“Based on our research and due diligence‚ we believe that Capitec is a loan shark with massively understated defaults masquerading as a community micro-finance provider. We believe that the South African Reserve Bank and Minister of Finance should immediately place Capitec into curatorship.”
That is the statement from Viceroy Research‚ the company that first flagged irregularities at Steinhoff.
Capitec Bank‚ in response‚ has stated: “We have taken note of the Viceroy report on Capitec Bank. We are currently in the process of investigating the report in detail and will respond appropriately.”
Capitec services a low-income demographic‚ “yet they out-earn all major commercial banks globally including competing high-risk lenders”‚ notes Viceroy.
“We don’t buy this story. Viceroy believes this is indicative of predatory finance which we have corroborated with substantial on-the-ground discussions with Capitec ex-employees‚ former customers‚ and individuals familiar with the business‚” it asserts.
“Viceroy’s extensive due diligence and compiled evidence suggests that indicates Capitec must take significant impairments to its loans which will likely result in a net-liability position. We believe Capitec’s concealed problems largely resemble those seen at African Bank Investments prior to its collapse in 2014.
“We think that it’s only a matter of time before Capitec’s financials and business unravel‚ with macro headwinds creating an exponential risk of default and bankruptcy.”
The shocking Viceroy report further asserts:
– “Legal documents obtained by Viceroy show Capitec advising and approving loans to delinquent customers in order to repay existing loans. These documents also show Capitec engaging in reckless lending practices as defined by South Africa’s National Credit Act. This corroborates Viceroy’s loan book analysis.”
– “As a consequence of re-financing delinquent loans‚ Viceroy believes Capitec’s loan book is massively overstated. Viceroy’s analysis against competitors suggests an impairment/write-off impact of R11bn will more accurately represent the delinquencies and risk in Capitec’s portfolio.”
– “Legal experts that we have spoken to believe that the outcome of an upcoming reckless and predatory lending test case in March 2018 will be used to trigger a multi-party litigation refund (class action). We believe that‚ at a minimum‚ Capitec will be required to refund predatory origination fees primarily related to multi-loan facilities; an estimated R12.7bn.”