February 1, 2018 / 8:25 AM / in a year

UPDATE 2-South Africa's National Treasury asks regulator to probe Viceroy's conduct

(Adds Capitec response to Benguela, Treasury; Viceroy reaction)

JOHANNESBURG, Feb 1 (Reuters) - South Africa’s government has asked the financial services regulator to consider launching a market abuse probe into Viceroy Research after its report on Capitec sparked a sell-off in the stock, it said on Thursday.

The National Treasury also asked the Financial Services Board (FSB) to alert relevant overseas regulators, including in the United States and Britain, to consider whether the U.S. research firm was regulated appropriately, it said in a statement.

Viceroy Research criticised lending practices at the bank on Tuesday, saying it understated defaults, triggering a brief slump of 25 percent in its shares. Capitec rejected the allegations, saying its corporate governance was strong and its disclosures were transparent.

The FSB could not be immediately reached for comment.

Founder Fraser Perring said Viceroy welcomed any investigation, and that it stood by the contents of its original report.

Viceroy Research shot to prominence in South Africa in December when it published a report questioning the finances at Steinhoff, owner of more than 40 retail brands globally. Steinhoff has since admitted “accounting irregularities”, triggering an 85 percent share slide.

On Capitec, the country’s No.5 bank by value, the Treasury said it was “satisfied with the assurance from the South African Reserve Bank that Capitec is well capitalised, liquid and solvent, and meets all prudential requirements”.

However, separately, Benguela Global Fund Managers wrote to Capitec this month, questioning the South African lender’s policy on rescheduling problem loans, the South African fund manager said in a statement to clients seen by Reuters on Wednesday.

Capitec said on Thursday Benguela’s report was erroneous because the bank “reschedules loans by amending existing loans instead of adding new ones”.

Chief Executive Gerrie Fourie spent 1.5 million rand on shares in the company on Wednesday, exchange filings showed on Thursday, a move hailed by one trader as a vote of confidence in Capitec.

“It’s a good way of showing that the directors are prepared to take the risk, so why wouldn’t the shareholder,” said Independent Securities trader Ryan Woods.

Capitec shares closed 5.6 percent higher at 845 rand, outpacing a weaker blue-chip JSE Top-40 index.

The stock was also boosted by news late on Wednesday from rating agency S&P Global, which said the Viceroy report and subsequent market reaction would not affect its BB/B with a stable outlook rating, which falls within the speculative range.

“To date, the bank has experienced only mild funding outflows and its liquidity remains sound,” Capitec said in a statement on Thursday, quoting the ratings firm’s bulletin. ($1 = 11.8884 rand) (Reporting by Tanisha Heiberg and Nqobile Dludla; Additional reporting by Alasdair Pal in London; Editing by James Macharia and Alison Williams)

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