Credit loss hits Sasfin’s earnings


Credit loss hits Sasfin’s earnings

Published Date: 2018-03-22 | Source: Stephen Gunnion | Author: Stephen Gunnion

Credit loss hits Sasfin’s earnings

The niche bank and asset manager has reported a sharp drop in first-half profit due to a large credit event related to a single client

Sasfin's new CEO Michael Sassoon had the dubious honour of presenting his first results since taking over the position from his father Roland in January - with a sharp drop in first-half profit.

A large credit event related to a small business client that went into liquidation is to blame for the slump in earnings from the niche bank and asset manager. As a result, its credit loss ratio deteriorated to 200 basis points from 121 basis points. It was also impacted by a change in the accounting estimate of certain deferred tax assets and a change in its estimate of a deferred tax liability.

Those aside, net interest income grew in line with growth in loans and advances at 6.51% notwithstanding an increase in its cost of funding. Despite positive income growth in Sasfin Wealth and the growth in net interest income, total income declined by 2.48% due to a decrease in non-interest revenue primarily due to lower income levels at Sasfin Capital.

For the six months ended December, Sasfin reported a 14% increase in total assets to R13.2 billion. Total gross loans and advances rose 7.1% to R6.86 billion and non-performing loans and advances declined by 14% to R402 million. It says a focus on cost management resulted in a 7.53% decrease in costs to R408 million. Headline earnings per share fell 42% to 157.95c and it's trimmed its dividend by 41% to 46.89c. Its return on equity, an important measure of performance, declined to 6.86% from 12.23%

Sasfin Bank reported a 53% slide in headline earnings to R38.8 million. The purchase of Absa Technology Finance Solutions resulted in some once-off costs but it says the deal will result in further critical mass in its Equipment Finance division once it takes effect next month.

Sasfin Wealth more than doubled headline earnings to R23.8 million. It says while local portfolio management and stockbroking fees were flat, there was a 50.6% increase in foreign income earned from managed global share portfolio and institutional asset management. In the previous period, it was affected by investment losses related to its shareholder in the Efficient Group. Assets under management increased by 8.1% to R40 billion while assets under administration rose 21.6% to R62 billion.

Sasfin Capital reported a headline loss of R4.54 million from earnings of R6.86 million due to lower fair value adjustments and tax changes.

The group says while renewed business and investor confidence bode well for its business it expects trading conditions to remain difficult for the remainder of its financial year.

It's shares ended trade unchanged at R46.88 on Tuesday. They fell 8.9% on 6 March after the group issued a trading statement.

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