Capitec Bank says it has a solid middle-class customer profile. Picture: WALDO SWIEGERS
Capitec Bank says it has a solid middle-class customer profile. Picture: WALDO SWIEGERS

Capitec Bank has come out in defence of its business fundamentals in the wake of a share plunge of 44% since Friday.

Its share price has weakened from R1,200 on Friday, closing at R682.50 on Thursday, but had fallen to a low of R539.80 earlier in the day.

Analysts say the bank faces the same risk and exposure to the weak SA economy as its peers and other SA consumer stocks that have plunged in the wake of the spread of the novel coronavirus and global economic strain.

Since the close of markets on Friday, First Rand’s share price has fallen by 31%, Standard Bank 25% and Absa 32% while the banking index has fallen 31.4%. But the index is down 46.61% since January.

However, Capitec’s share price dropped as much as 28% on Wednesday, leading to concern about the single dramatic fall with the price continuing to plummet on Thursday morning.

Capitec said in a statement that international traders motivated by the continued weakening of the rand had sold the bank’s shares on Wednesday, leading to a drop in price.

As the Capitec share price dropped, algorithms used by professional traders prompted the automatic disposal of the shares, it said.

Analyst at Avior Capital Warwick Bam said a forced sale was not “unusual in a market desperate for liquidity”.

But such a sale led to “unusual share price movements”. 

He said despite the sudden fall in the share price, Capitec was not any weaker than other banks and faced the same constrained SA economy. “There are no unusual risks specific to Capitec, relative to the banking sector.”  

Nolwandle Mthombeni, an investment analyst at Mergence, said despite its dramatic drop, “there’s no news flow that would warrant specifically such a dramatic fall”.

She said Capitec “is not unique [compared with] any other SA consumer-facing stock and other banks, which are subject to the same macroeconomic risks”.

Capitec’s large unsecured loan book has at times spooked investors after the failure of African Bank in 2014, which collapsed under the weight of bad debts and unsecured loans.

But Capitec explained in a statement to investors that only 9% of its customers have loans and a growing proportion of its clients are middle-class customers.

Of its 12.6-million retail customers, 1.1-million are credit customers. Transaction fees and funeral insurance sales equal 91% of its operating expenses.

Capitec stated that 81% of credit it had granted since August was to clients with a gross salary of over R10,000 a month and 47% to clients with a monthly gross salary of over R20,000.

It said headline earnings per share for the year ended February 29 were still expected to increase by 18%-21%, as it had indicated  earlier this month.

Correction: March 20 2020

An earlier version of this article incorrectly reffered to the FNB share price when in fact it should have been the First Rand share price. 

childk@businesslive.co.za