Sasfin takes cautious approach


Sasfin takes cautious approach


Published Date: 2021-03-04 | Source: Stephen Gunnion | Author: Stephen Gunnion

Sasfin takes cautious approach

Despite returning to profitability, the business bank and financial services group is remaining prudent by withholding an interim dividend.

Sasfin is remaining cautious, withholding an interim dividend due to the ongoing impact of Covid-19 on its operations. While the SA Reserve Bank has relaxed guidance on dividend payments by banks, the financial services group said the business credit environment remained exceptionally challenging for now. Still, it returned to profitability for the first half of its financial year after swinging to a loss last year due to the impact of the pandemic.

In an updated guidance note last month, the SARB's Prudential Authority said banks could resume distributions and executive bonuses, but should continue to act prudently. That followed a guidance note last April in which it advised them to withhold any payments due to the heightened stress Covid-19 was likely to place on the banking system.

While Sasfin's capital adequacy ratio remained stable at just over 17%, and its liquidity coverage and net stable funding ratios remained strong and above minimum requirements, the bank said it had decided to remain prudent for now. Over the past 12 months, it said it had created over R300 million in credit provisions to appropriately recognise the risk of clients potentially not being able to meet their obligations.

Releasing its interim results to end-December, Sasfin said the pandemic continued to have a severe impact on its expected credit loss that it recognised on loans and advances due to the strain South African business customers had come under. It also had a negative effect on its fair value measurements of its private equity and property portfolios. Its credit loss ratio doubled to 240 basis points.

Total assets declined by 13.6% to R12.6 billion for the six months to end-December, with net loans and advances contracting 13.4% to R6.36 billion due to lower demand and its own conservative approach to extending credit during the Covid-19 lockdowns. Deposits fell 3.1% to R4.83 billion.

Total income declined by 1.5% to R633 million, as improved profit margins in Sasfin Bank and increased revenue in its wealth businesses were offset by the lower loans and advances as well as a decline in fair value valuations. Profit before tax came in 53% down at R56.4 million and headline earnings fell 66% to R26.9 million, mostly as a result of the provisions it made for credit impairments. Headline earnings per share were down by the same margin at 83.54c.

Sasfin said it had obtained the Prudential Authority's consent to proceed with the repurchase of its preference share, which it first announced last September. It said it would announce the terms of the proposed buyback shortly.

Its shares fell 1.5% to R18.55 in thin trade yesterday.


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