SASFIN posts 23,7% increase in headline earnings
â€¢ Headline earnings per ordinary share 404 cents: 23,7% increase
â€¢ Return on ordinary shareholders' average equity: 31,2%
â€¢ Efficiency ratio improved from 61,1% to 57,9%
â€¢ Group risk-weighted capital adequacy: 37%
â€¢ Return on total average assets: 5%
â€¢ Ordinary dividends per share 161 cents: 23,8% increase
Banking and financial services group Sasfin posted a 23,7% increase in headline earnings per share (HEPS) for the year to 30 June 2006, with improved profitability from all divisions. This comes after a 38% increase in HEPS the previous year.
CEO Roland Sassoon says the group continues to consolidate its position as the preferred banking group for the entrepreneur. "All business units performed well, and the group was aggressive in pursuing business opportunities. These results are particularly pleasing, showing sustained growth over several years."
The group managed its cost base well, and the efficiency ratio improved to 57,9% from the previous year's 61,1%. Total group assets showed strong growth of 47% to R2,5 billion (2005: R1,7 billion), reflecting the increased level of activity in all divisions. The statutory risk-weighted capital adequacy of Sasfin Bank was 28,3% (2005: 25,7%).
The group's return on total average assets was 5% for the year, well above that typically earned by its peers. The return on shareholders average equity for the year was 31,2% (2005: 33,5%).
Two major corporate actions during the year were:
- the acquisition by black economic empowerment company InnoVent
Holdings of 10% of Sasfin Bank's equity; and
- the acquisition, through Hong Kong subsidiary Sasfin Asia Limited, of SBM Nedbank International, a specialist bank registered in Mauritius. Approval for this acquisition is under consideration by the regulatory authorities.
At the divisional level, Business Bankingâ€™s contribution to profits was R54,7 million (2005: R46,8 million), with trade, debtor and capital equipment finance posting excellent results.
The Capital division â€“ including the group's Private Equity, Corporate Finance and Treasury and Securitisation activities â€“ also had a good year with profits of R22,4 million (2005: R15,6 million). All units did well. Treasury and Securitisation increased deposits by 56% to R627 million (2005: R402 million). It also successfully raised R100 million of Perpetual Preference share capital for investment in private equity. Sasfin's securitisation commercial paper has remained constant at R670 million, whilst it undergoes major re-engineering in order to transform to a Domestic Medium Term Note programme.
It was also an excellent year for Personal Wealth, which increased its contribution to R23,2 million from R17,1 million the previous year. Sasfin Frankel Pollak Securities grew assets under management by 42,1% to R21,9 billion, and a R49 million capital gain was realised through the sale of the firm's interest in JSE Limited, which is not included in headline earnings.
The Financial Planning Unit was turned around by the acquisition in January 2006 of PIB Financial Services, a long-established financial planning consultancy based in Johannesburg and Pretoria. It is expected that with penetration of the broader Sasfin client base, profitability in this business will improve significantly.
Specialised Services comprises Freight, Healthcare Consulting, Regulation 28 Consulting, Short-term Insurance Broking and Employee Benefits. All Specialised Services units performed well, with the combined profit contribution increasing from R5 million to R5,7 million.
In terms of Black Economic Empowerment, the group has submitted its 2005 empowerment scorecard to the Financial Sector Charter Council and its empowerment programme is ahead of schedule. Sassoon says the group is well placed to achieve the 2008 charter targets.
Several new business opportunities have been identified and will be pursued in the coming financial year. Sasfin has applied for a foreign exchange licence that will enable it to provide a wide range of foreign exchange services, and plans are well advanced for the launch a property financing division to provide senior and junior debt and equity, subject to the South African Reserve Bank approval.
Sassoon says future performance will be influenced by the level of economic activity in general, interest rate patterns and the performance of the stock exchange. "Indications are that the current level of business activity being experienced by the group will be sustained for the forthcoming financial year. Recent increases in the rate of interest have not had any significant adverse effects and new business inflows continue to be strong."
Sassoon adds that the Group's operations are supported by a high level of capital adequacy at 37% and are benefiting from the ongoing investments made in recent years in human resources, support systems and brand development.
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