Banking group Sasfin Holdings grew headline earnings by 22% to 421c a share in year to June. Earnings growth, in line with the interim number, is among the highest in South Africa’s banking sector. Dividends for the 12 months were up by 23% to 168c a share.
The directors are confident that Sasfin is positioned to grow its franchise value and enhance its value proposition to its target markets of entrepreneurial, private business, corporate and institutional clients. And they expect to see improved levels of business activity across all segments.
Roland Sassoon, the CEO, regards Sasfin’s growth trajectory as sustainable on the back of its:
Total assets grew by 14% to R6,3 billion, largely as a result of a 17% increase in the Business Banking division, where loans and advances soared to R3,4 billion.
An expanded and lengthened funding base helped to generate a healthy surplus liquidity position of R1,6 billion.
Sassoon ascribes the group’s impressive earnings performance to a combination of strong revenue growth, tighter cost control and a lower tax charge of 20% against the previous year’s 24%.
He draws attention to the “encouraging” 16% increase in total income, driven by the group’s increasing top-line growth initiatives and the 19% expansion of the non-interest revenue base.
Addressing an 18% overall cost increase, Sassoon explains the high number as deriving largely from the consolidation of the IQuad Group’s cost base for the full financial year, increased software amortisation costs and staff growth.
“Excluding this cost base, a year-on-year cost increase of 11% was recorded to support the group’s growth initiatives through investment in technology, employees and infrastructure.”
While the Group’s cost-to-income ratio increased from 70% to 72%, the cost-to-income ratio of the Banking Group declined from 71% to 62%. This is due to a relative increase in the contribution made by the more HR intensive non-banking activities, particularly in the Commercial Solutions and Wealth divisions, whilst the banking activities have become more efficient, notwithstanding a marginal increase in the Credit Loss ratio from 60bps to 70bps.
Highlights from the group’s segmental overview include:
Sassoon predicts that the division will continue to grow rapidly, in the process evolving into a key profit driver.
Commenting on the group’s financial position, capital and liquidity, Sassoon advises that against the background of an improved deposit mix and maturity profile, the group’s deposit base and funding continue to grow. “Overall, the funding position remains healthy, with a diversified funding base of R4,4 billion, up from R3,9 billion last year.”
He notes that the funding base enhances the bank’s ability to meet the stringent Basel III liquidity coverage ratio requirements and the net stable funding ratio. “The group’s liquidity position remains very healthy with adequate liquidity buffers held for stress situations that may arise.”
He says that Sasfin complies with the new Basel III requirements, both at a liquidity and capital level – well ahead of their respective implementation dates.
Sassoon draws attention to Sasfin’s continued focus on growth in response to the changing banking and regulatory landscape. Initiatives include:
Sassoon also mentions that Norman Axten, after serving the Group for 14 years as an independent non-executive director, of which the last two were as Chairman, will be retiring at the forthcoming AGM. Roy Anderson will be taking over the Chairmanship of the Group and Bank at this date.