Sasfin sticks to guns on growth
Mar 03 2010 18:30
Marc Ashton
Johannesburg - Earnings at JSE-listed banking group Sasfin slid 32%, but the business was confident some $30m in foreign investors would return it to a solid growth trajectory.
The company, which specialises in lending to South African entrepreneurs, on Wednesday reported a 32% decline in interim headline share earnings of 164c.
Pointing to the $30m investment from the International Finance Corporation (IFC) in 2009, CEO, Roland Sassoon told investors the company was "poised for growth". IFC funds would provide a platform from which Sasfin could increase its lending activities, it said.
However, Sassoon was cautious about profit outlook in the near term: "Notwithstanding the uncertainty and difficult economic conditions, the group expects to continue at current levels of performance into the second half of the financial year."
Sasfin's business banking activities held up relatively well, posting an 11% decline in contribution to profit.
However, the logistics business reported a 70% decline in profit contribution followed by capital business (32% lower) and wealth management (-31%). The interim dividend fell 36% to 46 cents per share from 71c/share in the corresponding period of the previous financial year.
Pressure on commercial lending
Sasfin avoids comparison to the small business banking units of counterparts such as Absa and Nedbank, claiming it adopts a far more hands-on lending approach. However, South Africa's big four have warned commercial lending would remain under pressure.
Louis von Zeuner, Absa deputy CEO, recently expressed worry about businesses operating in the commercial property and transport sectors.
Sibongiseni Ngundze, MD of Nedbank's small business services, told Fin24.com he had not seen a meaningful pick-up in the sector in recent months and the outlook remained muted.
Sasfin's niche focus and understanding of the small business sector has been viewed as a competitive advantage by analysts.
In September 2009, Steve Meinjtes, an analyst at Imara SP Reid, compared Sasfin to a "baby Investec".
Sasfin's capital adequacy was 31%, far higher than industry peers. This figure has continued to rise to around 35%, partially boosted by the IFC injection.
This indicates management was conservative, with nearly R1bn in capital on the balance sheet which could be used to fund growth going forward.
However, shares in Sasfin have failed to capture the imagination owing to a lack of liquidity. Only eight funds hold it as part of their unit trust portfolios.
On average, less than 4000 Sasfin shares changed hands each day, but the stock remains popular with investors who had sought a strong dividend yield.
However, over the last year its appeal as a dividend-generating stock has slumped as earnings have dried up and it is now trading on an historical dividend yield of around 3.8%.
Sasha Naryshkine of asset management firm Vestact, told Fin24.com Sasfin's performance needed to be seen in a global context where a number of competitors had fallen by the way side. "At these levels Sasfin is probably well rated by the market," he said.
- Fin24.com |