Johannesburg, 19 June 2014 — Global Credit Ratings (“GCR”) has today affirmed the national scale ratings assigned to Sasfin Holdings Limited of BBB+(ZA) and A2(ZA) in the long term and short term respectively; with the outlook accorded as Stable. Furthermore, GCR has affirmed the international scale rating assigned to Sasfin Holdings Limited of BB+; with the outlook accorded as Stable.
SUMMARY RATING RATIONALE
GCR has accorded the above credit rating(s) to Sasfin Holdings Limited (“Sasfin”) based on the following key criteria:
Sasfin’s established franchise within its target markets and client base, and stable earnings, support its ratings. Adequate capital, increasing funding diversification, and low/moderating credit risk indicate a sound balance sheet. However, the group’s stability and prospects must be seen in the context of negative macroeconomic trends which impact consumer confidence and the credit cycle, and Sasfin’s small size. Ratings exclude the prospect of systemic support, given its low likelihood. The stable outlooks on the ratings reflect business sustainability, progress towards the group’s strategic objectives, and continued – mainly organic – business expansion. Improved diversification of earnings and access to cheaper funding supports net income. In F13 and 1H F14, earnings from Wealth Management, and other fee-generating divisions counteracted a flat Business Banking performance.
Reduced impairments and stable provisions (4.2% of gross assets), implying rising non-performing loan (“NPL”) coverage, improved asset quality. A shorter-term loan book (54% due within a year at FYE13 vs. 25% at FYE12) may be a contributor to the falling impairments, and has positive implications for balance sheet liquidity, but has depressed margins.
Despite a challenging operating environment, Sasfin posted 1.2% (annualised) net income growth in 1H F14 (F13: 14.8%). All business segments posted solid top-line growth, with margin retention and lower impairment charges tempered by a lower yield earned on the high proportion of liquid assets. High operating costs (supporting business development, particularly in Wealth Management and Transactional Banking) constrained net income growth somewhat.
Asset and earnings growth prospects are modest, but Sasfin seems well positioned to generate stable earnings while maintaining adequate capital and balanced funding. Sasfin’s focus on asset/trade finance, its personalised client approach, and the short- to medium-term nature of much of its lending, partly mitigates risks associated with the general economic malaise.
Sasfin’s natural concentration risk given its niche business/client base, small size and lack of access to systemic support, make an upgrade unlikely. Higher ratings would, at least, require further funding diversification, and increased business scale and diversification. However, declining asset quality or diminishing profitability, earnings diversification, and capitalisation levels would put downward pressure on ratings.
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The ratings above are unsolicited and accorded based on publicly available information.
| NATIONAL SCALE RATINGS HISTORY | INTERNATIONAL SCALE RATINGS HISTORY |
| Initial rating (Dec/2006) | Initial/Last rating (June/2013) |
| Long term: BBB+(ZA); Short term: A3(ZA); | Long term: BB+ |
| Outlook: Stable | Outlook: Stable |
| Last rating (Jun/2013) | |
| Long term: BBB+(ZA); Short term: A2(ZA); | |
| Outlook: Stable | |
ANALYTICAL CONTACTS
Primary Analyst
Omega Collocott
Senior Credit Analyst
(011) 784-1771
omegac@globalratings.net
Committee Chairperson
Dirk Greeff
Sector Head: Financial Institution Ratings
(011) 784-1771
dgreeff@globalratings.net
APPLICABLE METHODOLOGIES AND RELATED RESEARCH
GCR’s Global Master Criteria for Rating Banks and Other Financial Institutions
Sasfin rating reports (to 2013)
RATING LIMITATIONS AND DISCLAIMERS
ALL GCR’S CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://GLOBALRATINGS.NET/UNDERSTANDING-RATINGS. IN ADDITION, GCR’S RATING SCALES AND DEFINITIONS ARE ALSO AVAILABLE FOR DOWNLOAD AT THE FOLLOWING LINK: HTTP://GLOBALRATINGS.NET/RATINGS-INFO. GCR’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, PUBLICATION TERMS AND CONDITIONS AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE AT HTTP://GLOBALRATINGS.NET.
SALIENT FEATURES OF ACCORDED RATINGS
GCR affirms that a.) no part of the rating was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity; c.) such rating was an independent evaluation of the risks and merits of the rated entity; and d.) the validity of the rating is for 12 months, or as indicated by the applicable credit rating document.
Sasfin Holdings Limited did not participate in the rating process, though GCR is satisfied that the public information available was sufficient.
The credit ratings above were disclosed to Sasfin Holdings Limited with no contestation of/changes to the ratings.
The ratings above are unsolicited and accorded based on publically available information.
The information received from Sasfin Holdings Limited and other reliable third parties to accord the credit rating(s) included Sasfin Holdings Limited’s 31 December 2013 interim financial results, and 30 June 2013 audited financial statements (plus three years of comparative numbers), and banking sector information (as supplied in the BA900 Reserve Bank of South Africa reports).
