Sasfin Holdings Limited has produced satisfactory results for the year ended 30 June 2014. Headline earnings per share increased 15% to 486 cents (2013: 421 cents) and the Group significantly strengthened its balance sheet.
Total assets grew by 25% to R8.2 billion, underpinned by a 17% growth in gross loans and advances to R3.98 billion (2013: R3.41 billion).
The Group has expanded and diversified its funding base and holds a healthy surplus liquidity position of R2.1 billion (2013: R1.6 billion).
CEO Roland Sassoon says that the growth in the Group’s headline earnings is driven by strong revenue growth, offset by marginally higher credit impairments of R29.6 million (2013: R22.4 million), a R8.5 million increase in negative carry costs as a result of the Group’s surplus liquidity and a 15% increase in operating expenses.
Total income grew by 18% on the back of the 17% growth achieved in gross loans and advances and a 19% increase in non-interest revenue.
Group costs increased by 15% (excluding goodwill impairment of R10 million), “resulting from a 17% increase in employee costs and a 13% increase in other operating expenses. The growth in employee costs is largely attributed to an increase in employee numbers, particularly in Wealth Management, a new Fixed Income team, the establishment of a new Transactional Banking division and the new Stellenbosch client and sales office”, says Sassoon.
Sasfin’s strong focus on personalised, high-touch customer service, together with a large portion of non-banking businesses across the Group has resulted in a flat cost-to-income ratio at 72%. The Banking Group cost-to-income ratio increased to 64% from 62% in 2013.
The performance of each division improved, with key performance areas per division as follows:
The Business Banking division delivered a solid set of results, with profits for the year at R101.5 million (2013: R89.9 million), a 13% increase over 2013. The key factors were strong growth in loans and advances, margin retention and a below-budget impairment charge. While the Business Banking credit loss ratio showed an increase to 85 bps (2013: 63 bps), non-performing loans showed a positive downward trend representing 3.9% (2013: 5.6%) of the gross lending book, highlighting the inherent asset quality in Sasfin’s lending book and stringent credit criteria.
The Wealth Management division delivered a 4% growth in profit to R48.1 million from R46.1 million in 2013. This division’s results were impacted by its expansion initiatives and investment in high-quality people to support its growth strategies. The division experienced an increase in local and globally-managed portfolios resulting in improved annuity income. These combined initiatives resulted in Funds Under Administration and Management growing to R91 billion (2013: R71 billion), providing a strong platform for continued growth.
The Domestic Treasury unit, which has now been incorporated into the Group’s Transactional Banking segment, continued to grow its deposit base impressively and reached R2.7 billion at June 2014, an increase of 25%. Equally impressive is the lengthening of the deposit base with notice and fixed-term deposits now representing 50% of total deposits. While growing encouragingly, the Foreign Exchange business remains a drag on the Group’s profitability, and has accordingly been transferred to the Commercial Solutions division for renewed management attention.
The launch of the Transactional Banking business remains firmly on track as Phase I (Sasfin’s internal banking requirements) went live in June 2014. The Transactional offering to clients is scheduled to go to market at the end of this year, with a comprehensive range of electronic banking services.
The Capital division’s profitability grew to R14.4 million (2013: R9.4 million) for the year, after accounting for a R9.0 million (post-tax) increase in fair value on previously equity accounted investments and a goodwill impairment charge of R10 million. The Private Equity unit is well poised for further growth.
The Commercial Solutions division delivered a satisfactory set of results with a profit of R35.3 million, a 5% increase when compared to the same period in 2013. This segment is growing encouragingly, achieving scale and is a meaningful contributor to Group earnings.
The Group’s funding base remains strong, having grown 22% to R5.4 billion from R4.4 billion last year, with a diversified mix and maturity profile. “This funding base enables Sasfin to continue to grow, while meeting the stringent liquidity coverage and net stable funding ratios of Basel III in a sustainable manner,” says Sassoon.
The Group’s capital adequacy ratio has declined by 300 bps to 23% due to the new Basel III capital requirements and a growth in assets. The Group remains well capitalised and poised for growth.
Sassoon says that “Sasfin has laid the foundation for sustainable growth and expansion of its franchise value in its chosen markets. This growth will be aided by our Transactional Banking offering, which we launch to the market towards the end of the year. Our growth will also be strengthened by our strong capital and liquidity position as well as our highly-interactive approach towards service.”