Capitec CEO: Moody's rating inaccurate

Moody's cut the financial strength rating of the lender to D from D+ on Friday.

Moody's cut the financial strength rating of the lender to D from D+. Picture: Capitec

JOHANNESBURG - In defence of the downgraded credit rating Moody's has given Capitec, CEO Gerrie Fourie revealed that the institution only had a six percent rate of loans going bad.

Moody's cut the financial strength rating of the lender to D from D+ on Friday and deposit ratings to Ba2/NP from Baa3/P-, citing concerns about its exposure to risky consumer lending.

Worries about consumer lending in Africa's most developed economy are growing after the South African Reserve Bank launched a $1.6 billion rescue of African Bank Investments Limited (Abil) last week.

Speaking to Talk Radio 702's John Robbie on Monday, Fourie addressed the growing concern of financial institutions giving out loans to people who could not afford them.

"Given our history, the banks are not focusing on people with a housing need of about R500,000 and that's where the big need is. If you go and look at the National Credit Regulator's stats, you can see a quarter mortgages granted at about 30-34 billion and only 2.3 billion have been granted to R250,000 and less. So it's depending on the need, we all know that if credit is being used responsibly, it has a very positive effect."

Moody's believes that Capitec has similar lending patterns to Abil - an allegation that Capitec has waved off.

The decision is being disputed by both Capitec and the Reserve Bank.

"As you can see, Moody's is not happy with the decision that the Reserve Bank has taken. I think what has been a positive for us, is that we had a talk with the Reserve Bank on Friday afternoon when the news came out, and they released a media statement on Saturday morning supporting us."

Capitec's financial director meanwhile called the downgrade "unfair and inappropriate" in a statement issued on Saturday.

"Capitec Bank does not agree with the downgrade and would like to place on record that the business is healthy, growing according to plan, and its loan book is performing within its risk appetite," said Andre du Plessis, Capitec Bank's financial director.

Capitec said that unlike Abil, which depends almost exclusively on high-margin but risky unsecured loans, it has diverse revenue streams that include more than five million banking clients.

About 2.2 million of these clients receive their salaries through the bank, giving the lender insight into their cash flow when considering whether to make loans to them, it said.

Listen to John Robbie's full interview wi

Listen to John Robbie's full interview with Fourie: