Sasfin feels clients pressure ’
CEO does not expect swift return to 2019 levels
Financial services provider Sasfin Holdings, which slipped into a loss in the year to June, is bracing for more pain thanks to the Covid-19 pandemic. The group reported a headline loss of R48.1m in its year to end-June, from headline earnings of R161.3m previously, amid pressure on its private-equity valuations and on its clients.
Financial services provider Sasfin Holdings, which slipped into a loss in the year to June, is bracing for more pain thanks to the Covid-19 pandemic.
The group reported a headline loss of R48.1m in its year to end-June, from headline earnings of R161.3m previously, amid pressure on its private-equity valuations and on its clients.
Sasfin, which specialises in lending to and facilitating transactions for low-turnover businesses, said a mix of factors weighed on the business with its clients ’ appetite for credit waning and asset purchases dropping in the last quarter of 2020.
Sasfin also had to increase impairments significantly to accommodate future economic shocks.
Speaking to Business Day after delivering the company’s financials, CEO Michael Sassoon said while he expected a quick recovery in the coming financial year, earnings would not return to 2019 levels, given the extent of uncertainly in the market.
“We ’ ll recover quite quickly. There will be some muted loans growth, which means that it’s very difficult to tell, because there’s uncertainty in the market. Exactly how long it will take and what form it will take all depends on what happens in this economy in the next few months relative to what we’ve anticipated,” Sassoon said.
The group’s arrears book deteriorated as SA businesses faced increasing pressure in the fourth quarter, causing a rise in the balance-sheet credit loss coverage ratio, which grew to 7.96%, compared with 5.09% in 2019.
Nonperforming loans rose to 10.26% of the group’s total book from 9.22% previously, while its credit-loss ratio almost tripled to 303 basis points.
Sasfin adopted a more conservative credit approach during the lockdown as the virus menaced SA businesses with credit risk rising.
The result was total assets falling 4.08% to R14bn and net loans and advances contracting 11.87% to R6.6bn.
“When Covid hit and the first lockdowns came into effect, you had to rethink credit immediately because a business which, for example, was in leisure or tourism and had a decent balance sheet and wellrun business, and may have been a really good credit decision in January, today might not be a good business,” he said.
“You had to, kind of, on the fly, amend your approach to credit. Now that I think we know a bit more, it’s a very uncertain paradigm in which to grow a credit portfolio,” he said.
Sasfin Bank posted an operating loss of R51.39m vs the R169.02m profit previously. This was driven by a spike in credit losses, while income contracted as a result of lower volumes.
Sasfin said it entered into a R1bn partnership with Dutch Development Bank as it seeks to grow lending for small to medium enterprises.
The partnership is made up of a R390m term facility and a $35m loan guarantee facility to provide loans to women, youth, migrants and Covid-19-affected businesses.
Sasfin Capital’s operating losses increased by R66.08m as a result of the revaluation of its private and property equity portfolios, while Wealth had an increase in operating profit to R66.41m, which was helped by the 18.45% growth to R48.7bn in assets under management.
At close of trade, the share price was marginally down at R15.40, giving the group a market capitalisation of R497.4m. The share price has fallen about 46.8% so far in 2020. /