Capitec Plans 2.2 Billion-Rand Stock Sale to Boost Capital

Capitec Bank Holdings Ltd., the South African lender that specializes in unsecured loans for low-income earners, plans to raise 2.2 billion rand ($267 million) in a rights offering to boost capital and fund growth.

Shareholders will be entitled to buy seven new Capitec shares for 160 rand each for every 50 they own. That’s 22 percent less than yesterday’s closing price, the Stellenbosch, South Africa-based bank said in a statement today. Bank of America Corp. and Sanlam Capital Markets are managing the sale.

The lender said it will use the money to fund more lending, add branches and help it comply with the latest round of Basel capital rules. While Capitec’s capital-adequacy ratio of 38 percent surpasses the 14 percent average of South Africa’s four largest banks, 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 through August from the year-earlier period, the company said in the statement.

South Africa’s mining industry has been hit by the most violent labor protests since the end of apartheid, with strikes spreading from the platinum to the gold and coal industries. A six-week walkout at Lonmin Plc’s Marikana platinum mine erupted into violence that killed 46 people, including 34 shot by police on Aug. 16.

‘Aggressive’ Policy

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 company’s exposure to the mining industry as a percentage of its total loan book is 7 percent while balances in arrears are 0.3 percent, according to Andre du Plessis, Capitec’s financial director.

“This is fully covered by specific provisions,” he said.

The lender dropped 1.3 percent to 203.71 rand at the 5 p.m. close in Johannesburg trading. The shares have risen 14 percent this year for a market value of 20.4 billion rand.

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