Amid the down grade by Moody’s Investor Service which many say is an inaccurate reading on Capitec Bank, it is business as usual at the Bree Street branch with scores of people still depositing and using ATM’s on Monday. Picture: Timothy Bernard 18.08.2014

Capitec Bank would have to work its way back to a better rating in future, the lender said yesterday, despite saying it disagreed with the decision by Moody’s Investors Service to downgrade it on Friday.

Charl Nel, a spokesman for Capitec, said Moody’s was an independent body and Capitec did not have the option of considering action against it.

The bank said its financial results for the six months to August would be published on September 29.

A trading update on the results would be provided on or before September 10, irrespective of whether it was required in terms of the JSE listings requirements.

Capitec said it had been informed of Moody’s decision in a 30-minute telephone review on Thursday.

Jac Laubscher, an economist at Sanlam, said there was no reason for any run on the bank or any panic by Capitec’s depositors.

He recalled that the last time there was a run on a bank was in 2002. There was a run on BoE when Saambou was liquidated and it lost about 25 percent of its deposits.

Laubscher said it was ironic that Capitec was part of the consortium of banks that was rescuing African Bank Investments Limited (Abil) and its African Bank subsidiary and had the expertise to manage the kind of loan book that African Bank ran.

“Rating agencies have a record of acting after events,” Laubscher said.

Capitec Bank’s share price tumbled yesterday in the first day of trading since Moody’s cut its credit rating and said it faced some of the same risks as African Bank.

Capitec shares fell 6 percent to R203.04. The shares pared their losses to close 2.69 percent lower on the day at R210.20.

Shares in Abil have been suspended on the JSE at 31c.

“The selling is less based on fundamentals and more on fear,” Rhynhardt Roodt, a co-manager of the Investec Equity Fund, said from Cape Town.

“Over the longer term, it will be okay when people realise the companies are very different. We will see a reversal of these moves.”

The Reserve Bank disputed Moody’s decision on Saturday to cut Capitec’s deposit rating two levels to Ba2 from Baa3, with the potential for further downgrades. Moody’s cited Capitec’s consumer focus as a threat to investors and also said it suspected the Reserve Bank would be less willing to protect creditors now that it had shored up African Bank.

“We do not agree with the rationale given in taking this step,” the Reserve Bank said on its website.

“Capitec follows a very conservative approach to risk and prudent provisioning practices, and considerable diversification has been taking place in a steady manner in product, client and revenue streams.”

It said Capitec was not involved in selling furniture and had not needed to raise debt or equity capital in the past year.

While the bank, based in Stellenbosch, attracts the same low-income customers as Abil with loans that do not require collateral, it takes deposits and uses those proceeds to fund its lending, unlike its collapsed rival.

Abil was rescued on August 10 after revelations of its financial difficulties nearly wiped out the value of its stock.

The value of its shares plunged more than 95 percent after it said it needed at least R8.5 billion of new capital, in part to cover mounting losses at its furniture retailer.

Moody’s should not assume the central bank would not step in to back other financial institutions posing a systemic risk, the Reserve Bank said.

The African Bank rescue package imposed a 10 percent “haircut” on bondholders, compared with the 40 percent discount on prices during the global financial meltdown, the Reserve Bank said.

Capitec’s total capital adequacy ratio is 40 percent and its liquidity coverage ratio is above regulatory minimums, according to RMB Morgan Stanley.