Viceroy takes aim at Capitec

[saturnz]

You can’t get over the fact that I can change my mind, so you?

Interesting that Benguela comes to the party.

changing your mind is one thing, showing me proof that you are blocking me while engaging me is another thing

 

[f2wohf]

changing your mind is one thing, showing me proof that you are blocking me while engaging me is another thing

And you’re still there.

I actually like it, it’s like a double warning that you posted here and that there will be nit picking on what I write.

 

[NarrowBandFtw]

Interesting that Benguela comes to the party.

Comes to the party late though, it looks like they're just hopping on the free publicity bus after Viceroy has already stirred the pot

The (neutral) analysts that say Viceroy is either wrong or hasn't proven anything yet far outnumber those that agree, pity they don't each get their own headline article. Guess that's less dramatic and click-worthy ...

 

[f2wohf]

Comes to the party late though, it looks like they're just hopping on the free publicity bus after Viceroy has already stirred the pot

The (neutral) analysts that say Viceroy is either wrong or hasn't proven anything yet far outnumber those that agree, pity they don't each get their own headline article. Guess that's less dramatic and click-worthy ...

Obviously, but they must have some elements of thinking behind it.

Or they’re to be avoided.

 

[thestaggy]

So what is the general belief?

Is someone trying to sink Capitec in order to get it on the cheap?

 

[rh1]

Without knowing whether the report is true, I easily understood what the Viceroy guys were saying.

I have no idea what Capitec is trying to say. Can someone please explain their argument

 

[Sinbad]

So what is the general belief?

Is someone trying to sink Capitec in order to get it on the cheap?

They are short sellers

 

[MrGray]

Although Capitec’s loan book seems to be in much better shape than African Bank’s was, micro lending billions at rates up to 27,5% and periodically refinancing those loans doesn’t exactly make them saints. Is Viceroy just creating FUD to short the stock, or is Capitec really guilty of loan sharking? Hard to say, but I suspect the truth is somewhere in between these two extremes.

 

[Nom Chompsky]

Viceroy has more dirt on Capitec

JOHANNESBURG - Despite Capitec slamming a damning report by Viceroy Research and the SA Reserve Bank coming to the bank’s defence, Viceroy stood by its word and said it could dish more dirt on Capitec.
JSE-listed Capitec Bank has undertaken to relook at its financials after the company’s shares were thrown into a tailspin - and at one stage had slumped 25percent - by a damning report from Viceroy Research.

But analysts slammed the Viceroy report as one-sided and “reckless”.

The report blew the lid off the bank’s alleged reckless lending practices, including “refinancing delinquencies”.

The research group also poked holes in the lender's loan book.

It said Capitec claimed to have achieved R27.2billion in loan sales in its 2017 financial year and R24.2bn in the previous financial year, which represented more than 50percent of Capitec’s opening gross loan book each year.

Viceroy suggested these figures should be R2.5bn to R3bn lower in each year and called on the SA Reserve Bank and Finance Minister Malusi Gigaba to immediately place Capitec into curatorship.

Viceroy operated anonymously until the beginning of the year, when Fraser Perring revealed himself and two other colleagues, Gabriel Bernarde and Aidan Lau, as the faces behind the firm.

Capitec chief executive Gerrie Fourie yesterday hit back at the research group.

“We strongly refute these allegations and are in the process of gathering information to respond to the claims made in the report with facts. We are committed to providing clear and transparent information that will show that these claims are baseless,” he said.

At a media briefing yesterday afternoon to clarify some of the matters contained in the report, titled “Capitec: A wolf in sheep’s clothing”, Fourie insisted that Capitec writes off bad loans after 90 days.

Viceroy claimed Capitec’s “concealed problems” largely resembled those seen at beleaguered African Bank prior to its collapse in 2014.

It also criticised Capitec for what it termed a massive overstatement of financial assets and income.

“By refinancing delinquencies, Capitec is also creating a false economy within its income statement, as it records interest and fees on delinquent loans which would otherwise be unpaid. This type of loan renewal would be concerning at any commercial bank. However, Capitec being a retail microfinance lender, carrying forward small, unsecured retail loans represents much higher credit risk,” it said.

Capitec said it was not contacted by Viceroy when it was conducting the investigations into the bank and only received a copy of the research report at 10am yesterday.

 

[konfab]

Although Capitec’s loan book seems to be in much better shape than African Bank’s was, micro lending billions at rates up to 27,5% and periodically refinancing those loans doesn’t exactly make them saints. Is Viceroy just creating FUD to short the stock, or is Capitec really guilty of loan sharking? Hard to say, but I suspect the truth is somewhere in between these two extremes.

I find it hilarious that everyone is complaining about that practice when a bank does it. But the same people are completely fine when a government bases its entire economic policy on the concept.

 

[Sinbad]

It's not that a bank does it. It's that a bank does it to people who can't afford the repayment

 

[konfab]

It's not that a bank does it. It's that a bank does it to people who can't afford the repayment

Do you think the taxpayers can afford the repayment? :crylaugh: :wtf:

 

[Sinbad]

Do you think the taxpayers can afford the repayment? :crylaugh: :wtf:

Yes. Mostly.
Until the sovereign debt rating falls to junk, at which point they can't.

 

[Techne]

Do you think the taxpayers can afford the repayment? :crylaugh: :wtf:

A logical impossibility. That is what you get in ponzi schemes. Just increase the fake debt ceiling.

 

[rietrot]

Yes. Mostly.
Until the sovereign debt rating falls to junk, at which point they can't.

A budget deficit says we can't.

 

[rietrot]

I find it hilarious that everyone is complaining about that practice when a bank does it. But the same people are completely fine when a government bases its entire economic policy on the concept.

Restructuring or consolidating debt does have a place when used properly. It's almost always better for the bank to give the client some more time to repay their debt in this way.

 

[f2wohf]

Do you think the taxpayers can afford the repayment? :crylaugh: :wtf:

As long as the economy grows and the taxpayer base gros too, yes.

 

[Nom Chompsky]

Benguela Fund Managers: Viceroy is right

Following the release of Viceroy’s report into Capitec on Tuesday morning, boutique asset manager Benguela Fund Managers has made public an extensive letter it sent to Capitec’s chief financial officer, Andre du Plessis, in which it raises very similar concerns. The letter was sent to Du Plessis on January 19.

“Our concerns revolve around the rescheduling of arrears and the impact these have had on reported financial performance of the business,” wrote Benguela’s chief investment officer, Zwelakhe Mnguni. “We believe this practice has distorted the true performance of your business and warrants some review.”

...

“Clients in arrears are already struggling to repay their Capitec loans, it would appear that they are being issued new loan contracts to start afresh despite their impaired ability to honour their existing obligations,” Mnguni noted. “We believe that it is near impossible for 77% of the clients in arrears to successfully apply for rescheduling especially when it was reported that more stringent rule changes applied to the rescheduling policy: As a result, it does appear to be reasonable conclusion that some form of reckless lending may be taking place within Capitec’s arrears loan book.”

Benguela went on to highlight that Capitec’s bad debts had picked up materially since it introduced loan rescheduling in 2013.

“We believe that this is a symptom of the aggressive rescheduling of arrears,” Mnguni noted.

He also raised its concerns about how rescheduled loans are reported as ‘new sales’.

“The trailing 12-month rescheduled loans now contribute over 16% to new sales and by extension lending and interest income,” Mnguni noted. “In the past four years, an average of 98% of gross loan book growth came from rescheduled arrears. It is indisputable that without rescheduling the arrears, Capitec’s reported loan book and revenues would have been stagnant for the past four years. This is material to a large degree.”

In other words, all of the growth in ‘new sales’ reported by Capitec since the 2013-2014 financial year can be put down to rescheduled loans. These are, however, existing loans just offered on different terms.

“We would like to enquire about whether the board is aware of how material the rescheduling practice has been in the reported growth of the loan book, revenues and profits?” Mnguni wrote. “In addition we are curious to know what the board has done about this aggressive level of rescheduling?”

 

[konfab]

As long as the economy grows and the taxpayer base grows too, yes.

So it is gambling then.

 

[Vrotappel]

I guess these guys are targeting SA firms because we are easy targets. they know that the risk factor associated with SA is very high and that foreigners dump their shares at the slightest hint of bad news. So shorting SA firm, make bad news, $profit$.

So they are looking for the SA to good to be true stories nod target them. I wonder who will be their next target?