Ann Crotty
Capitec chief executive Riaan Stassen knows the period ahead “will be difficult” but maintains “it would be a lot less difficult if the regulatory framework was sorted out”.
Stassen spoke to Business Report after the company’s annual general meeting (AGM) on Friday, which marked the end of a tough week for the bank. A referral to the National Consumer Tribunal and negative media reports saw the company’s share price drop 6.2 percent for the week to R184.99.
In his address to shareholders, Stassen confirmed that trading conditions during the first quarter of the company’s financial 2014 year had been weaker – in line with industry trends. “This has been driven by the much weaker economy where strikes have affected economic growth”.
Stassen noted that an indication of the need to reform the statutory framework was that, although the industry operated within a price control environment, insurance charges were not controlled.
He told Business Report of one lender that was charging zero interest but levying enormous insurance costs.
“Credit providers are able to charge any amount they want for insurance; this loophole means there is no effective price control for the industry.”
An alleged contravention of the National Credit Act was first brought to Capitec’s attention by the National Credit Regulator (NCR) in February.
“Since February we have been trying to get clarification from the NCR. In our view we’re 100 percent within the act but the NCR did not want to meet, referring to the technical nature of the complaint and stating that it was now down to the tribunal to decide on the matter,” Stassen said.
Capitec chairman Michiel le Roux said he believed the matter would be resolved through a “better understanding” between the parties.
Stassen’s presentation to shareholders highlighted the rapid growth in the unsecured lending industry between 2007 and 2012, as banks cut back significantly on mortgage lending and secured credit after the financial crisis in 2007. By the end of 2009, mortgage and asset-backed lending had stabilised.
However, the most significant development at this stage is the dramatic increase in unsecured lending. By 2012, there were 8.5 million unsecured accounts in the country compared with just 1.8 million mortgage accounts and 4.8 million secured accounts.
More significant, given the uncertainty in the market for the past six months, is the extent to which the terms of unsecured loans have been extended and the loan size increased. By the end of last year there were R22.7 billion worth of loans over R15 000. At the same time, the loan term had extended so that loans of over two years accounted for over 80 percent of the total of unsecured loans.
A more encouraging development for the industry is that, by 2012, 41 percent of unsecured loans were being granted to individuals with monthly incomes exceeding R15 000; up from 17 percent in 2008.
Given the overwhelming support at the AGM for every resolution except the remuneration policy, which received an 18.4 percent negative vote, it appears that Stassen has persuaded shareholders of the bank’s strengths.
These, he said, included “world-class approval and collections methodology, active management, 13-year history, rich data intelligence and prudent provisioning”.