Sasfin Group, which reported a 19.4% slide in headline earnings a share in the year to June 30, is resetting strategy as it continues to grapple with issues of financial misconduct among staff and clients.
Last year Sasfin indicated that no stone would be left unturned in an expanded investigation into allegations of financial misconduct by clients and staff of its foreign exchange operations.
The bank’s investigation revealed a criminal syndicate who colluded to circumvent internal controls. Criminal charges were laid against all implicated erstwhile employees, and information was shared with the relevant authorities.
The SA Reserve Bank also started its own investigation into the matter, including a review of Sasfin's compliance, governance, and internal control standards, which Sasfin cooperated with.
“The outcome of this investigation has resulted in allegations of non-compliance by Sasfin which, subject to representations and remediation steps, may result in potential sanctions.
“Our auditors, PwC, issued a suspected reportable irregularity relating to this matter, which they concluded, based on the audit evidence they reviewed, including remediation steps taken by Sasfin, is no longer ongoing,” Sasfin CEO Michael Sassoon said yesterday at the release of the annual results.
“We have taken decisive action in this regard to tackle financial crime head on,” he said.
He said during the year Sasfin did a lot of work to strengthen controls and financial reporting, and through this process, it became aware certain transactions had not been correctly accounted for in prior periods, resulting in restatements.
This had contributed to delayed results as the company sought additional assurance, including a review and substantive audit.
In the past year, balance sheet growth was healthy - total core funding grew 10.8%, net loans and advances were up 11.5% to R9bn and Sasfin Wealth recorded a 12.3% growth in Assets Under Advice and Management (AUM) to R66.4bn.
The lower headline earnings per share was mainly due to higher costs and rising impairments. Total income growth of 7.3% was offset by cost growth of 10.6% and a higher credit loss ratio of 125 bps (2022: 25 bps).
Sassoon said they had embarked on a strategic reset underpinned by its Wealth, Rental Finance, and Banking activities.
The reset saw a zoning in on businesses that generated a higher return on equity, with strong competitive capabilities.
In this regard, Sasfin recently announced the disposal of its Capital Equipment Finance and Commercial Property Finance businesses books to African Bank, valued at R3.26 billion.
In the Business and Commercial Banking unit, a headline earnings loss of R104.3m (2022 restated: R40.3m loss) was reported mainly due to higher costs and impairments.
As part of the strategic review in this unit, non-core activities were exited, headcounts were reduced and investment was scaled back.
“We continue to streamline the business around our strong core capabilities, which will result in improved, less volatile, consistent performance,” said Sassoon.
Asset Finance headline earnings fell 12.25% to R143.7m (2022 restated: R163.8m), driven by higher impairments.
Post the ABL transaction, this pillar would comprise a focused Rental Finance business that Sasfin had built over three decades.
Wealth saw a big increase in headline earnings to R94.2m (2022: R45.5m), due to strong income growth, off good growth in assets under management and income from associates.
Wealth continued to expand its investment management and distribution capabilities. “This award-winning business has enjoyed several years of consecutive growth,” 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,” said Sassoon.
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