Riaan Stassen, former chief executive officer of Capitec Bank Holdings Ltd. (CPI), said he’s “very excited” about the company’s banking business after selling 44 million rand ($4.1 million) of the firm’s shares.
Stassen cut his holdings in Stellenbosch-based Capitec to 1.9 million shares to diversify his investment portfolio, the former CEO said in an interview today. That Capitec stock, valued at about 420 million rand, still accounts for more than half his investment holdings, Stassen said.
“I just rebalanced it really,” said Stassen, who serves on the bank’s board of directors after retiring at the end of last year. “I’ve tried to increase my offshore holdings for the same reason.”
Capitec, South Africa’s second-largest provider of unsecured loans, is setting aside more money for bad debt as a sluggish economy and mine strikes hurt borrowers. Stassen said he doesn’t expect the economy to show a “significant improvement” over the next two years.
“There’s the definite impact of labor, which has been fairly tense in the past few months,” he said. “And there are some structural issues that make me believe that there won’t be a significant improvement in the short term.”
Almost half South Africa’s estimated 21 million borrowers had impaired credit records at the end of December as economic growth slowed to a four-year low in 2013. Strikes in the platinum-mining industry and a jobless rate of 25.2 percent are making it harder for some clients to service debt.
Capitec increased provisions for doubtful debts by more than a third to 3.64 billion rand in the year through February as arrears rose, the company said in March.
Unlike larger rival African Bank Investments Ltd. (ABL), Capitec takes in customer deposits and benefits from fees and commissions linked to client transactions.
“We’ve now got just over 14 percent market share in primary banking clients and that’s still growing significantly,” Stassen said. “I’m very excited about that part of the business.”
Unsecured lenders target lower-income consumers with loans not backed by assets and charge interest rates of as much as 31 percent. African Bank last month reported a record first-half loss of 4.38 billion rand after boosting bad-debt provisions as customers struggled to repay loans.
“If you look at the comparison between ourselves and our competitors, it’s fairly transparent to determine the differences,” Stassen said. “There’s a good understanding by management of the impact of the continued slow economy.”
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