Lots of concern abut rising bad debts and how this will impact Capitec.
They identify three risks; market, credit & business. Rescheduling is a risk that concerns many but Capitec defends it in being better business and they have over 200% provisions on arrears and they are well ahead of Basel 3 2019 requirements. Further when they reschedule a loan they increase provisions against non payment. They have been declining more loans and have been tightening credit granting criteria since April 2015 and now 92% of the value of a loan is provided for when three instalments are missed. In short they are obsessive about managing risk. That said tougher economic conditions, credit card and longer term loans do add to risk and they will likely see bad debts increasing. But they are not going to do an African Bank.
Longer term they're earning more from non interest but this will take a long time to become significant against loan profits.
The annual report is due later this month and will be online here.
I had an aggressive R720 buy price, but that was before shuffles and downgrades and with growth likely to be hit post all the noise R620 is my safer buy price.
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