Shares of South Africa's Capitec Bank sank more than 5 percent in early trade on Monday after a Moody's ratings downgrade that cited concerns about the bank's exposure to risky consumer lending.
The ratings agency cut Capitec's financial strength rating to "D" from "D+" late on Friday and downgraded the bank's bank deposit rating by two notches. It also put Capitec on review for further downgrades.
The cuts come after South Africa's central bank launched a $1.6 billion bailout of unsecured lender African Bank Investments (Abil) this month, which was toppled by surging bad debts among its core market of low-income borrowers.
In a statement, Moody's cited "heightened concerns regarding the inherent risks of Capitec's consumer-lending focus," adding that challenges in the unsecured market could weigh on the bank's financial performance.
The South African Reserve Bank said over the weekend it disagreed with the rationale for the cuts, saying Capitec did not follow the same business model as Abil.
Capitec said in a statement it was "extremely dissatisfied with the extent of the review and its conclusion".
"The business is healthy, we are growing according to our plan and our loan book is performing within our risk appetite," it said.
Shares of the bank were down 5.2 percent at 204.75 rand at 0813 GMT.
Capitec shares sink after ratings cut
Shares of South Africa's Capitec Bank sank more than 5 percent in early trade on Monday after a Moody's ratings downgrade that cited concerns about the bank's exposure to risky consumer lending.
The ratings agency cut Capitec's financial strength rating to "D" from "D+" late on Friday and downgraded the bank's bank deposit rating by two notches. It also put Capitec on review for further downgrades.
The cuts come after South Africa's central bank launched a $1.6 billion bailout of unsecured lender African Bank Investments (Abil) this month, which was toppled by surging bad debts among its core market of low-income borrowers.
In a statement, Moody's cited "heightened concerns regarding the inherent risks of Capitec's consumer-lending focus," adding that challenges in the unsecured market could weigh on the bank's financial performance.
The South African Reserve Bank said over the weekend it disagreed with the rationale for the cuts, saying Capitec did not follow the same business model as Abil.
Capitec said in a statement it was "extremely dissatisfied with the extent of the review and its conclusion".
"The business is healthy, we are growing according to our plan and our loan book is performing within our risk appetite," it said.
Shares of the bank were down 5.2 percent at 204.75 rand at 0813 GMT.
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