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Sasfin shows strong growth

Johannesburg - Banking group Sasfin Holdings [JSE:SFN] 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, the group said in a statement released on Wednesday.

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.

They expect to see improved levels of business activity across all segments.

Sasfin CEO Roland Sassoon regards Sasfin’s growth trajectory as sustainable on the back of its strong infrastructure and capital position, improved liquidity levels, diversified, yet synergistic product and service offering; and high-touch banking and financial services model.

Total assets grew by 14% to R6.3bn, largely as a result of a 17% increase in the business banking division, where loans and advances increased to R3.4bn.

An expanded and lengthened funding base helped to generate a healthy surplus liquidity position of R1,6bn.

Sassoon ascribes the group’s 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 mentioned the 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 explained 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,” he said.

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.

There were solid results from the business banking division, which accounts for 59% of the group’s profitability. Key factors behind the R90m profit were a strong growth in loans and advances, margin retentions and a below-budget impairment charge.

The wealth management division improved its profit contribution by a steep 46% to R46m following two years of growth. Funds under advisement and management have increased by 31% to R72bn.

Sasfin Securities established a fixed income and repo trading desk to be managed by Leon Krynauw, formerly a director of Renaissance Capital and prior to that BJM Securities.

Sassoon predicts that the division will continue to grow rapidly and becoming a key profit driver.

The Treasury division grew its deposit base by 21% to R2.2bn while continuing to develop its foreign exchange business through an expanded regional footprint and new sales channels.

The bank recently opened a Treasury office in Stellenbosch to serve the Western Cape region in a more focussed manner.

Following two years of disappointing results, the capital division increased its earnings to R10m from a break-even position in 2012.

The commercial solutions division was the group’s star performer, with earnings having grown by 75% to R34m, primarily owing to a strong performance from the now wholly-owned IQuad Group, which has been fully integrated and renamed Sasfin Commercial Solutions.
 
Commenting on the group’s financial position, capital and liquidity, Sassoon advised 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 R4.4bn, up from R3.9 billion last year.”

“The group’s liquidity position remains very healthy with adequate liquidity buffers held for stress situations that may arise,” he said.

Sasfin will continue to focus on growth in response to the changing banking and regulatory landscape.

Initiatives include increased funding through term deposits and debt capital market instruments, profitable growth of existing divisions to benefit from economies of scale, investigation of prospective products and markets to expand the product range and penetrate new markets, ongoing upgrades of the IT infrastructure and the creation of a new division to provide a transactional banking service offering.

Sassoon also mentioned that Norman Axten, after serving the Group for 14 years as an independent non-executive director, of which the last two were as Chairperson, will be retiring at the forthcoming AGM.

Roy Anderson will be taking over as chair of the group and bank then.

- Fin24

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