Sasfin Holdings Limited has produced a satisfactory set of Interim Results for the period ending 31 December 2013. The Group showed a 12% increase in headline earnings per share at 222 cents and significantly strengthened its balance sheet.
The directors attribute the growth to a focus on its target markets, comprising entrepreneurial businesses and private clients. Based on prevailing market conditions, Sasfin expects continued levels of business activity in the second half of the financial year.
Total assets grew by 36% to R7,4bn, largely as a result of a 21% growth in the Business Banking division, with loans and advances reaching R3,8bn.
A very healthy liquidity position of R2,1bn exists due to the Group expanding and diversifying its funding base.
CEO Roland Sassoon says that the Group’s satisfactory headline earnings growth of 10% to R70,4m is a result of strong revenue growth and lower tax rate despite a higher impairment charge of R15,7m.
Total income grew by 15% on the back of growth in loans and advances and expansion of the non-interest revenue base.
A 17% increase in Group costs was “largely driven by a 24% increase in employee costs. The significant growth in employee costs is attributed to an increase in employee numbers, specifically in the Wealth Management division, which is growing strongly and is a platform for future growth in the business. Recruitment also took place in the new Fixed Income trading team, the new Transactional Banking division and the new Stellenbosch sales office,” says Sassoon.
This, along with an increased negative carry on the surplus liquidity levels, saw the Group’s cost-to-income ratio creep up marginally to 74%, which is high due to Sasfin’s strong focus on its personal customer service culture; the fact that optimal scale has not as yet been realised across many of its business units; and a high proportion of non-banking activities that exist within the Group. At a Banking Group level, the cost-to-income ratio was 65%.
Key performance areas per division are as follows:
The Business Banking division delivered a solid set of results, showing a profit of R47,3m, marginally lower than that in 2012 of R48m. The Group says that this is due to strong growth in loans and advances, margin retention and cost containment. The unit’s profitability was negatively impacted by a higher credit loss ratio of 90 bps up from 30 bps in 2012. Non-performing loans showed a downward trend to 4,2% at December 2013 from 5,3% in December 2012. “This unit remains positive for continued growth in the second half of the financial year and beyond,” says Sassoon.
The Wealth Management division achieved impressive profit growth from R15,5m to R22,1m, an improvement of 42%. The Stockbroking unit experienced an increase in local and globally-managed portfolios resulting in improved annuity income. The Asset Management unit developed a fully-fledged offering with an effective distribution channel. The Wealth Management division, which recently brought on board an experienced fixed income and bond trading team, is well positioned to become a larger profit driver for the Group going forward. Funds under advisement and management now amount to R77bn (2012: R57bn), an increase of 35% from 2012.
The Treasury division continues to grow its deposit base impressively, and increased it to R2,75bn at December 2013, an increase of 50%. Equally impressive is the lengthening of the deposit base, with notice and fixed-term deposits representing 50% of the 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 Capital division’s profitability declined marginally to R5,3m for the period, impacted by a mixed performance in the underlying portfolios. The Corporate Finance unit delivered a flat performance with a lower level of deal flow and mandates.
The Commercial Solutions division delivered a satisfactory set of results with a profit of R15,3m. This segment is growing encouragingly and achieving scale and is now a meaningful contributor to Group earnings.
In terms of the Group’s financial position and capital management review, the Group’s deposit and funding continued to grow, with an improved deposit mix and maturity profile.
Overall, the Group’s funding position remains strong with a diversified funding base of R5,4bn, up from R4bn of last year. “This funding base enables Sasfin Bank Limited to continue to grow, whilst meeting the stringent Basel III liquidity requirements of liquidity coverage ratio and the net stable funding ratio in a sustainable manner,” says Sassoon.
While the Group’s capital adequacy ratio has declined by 500 bps to 24% due to the new capital requirements of Basel III and growth in assets, the Group remains well capitalised with a primary tier 1 capital ratio of 22%.
Sassoon says that “Sasfin has laid the foundation for sustainable growth and expansion of its franchise value in its chosen markets. This will in future be supported by its Transactional Banking business and service offering which will be launched to clients toward the end of the year.”