Sasfin: economy is flickering
Marc Ashton
Johannesburg - Specialist banking group, Sasfin, said it had noticed signs the South African economy was reviving.
"On the private equity side, green-shoots have now become more evident over the last four to six weeks," said Sasfin financial director, Malcolm Segal. He was speaking at the presentation of the Sasfin financial results for the year ended-June.
The group reported a slight decline in headline earnings from 156m to R154m year-on-year. The dividend per share was 4% lower at 220c. The dividend policy at Sasfin is to pay out 40% of the headline earnings per share to shareholders.
With financial markets rebounding strongly over the last six months, focus had been placed on the level of economic activity accompanying these market moves.
Stock markets are traditionally "leading indicators", which means that they tend to move in line with expectations of future earnings.
While markets had recovered, there had been little to suggest that economic activity on the ground was picking up, with job losses continuing to mount both locally and abroad.
Absa, Standard Bank and Nedbank said they expected corporate bad debts to continue to rise in the second half of 2010.
However, the message from Sasfin was upbeat.
Although bad debts had risen to around 1% of its lending book, equal to R18.8m, it was coming off a exceptionally low base of R4.3m in the previous year.
Sasfin CEO, Roland Sassoon, said it was Sasfin's mission to entrench itself as "the preferred bank for the entrepreneur". There were opportunities to further entrench Sasfin in the small to medium sized business sector, he said.
Mixed year
Sasfin's niche market banking group had had a mixed year. Said CFO Tyrone Soondarjee: "The 2009 financial year has been an interesting one".
The bank held high levels of capital and would hold more than R1bn in capital on its balance sheet.
Unlike their international counterparts, South African banks have remained well capitalised through the economic crisis. This allowed them to continue to grow their lending books despite an economic slow-down.
Capital adequacy ratios for the group and bank rose to 31% and 32% respectively. This was up from 28% and 22% in the previous financial year.
Soondarjee and Sassoon were similarly positive on Sasfin's securitisation market, saying it had placed more than R700m into the securitisation market in November 2008. Securitisation is when loans are bundled together and sold to other lenders at a lower rate.
In the case of Sasfin, securitisation has also helped lower the cost of funding which has, in turn, boosted profits at its treasury division.
Asked about the risk attached to these securitisation portfolios, Sassoon said there was no correlation risk between the underling client base and the securitisation offering.
One of the problems experienced in the US sub-prime securitisation crisis was that many of the portfolios included concentrated risk of particular asset classes.
Sassoon said that in Sasfin's case, the underlying portfolios represented a variety of business and government loans of different natures which reduced the risk for Sasfin.
One area of bad news was in Sasfin's wealth management business which posted a R12m drop in contribution to profit of R21m year-on-year.
There was also a noticeable decline in deposits from customers which fell to R881m from R1.1bn in the year. |