Cape Town - Capitec Bank has slammed the report by US researcher Viceroy that it was "a loan shark with massively understated defaults masquerading as a community microfinance provider" as a campaign that will continue for the foreseeable future.
Last week, Viceroy said it had done extensive due diligence and compiled evidence suggesting Capitec must take significant impairments to its loans which would likely result in a net-liability position.
Shares in Capitec Bank tumbled as much as 24 percent after Viceroy said the South African Reserve Bank (Sarb) and the Minister of Finance should immediately place the bank into curatorship because its loan book was massively overstated as a consequence of re-financing delinquent loans.
Instead, the Sarb vouched for Capitec, saying that according to all the information available, Capitec is solvent, well capitalised and has adequate liquidity, and that the bank meets all prudential requirements.
National Treasury said that Viceroy's "reckless manner" in releasing its report showed that it was not acting in the public interest, nor in the interest of financial stability in South Africa, adding that the Viceroy report provided no basis to put any bank under curatorship.
In response on Monday, Capitec said that only 7.3 percent of its credit clients currently qualify for loans in excess of 60 months, with only 3.6 percent qualifying for 84-month loans, and that the portfolios are naturally weighted to the larger amounts and consequently the longer-term and lower risk clients.
The bank said that it has a sophisticated pricing for risk model that quantifies the reduction in risk when low risk clients, that qualify for long-term products, take up loans with a shorter duration, and it offers lower rates in order to ensure that it provides competitive products to these clients.
"Viceroy Research Group refers to the loss rates on 'US prime credit cards' but shows aggregate credit card losses. Viceroy infers that it is impossible for the average American credit card holder to have similar credit risk as the top seven percent of Capitec's clients. We have extensive history and sophisticated models to support our results," Capitec said.
"The South African Reserve Bank, as part of their normal oversight function, performs reviews of all areas including detailed credit risk reviews on Capitec. They are fully aware of the credit scoring models and the risk targets that we set when we extend credit. We track performance against these targets and update our models as soon as any deviation occurs."
Capitec said that it believes that the campaign will continue for the foreseeable future as the release of fresh attacks and false allegations over an extended period is expected, and advised shareholders to use caution when reacting to such allegations.