(Bloomberg) -- Capitec Bank Holdings Ltd. plunged the most on record after short-seller Viceroy Research said the lender may be concealing losses by refinancing loans that customers were unable to repay.
Shares of the Stellenbosch, South Africa-based lender declined as much as 25 percent in Johannesburg, dragging the benchmark index to its biggest intraday drop in 14 months. PSG Group Ltd., the bank's biggest shareholder, fell the most in more than 13 years. Capitec Chief Financial Officer Andre du Plessis said the allegations by Viceroy, which wrote a damning report about accounting irregularities at Steinhoff International Holdings NV, are unfounded.
Capitec, whose customers are mainly low- and middle-income households, may have to write down its loan book by 11 billion rand ($920 million) -- equivalent to 14 percent of the bank's assets -- to “more accurately represent delinquencies and risk,” the Viceroy report said. Capitec said it isn't planning on increasing its provisions for impairments and isn't about to announce any accounting irregularities.
“They basically labeled Capitec as a loan shark, with massively understated defaults masquerading as a community micro finance provider,” Michele Santangelo, a money manager at Independent Securities, said by phone. “None of the analysts who cover Capitec or PSG have even pulled any of these or seen any of these red flags, so it's going to be interesting to go through the report in more detail and see if everything can be substantiated.”
Capitec dropped as low as 705 rand, before trading 17 percent lower at 780 rand by 12:10 p.m., headed for the weakest close since June. PSG fell as much as 24 percent, before paring the loss to 14 percent, while an index of South African banking stocks was 4.1 percent lower, set for the biggest three-day retreat since December 2015.
Read more about the Viceroy report on Capitec here
“The interesting part is that the other shares that the market suspected were targets of Viceroy, like Aspen and Resilient, are bouncing back strongly, because the market's seeing that it's not these guys, it's someone else,” said Peter Takaendesa, a money manager at Mergence Investment Managers in Cape Town.
Resilient REIT Ltd. rose as much 14 percent, before trading 2.8 percent higher. Greenbay Properties Ltd. was up 7.5 percent after climbing 15 percent. Aspen Pharmacare Holdings Ltd. was 2.8 percent higher after climbing 4.8 percent.
South African regulators said earlier this month they were scrutinizing volatile share-price swings prompted by speculation the stocks involved could be the subject of a negative report by Viceroy.
To contact the reporters on this story: Thembisile Dzonzi in Johannesburg at tdzonzi@bloomberg.net, Neo Khanyile in Johannesburg at nkhanyile@bloomberg.net.
To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, John Viljoen, Kasper Viita
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