Sasfin baits its banking hook
Niche outfit is working on new transactional offerings
ROLAND Sassoon, Sasfin Holdings CEO, aims to lure more high-income clients with a new suite of products.
Competition has been tough in the private banking sector, especially for niche banks, so it is not surprising that Sassoon wants to enhance the company’s competitive appeal.
Sasfin Bank is in the final stages of introducing a transactional banking offering to high-net-worth individuals who are traditionally serviced by the likes of Investec, FNB Private Wealth or RMB Private Bank.
It will offer clients a transactional account that they can manage through online banking, debit card and mobile banking.
The transactional offering is likely to serve as a defensive mechanism for Sasfin. Even though it could have a loss in its first year, the offering will shield it from its rivals, which have been trying to lure its clients.
“The other reason is that we are currently susceptible to other banks being able to see our interactions with our clients . . . we want to take that risk off their radar,” said Sassoon.
He was referring to Sasfin Bank clients with transactional accounts at other banks who invest through Sasfin.
The move into retail banking will be pitched only at the big earners.
“We don’t want to become a Capitec,” said Sassoon. Sasfin, which attained its banking licence 15 years ago, aims to remain a specialist bank.
Sassoon can take comfort in the fact that although confidence in the retail sector is marginally firmer, the outlook is weak. The Ernst & Young’s (EY) banking survey found that retail bank confidence was moderately stronger in the first quarter this year, rising from 30 index points in last year’s fourth quarter to the current 38 index points. Investment banking confidence fell from 82 to 73, even though the sector benefited from stronger corporate sector prospects.
“In fact, the second half of 2013 was the first reporting period where investment banking earn- ings achieved pre-global financial crisis levels,” said EY’s financial services sector leader for Africa, Emilio Pera.
Sassoon disputed that his competitors ought to be worried about his stealing their lunch, because his bank is tiny.
Even with its modest size, though, it has more than 25 prod- ucts, including wealth and asset management, trade and debtor finance, capital markets and various commercial solutions.
It has also been considering doing business elsewhere in Africa.
So far, it has been doing suitcase banking, but Sassoon said Africa was very important to him and getting into the rest of Africa would be a “significant strategic move”.
Another route for the cashflush bank is to find acquisitions. It had a go at acquiring Mercantile Bank in 2010, but the deal flopped.
Sassoon said that so far no possible targets had been found, but the bank was on the lookout.
Sasfin Bank arguably has a knack for generating recurring profits. Rating agency Moody’s, which recently affirmed its outlook for the banking unit of the group as stable, says it does not expect any short-term downward pressures in the bank’s financial metrics, despite the tough operating environment in South Africa.
The rating agency considers Sasfin Bank’s profitability levels “sustainable”, given its highquality service positioning in its specialised businesses.
But its earnings diversification remains weak because of the dominance of office-equipment finance loans in the overall business mix.
Moody’s is comfortable with the fact that the bank is growing its customer deposits, which had risen 50% year on year at the end of December.
The rating agency also believes that the bank’s longstanding and well-established franchise in South Africa’s securitisation market helps to mitigate refinancing risk.
The total assets of the bank’s parent company, Sasfin Holdings, grew 36% to R7.4-billion, largely as a result of a 21% growth in the business banking division, with loans and advances reaching R3.8-billion.
Total income jumped 15% on growth in loans and advances and expansion of the noninterest revenue base.
This is despite the fact that the Bureau for Economic Research revealed that investment banks’ confidence took a knock compared with retail banks’ in the first quarter of this year.
Although this is the case, the specialised second-tier bank refuses to enter the mass retail banking market.
This will shield it from rivals that have been trying to lure its customers