Why Sasfin Holdings reported a disappointing result for 2016

Why Sasfin Holdings reported a disappointing result for 2016

Sasfin Holdings said is posting a disappointing earnings for the six months ended 31 December 2016. The group said its headline earnings and headline earnings per share dropped by 18.84% to ZAR86.142 million

In the December of 2015, the group posted ZAR106.137 million and 271.42 cents (December 2015: 334.43 cents) for the six months to December 2016 respectively, after achieving a 29.0% increase in headline earnings for the year to June 2016. Dividends per share showed

Sasfin said the volatility in earnings is a function of the lack of granularity of assets in Sasfin, as a small banking group, in comparison to the larger banks. Further reasons for the poor performance were the low growth levels (assets grew by 7.48% and gross loans and advances by 7.89%) and a material increase in expenses in order to comply with new regulations and position Sasfin for strong growth.

The Group expanded its funding base to R8.158 billion from R7.316 billion in December 2015 resulting in a liquidity
position of R2.838 billion and is well positioned to meet the funding requirements of the Group. Total income grew by 4.30% on the back of lower levels of revenue generation in the Business Banking and Wealth divisions. The Group has benefited from a lower tax charge for the period due to a larger share of income subject to lower rates of
taxation.

The challenging credit environment, sluggish economy and two material impairments led to the Group credit loss ratio
increasing to 121 bps (December 2015: 51 bps) with a commensurate increase in non-performing loans to R466 million from
R233 million in December 2015. Subsequent to the December 2016 reporting period, non-performing loans reduced to R349 million following certain loan recoveries.

Group costs increased by 9.15% to R440.888 million (December 2015: R403.928 million) with increased investment in Risk,
Compliance and Information Technology, whilst staff costs decreased by 4.33% largely as a result of the deconsolidation
of Imperial Sasfin Logistics (Pty) Limited (ISL) (previously Sasfin Premier Logistics (Pty) Limited).

The Group and Banking Group’s cost-to-income ratios regressed to 72.05% (December 2015: 70.92%) and 66.47% (December 2015: 62.53%) respectively. The rising cost-to-income ratios are largely as a result of the significant investments made in the Information Technology, Risk and Compliance units.

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