JSE-listed low cost bank, Capitec Bank (Capitec), on Monday said it is “extremely dissatisfied” with the downgrade by rating agency Moody’s Investor Service, saying this is a reaction to the situation at lender African Bank and not appropriate to it.

Last week Friday, Moody’s downgraded Capitec’s international deposit ratings to Ba2 from Baa3. It also downgraded its national scale ratings to Baa1.za from A2.za.

Capitec said it was informed of the decision to downgrade it after a short 30-minute telephonic review on Thursday last week.

Capitec said it is unhappy with the recent downgrade because on 12 May this year, Moody’s confirmed its ratings at a higher level.
“We feel that the downgrade by Moody’s is a reaction to the situation pertaining to African Bank, which is not applicable to Capitec Bank,” Capitec said.

“Despite assurances from Capitec Bank that our performance is according to plan, we feel Moody’s did not take this into account when assessing the bank,” Capitec continued.

South Africa’s biggest unsecured loans provider, African Bank, was recently rescued by the South African Reserve Bank, which said it would pay R7 billion for its bad loan book. This move allowed it to continue to lend to its customers and protect its retail deposits.

This came after CEO Leon Kirkinis resigned from the bank and the bank’s market value on the JSE contracted by more than R10 billion ($942 million) to R465 million ($44 million).

The bank had been negatively impacted by an ever increasing non-performing loans and the underperforming subsidiary, Ellerine Furniture, which was acquired a couple of years ago.