 5 million banking clients.

About 2.2 million of these clients received their salaries through the bank, giving the lender insight into their cash flow when considering whether to grant them loans.

Moody’s said on Friday that unsecured loans made up the bulk of Capitec’s loan book.

Capitec shares fell 50c to R216 on Friday. – Reuters