Sasfin Group’s headline earnings per share for the year to 30 June 2023 declined 19.4% to 366.18 cents from 454.43 cents per share a year earlier, mainly due to rising costs and higher impairments. The Bank saw healthy balance sheet growth, as total core funding grew 10.8%, net loans and advances were up 11.5% to R9.0 billion, and Sasfin Wealth recorded a 12.3% growth in Assets Under Advice and Management (AUM),to R66.4 billion.
Total income growth of 7.3% was offset by cost growth of 10.6% and a higher credit loss ratio of 125 bps (2022: 25 bps), which came off an unsustainably low base in 2022.
CEO Michael Sassoon emphasised that the business has embarked on a strategic reset underpinned by its core Wealth, Rental Finance, and focused Banking activities. “We have made tough decisions to ensure we are geared for future growth,” he said. The strategic reset sees the Group zoning in on businesses that generate a higher Return on Equity, where it has strong competitive capabilities. In this regard, Sasfin recently announced the disposal of its Capital Equipment Finance and Commercial Property Finance businesses books to African Bank Limited (ABL), valued at R3.26 billion. This sale is subject to suspensive conditions, including regulatory approval, expected to be fulfilled early next year.
During the year, Sasfin did a lot of work on strengthening controls and financial reporting. Through this process, Sasfin became aware that certain transactions had not been correctly accounted for in prior periods, resulting in restatements. This contributed to delayed results as the company sought additional assurance, including a thorough review and substantive audit which provides additional assurance to all stakeholders.
Last year Sasfin advised stakeholders that no stone will be left unturned through our expanded investigation into allegations of financial misconduct by clients and staff of our foreign exchange area. The conclusion of our investigation revealed a criminal syndicate who colluded to circumvent our internal controls. Sasfin has laid criminal charges against all implicated erstwhile employees and shared all pertinent information with the relevant authorities. The SARB commissioned their own investigation into this matter, including a review of Sasfin’s compliance, governance, and internal control standards, which we have cooperated fully with. The outcome of this investigation has resulted in allegations of non-compliance by Sasfin which, subject to representations and remediation steps, may result in potential sanctions. Our auditors, PwC, issued a suspected reportable irregularity relating to this matter, which they concluded based on the audit evidence they reviewed including remediation steps taken by Sasfin, is no longer ongoing.
“All banks are under constant threat of attack from criminals, and vigilance remains critical. Sasfin has zero tolerance towards any unethical behaviour and we have taken decisive action in this regard to tackle financial crime head on,” said Sassoon.
Asset Finance headline earnings declined by 12.25% to R 143.7 million (2022 restated: R163.8 million), driven by higher impairments. Post the ABL transaction, this Pillar will comprise a focused Rental Finance business that Sasfin has built over three decades on deep relationships with equipment suppliers and a granular base of loans advanced to South African businesses. “Our strong distribution channels, excellent client service and long-standing relationships in Rental Finance, underpinned by an understanding of our clients’ needs continues to position us as a market leader in this sector,” said Sassoon.
Wealth saw a significant increase in headline earnings to R94.2 million (2022: R45.5 million), due to strong income growth, off the back of the growth in AUM and income from associates. Wealth continues to expand its investment management and distribution capabilities. “This award-winning business has enjoyed several years of consecutive growth. We will continue to institutionalise the business to drive further growth in AUM, which positions it well into the future,” says Sassoon.
Business and Commercial Banking recorded a headline earnings loss of R104.3 million (2022 restated: R40.3 million loss) due to the significantly higher costs and impairments referred to above. As part of the strategic review, we have exited non-core activities, reduced headcount, and scaled back on investment. We continue to streamline the business around our strong core capabilities, which will result in improved, less volatile, consistent performance.
“We are confident in the prospects of our core activities, both in terms of financial returns and competitive positioning. We continue to strategically review our business to ensure that the outcome lends itself to leaner focused activities, driving positive earnings, thereby enhancing sustainable stakeholder value,” concludes Sassoon.