JOHANNESBURG – Financial services group Sasfin had a tough time of it in the year to June, taking broadsides in headline earnings and headline earnings a share, but salvaged some headwind marginally through total income, which improved 4.46 percent to R1.219 billion from last year’s R1.167m.
Sasfin, a bank-controlling company that provides a comprehensive range of specialist financial products and services for business and wealth clients, saw a 37 percent decline in headline earnings which slipped to R122.1m from R194.1m at the same time in 2017.
Headline earnings per share dropped by 37.69 percent to 381.21c compared with 611.76c in 2017, primarily due to a significant increase in the credit loss ratio to 197 basis points a share (bps) from 124 bps in 2017.
It saw a 77.04 percent growth in impairments on the back of a single large credit default and an increase in portfolio impairments, resulting in the profit before tax declining by 16.25 percent to R203.874m. In addition, non-performing loans increased by 22.3 percent to R234.625m.
“We are concerned about the deteriorating performance of our credit book over the last two years and have taken significant steps to improve our credit processes and team,” Sasfin said.
Sasfin said despite a robust global economy and markets, it was affected by policy uncertainty, most notably with regards to private property rights, which it says has further reduced investor confidence.
“Specifically, the increase in business and investor confidence post the ANC national conference was short-lived, with renewed concerns around the state of the economy, which has gone into recession,” it said.
Grow revenue
36One analyst Wessel Badenhorst said at a high level Sasfin generally managed to grow revenues in line with market trends, but results were affected by accounting adjustments relating to loan provisions and future tax expectations.
“New businesses were acquired late in the year and, therefore, not fully reflected in the results. If Sasfin can reduce impairment losses on the loan book in the coming years, this, together with the revenue from the new businesses, should result in a return to earnings growth,” he said.
Sasfin has reconfigured its business to mainly three pillars - banking, wealth and capital - which it anticipates will drive growth going forward.
“Each of the Sasfin pillars have taken meaningful steps in strengthening their teams and expanding their product offering to ensure that they are well positioned to enable growth in the businesses and global wealth of the group’s client,” the group said.
Asief Mohamed, the chief investment officer at Aeon Investment Manangement, said it appeared the deteriorating credit book over the past two years was a contributing factor in a weakening economic environment.
“It remains to be seen whether the number of significant management changes will be able to rein in the increase in credit costs and further portfolio impairments in a competitive banking environment,” he said.