Business at Capitec Bank Holdings is “back to normal,” chief executive officer Gerrie Fourie said, weeks after it became the target of the short seller that contributed to the scandal surrounding Steinhoff International Holdings.

Despite some initial uncertainty and customer withdrawals, Capitec is signing between 6 000 and 8 000 customers a day in February. It expects to have about 9.8 million by the end of its fiscal year, which ends this month, from 8.6 million a year earlier. While the bank’s shares have pared losses since a January 30 report by Viceroy Research accusing it of concealing loan losses and underestimating bad debts, they’re still down 10%.

Capitec three-month share performance

Fourie said his disbelief turned to anger after he read the report. The South African lender that makes unsecured loans mainly to low- and middle-income households was riding high. It had been one of the best-performing emerging-market bank stocks since its initial public offering in 2002. It went from a small unsecured lender in the Stellenbosch winelands into the country’s second-biggest retail bank.

Viceroy “typically targets a company that’s doing well,” Fourie said in a February 13 interview. With “our share rising more than 50 000%. That’s what a short seller would look for — it’s the ideal company to short,” he said.

No let up

Viceroy isn’t letting up. The short seller, which has taken a position in Capitec’s securities to benefit from their decline, released a third note on the lender on February 14, dismissing Capitec’s rebuttals.

“Capitec’s lending practices are grossly irresponsible,” Perring said in an emailed response to questions on Friday. “We are being sent evidence of people committed to pay 70% of their net monthly income on debt.”

Fourie says Capitec is now focusing on its business and isn’t planning any legal action against Viceroy. There’s hasn’t been a final decision on whether Capitec will sanction an independent investigation by a consultancy or an auditor into the bank’s lending practices, Fourie said. Capitec is preparing for an investigation by Pretoria-based regulator, the Financial Services Board, into Viceroy for potential market abuse and breaches of the Financial Markets Act, he said.

Viceroy has come under criticism from analysts including those at Arqaam Capital, JPMorgan Chase & Co and Avior Capital Markets for comparing Capitec to one-time competitor African Bank Investments Ltd, which collapsed in August 2014 after bad debts soared, it failed to increase provisions and funding dried up. Unlike African Bank, Capitec relies on deposits and other avenues for its funding rather than solely the bond market.

Perring said the FSB probe “is purely to distract from reckless lending practices.”

Viceroy isn’t the first to criticise Capitec’s lending practices. The company is being sued by Summit Financial Partners, which alleges the bank has broken the country’s credit laws in a court case scheduled for next month. The lender has said it will fight the allegations brought by Summit, which helps consumers work their way out of debt.

New report

In the latest note, Viceroy accused Capitec of exploiting customers’ current accounts by ensuring their loan repayments are deducted before other debts. According to rules posted on the Payments Association of South Africa’s website, debit orders are processed on a randomised, non-preferential basis to ensure “an equal and fair opportunity to recover payments due from the account.”

Viceroy also said Capitec is giving new loans to clients a day after they clear arrears from other loans.

The report was “again filled with factual inaccuracies, misleading half-truths and sensationalist statements,” Capitec said in a statement on Thursday.

The company couldn’t immediately comment on the allegation about clients taking on new loans soon after clearing arrears other than to reiterate that Capitec makes provisions for all types of clients.

Read: Capitec analysts defy Viceroy’s ‘predatory’ attack on its shares

Capitec sees a big opportunity in South Africa’s small- to medium- businesses, insurance and business banking sectors.

“We’re exploring those,” he said. “The biggest area to get going in in South Africa is the informal segment. It’s extremely difficult, but we’ve got to go to townships and understand the cash flows, the challenges.”

Capitec rose as much as 2.9% and was trading 1.6% higher at R834.13 as of 12:47 pm in Johannesburg, making it the best-performing bank stock on the six-member South African Banks Index.

© 2018 Bloomberg