Share

Sarb defends Capitec after downgrade

Cape Town - Ratings agency Moody’s Investors Service (Moody's) has downgraded Capitec Bank Limited [JSE:CPI] (Capitec) by two notches, and placed it on review for a further downgrade because of a lower likelihood of support from the SA Reserve Bank following the African Bank fiasco.

Moody's cited a lower likelihood for sovereign systemic support based on decisions recently taken in relation to African Bank Limited [JSE:ABL] (African Bank), and heightened concerns regarding the risk inherent in Capitec’s consumer lending focus as reasons for the downgrade.

The SA Reserve Bank said in a statement following the downgrade that while the Bank respects the independent opinion of rating agencies, it does not agree with the rationale given in taking this step.

The Bank said the approach taken by the Sarb to any resolution to address systemic risk will always be based on the circumstances and merits of the particular prevailing situation.

READ: Rescue plan for African Bank

The Bank also said Moody’s incorrectly justifies the rating action on the basis that Capitec follows a similar business model to African Bank. "The two lenders do not share the same business model.

"While both are active in the unsecured segment of the market, Capitec follows a very conservative approach to risk and prudent provisioning practices, and considerable diversification has been taking place in a steady manner in product, client and revenue streams," the Bank said.

The Sarb said in the case of African Bank substantial support was provided. "Bond holders and wholesale depositors are taking a 10% haircut, which is generally regarded as being very positive given that the trades following the announcement of African Bank's results were taking place at around 40% of par.

"Moreover, all retail depositors were kept whole and are able to access their accounts fully," the Sarb said.

The Sarb said the South African banking sector remains healthy and robust, and Capitec’s publicly available data on the BA900 returns, which are submitted monthly and published on the Sarb’s website, indicate the continued good growth that the bank is experiencing.

ALSO READ:
African Bank too inclusive to fail
Nene: Bank sector healthy, no sign of Abil impact

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Voting Booth
Do you think corruption-accused National Assembly Speaker Nosiviwe Mapisa-Nqakula will survive a motion of no confidence against her?
Please select an option Oops! Something went wrong, please try again later.
Results
No, her days are numbered
42% - 379 votes
Yes, the ANC caucus will protect her
58% - 523 votes
Vote
Rand - Dollar
18.93
-0.2%
Rand - Pound
23.90
-0.0%
Rand - Euro
20.43
+0.2%
Rand - Aus dollar
12.34
+0.1%
Rand - Yen
0.13
-0.1%
Platinum
907.85
+1.2%
Palladium
1,012.25
+1.1%
Gold
2,218.87
+1.1%
Silver
24.85
+0.8%
Brent Crude
86.09
-0.2%
Top 40
68,346
+1.0%
All Share
74,536
+0.8%
Resource 10
57,251
+2.8%
Industrial 25
103,936
+0.6%
Financial 15
16,502
-0.1%
All JSE data delayed by at least 15 minutes Iress logo
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE