Viceroy takes aim at Capitec

Listening to Fine Music Radio on my ride home every day (business news time) and as early as 2 years ago people were questioning the loans Capitec provided and their liquidity.

The issue keeps being recycled.

It was being question so often that I just find it hard to imagine this hasn't been looked into
 
Pitbull said:
Maybe it has to do with the interest rates they are using on their unsecured loans. Might be within NCA standards, still daylight robbery!
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Shouldn't be possible.

The good news is that the maximum interest rates you can be charged are linked to calculation formulas using the repo rate (currently 7%). The repo rate is the interest rate at which the SA Reserve Bank lends money to commercial banks such as FNB, Absa, Standard Bank, Nedbank and Capitec.

The revised capped interest rates on loans are:

. Unsecured credit (personal loans etc):

Repo rate + 21% per annum = 28%

. Mortgage agreements (home loans):

Repo rate + 12% per annum = 19%

. Credit facilities (credit cards and store cards):

Repo rate + 14% per annum = 21%

. Developmental credit:

Repo rate + 27% per annum = 34%

. Incidental credits: For example, if you are late paying your doctor’s bill, he can charge you interest at 2% per month.

. Other credit agreements:

Repo rate + 17% per annum = 24%

. Short-term transactions: 5% per month on the first loan and 3% per month on subsequent loans within a calendar year.

The maximum service fee that may be charged on credit agreements has increased from R50 a month to R60 a month (excluding VAT).

The maximum initiation fees on credit agreements have also been changed and now stand at:

. Initiation fee on a home loan: R1 100 plus 10% of the amount in excess of R10 000, capped at a maximum fee of R5 250.

. Initiation fee on credit facilities (credit cards and store cards), personal loans and short-term credit transactions: R165 plus 10% of the amount in excess of R1 000, capped at a maximum fee of R1 050.

. Initiation fee on developmental credit for small businesses: R275 plus 10% of the amount in excess of R1 000, capped at a maximum fee of R2 600.

. Initiation fee on developmental credit for low-income housing: R550 plus 10% of the amount in excess of R1 000, capped at a maximum fee of R2 600.

Ian Wason, CEO of DebtBusters, says that in the past, lenders had the ability to charge as much as 32.65% for unsecured loans.

“Now that they are being forced to reduce that to 21%, they may get far more selective about who they lend money to. This could drive more people towards loan sharks and other unaccredited lenders.

“Often, these fringe players don’t adhere to the
NCA and the Debt Counselling Rules System, so the National Credit Regulator will need to police this,” he cautions.

Affordability assessments

The methods used by credit providers to determine whether or not you can afford a loan are now stricter than before. Credit providers now have to:

. Ensure that they obtain three months of payslips; or the latest three months of bank statements reflecting three salary deposits; or the latest three months of documented proof of income; or latest financial statements.

. Work on average over not less than three months in cases where there is a material variance in the income. This change is important for consumers to take note of because in the past it was often possible to open an account just by presenting an identity document. Now you have to arrive prepared with the necessary documentation.

The next step is for the credit provider to perform a specific calculation to ascertain the following:

. Your gross income, using the documentation supplied by you.

. All statutory deductions.

. What your “minimum living expenses” are – according to the minimum expense norms – to establish the net income.

. All your existing debt obligations, as may be reflected by the credit bureaus. The net result is your “discretionary income”. The “discretionary income” is the amount available to repay new debt. The monthly repayment on any new credit agreement must be less than this amount.

Wendy Monkley, head of marketing at DebtBusters, notes that the DebtBusters’ Debtometer report for the first quarter of this year indicates that banks’ share of overall debt is down 55% (from 72% in 2012), signalling a scaling back on lending by credit providers, “which was what DebtBusters predicted in March last year – a downward trend in unsecured lending”.

Monkley says that while the amendments to the affordability assessment regulations are a step in the right direction, consumers with nowhere left to turn may find themselves tempted to approach loan sharks for assistance.

“The unfortunate reality is that many consumers don’t know about debt counselling and how it can benefit them,” she says.

“Debt counselling is the best solution for consumers who are struggling to pay their way and who need their debt consolidated into a lower monthly repayment to free up cash for living expenses.”
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All respect to article -> http://city-press.news24.com/Personal-Finance/nca-amendments-what-they-mean-for-you-20160617
 
Also, I don't think the SARB is responsible for lending criteria. It's their job to monitor reserves and liquidity.
 
konfab said:
You technically shouldn't be investing in a single share in any company unless you know what you are doing. Just look at Steinhoff.

I don't invest in anything other than index funds for that reason.
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Reason why I don’t invest in banks, and avoid heavily leveraged companies such as Steinhoff. It‘s seldom when it ends as a fairytale.
 
Mystic Twilight said:
while Capitec clients are probably protected, if Capitec goes down then the direct and indirect jobs are going to be wrecked with a lot of impact on the already weak economy
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Sure, but as a client I'm concerned with the client impact first and foremost.

Mystic Twilight said:
take the money out and have it under their direct control and possession instead of leaving it under someone else control and possession. Cue in panic withdrawals.
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Unless they're putting it under their mattress it would still be under someone else's control and possession. Moving your money out of Capitec to another bank or ETF doesn't change that in the least.
 
http://www.sharenet.co.za/v3/sens_display.php?tdate=20180130163500&seq=42&scode=CPI

Capitec:
Viceroy Research Report On Capitec – Addressing The Main Issues Raised In The Report

Capitec Bank Holdings Limited
Registration number 1999/025903/06
Registered bank controlling company
Incorporated in the Republic of South Africa
JSE ordinary share code: CPI ISIN code: ZAE000035861
JSE preference share code: CPIP ISIN code: ZAE000083838
("Capitec" or "the company")

VICEROY RESEARCH REPORT ON CAPITEC – ADDRESSING THE MAIN
ISSUES RAISED IN THE REPORT

We refer to the earlier announcement on SENS today
advising shareholders of concerns about the integrity of
a report by Viceroy Research on Capitec and advising
shareholders that management will review the report in
detail and will respond to same before the end of today.

We are studying the report systematically and are still
seeking clarity on some of the allegations. It is
important to note that the report is flawed with
inaccurate statements.

We respond as follows to the main allegations raised in
the report:

1. Allegation that Capitec fabricates new loans and
collections, or refinances up to R3b in principal per
year by issuing new loans to defaulting clients

With reference to the reconciliation of the loan book,
we can confirm that the estimate in the Viceroy report
does not accurately calculate client repayments. They
use a figure net of fees on loan accounts based on
assumptions regarding the amortisation and capital
repayment profile of the loan book. Their estimate of
capital repayments of R16.7 billion underestimates
actual loan receipts net of fees of R18.6 billion
(receipts less fees) by approximately R1.9 billion.
They also reduce write-offs by an estimate of the
component of write-offs that originate from new sales
in subsequent years. There is a logic flaw that loan
sales should be reduced accordingly. Furthermore, the
default rates that they calculate does not consider
the fact that written off balances include fees and
should be compared against the sum of actual receipts
plus write-offs.

2. Allegation of loans granted to delinquent customers to
repay existing loans
What the Viceroy report is referring to is the court
cases of 3 particular clients. They make no mention of
Capitec’s comprehensive responses in each of these
cases which addresses each of the allegations
contained in Viceroy’s report. Our comprehensive
responses are public documents and are available at
court or from our legal department. Whenever we grant
a loan, we do a comprehensive credit assessment based
on the BAS principles (behaviour, affordability and
source).

3. Allegation of over-statement of Capitec’s loan book
Our impairment on loans are based on the probability
of default. Loans are written off at the earliest of
when they are in arrears for 90 days or more, or legal
hand-over occurs. As at 31 August 2017, our doubtful
debt provision covers loan balances in arrears by 237%
and 152% when including arrears loan balances
rescheduled within the last 6 months. Any competitor
analyses requires a further breakdown of their loan
granting, pricing, write-off and provisioning policies
to compare our approach and position on a like for
like basis.

4. Assumption that court cases may result in a class
action

The proposition of a class action is speculation of
the highest nature and premature. The matter must
still be heard and Capitec believes it has solid
defences to the allegations.

Capitec’s explanations in its answering papers in the
court cases are not taken into account. The monthly
loans were granted under an over-arching multi-loan
agreement, concluded at the outset.

Before concluding this agreement, Capitec concluded
its standard comprehensive credit assessment. This
consisted of documentary and other information
provided by the customer (including bank statements,
payslips and answers to questions posed by Capitec),
as well as information sourced externally from credit
bureaux.

Before each withdrawal under the over-arching multi-
loan agreement, Capitec performed supplementary credit
assessments. Capitec supplemented and updated the
results of the underlying initial assessments, and its
purpose was to check whether the customer still
qualified for the proposed credit.

The process consisted of the following:

• Customers asked to confirm that, ‘since you signed
your last multi-loan agreement, your income is the
same or more’ and ‘since you signed your last
multi-loan agreement, your expenses are the same or
less.’
• Capitec making a credit bureau enquiry to enquire
whether the customer had any disqualifying legal
statutes (insolvency, administration, etc)
• Capitec making a credit bureau enquiry to determine
the sum total of the customer’s current external
obligations, i.e. whether in the period since the
conclusion of the over-arching multi-loan
agreement, he has taken up fresh debt from entities
other than Capitec or settled existing debts with
such entities (as far as credit from Capitec itself
was concerned, this was checked and taken into
account directly)

5. Incorrect correlation between our credit facility and
discontinued multi-loan facility

The credit facility operates the same way as a credit
card except that the Capitec credit facility
terminates after 9 months. If the client applies for a
new Capitec credit facility we do a new comprehensive
credit assessment to see if the client qualifies for a
new Capitec credit facility.

The initiation fee is only triggered once the client
uses the facility up to a maximum fee agreed with the
client, that is within the NCA.

Monthly fee – this fee is raised as allowed in the
applicable regulations of the NCA. There is a
difference between availability and use of the
facility and interest is charged as contracted with
the client and the full amount used, including
interest and fees, is repayable on a monthly basis.

6. Capitec Bank’s operations are significantly different
to that of African Bank

Capitec Bank is fully fledged retail bank and has
different sources of income, not only credit. It’s
transactional business continues to contribute
materially to its earnings as reported in our 1H 2018
results.

Capitec Bank has a significant retail deposit book,
unlike African Bank. The result of this is that
Capitec has a low reliance on wholesale funding.

Capitec Bank has a far more conservative approach to
providing credit than African Bank. The provisioning
of Capitec Bank is market-leading and significantly
more conservative to that specifically of African
Bank, as well as other unsecured loan books.

7. Opinions of former employees

Employees who are no longer employed by an
organisation can make claims that are false. It is
patently untrue that Capitec has fired any employees
‘for not deceiving borrowers’. Amongst the many
inaccuracies in the report another exists where it is
claimed that our branch managers earn an average of
R13 219 where the actual average is R22 000 per month.
We are proud of the journey that we have placed our
employees on with the result that many employees are
promoted within the organisation.

We are concerned about the way in which Viceroy Research
conduct their business and our attorneys have registered
a formal complaint with the Financial Services Board.

30 January 2018
Stellenbosch
Sponsor
PSG Capital
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zippy said:
Yeah, the auditors where ontop of the whole Steinhoff thing :)
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The Steinhoff issues were actually revealed by the auditors.

Nobody knows yet if the fraud was too sophisticated for a reasonable audit to discover it, or if they decided that the pyramid was too big and that they better expose even if they lose.

I do agree that there is a big issue with auditors or auditing rules, whether it’s fraud or incompetence or audits being too lax.
 
Looking at the share price recovery since midday, seems investors aren't believing the wild claims of Viceroy.

Also, Capitec are giving a press conference right now.
 
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The entire modern monetary system is one giant ponzi scheme and people moan about Capitec's lending practices.
Methinks there arw bigger fish to fry.
 
Techne said:
The entire modern monetary system is one giant ponzi scheme and people moan about Capitec's lending practices.
Methinks there arw bigger fish to fry.
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The difference is that this Ponzi scheme is guaranteed by the governments, hence it won’t fail and is not subject to rational economics because everybody needs the scheme to work.

A company (whether it’s Madoff, Steinhoff or Capitec) is subject to these economics.
 
supersunbird said:
As was my DirectAxis loan (which is a FNB company) and most other personal loans I'd guess. FNB and Nedbank CCs also right there at the top end of the permitted amount, and I have an excellent credit score.
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Is it?

On my latest credit card statement

7ab098618783b20e490a6b18c8218d69.jpg
 
supersunbird said:
As was my DirectAxis loan (which is a FNB company) and most other personal loans I'd guess. FNB and Nedbank CCs also right there at the top end of the permitted amount, and I have an excellent credit score.
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I have 13 and 14% on my credit cards (Nedbank and SB) and I was foreigner with no credit record when I got them.

Me think you got scammed.
 
Techne said:
The entire modern monetary system is one giant ponzi scheme and people moan about Capitec's lending practices.
Methinks there arw bigger fish to fry.
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Yes, leave Capitec alone. Especially since "we" bank there and we dont want this to be true :)
 
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