Mr Market shrugs as Capitec’s brilliant iconoclast sells shares, says he’s leaving.

We’ve been paying a lot of attention to Capitec. It’s a phenomenal story of a micro-lender that has gone mainstream, ploughing in the high profits from its unsecured lending into creating a transaction fee base now approaching R1bn a year. But as serious problems have emerged for its core business, questions have been raised around Capitec’s sustainability. Especially whether it can continue delivering the type of growth rates that have made outgoing CEO Riaan Stassen the best of the best performing CEOs on the JSE – and streets ahead of his banking peers as you’ll see from my piece and the accompanying table. The table also illustrates the differences between the other banking CEOs, putting their differing public relations profiles into the perspective which matters most – profit delivery. For more of our recent coverage on Capitec click on the links at the bottom of the story.  – AH

Capitec's outgoing CEO Riaan Stassen: now 60, he's moving along at the top of his game
Capitec’s outgoing CEO Riaan Stassen: now 60, he’s moving along at the top of his game

By Alec Hogg*

Last Wednesday, SA’s best performing banker by a country mile announced his retirement. Riaan Stassen, who turned 60 in August, is to leave Capitec at the end of December.

Stassen’s resignation was a surprise. But what followed was even stranger. Mr Market shrugged it off. The Capitec share price hardly moved. For all the world it seemed a non-event.

It is. And it isn’t. Let me explain.

In the past year, Stassen cashed in shares and options worth R90m at prices of between R210 and R218 a share (current price R202). Sure, he’s still got over R500m tied up, but even for the mega rich, ninety bars is proper money.

The sceptic in me says Stassen reckons the shares are fully valued. Another sign the incredible run by the JSE’s best performing financial stock is over.

A money manager of my acquaintance reckons the market’s reaction to Stassen’s announcement the ultimate proof that Capitec’s share price is “assisted”. He maintains the true free float is so small – under 10% – those with vested interests are able to keep it buoyant. Only time will tell whether his conspiracy theory is anything more than just that.

On the other hand, Stassen is only half the Capitec story. His long-time boss, the excruciating low-profile chairman Michiel le Roux, isn’t going anywhere.

Stassen has worked under Le Roux for almost a quarter century. First at Distillers. Then Boland Bank. And at Capitec since 2000. Until 2004 Le Roux was the bank’s CEO. After a three year cooling off period he took over as chairman.

The 2013 annual report shows that while Stassen was selling, in the past year Le Roux actually added 470 000 Capitec shares to his stash. That takes his total holding to just under 15m shares. Worth R3bn.

So despite what the rest of us might think about consequences of a bursting unsecured lending bubble, the senior half of Capitec isn’t losing any sleep.

Stassen’s retirement also got me thinking about the way we rate chief executives. It sent me back to The Outsiders, one of four books recommended by Berkshire Hathaway chairman Warren Buffett in his 2013 letter to shareholders.

Author William Thorndike draws a comparison between CEOs and athletes. He argues that although they’re similarly remunerated, public assessment of performance is not.

Just about every possible statistic of an athlete gets crunched and analysed. CEO comparisons, on the other hand, are driven by narrative: “The business press doesn’t attempt to identify the top performers in any rigorous way. It’s as if Sports Illustrated put only the tallest pitchers and the widest goalies on the cover.”

Thorndike’s over-riding principles are to compare like with like and remove biases. Taking this cue, and with the help of Profile Data, I put together a table showing compound annual headline earnings per share growth during the tenure of SA’s recent banking CEOs.

Their first year in the hot seat was taken as the base. That avoided the distortion of pre-appointment write-downs. The last year was CEO’s final or, for incumbents, most recent reporting period.

It’s not perfect. For instance, FirstRand’s Paul Harris may feel aggrieved. His overall performance was blighted by an awful final year. Stephen Koseff, too, could argue that his stats would be far better if Investec’s reporting currency was SA cents rather than British pence.

Still, the table does deliver some interesting conclusions. Most obvious is how Stassen has substantially performed his peers.

It’s tempting to write this off to Capitec being in the micro-lending space at the right time. That notion is easily dispelled. Just have a glance at the returns by direct competitor Leon Kirkinis of Abil.

I’d like to believe Stassen is the real deal. Not least because he shares many characteristics with those featured in The Outsiders.

Thorndike calls them iconoclasts, a word derived from Greek, meaning “smashers of icons”. The original iconoclasts, he writes, were outsiders who challenged societal norms and were much feared in ancient Greece: “The CEOs profiled…..were also outsiders, disdaining long-accepted conventional approaches and relishing their unorthodoxy.”

Stassen fits that bill. His strategy seems to have been directing Capitec into doing the opposite of the Big Four banks. Lower transaction fees and longer banking hours two of many examples.

The table throws up some other interesting comparisons.

Comparing the performance of SA banking CEOs

CEOCompanyAppointedStart yearLatest yearHEPS CAGR
Riaan StassenCapitec31 March 20042004201340.7%
Mike BrownNedbank1 March 20102010201221.9%
Sizwe NxasanaFirstRand1 Jan 20102010201315.4%
Leon KirkinisAbil1 Dec 1999200020129.0%
Stephen Koseff*Investec plc17 June 1997199820138.2%
Maria RamosBarclays Africa1 Mar 2009200920123.5%
Former CEOs
Tom BoardmanNedbank1 Dec 20032004200913.1%
Steve BooysenABSA1 Aug 20042005200811.5%
Jacko Maree*Standard Bank29 Oct 19992000201210.2%
Paul HarrisFirstRand31 Dec 200520062009-4.1%
Source: Profile Data

Nedbank’s Mike Brown, FirstRand’s Sizwe Nxasana and Barclays Africa’s Maria Ramos took office at roughly the same time. By far the lowest profile of the three, Brown, has comfortably the best performance. That’s a race to watch with interest.

Another conclusion surrounds CEO sell-by dates.

Standard Bank’s recently departed Jacko Maree was 44 when appointed to defend his group from a hostile takeover bid by Richard Laubscher’s Nedbank.

Maree energised the slumbering giant, driving the bottom line performance so hard that shareholders were grateful Laubscher failed.

But when his overall career stats are tallied, Maree ranks no better than midfield. A brilliant start tarnished by holding onto the corner office a tad too long.

Interestingly, despite performances that lag Maree’s, both Koseff and Kirkinis have outlasted their former peer.

In their instance, it may be a case of a long-term reversion to the mean. Or support for the theory that even the co-founders of businesses – as both are – can overstay their effectiveness.

Both Koseff and Kirkinis will doubtless counter that they still occupying the hot seat because, right now, continuity is critical for their businesses. Maybe. But Maree made the same case for some years.

Either way, Stassen the iconoclast isn’t going to risk making the same mistake.

  • Alec Hogg is a writer and broadcaster. He founded Moneyweb and now runs biznewz.com. UNDICTATED is published on Mondays in Business Day, Africa’s leading business newspaper. 
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