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Johannesburg – Banking and financial services group, Sasfin [JSE:SFN] managed to circumvent the effects of the tough economic environment and grow shareholder value by 29%.
Speaking at the financial results presentation for the year ended 30 June 2016 in Sandton on Monday, group financial director Tyrone Soondarjee said the group reported growth across all its divisions, bar Treasury and Transactional banking which declined in profitability.
Operating profit improved 31% from R232m in 2015 to R304m. Profit for the year was up 23.7% to R238.7m. Total income growth was up 25.1% given the strength of the business banking and wealth divisions of the group.
However, with the pressure from the economy, the bank saw impairments rise. The credit loss ratio was up 108 basis points versus 77 basis points the previous year. There had been a sharp increase in credit loss, said Soondarjee.
Group costs increased 19.8% to R828.3m, mainly due to increased investment in risk, compliance and information technology and the inclusion of Fintech in its cost base, said Soondarjee. The cost to income ratio improved from 71.07% in the previous year to 68.89%, mainly due to its cost containment strategy. “This has been key to manage and showed notable improvement,” he added.
Return on equity showed steady growth, up to 17.54% to R232m from R15.21m, said Soondarjee. He added that growth had been steady over the past five years.
Although collectively, the Treasury and Transactional Banking division headline earnings declined from R10.39m to R6.559m, the Treasury division showed strong performance, with a stable deposit base of R3.32bn, said Soondarjee. “There have been steady growth in deposits,” he said.
As for the Transactional Banking division, executive director Michael Sassoon explained that the newly launched division was still in its formative phase. “It is a critical initiative for Sasfin bank, in terms of offering a complete banking solution to our clients and a mechanism to enable us to achieve scalable deposits and growth,” he said.
The group has focused on creating solutions for transactional banking clients which are digitally orientated to add value. This is to allow them to seamlessly manage their transactional banking affairs and effectively manage cash flow, explained Sassoon.
The unit may take time to generate profitability, and although Sasfin is not happy with the rate of client acquisition, they are confident in the offering. The unit is expected to grow its deposit base, he added.
CEO Roland Sassoon added that the unit was key product and part of the strategy to make Sasfin a “one-stop shop” for wealth and business banking clients. It is expected to broaden the group’s franchise value.
Future goals
Sassoon said he was proud of the group’s gains. “It was not easy for a small bank like Sasfin to develop a wide offering to clients. It has been our dream, and the dream is starting to take shape.”
The group has 25 units serving wealth and business markets. They hope to achieve scale and growth in the coming years. Among other goals, the Sasfin plans to improve its BBBEE status this year.
Sassoon added that the group had performed stress tests in preparation for different scenarios in the case of a sovereign downgrade. He also said that despite the political and global uncertainty, the group had lived through such cycles before.
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