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Crisis, what crisis?

07 September 2004 Angelo Coppola

Sasfin has delivered a 185% increase in headline earnings per share to 236,5c (2003: 83c) for the year ended 30 June ‘04, while earnings attributable to ordinary shareholders climbed to R60,2m (2003: R20,4m).

* Attributable earnings increase to R60m
* 13% increase in advances to R960m
* Deposits increased 8% to R268.5m
* Returns on equity of 30.6% (2003: 12.6%) and on assets of 4.6% (2003: 1.7%)

The banking business was a big contributor, while the freight business was also quite profitable. The commercial finance division was the big portion of the income increase.

According to CEO Roland Sassoon they have completely re-engineered the securitization offering, bringing it line with world’s best practice.

The only business that went backwards,” says Sassoon, “was the investment and asset management division, which includes financial planning, healthcare and employee benefits.”

“We have right-sized some of the business and sold off the employee benefits business to a company in which we have a 30% share.”

An increase in non-interest income coupled with the elimination of foreign exchange losses translated into a 34% increase to R270,5m (2003: R201,7m) in total income.

Sassoon says the bank has flourished since the small banking crisis two years ago: "More than 30 banking licenses have been handed back to the regulators in recent years, and that opened up market opportunities for those who remained."

The group's improved interest margin can be attributed to a decision in 2003 to switch offshore interest earnings to higher-yielding Rand-based investments and receivables, and the sharp reduction in borrowing rates over the last year.

Performance was further lifted by the decision in 2003 to curtail foreign exchange losses by eliminating the foreign currency exposures of its offshore subsidiary.

A focus on cost containment and a re-engineering of the group's securitisation structure - which reduces its cost of funds and enhances its flexibility - contributed to the group's strong financial performance.

The group's statutory risk-weighted capital adequacy is still high at 26.4% (2003: 35.6%). Sassoon says the group is comfortable with a lower capital adequacy ratio as this represents better utilisation of capital.

A cash dividend of 94 cents per share (2003: 33 cents) has been declared.

Quick Polls

QUESTION

The second draft amendments to Regulation 28 will allow retirement funds to allocate up to 45% of their assets to SA infrastructure, with a further 10% for rest of Africa; but the equity & offshore caps remain unchanged. What are your thoughts on the proposal?

ANSWER

Infrastructure? You mean cash returns with higher risk!?!
Infrastructure cap is way too high
Offshore limit still needs to be raised
Who cares… Reg 28 does not apply to discretionary savings
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