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3/22/13

Markets: David Shapiro (Sasfin), Ed Carrell (Absa Retail & Business Banking) & Lee-Anne van Zyl (FNB Online Banking) - SAfm Market update | Mon
19 March 2013 19:01

Markets: David Shapiro (Sasfin), Ed Carrell (Absa Retail & Business Banking) & Lee-Anne van Zyl (FNB Online Banking)

Markets, the rand and the FNB/Absa debit-order chaos.


- DOWNLOAD THIS INTERVIEW HILTON TARRANT: David Shapiro of Sasfin is alongside me. David, the market down about a third of one percent. Financials strong and we saw pockets of strength. We saw some strong buying in specific stocks. Woolworths world's one of them. FirstRand very strong, 1.5% higher today. Old Mutual also very strong. DAVID SHAPIRO: Overall, industrials were strong and financials. It's the resource market thats bringing us down, and it has nothing to do with Exxaro or Kumba. I think it's a global trend where there are concerns building up by analysts that commodity prices are not going to go anywhere, going to stay steady. Robust demand from China will continue but I think analysts worry that corporate profits or mining profits will just remain neutral, almost, from last year. So theres quite a few worries about it and thats playing on the resource sector, bringing shares down. The other markets are doing OK. So it's something that we didnt build in. We thought this was going to be the year of resources and it will be. Demand will pick up again from China. But I think extra supply coming up onto the market is going to keep things down. Thats why we've seen Kumba coming down quite a lot, Exxaro coming down, all the diversifieds coming down because Billitons got nothing to do in South Africa. So why would Billiton come down if it's unique to SA? HILTON TARRANT: Standard Bank that share up over 2% on the day. And 52-week highs: Mediclinic up there again. SABMiller R484/share, next stop R500. DAVID SHAPIRO: Well, the rand took a bit of a pummelling today on the Eskom story, on concerns that we are going to see power cuts, which is going to affect output. So, having started to recover yesterday we saw it bounce back to R9.25 and it's looking weak. I think SAB on the back of that picked up. Richemont was under a bit of pressure. There was talk in the market of a big line being placed of almost about 1% of the company. I not sure whos getting out and what that means, but I think thats one of the reasons we saw weakness. Naspers also down. But a very strong day on the industrials. HILTON TARRANT: Richemont R74.85/share. Now, this was a share which back in 2008 hit a low of R4. DAVID SHAPIRO: I dont think as low as that, but it certainly HILTON TARRANT: I think it was close to R4. When it got to R40 or just over R40 it made a 10-bagger. Now it's almost a 20-bagger. DAVID SHAPIRO: I didnt realise it had fallen that far. I remember it below R20 or thereabouts, but never as far down as that. I can't think that far back! [Laughter] HILTON TARRANT: David, Cyprus off the agenda today. DAVID SHAPIRO: Well, I think we are getting used to it. I think we're a little more comfortable with the outcome, understanding what was it that they could only lend about 10bn and they had to make up that 7bn somewhere, and this was the only solution. This is unique to Cyprus. I dont think this will be repeated anywhere else. So I think as the stories unfold, investors are getting more comfortable. You can see in the US I dont where it is now when I left [the office] the Dow was bouncing back 0.2%. We had better housing numbers out there as well. So it wasnt even dominating the headlines in the US. HILTON TARRANT: The euro under 1.29 to the dollar for the first time since December. DAVID SHAPIRO: It's going to plague more and more money is going to flow into the US. And you could also see treasuries improving then. It's twofold I think they think that Bernankes going to continue with his policies. Well hear from him tomorrow. And also money flowing in from the eurozone into US treasuries. HILTON TARRANT: A couple of economic stats out today. The decision tomorrow of the Reserve Banks Monetary Policy Committee meeting, the meeting kicking off today. Also inflation numbers out tomorrow. David, building plans passed the difference between January last year and January this year, up 41%. DAVID SHAPIRO: That's interesting, because I dont think you can actually sell existing houses. When you drive around here there are so many houses on show. It depends on where and what level. Probably at the lower end of the market. I'm sure there is plenty of building taking place. But it seems rather odd, because I would have thought the capacity of houses on the market is increasing. HILTON TARRANT: We saw employment data out today non-farm employment for the fourth quarter up, 22 000 jobs. DAVID SHAPIRO: Not much. I dont know where it comes from and whether we can rely
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3/22/13

Markets: David Shapiro (Sasfin), Ed Carrell (Absa Retail & Business Banking) & Lee-Anne van Zyl (FNB Online Banking) - SAfm Market update | Mon

on these stats any more. It just doesnt tie in with what's happening or what we are hearing in the economy. HILTON TARRANT: Well, a number of Absa customers were affected by debit-order problems over the weekend. Some clients were left overdrawn as these debit orders were processed. Ed Carrell is chief operating officer of Absa Retail & Business Banking. Ed, as far as I understand this, you received an order to process a number of debit orders from FNB, as you normally do on Friday night, and then the havoc began. ED CARRELL: Yes, thats exactly what happened. Thanks for the chance to explain what happened. The first thing we really knew about it was on Saturday morning. We noticed unusual spikes in our call centres and the volumes there, and of course we set out investigating what was going on. We quickly established that an FNB file had unauthorised debits in it for our customers and wed processed this file as we do in the normal course of events as per the payment scheme rules here in South Africa. It seems these debits were actually issued in order to reverse a systems error that FNB had experienced over a period of months. So it was, if you like, a huge volume of debit orders came through on a Friday night, were processed and customers who were out there spending money in shops, etc, found suddenly there was no money in their accounts. HILTON TARRANT: Ed, is there any indication of how many customers were affected? Is this hundreds, thousands, ten of thousands? ED CARRELL: I think the number we would measure in thousands, but for us one customer experiencing this is one too many. And our focus moved straight on to how could we take the pain away from customers and reverse this and obviously restore their accounts to the space that they should be in. HILTON TARRANT: So these are being reversed one by one? ED CARRELL: Well, no. Actually what we've been doing is since yesterday we've been working with FNB. It's fairly complex to reverse these because there have been plenty of other transactions going on. We are now working with FNB to make sure we can reverse all of these transactions and we need to address this issue between Absa and FNB and not, if you like, pass it straight on to the clients. HILTON TARRANT: Our thanks to Ed Carrell. Lets bring in Lee-Anne van Zyl now, chief executive officer of FNB Online Banking. LeeAnne, is that as simple as what happened on Friday evening? LEE-ANNE VAN ZYL: Hilton, from our side definitely. We identified a small batch of payments that were, as Ed correctly said, processed in one of our payment systems and there had been a duplication. Now, because it was a bank system error and not a client-generated error, we felt it was acceptable for us as a bank to actually put afile through these accounts. HILTON TARRANT: A number of reports have speculated that there have been systems errors at FNB for a number of months now. As an FNB client myself, is there anything to worry about? LEE-ANNE VAN ZYL: I dont think they can actually be compared. This was in just one of our processing systems, and it was just on a specific type of customer. Here I am talking 37 000 transactions affecting 7 000 customers. So it definitely wasnt widespread at all in our organisation. But we do appreciate that the implication for customerswas large. HILTON TARRANT: And as far as this is concerned, when you do pick these up, are you proactive and make contact with the other party, like Absa, as soon as possible? LEE-ANNE VAN ZYL: Hilton, the normal course, definitely in this instance because it was a bank systems error, we felt it appropriate and we went and pulled the collection. Absolutely in the normal course of events we would always make contact with the customer first. Once the customer has approved, we would then proceed with the collection. And this is exactly now the process since today, just as today we're also working with Absa to restore how we are going to actually reverse this transaction with their customers. HILTON TARRANT: Thanks to Lee-Anne van Zyl. David, aren't you glad you dont have to re-process debit orders? DAVID SHAPIRO: That 7 000 sounds a lot to me, 7 000 angry people stomping their feet. I think thats a lot of noise they can make. HILTON TARRANT: Yes, 7 000 people calling your call centre on a Saturday morning! DAVID SHAPIRO: Thats nothing for FNB. You can imagine how many customers they really have. But ja. HILTON TARRANT: David, just before we get to Telkom, interesting e-mail in from a listener. Remember, we spoke about the Times Media Group results last week some significant losses in the Nu Metro home entertainment division, the division responsible for DVDs, the shops distributing those, and DVDs to rental stores. He says: I run a business that competes with one of the Times Media companies, and for the corresponding period we have banked over R10m profit before tax. If you are a good operator in a challenging industry youll always find ways to turn a profit. Maybe they should stop using the shift to digital as an excuse and find some decent management. He says as an aside that retail sales of DVDs and Blu-ray actually increased by 4% across last year. DAVID SHAPIRO: There you are. It's interesting to know that demand continues like that, and that they are not going digital.

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3/22/13

Markets: David Shapiro (Sasfin), Ed Carrell (Absa Retail & Business Banking) & Lee-Anne van Zyl (FNB Online Banking) - SAfm Market update | Mon

HILTON TARRANT: Thats very, very interesting. Just as far as the problems in the mining sector are concerned, Palaboras copper mine sit-in DAVID SHAPIRO: Has it been resolved yet? HILTON TARRANT: It's 70 workers. Now, David, I bring this up because the IDC and the Chinese are busy with a transaction to acquire Palabora and to acquire this copper mine up in Limpopo. I think they are about to discover how tough mining is in South Africa. DAVID SHAPIRO: How tough labour is, not mining! HILTON TARRANT: David, a question on our SMS line. It's on the expansion of all our banks up into Africa. We've obviously got Standard Bank and Absa leading the pack, FNB or FirstRand trying a very organic growth strategy aside from that transaction in Ghana. We've also got Nedbank with the Ecobank alliance. [One wonders] whether or not one could see Capitec moving into Africa at some point. DAVID SHAPIRO: I think theyve got so much to do here to catch up with the other banks, I think that will be their priority in order to tackle the local banks first before they even start thinking of Africa. I'm sure it's on their radar, and I'm sure they are thinking about it. I'm not sure in what form whether it's on the unsecured lending side. But Capitec in my view will move to a full bank in other words, start giving a lot more services and I think thats going to be their strategy. They still are well behind Abil in market cap, so theres a lot of work for them to do. HILTON TARRANT: One can guess that a type of move into the rest of Africa will start very slowly, with maybe a branch in Maseru in Lesotho and maybe a branch in Botswana, etc. DAVID SHAPIRO: Look, it's a highly administrative bank and it relies very heavily on infrastructure, on its computer systems. Thats what makes it unique. The human interaction is fast and it's a great bank and it's a great banking model. I think it's going to be a model of the future, which means it hasnt got the branch infrastructure. That's going to make it unique. So youve got to make sure that the same systems exist in a lot of those African countries if you are going to copy the service. Sub scrib e to a daily email of transcripts from Moneyweb Radio - click here
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