Sasfin posts modest growth

Johannesburg - Bank-controlling company Sasfin Holdings [JSE:SFN] on Wednesday reported a 10% growth in headline earnings from R48m to R53m for the six months ended December 2010.

However, diluted headline earnings per share for the half-year were flat at 163 cents versus 164c previously, which the group said was due to the dilutory effect of capital injections.

Sasfin recorded a return on equity of 13% versus 14%.

The group declared an interim dividend of 49c/share compared to 46c/share for the previous comparable half-year.

The group said its operational performance was favourably impacted by the strong lending base, representing the majority of earnings. The other core businesses traded profitably, albeit at lower levels when compared to the corresponding period in 2009, it said.

The results were positively affected by the business banking division, which contributed about 56% to group earnings, following the impressive asset growth achieved, particularly in the rental finance book.

Credit impairment losses continued a positive downward trend, indicative of an improving credit environment. The annualised credit loss ratio decreased to 1.6% on average loans and advances from 2.1% in 2009, with non-performing loans and advances to total gross loans and advances down by 22% on 2009.

"As previously stated, the groups investment in its infrastructural development, incorporating its people, technology and systems is largely in place, resulting in the groups cost structure stabilising and reflecting an inflationary increase of 5% year on year (y/y).

"However, the groups cost-to-income ratio is still relatively high which is largely attributable to the lower revenue levels and lack of scale in certain of the groups activities," Sasfin said.

In terms of Sasfins stated objective of growing the deposit book and lengthening its the maturity profile, deposits increased encouragingly by 35% y/y. In addition, the group is actively pursuing further diversification of its funding sources, and was successful in securing new funding lines during the period under review.

Sasfins securitisation vehicle, a leader in its market, continues to perform extremely well and successfully refinanced a tranche of R351m of its maturing notes subsequent to this reporting date.

The group maintains comfortable levels of capital and at December 31 2010, the statutory risk-weighted capital adequacy ratio of the group was 28% (2009: 30%) and that of Sasfin Bank Limited 22% (2009: 29%), which is well above the prescribed regulatory requirement.

Looking ahead, Sasfin said that the combination of the groups contained overheads, reduced credit losses and increased business activity across the banks full spectrum of operations would have a positive impact on the business.

It added that the economy was beginning to show signs of recovery, but there were still some "dark clouds ahead," mainly in the form of rising commodity and food prices and the impact that this would have on inflati