Capitec Offers 14 Million Discounted Shares to Boost Capital

Capitec Bank Holdings Ltd. (CPI), the South African lender that specializes in unsecured loans for low-income earners, will offer 14 million discounted shares to fund growth and meet new capital requirements.

Shareholders will be able to buy seven new Capitec shares for every 50 they own at 160 rand apiece, representing more than a 22 percent discount to yesterday’s closing price, the Stellenbosch, South Africa-based bank said today in a statement. The lender, with 534 branches, wants to raise 2.2 billion rand ($267 million) in an offer underwritten by Bank of America Corp.’s Merrill Lynch unit and Sanlam Capital Markets.

The money will be used to fund more unsecured lending, add branches and help the bank comply with Basel III capital requirements, Capitec said. While Capitec’s capital adequacy ratio at 38 percent surpasses the 14 percent average of South Africa’s four largest banks, its loans in arrears grew 66 percent in the first half, it said in a separate statement today.

Capitec’s profit rose 43 percent to 700 million rand in the six months ended August compared with a year earlier, the company said in the statement.

Capitec “undoubtedly” provides some loans in areas affected by South Africa’s labor protests, which may lead to an increase in bad debts, said Patrice Rassou, who helps oversee about $40 billion as head of equities at Sanlam Investment Management in Cape Town. “It has an aggressive write off policy which means that the bank recognizes bad debts early on so that we should see the impact by the next interim results.”

The lender dropped as much as 3.8 percent, its lowest in sixth months, and fell 2.1 percent to 202 rand as of 12:04 p.m. in Johannesburg trading.

To contact the reporters on this story: Jaco Visser in Johannesburg at avisser3@bloomberg.net; Renee Bonorchis in Johannesburg at rbonorchis@bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net

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