Wrap Text
Sens Announcement On Viceroy Report Of 30 January 2018
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")
SENS ANNOUNCEMENT ON VICEROY REPORT OF 30 JANUARY 2018
The structure of this SENS announcement is to summarise our
responses to each allegation in the 30 January 2018 Viceroy
Research Report (“Viceroy” or “the Report”). The 5 February
2018 allegations have been addressed on the same day. We
incorporated our previous SENS announcements on specific
issues by reference, where appropriate.
CAPITEC STATEMENT
• A Viceroy Research Report was published publicly on 30
January 2018 at 10:00 and leaked to at least one
journalist the previous day
• We believe we had to deal with this report as well as the
Benguela Global Fund Managers’ letter, also leaked to the
press, by providing factual information as necessary
• We decided to publicly respond to these allegations and
viewpoints on SENS announcements so that everyone in the
market has access to all our responses
• We believe with this final SENS announcement, we have
responded in detail to all concerns and allegations
levelled at Capitec
• As stated in a previous SENS announcement, we believe
that there will be further attacks by Viceroy in an
attempt to substantiate their false claims
• Shareholders are advised to use caution when reacting to
such reports
CONCLUSIONS REACHED IN THIS REPORT
• Capitec’s loans and advances are NOT misrepresented, as
rescheduled loans are not treated as new loan sales
• NO origination/initiation fees are charged on rescheduled
loans as NO new credit is advanced
• Rescheduling is a formal amendment to an existing loan
contract and rescheduled loans are therefore NOT included
in loan sales as NO new credit is granted
• Origination fees are only charged on new loans advanced
• When an existing loan is consolidated, loan sales only
contain the amount of the new credit
• Initiation fees comply with the National Credit Act
• We DO NOT advance loans to clients who are in arrears
with any of their Capitec instalments
• The Report does not consider Capitec’s conservative
write-off policy and approach to provisions when
analysing our arrear balances. Comparing Capitec to other
credit providers with different loan book granting, risk
appetite and write-off strategies results in misleading
conclusions. Based on detailed explanations provided in
our previous SENS announcement on 5 February 2018, NO
adjustment to the net loan book is therefore required
1. BACKGROUND
• Capitec Bank
Viceroy states that Capitec’s banking services are
aimed at the low income market in South Africa. As
noted on page 35 of the 2017 Integrated Annual Report
(“IAR”) “Demographic segmentation, especially income
segmentation, is not used to target a specific type of
client. The focus is on providing essential banking to
all clients, regardless of income level.”
Capitec is a fully-fledged retail bank allowing
clients to save, transact and borrow. [We will use the
February 2017 figures in this report, unless otherwise
stated, to align with the Viceroy Report.] The bank
had 8.6 million active clients at 28 February 2017. We
have diversified income streams with net transaction
fee income contributing 37% of our total net income.
Net transaction fees (non-lending income) covers 72%
of our operating expenses. 1.4 million clients borrow
from the bank with 53% of the balance sheet assets
exposed to retail unsecured loans.
• History of micro lending in South Africa
Viceroy completely disregards the beneficial role that
the unsecured credit market plays in South Africa. The
terminology such as ‘predatory finance’, ‘loan
sharks’, clients referred to as ‘victims’ is
deliberately inflammatory and derogatory.
One example of the role of unsecured lending is that a
large section of the South African population live in
dwellings on communal land and townships with no title
deeds. These people can only build or improve their
houses by accessing unsecured finance. Supporting this
assertion is the fact that there are only 1.7 million
mortgages in South Africa. More than three-quarters of
South Africans thus live in housing that is not backed
by secured housing finance. The vast majority of South
Africans do not have access to traditional secured
lending to finance assets such as vehicles older than
five years and white goods.
The Report contains the reference “carefully concealed
high interest rates, hidden administrative fees,
unannounced penalties for non-repayment, garnishee
orders that could tap into a client’s income in order
to repay a debt, and grossly exorbitant lawyer fees
that were incurred for any trivial contract
infraction”. Our approach to collections focuses on
contacting clients and, as a last resort, follow legal
process.
• The Board of Directors
Viceroy alleges that ‘Capitec’s board is largely and
unsurprisingly made up of several executives from both
PSG and Steinhoff’.
The statement above is false as there is no Steinhoff
executive (or director) that serves on Capitec’s
board. Piet Mouton is the only PSG executive that
serves on Capitec’s board. Chris Otto, a non-executive
director of PSG, has served on Capitec’s board as a
non-executive director since the company’s inception.
Markus Jooste served on Capitec’s board from 2011 to
2012 when he retired from the board by mutual
agreement due to a possible conflict of interest
created by Steinhoff’s entry into the financial
services industry when they bought the JD Group. The
Capitec board members are listed in the 2017 IAR on
pages 42-45.
There is NO business relationship between the members
of management of Capitec and Steinhoff.
Related party transactions between Capitec and PSG are
detailed in the 2017 IAR as note 31 on page 167. These
transactions are at arm’s length and limited to PSG
Capital acting as Capitec’s sponsor for the JSE and
broker for employee share trust transactions. The
amounts concerned are immaterial.
• Breakneck insider sales
Capitec has grown significantly since inception. This
has resulted in total assets at 28 February 2017 of
R73.4 billion (2004: R510 million) and equity of R16.1
billion (2004: R428 million). The Rand value of
shareholding of individuals who started the business
has naturally increased along with the growth in the
bank.
As noted in the Report, directors and management sell
shares from time to time to diversify their investment
portfolios. Founding directors of Capitec, which
include Riaan Stassen (non-executive chairman),
Michiel le Roux (non-executive director and previous
non-executive chairman), Gerrie Fourie (CEO) and Andre
du Plessis (CFO), however, all continue to hold
significant interests in Capitec. Their combined
shareholding in Capitec today amounts to 13% of
Capitec’s issued capital.
• Jean Pierre Verster
Jean Pierre Verster is an independent non-executive
director and chairman of the audit committee. His
appointment to the board of Capitec in 2015 was
subject thereto, and as an absolute condition, that he
would not trade in Capitec securities in his role as
asset manager or have influence over trading decisions
on Capitec shares. This was confirmed publicly and
verified by his previous and current employer.
2. KICKING THE CAN – RECEIVABLE OR NOT RECEIVABLE
• The Report concludes that our bad debt equates to over
42% of our gross collectible principal per the loan
book’s maturity schedule.
The header above states that we write off 42% of the
principal of loans receivable within the next year.
The following flaws exist with this conclusion:
• The Report uses the written-off balance (numerator)
including fees and interest up to the point of
write-off, but the capital due in the next year
(denominator), excludes fees and interest for the
following year.
• The write-off balance (numerator) includes all the
capital due in the following and all future years,
whereas the denominator excludes all capital due
beyond twelve months.
This is demonstrated by way of an example:
Assuming one loan had 30% of capital due in the
following year, and the loan was written-off in the
subsequent year, then the write-off percentage as
calculated by Viceroy would be 100/30, or 333%.
This incorrect calculation misleads the reader as to
the asset quality of the bank.
A representative calculation using disclosed
financial information is to take write-offs - which
includes all capital and income up to the point of
write-off (numerator R5.447 billion) and divide that
over total outstanding capital plus loan income for
the following year (denominator R40.891 billion plus
R14.362 billion). The answer equates to 9.8%, which
is conservative, as some write-offs originate from
sales in the following year. This also proves that
the previous year’s provision as at 28 February 2016
of 12.5% was more than adequate.
The reference to ‘massive write-off’s’ on page 9 of
the Report is refuted by the 9.8% default rate
above.
• Irreconcilable loan book
The first SENS announcement released on 5 February
2018 deals with this in detail.
• Rolling of existing unpaid loans by issuing new loans
while collecting zero principal
This has been dealt with in the first SENS
announcement released on Monday 5 February 2018. We
reiterate that we do not grant credit or facilities to
any client if any Capitec loans or facilities are in
arrears. We are comfortable that our average book
growth of 10% per annum in the last three years
supports our assertion of a healthy book with
conservative granting appetite. For reference, average
inflation over the past 3 years was 5.4%.
• Rescheduled loans
This has been dealt with in the written response to
Benguela Global Fund Managers as noted in the SENS
announcement of 1 February 2018. We reiterate that we
do not charge initiation fees on rescheduled loans and
do not include rescheduled loans in our loan sales
calculations. The full report is available on our
website at www.capitecbank.co.za/investor-relations.
• The Report states that Viceroy finds it is literally
unbelievable that a bank would be able to increase its
balance sheet by more than half and only incur a 1
percentage point increase in its non-performing loans
in that environment, much less an unsecured lender.
Capitec’s loan book grew from R18.4 billion (February
2012) to R30.7 billion (February 2013) which is an
increase of 67%. In Rand terms, impaired advances went
from R932 million (February 2012) to R1.777 billion
(February 2013) which is a 91% increase year-on-year.
Viceroy creates an expectation with readers that the
arrears rates should increase with the growth in the
loan book. If arrears balances increase in line with
book growth percentages, the arrears rates would
remain static.
It appears that the reference to the 1 percentage
point increase was stated in a manner to mislead the
reader. Viceroy directly states that “Capitec’s low
arrears cannot be explained any other way: the company
must be refinancing its own delinquencies” Viceroy
does not seem to understand the simple explanation
that Capitec’s arrears are low due to the strict
write-off policy.
• 61 to 84 month loan products
On page 13, 4th paragraph the Report says “Incredibly
and suspiciously, 2013 was the first year Capitec
introduced its 84 month loans, which instantly became
its most popular loan product, accounting for a third
of its loan book. Given the sudden popularity of the
61-84 month loan product, it would be expected that
these loans would become a larger part of the Capitec
loan book over time. This was not the case.” Viceroy
uses language such as “incredibly” and “suspiciously”
to describe the logical and prudent actions of a
responsible credit provider to limit long-term credit
to only the lowest risk clients. Only 7.3% of
Capitec’s credit clients currently qualify for loans
in excess of 60 months (3.6% qualify for 84 month
loans).
A further important point to understand is that the
book growth accelerates significantly, even at stable
loan sales levels, when extending the product term.
This trend reverses as the book matures. On launching
an 84-month product for example, clients repay 1/84th
of the amount advanced in the first month and the net
book grows by the differential of 83/84th of loan
sales. In month 2, repayments increase to 2/84th and
book growth continues, but at a slightly reduced rate.
If loan sales remain stable over the next 84 months,
the value of capital repaid will steadily increase up
to the point in month 84, when capital repayments
match sales and book growth will cease. The book
growth during the 2014 and 2015 financial years,
despite the decreasing and flat loan sales,
demonstrates this effect.
There is nothing sinister or suspicious in the
performance of the book. The flattening of the book
growth was in line with our expectations and
demonstrates that the repayments on the products are
healthy. As disclosed on pages 29 and 30 of the 2017
IAR, the product is performing in line with our
estimates.
3. CAPITEC’S CREDIT FACILITY ORIGINATION FEE
• Capitec credit facility’s origination fee resembles
loan shark tactics
Rationale for multi-loan product
The market norm when we started the bank was a charge
of 30% per month for 1-month loans. We initially
reduced the pricing to 21.5% and later to 15%. The
process to grant credit to clients on a monthly basis
was time consuming and highly inefficient, costing
them time and transportation costs to apply in branch
for each loan. The multi-loan product was developed to
provide the client with an accessible solution
(branch, ATM, cellphone) and we passed through the
benefits of the more efficient process by reducing
prices.
Discontinuation of multi-loan and starting of facility
The multi-loan was not prohibited. Capitec ceased
offering the multi-loan product because the
requirements of Affordability Assessment Regulations,
made under the NCA, which rendered the product
uneconomical.
The initiation fee on the credit facility is
calculated differently to that of the multi-loan.
In the example on page 17 of the Report, Viceroy
assumes that the total initiation fee of 155% of the
facility amount, which would amount to R7,729.20. This
is incorrect as the actual maximum initiation fee
could only be R644.10 or 12.9% of the facility amount.
The initiation fee is not repeated once the cumulative
drawdowns reach the maximum facility amount. All
Capitec loan and facility pricing conforms to the NCA.
It is common for banks to charge clients monthly fees
for overdrafts, facilities and credit cards
irrespective of use. The charge of R35 per month is in
line with other credit providers and well below the
NCA caps.
Calculation errors on origination fees made by
Viceroy:
• Percentage of origination fees to total revenue
On page 15 of the Report, Viceroy makes the
following incorrect statement “While competitors’
origination fees are immaterial (<1% of earnings),
Capitec’s origination fees contributed + 21% of
earnings in 2017”. This statement is misleading for
the following reasons:
• The <1% of earnings probably applies to larger
banks where mortgages make up a large proportion
of their loan book and income. On these products,
the origination fees are charged once in 20 years.
Viceroy has selectively changed the comparison for
this purpose to that of secured credit providers
only. Elsewhere they compare us against unsecured
credit providers
• They compare pre-tax origination fees with post-
tax profit, net of operating costs and tax
• Origination fees comprise 3.8% of Capitec’s total
revenue
• Number of credit facilities and facility loan book
size
Viceroy’s estimate is incorrect that 87% of the total
number of loans issued by Capitec are credit
facilities. Furthermore, this statistic is pointless
as it is similar to comparing credit card
swipes/transactions to mortgage advances.
Furthermore on page 24 of the Report, Viceroy makes
the misleading statement that “roughly 87% of
Capitec’s loan book is comprised of the 12-month
credit facilities”. In our 2017 IAR (page 26), we
disclose that the credit facility makes up 0.3% of the
total gross loan book.
• Revenue earned from origination fees on multi-loan and
credit facility
On page 21 of the Report there is an incorrect
estimate that our origination fees on the multi-loan
product for the 2010 financial year amounted to R720
million. On page 16 of the 2010 IAR, we show that the
total revenue on all 1-month loan products including
the multi-loan, was R361 million for that year. In
2017, the initiation fees on credit facilities were
R97 million and are included in interest received. The
estimates regarding the origination fee income of the
multi-loan product on page 21 of the Report
demonstrates that Viceroy purposely draws incorrect
conclusions regarding the nature and revenue of the
product.
• Conclusion on origination fees
We do not agree with the statement that there is a
legal risk on these products. Viceroy incorrectly
quantifies the size of the book and the revenue from
these products. The statement that our loan
origination fees are a major boost to our returns has
been incorrectly calculated and creates a false
narrative. The Report states that we charge excessive
and illegal interest rates on our credit facility,
disguised as initiation fees. This is incorrect.
Viceroy incorrectly concluded that Capitec’s pricing
was excessive and illegal based on their incorrect
understanding of the product in the example above. The
NCR reviewed the product in detail and concluded their
satisfaction with the product, including the fees and
interest charged.
4. LEGAL PROCEEDINGS
Viceroy accuses Capitec of advancing excessive credit,
reckless lending and rescheduling existing loans in order
to disguise delinquencies and, in the process, earning
fees to which it is not entitled.
In so doing, Viceroy relies on a press report (figure 11,
p 10 of the Viceroy report), selective extracts from
legal proceedings against Capitec (figures 12 and 13, p
11; figures 14 to 17, pp 11 - 12; figure 25, p 16;
figures 28 to 30, p 19; figure 32, p 20; figure 33, p 21
and figure 35, p 22) and social media (figure 23, p 15).
At least one extract (figure 33, p 21) has no relevance
whatsoever to the conclusions and inferences drawn by
Viceroy in its report. In respect of the other three
court cases referred to (a) the allegations by
complainants, in the selective extracts relied upon by
Viceroy, do not support the conclusions and inferences
drawn therefrom; (b) Viceroy failed to disclose that
Capitec has filed extensive answering papers in those
court cases; and (c) Viceroy failed to disclose Capitec’s
answers in those papers to the allegations (in the
extracts relied upon by Viceroy). Viceroy also did not
take into account nor divulge (except in respect of an
unnamed case, which allegedly will be heard in March
2018) in its report that none of the three cases from
which it had quoted have been heard and pronounced upon
by the court. Moreover, Viceroy did not see it fit to
ask Capitec for its comments on any of the allegations as
quoted, and its conclusions and inferences drawn
therefrom.
As a result, Viceroy ignored the most basic tenet of any
objective and impartial research, namely to present
balanced and even-handed findings. Nonetheless, Viceroy
saw it fit to opine that one of the court cases against
Capitec will trigger a class action against Capitec
resulting in a massive liability.
Capitec refrains from answering the allegations in the
extracts relied upon by Viceroy, and the conclusions and
inferences drawn therefrom by Viceroy. The reason is
that it will be neither practical nor appropriate for
Capitec to attempt to summarise and contextualise the
content of voluminous court papers. Such papers are
however available on request from Capitec’s legal
department.
5. CAPITEC’S IMPOSSIBLY LOW ARREARS
• Accusation that the loan book is overstated by R11
billion
The first SENS announcement released on 5 February
2018 deals with this in detail. Furthermore, a
comprehensive review was done and released on Friday 2
February 2018 on rescheduling of loans and the
treatment of provisions. This review was done for
Benguela Global Fund Managers and is available on our
website www.capitecbank.co.za/investor-relations
• Difference in arrears performance between Capitec and
other credit providers
• Credit granting
The allegation that Capitec granted multi loans
without a credit risk or affordability assessment is
untrue.
• Viceroy falsely alleges that Capitec grants credit
to clients that are in arrears with their Capitec
loans.
The statement is false. Capitec does not issue loans
to clients that are in arrears at Capitec. Staff do
not have the discretion to override this rule.
• Viceroy falsely alleges that Capitec disregards the
instalments of new and existing debt in its
affordability calculations.
The statement is false. The Capitec system always
takes into account instalments of any internal or
external credit agreements. Instalments for all
Capitec loans and all credit listed on the credit
bureau are taken into account in the affordability
assessment. The consultants also review the bank
statements to identify new debt (inflows from credit
providers or instalments) that is not yet on the
credit bureau. Where clients settle internal or
external debt with new debt, the system always
settles the old debt directly to the relevant loan
account at the relevant credit provider. Capitec is,
therefore, certain about the settlement of the old
debt. The system consequently disregards the
instalments on debt directly settled by the system
during the loan granting process in the
affordability calculation, as no additional
instalments will be due on these loans. The new
debt is taken into account to ensure the client can
afford the monthly repayment.
• Granting credit to clients that have existing debt
During the loan application process, Capitec
presents the maximum loan amount, maximum term and
maximum instalment to the client. Within those
constraints, the client may select any combination
that suits the client best.
Capitec encourages clients to take up credit for
shorter periods of time and smaller amounts, through
a pricing model that discounts the interest rate in
instances where clients select a term that is
shorter than the maximum that they qualify for. This
is due to the manner in which the pricing for risk
model reacts to the lower default rates observed for
such clients.
There are various circumstances where clients may
return later to take up additional credit,
including:
• Instances where clients use credit to fund
projects such as home improvements or studies
(self and/or for their children) and the funds are
needed over a period of time as the project or
studies progresses.
• Clients may become aware of the amount of credit
that they qualify for and return when they
identify opportunities to use the funds, such as
identifying a special offer on white goods or a
vehicle at a low price.
Take an example where a client qualifies for a
maximum term of 63 months, a maximum instalment of
R3 000 per month, leading to a maximum loan amount
of R101 000. Should the client decide to buy an
item for R20 000 and selects to repay the debt
over 24 months, the instalment would be about
R1 000 per month.
Should the above client later come across an
opportunity to buy a second hand vehicle for
R75 000, he will only be able to afford a loan of
R65 000, as the R1 000 instalment reduced the
amount available for a second loan to R2 000.
Clients find this difficult to accept, as he
qualified for more than R100 000, but the
conservative and sensible choice to repay the
first item over a short period, now limits the
client to total credit of only R85 000. The client
could miss the opportunity to buy the vehicle. The
client could go to another credit provider, borrow
R95 000, settle our loan of R20 000 and buy the
vehicle with the remaining R75 000.
Capitec offers the client exactly the same
solution, on condition that he meets our credit
risk and affordability requirements. We allow the
client, in this case, to consolidate the R20 000
existing loan to a new loan over 60 months. The
total credit over 60 months will therefore be R95
000 (initial R20 000 plus R75 000 new credit).
There will be one monthly fee and the initiation
fee would only be charged on the additional R75
000. The client’s total instalments amount to
R2 800 and we are comfortable that the client can
afford the debt. Refer to the 5 February 2018 SENS
announcement for more examples.
Our scoring models do react to instances where
clients repeatedly take up credit and where a
client’s debt to income ratio becomes too high. In
such instances we limit the term and amount of
credit offered to clients or we decline the
application for credit.
There is nothing sinister or reckless in this
approach and the bold statements in the Viceroy
report that Capitec operates recklessly, rolls
debt and hides defaults are completely unfounded.
When Capitec reports loan sales, we report the net
amount of debt issued and we exclude the
consolidation loan from loan sales. Refer to the 5
February 2018 SENS announcement for examples.
• Our full credit risk management process, including
credit granting is discussed in detail on pages 58
to 63 of our 2017 IAR. We believe that our
analytics gathered over the last 17 years is of
high quality. This is further enhanced with the
information that we obtain from our banking
clients.
• Viceroy ignores logic in drawing conclusions regarding
the impact of pricing on credit performance
Viceroy shows that another bank (bank one) sometimes
has lower pricing than Capitec, but that another
credit provider is substantially more expensive. They
provide no pricing for a second bank and no credit
performance for bank one. From the above they conclude
that Capitec should perform similar to competitors
(bank one) while our analytics based on credit bureau
information show that Capitec is less expensive and
performs better due to it being more conservative. We
have analysed the pricing presented by Viceroy and it
appears that this is outdated and there are
calculation errors in some of the information.
In our experience, the affordability computation is
more critical in order to ensure that clients are not
over indebted. Capitec has always maintained
conservative buffers in its living expense
calculations and this is an important reason why
Capitec has outperformed many competitors from a
credit risk perspective. Viceroy appears not to have
attempted to understand how the different credit
providers perform their affordability computations.
Consequently we do not believe they are sufficiently
informed to express an opinion regarding the
operational processes of the various credit providers.
6. STATE OF THE MARKET
• Current financial stability assessment by the central
bank
On page 28 of the Report, Viceroy stated that they
believe the projected appetite for the market for
‘microfinance’ is drastically being overestimated.
Capitec has continuously reduced its appetite for
credit in the current economic and political climate.
This has been communicated formally in integrated
annual reports, interim results releases and investor
presentations. Gross loans and advances for the 2017
financial year grew by 10%, compared to the 13% growth
in 2016 and 8% in 2015. This is nothing new and is
publicly available.
Capitec monitors credit risk performance on a daily,
weekly and monthly basis. Whenever we identify changes
and trends, we analyse the cause thereof and take this
into account by adjusting our credit scoring and
provisioning models as often as needed. As an example,
we identified in the beginning of 2016 that small
employers were starting to pay staff (our clients)
late, which affected our clients’ repayment
performance. We adjusted our credit offer to those
clients accordingly which affected our clients’
repayment performance. This can be seen in the
reduction in loan sales in the shorter duration
products during 2017.
The fact that Capitec has 8.6 million active clients,
allows us to analyse the financial health of the
client and identify and monitor trends. We use this to
inform and support our credit granting appetite and
identify risk areas and opportunities.
• Deposit Insurance Scheme (DIS)
The Report states that Capitec has a DIS funding
obligation of R2.402 billion that will place ‘further
strain on its cash reserves’. The conclusions arrived
at by Viceroy are incorrect based on the following
considerations:
• Based on the proposed ‘covered deposits’ of up to
R100 000 per client per bank, a significant
proportion of Capitec’s deposits will not be covered
and will not attract a funding obligation.
• The funding obligation of 5% per the Report is
incorrect and is still in the process of being
finalised.
• The insurance fee is unknown and will differ from
the funding requirement. The estimate regarding the
impact on Capitec’s book value is speculative.
• The R2.402 billion is inaccurate. However, this
still remains insignificant compared to Capitec’s
surplus cash reserves of R26.5 billion as disclosed
in our 2017 IAR on page 22 and will have no impact
on our loan book growth.
• Capitec retains a very conservative liquidity
policy, which resulted in a Basel Liquidity Coverage
Ratio of 1187% at 30 November 2017, way in excess of
the 100% prescribed.
SARB and National Treasury are in a process to submit
a formal public proposal for a DIS. This process has
yet to be completed. The SARB paper published in May
2017 has undergone numerous iterations.
We have calculated the impact based on preliminary
discussions with SARB and National Treasury. We
confirm the results are significantly less than
alleged by Viceroy.
7. NUMBER SKIPPED
The Report jumps from section 6 to 8, neglecting a
mysterious paragraph 7.
8. IMPOSSIBLE COST STRUCTURE
• Capitec uses a modern Microsoft Windows based system
with carefully designed workflow that guides and
supports branch staff through all client interactions.
Staff are able to focus on client service instead of
processes that involve filling out, capturing and
reconciling forms. Branch support is fully
centralised, which means that branches have no back
office and all branch staff, including branch
managers, are client facing. Branch staff have no
credit granting discretion and all exceptions are
centrally managed and monitored by a central
specialist team.
• One example in which the centralised system helps to
manage risk is the manner in which we compare loan
applicants’ biometrics (finger prints) to the
Department of Home Affairs database. We do this to
decrease application fraud.
• Capitec does not offer business banking and
consequently there is no need for specialists to
analyse balance sheets and income statements and
assess credit risks for businesses. All of the above
facts are readily available in our IAR and are well
known to investors and clients (e.g. 2017 IAR page
36).
• The report states that a Capitec branch manager earns
R13,219 per month. The actual figure is R22,000 per
month.
• The conclusion that Viceroy reaches on page 33 in the
8th paragraph regarding staff quality is untrue. The
numerous service quality awards that Capitec’s staff
have received such as Ask Africa and Orange, as well
as the market share that Capitec was able to obtain in
a fairly short period supports the assertion that
Capitec’s staff are well-trained, highly motivated and
very client service oriented. The staff profile is
young and dynamic and the assessment criteria for
selection of new staff is strict.
9. CHANNEL CHECKS
In the February 2017 financial year, our employee
turnover was 14.8% versus a financial industry average of
20.5%.
We have a specialist team that responds and follows up on
social media interactions.
8 February 2018
Stellenbosch
Sponsor: PSG Capital
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