Sasfin has recorded a significant drop in profits as customers struggle to pay back loans.
According to the group’s delayed financial results for the year ended 30 June 2023 (FY23), headline earnings plunged 19.4% to 366.18 cents from 454.43 cents per share in FY22 due to rising costs and higher impairments.
Despite seeing total income growth of 7.3%, this was offset by cost growth of 10.6% and a higher credit loss ratio of 125 bps (2022: 25 bps).
The group’s credit impairments rose from R18.2 million in FY22 to R77.44 million in FY23.
Sasfin is not alone in this, as several other banks have seen a substantial increase in credit impairments.
In its interim results for the six months ended August 2023, Capitec said that its credit impairments increased by 62% to R4.7 billion (August 2022: R2.9 billion).
Nedbank’s credit impairments also increased by 57% in the first half of the year due to high-interest rates, increased inflation and heightened load shedding.
Looking at specific areas, Sasfin’s Asset Finance Headline earnings dropped by 12.25% to R143.7 million (2022 restated: R163.8 million), primarily due to higher impairments. This will shift to a focused Rental Finance Business next year.
“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 CEO Michael Sassoon.
Business and Commercial Banking saw a headline earnings loss of R104.3 million (2022 restated: R40.3 million loss) due to higher costs and impairments.
Wealth, on the other hand, saw an increase in headline earnings to R94.2 million (2022: R45.5 million) following strong income growth due to growth in AUM and income from associates.
Amidst the current and forecast challenging economic conditions and the disappointing financial performance, the group declared no final dividend for the period (2022: 120.90 cents).
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CEO Michael Sassoon said that the group has started a strategic reset focused on its core Wealth, Rental Fiance and Banking activities, with the group selling its Capital Equipment Finance and Commercial Property Finance businesses to African Bank for roughly R3.26 billion.
The group added that an internal investigation uncovered a criminal syndicate that conspired to circumvent its internal controls. All implicated employees are now facing criminal charges.
The SARB did its own investigation, which resulted in allegations of non-compliance in which the group may have potential sanctions. PwC, the group’s auditors, said that the reported irregularity relating to the matter 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.
“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.”