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Sasfin grows earnings, increases dividend, a sparkling 22% increase in headline earnings

2013-03-11

Basel III requirements well in hand

Banking group Sasfin grew headline earnings by 22% to 198c a share in the six months to December. The interim dividend has been raised by 22% to 60c a share.

The directors are confident that Sasfin is positioned to continue to achieve sustainable growth following the “significant strategic initiatives and investments made in prior years”. They expect “continued levels of business activity” in the second half of the financial year.

Features of the half-year’s interim results include:

  • headline earnings growth of 22% to R63,9 million compared with the same 2011 half-year period;
  • a 5% year-on-year increase in the funding base to R3,8 billion;
  • deposits up by 11% on December 2011’s R1,8 billion;
  • total gross loans and advances 16% higher at R3,2 billion;
  • total assets of R5,5 billion, 4% above the year-ago number;
  • return on ordinary shareholders’ average equity one percentage point up at 13%; and
  • a healthy group capital adequacy position.

CEO Roland Sassoon is gratified with the performance achieved in a South African economy characterised by a “challenging environment” and a subdued banking sector facing rapidly escalating regulation and increasing costs of compliance.

He ascribes the successful half-year to enhanced top-line growth initiatives and expansion of the non-interest revenue base. In addition, net interest income was 18% up on the back of higher loans and advances “which partly offset the negative carry incurred on the interest cost from long-term loans”.

While the cost base increased by 26%, it reduces to a more modest 15% after adjusting for the 2011-acquired IQuad cost base, which was fully accounted for in the six months to December.

Sassoon points out that Sasfin’s increased cost structure arose largely as a result of the need to support growth initiatives by way of additional investment in information technology and human resources. The high 73% cost-to-income ratio was also adversely affected by the negative carry incurred on the group’s long-term funding base.

Sassoon pinpoints another cost-push factor as Sasfin’s focus on staying close to its clients. “We are a high-touch bank employing high quality people. This is our model and it works well for us.” 

The Sasfin board contends that the group’s high cost structure will be alleviated by greater critical mass. “We have to scale up across the board and have put in place the necessary infrastructure for doing so,” says Sassoon. “Encouragingly, we have the required liquidity, though it must be appreciated that scaling up is a long-term process.”  

Of the group’s divisions, Business Banking’s earnings grew by 13% to R48,1 million, thanks largely to a 16% growth in the lending book, margin retention and lower impairment charges.

Wealth Management’s earnings were 32% higher at R15,6 million, driven primarily by increased trading volumes, improved fee income and a strong performance from the Asset Management unit. 

The Treasury division, although impacted by higher funding costs, achieved a marginal profit gain, while the Capital division recovered strongly, with earnings up from R2,7 million to R5,5 million.

Earnings in the Commercial Solutions division – logistics, short-term insurance and commercial advisory activities – soared by more than 100% in the wake of a strong performance from IQuad, which has been fully integrated into Sasfin, and an improved result from the Freight unit. 

Sassoon draws particular attention to Sasfin’s growing deposit and funding base, which is being increasingly characterised by an improved deposit mix and maturity profile.

“Overall, the group’s funding position remains healthy, with a funding base of R3,8 billion, up from R3,6 billion last year.”

Sasfin’s securitisation vehicle, “a leader in its market”, continues to perform well.

Sassoon is confident in the group’s levels of capital, with its statutory risk-weighted capital adequacy ratio at a solid 29% at the end of 2012. The Bank enjoys a capital adequacy ratio of 24%.

“These are well above the prescribed regulatory requirements and the group’s internal targets. Our Common Equity Tier 1 ratio, Basel III’s main measure of capital strength, is a solid 26%. Indeed, Sasfin is favourably positioned to meet the stringent new Basel III requirements, both at liquidity and capital levels – well ahead of their respective implementation dates.”

For further information please contact:
Roland Sassoon - Sasfin Holdings Limited
Tel: 011 809 7778 
Cell:  083 417 1100
Email: Roland.Sassoon@sasfin.com