Financial Services group, Sasfin Holdings Limited, overcame a rapidly cooling economy to turn in a solid performance for the first six months ended on the 31st December 2008.
In response to the deteriorating conditions in the domestic economy, brought about by the international credit crunch, the group tightened its credit policies.
Whilst net profit for the first six months was down 13% over the corresponding period last year – from R93m to R81m – and Headline Earnings per Share declined accordingly, from R75m to R65m, the group’s capital adequacy ratio rose 100 bps to 31%, which is well above the prescribed minimum requirement of 9,75%.
The increasing credit pressure on customers and subsequent business failures lead to impairment losses moving out considerably compared with the prior period, which had previously benefited from some sizeable debt recoveries. The impairment charge now stands at 1,2% p.a. on average loans and advances, which is considered satisfactory under these conditions.
Group CEO, Roland Sassoon, says the group incurred some non-recurring expenses as a result of misreading the changing global economic environment, which included losses on hedges for certain exposures and the diminution in the value of its investment in preference shares.
A major highlight was that, in spite of the extremely tight capital markets, it was able to not only refinance its securitisation notes which fell due in November 2008, but to securitise a further R200m tranche of office automation rental agreements, which is indicative of the quality of Sasfin’s loans and advances.
Sasfin’s assets increased by a modest 10% in the period, from R2.8bn to R3bn, due to the more conservative lending policy. Following the generally tightened liquidity levels, deposits decreased marginally in the period.
Says Sassoon, “When the market began to deteriorate at the end of last year we took a more cautious approach to our lending decisions and we battened down the hatches, which has worked for us.
As for the future, we are going to continue with our more cautious approach until a clearer picture emerges. There is a lot of business available in the small to medium business sector as the bigger banks concentrate on servicing their key corporate clients and the mass retail market.”
Sasfin recently secured a R100m trade finance guarantee facility from the International Finance Corporation. This relationship creates further opportunities for the business to grow.
Sasfin announced that it will be offering shareholders a scrip dividend whereby shareholders will have the option of taking their dividend in cash or shares. This should ultimately have the effect of further bolstering the Group’s capital adequacy ratio.
Sassoon also notes that the timing might be apposite now for the group to re-examine its BEE initiative.
In terms of its internal restructurings, the board has decided not to appoint a new MD to replace Alan Greenstein, who recently emigrated to Australia. Rather, it has promoted Maston Lane to Chief Operating Officer and Gavin Came to head of its Wealth Management Division.
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