Tag: Capitec

Source: eNCA

The Financial Sector Conduct Authority has imposed a R50-million fine on Viceroy Research and its partners for making false, misleading, and deceptive statements about Capitec in 2018.

Viceroy had written a report called “Capitec — A wolf in sheep’s clothing”.

Capitec’s share price plummeted by over 23-percent on the back of this.

The regulator says the penalty has to be paid by Viceroy and its partners within 30 days from the date of the order, which was at the end of last month.

Viceroy says it will challenge the decision.

It says it has cooperated with the FSCA’s inquiries and has maintained open dialogue.

Capitec to add 300 jobs

By Londiwe Buthelezi for News24

As many people and some businesses are likely questioning the wisdom of ploughing more money into South Africa after the recent unrest, Capitec CEO Gerrie Fourie says he sees ample opportunities.

A perfectly running economy like Switzerland might sound like a dream, but Fourie says it doesn’t have the magnitude of opportunities that challenges-ridden SA presents.

“I am a strong believer that if you are positive, you’ll look for opportunities, you’ll find opportunities. If you are negative, you just see problems,” said the Capitec CEO during the PSG Think Big Series discussion on Tuesday.

Capitec launched a big recruitment drive on Tuesday, which will see it fill around 300 positions of mainly “fourth industrial revolution” skills over the next few months. These will include disciplines in business science, artificial intelligence, data engineers and computer analysts.

Fourie said he understood that it could be “quite scary” to be recruiting hundreds of people in the current environment as economies battered by Covid-19 are still trying to recover. But Capitec is “looking to grow and go further”, he said.

Fourie said he does not want to underplay SA’s challenges, especially the education system that needs an overhaul. But to get around this, Capitec is doing its own training.

“There are big challenges there. But when I look at where we are, we believe there are massive opportunities in South Africa,” he said.

Room to disrupt the market

Capitec has around 16.3 million clients, which Fourie says is a 10% market share of SA’s retail banking. The banks wants to grow that to around 20% to 25%. In the retail deposit space and insurance, Capitec respectively commands 8% for now and about 6% in credit.

So, Fourie sees “plenty of opportunities” to grow in these areas.

The bank also has big ambitions for its business banking proposition, following its acquisition of Mercantile Bank in 2019.

READ | Snail-paced rollout of business banking – Capitec has a few tricks up its sleeve
“We’re very excited about Mercantile because, in business banking, there’s a big opportunity in the SME market. If you want to unlock the opportunity in Africa, that’s the market you focus on,” he said.

Mercantile Bank will be transformed into a completely digital Capitec Business Bank. With a bank that’s not dependent on its brick-and-mortar infrastructure to grow, it might offer Capitec the opportunity to take its offering internationally, said Fourie.

However, the bank’s immediate focus is growing its market share in SA, and any international expansion would be small and measured.

Building an army of innovators

As a young bank, Fourie said Capitec’s roadmap looked at where it wants to be in three years during the first two decades of its existence. Now, it’s looking at where the bank must be in 2030.

With this long-term focus, it’s looking past short-term noises.

The bank has an “innovation team” that scouts the world, looking at how banking and financial services are changing in other markets.

Fourie said the team travelled a lot before Covid-19, doing over 1 000 international trips a year. It not only confined its learnings to financial services but spent time with retail and internet giants like Alibaba and Tencent to understand where opportunities lie in the blurring lines between banks, mobile operators and retailers.

But Capitec also learns a lot from the annual hackathon competitions that it runs with universities to get new innovative digital solutions for real-world problems.

Fourie said there are three to four solutions currently in production that came from this initiative that the bank will probably use.

 

Capitec announces fee cuts

By Angelique Arde for Business Day

Capitec is cutting its fees. The bank, which normally announces its fee increases in March, made the announcement a week before new digital bank TymeBank is due to host an investor day, upping the ante in what could be a banking fee price war.

From 1 March, the monthly admin fee on the bank’s one and only account, the Global One account, will decrease from R5.75 to R5. The price of electronic payments on mobile and internet banking will decrease from R1.60/transaction to R1. Debit order fees will decrease from R3.70 to R3.50. The cost of drawing cash at all Pick n Pay, Shoprite, Checkers and Boxer till-points will drop from R1.60 to R1. And the cost of immediate payments has also decreased from R10 to R8.

International and online card purchases, transfers between own accounts and e-mailing statements on mobile and internet banking will remain free.

The bank has increased a few fees: the fee for in-branch transfers and payments will increase from R5.30/transaction to R6. Cash withdrawals from Capitec-branded ATMs will cost R6 per R1,000, while all other bank ATM withdrawal fees will be lowered to R8 per R1,000. Capitec used to charge a flat fee irrespective of the amount withdrawn.

Capitec said in a statement on Tuesday that the bank had experienced its highest single-month uptake to date, with more than 266,000 new clients joining the bank in January 2019.

In addition to low fees, Capitec clients get access to four savings plans, offering from 5.1%-9.25% interest per year,” said Francois Viviers, the bank’s marketing and communications executive.

 

By Roxanne Henderson and Antony Sguazzin for Business Day

The Reserve Bank has written to the National Credit Regulator requesting a probe of loan-origination fees charged by Capitec, according to a person familiar with the matter.

The referral came after the issue was raised in a report by short-seller Viceroy Research in January, said the person, asking not to be identified because the matter is private.

The investigation is ongoing, the person said.

On Tuesday, Capitec shares were trading down 1.9% at R870.89 at 9.05am on the JSE.

Capitec chief financial officer Andre du Plessis said he was unaware of the central bank’s referral, or of an investigation by the Johannesburg-based credit watchdog.

In the report, Viceroy said Capitec’s income was boosted by excessive fees on its multiloan product, which carried a monthly charge for allowing a previously vetted customer to extend their facility by answering some questions.

While Capitec said it terminated the product in 2016 — after rules introduced by the NCR meant it was no longer viable — Viceroy said the lender rebranded it and that Capitec’s methods risk over-indebting consumers.

Capitec denied this, saying Viceroy did not understand how the product or its processes work.

The NCR had previously probed the multiloan facility and was satisfied with the fees and interest charged, Capitec said on February 8.

‘Very active’

Both the Johannesburg-based NCR and Pretoria-based central bank declined to comment.

The central bank monitors lenders for their compliance with rules ranging from their operations and capital levels to staffing and money laundering, with the ability to fine companies or revoke their licenses. The NCR can also administer financial penalties on lenders which violate the National Credit Act, legislation aimed at protecting consumers from becoming over-indebted.

Officials from the central bank and the NCR told MPs in March that many of the allegations made by Viceroy were not new and that not all of them were accurate.

“The Reserve Bank is very active in doing ongoing reviews at all the banks,” said Du Plessis, speaking more broadly on the regulator’s oversight. “If anything bothers them, they actually contact us or ask that we report on something. That happens on an ongoing basis.”

On Friday, Capitec announced it had reached an agreement with Summit Financial Partners, which was challenging the lender in court and before the NCR on behalf of six complainants.

The cases, which mostly centred on Capitec’s now defunct multiloan facility, were withdrawn.

Capitec’s stock has declined 19% this year, more than any of the other lenders on the six-member FTSE/JSE Africa banks index, which is down 5.6%.

By Hanna Ziady for Business Live

Capitec, the lender that indelibly disrupted SA’s banking sector, entered the insurance market with the launch of Capitec Insure on Monday.

It will dip its toes in the water with a funeral plan underwritten by Sanlam-owned Centriq Life Insurance Company.

“We know what our banking clients are paying to other providers and we are coming in well below the competition with more cover,” Francois Viviers, executive of marketing and communications at Capitec, told Business Day on Monday.

The vast majority of the bank’s clients had funeral policies with other providers. It would target these customers initially before launching marketing campaigns, Viviers said.

Capitec, which obtained its banking licence in 2001, now boasts nearly 10-million customers. About 46% of these are primary banking clients, who not only have loans with the bank but make regular deposits into their Capitec accounts, mainly salaries.

It now has 289,000 active credit cards in issue, launching that product at the beginning of 2017 to target wealthier customers. Its credit card product had a book value of R2bn at the end of February — about 4.2% of Capitec’s total loan book.

According to Vitality Life Insurance Review, the funeral insurance market in SA is worth more than $500m in annual premiums. The Financial Services Conduct Authority could not confirm this figure at the time of publication.

Funeral insurance was a “good opportunity” for Capitec, as it had been very lucrative for large life insurers such as MMI and Sanlam, said Renier de Bruyn, investment analyst at Sanlam Private Wealth.

“Margins are high, which means Capitec can charge less and still be profitable,” he said.

There were 15-million funeral insurance policies in circulation covering 19-million adults, Viviers said.

“Based on our research, we estimate the average policy in the market to cover a main life, spouse, two children and one extended family member costs between R175 and R295.

“Capitec provides the equivalent cover at approximately R140 in branch and R124 on our banking app,” he said.

Policies start from R25 a month, through the Capitec app and R40 a month when applying in branch.

Funeral cover ranges from R10,000 to R100,000.

The product would be accessible via the Capitec banking app, where customers could change their cover amounts depending on monthly affordability, Viviers said.

The funeral plan featured cover for up to 21 dependants, including the policyholder.

Other features include a doubling of the funeral payout if a life assured died in an accident and a six-month premium waiver if the policyholder died for the remaining life assureds.

In addition, there was a voluntary policy pause for up to six months, with no premiums payable and no cover.

Capitec hoped to launch other insurance products in the long term, Viviers said.

Also on Monday, international short-selling outfit Viceroy Research published a letter containing questions for Capitec’s audit committee.

These relate to alleged changes in Capitec’s provisioning policy and the nature of internal consolidation.

A scathing Viceroy report in February torpedoed the share price and prompted a back-and-forth debate between Capitec and Viceroy.

Capitec CEO Gerrie Fourie said at the time that the Viceroy report was “riddled with inaccuracies”.

The share price did not react to the Viceroy letter on Monday.

Viceroy not backing down on Capitec report

Shortseller Viceroy Research has insisted the Reserve Bank should not rely on Capitec’s financial statements and should place it into curatorship.

On Monday, the shortseller released its long-awaited statement in response to the Reserve Bank’s statement of support for Capitec in which the Bank assured the market that Capitec was “solvent, well capitalised and had adequate liquidity”.

The Reserve Bank made this statement after Viceroy claimed last week that Capitec was understating losses and on the brink of insolvency.

“We understand that the [Reserve Bank] has not yet performed an adequate regulatory inspection of Capitec and expect they will do so in due course.

“For the moment Viceroy will respond to [the Reserve Bank], limiting themselves to information contained in the most recent Capitec annual report,” Viceroy said.

But sources in the banking sector said the Reserve Bank’s bank supervision department did not rely on annual reports or results. In terms of the Banks Act, all registered banks and representative offices are required to file financial and risk information regularly with the department.

“Monthly BA [Banks Act] reporting takes place using various BA returns for finance and risk, on either 15, 20 or 30 days,” said Jaco van Wyk, head of group finance at FirstRand. “These returns are not public.”

The Reserve Bank does publish the BA900 form, an itemised balance sheet.

The Reserve Bank was “fully aware of the credit-scoring models and the risk targets that we set when we extend credit”, Capitec said.

In its statement, Viceroy said Capitec’s mechanism of underrepresenting losses was to “pretend” that uncollectable loans of at least R10bn were collectable and accruing interest.

Most of these were in longer-term categories stretching up to 84 months, it said.

Using Capitec’s gross cumulative loss curve for 61-to 84-month loans granted in different quarters, Viceroy concluded that losses on these loans were roughly 1.5% a year, a figure which Viceroy described as “astonishingly low”.

But Capitec said only 7.3% of its credit clients qualified for loans longer than 60 months.

“Viceroy infers that it is impossible for the average American credit-card holder to have similar credit risk as the top 7% of Capitec’s clients.

“We have extensive history and sophisticated models to support our results,” the bank said on Monday.

The actual arrears on 84-month loans was 3.1%, not the 1.3% cited by Viceroy.

Capitec also addressed the main issues raised in the initial Viceroy report in more detail on Monday.

Viceroy had not taken into account its conservative write-off policy relative to its peers, nor had it distinguished between consolidated and rescheduled loans, it said.

By Moyagabo Maake and Hanna Ziady for Business Day

On Tuesday morning, a financial research group called Viceroy released a report looking into the business model and practices of South African lender Capitec. It is damning in the extreme, accusing Capitec of “predatory finance” and massively overstating its performance and value. Capitec will collapse, says Viceroy, unless it is placed under curatorship by the authorities. Here’s what you need to know so far.

What is Capitec?

It’s a South African micro-finance provider which does business mainly with low-income South African consumers. It has been garlanded with awards for its innovative practices and high share prices.

What is Viceroy?

Good question, because until a few months ago few people in South Africa had heard of them. Viceroy is a financial research outfit consisting of three people working between New York and Australia. Viceroy is a deliberately low-profile company with a WordPress website, on which it describes itself as “a group of individuals that see the world differently”.

Viceroy started releasing reports on big companies in 2016, but only attracted South African interest after publishing a report exposing Steinhoff a day after the company admitted accounting irregularities. Now Viceroy has gone in guns blazing for Capitec.

So they’re like a financial version of activist group Anonymous?

That might be pushing it, because there is speculation that Viceroy also shorts stocks on the basis of its information. There is definitely a financial motive to their research as well as an altruistic dimension. Earlier this month, they told Fin24 that they had made donations to South African charities after the Steinhoff exposure, and claimed: “Our ethos is protecting consumers, investors and integrity by making sure all the facts are known.”

What does Viceroy have to say about Capitec?

Nothing flattering. In a 33-page report released on Tuesday morning, Viceroy says that its analysis of Capitec’s reports, study of legal papers and interviews carried out with former Capitec clients and employees reveals a South African enterprise engaging in “predatory finance”.

Capitec is preying upon low-income South Africans, Viceroy suggests, by offering instantly accessible credit via ATMs to people. Customers can be charged interest rates of 155% on a single loan. Viceroy has also obtained affidavits from clients who say that when their first loans with Capitec became too big, Capitec granted them further loans – which clients could not afford – to repay the first loan.

In effect, Viceroy charges that Capitec is acting like a snazzier version of a backstreet loan shark.

Why would Capitec offer loans to people who can’t afford them?

That’s the question which cuts to the heart of the micro-finance industry in South Africa. In Capitec’s case, Viceroy claims that the lender took home more than 20% of its 2017 earnings in loan fees. Viceroy says that Capitec also concealed the extent of its unpaid loans by constantly issuing new loans to refinance the old ones.

Are Viceroy’s claims true?

That remains to be seen. Its Steinhoff report was “hailed as highly professional and accurate”, according to Moneyweb.

The South African Reserve Bank, however, told Fin24 on Tuesday morning that according to the information SARB has at its disposal, Capitec is “solvent, well capitalised and has adequate liquidity”.

What does Capitec have to say for itself?

Its sole public statement on the matter at time of writing had been via social media. Capitec tweeted on Tuesday morning that it had “taken note” of the report. “We are currently in the process of investigating the report in detail and will respond immediately,” it said.

In a hastily sent-off memo to shareholders, however, Capitec was conceding nothing. It described the Viceroy report as “filled with factual errors, material omissions in respect of legal proceedings against Capitec and opinions that are not supported by accurate information”.

By Rebecca Davis for The Daily Maverick

Follow us on social media: 

               

View our magazine archives: 

                       


My Office News Ⓒ 2017 - Designed by A Collective


SUBSCRIBE TO OUR NEWSLETTER
Top