Sasfin suffers 62.5% interim earnings plunge as it still sits in Sars’ crosshairs

Sasfin offices in Johannesburg. Picture: Bhekikhaya Mabaso/ Independent Newspapers

Sasfin offices in Johannesburg. Picture: Bhekikhaya Mabaso/ Independent Newspapers

Published Mar 28, 2024


A 62.5% plunge in interim headline earnings worsened the plight of Sasfin, which is facing a R4.87 billion suit from the South Africa Revenue Service (Sars) for allegedly covering up for clients who may have repatriated large sums of funds without paying due taxes.

Sasfin has been in the crosshairs of Sars, with the taxman saying it had conducted a thorough investigation that unearthed how clients of Sasfin Bank had colluded to expatriate funds offshore in a manner that jeopardised the recovery of due taxes in South Africa.

Sasfin said yesterday it was continuing to engage regulators regarding the suit by Sars.

“On the basis of strong legal opinion, Sasfin Holdings concluded that the claim (by Sars) will not result in the recognition of any liability and the likelihood of an outflow of resources embodying economic benefits is remote. Sasfin Holdings continues to engage with its regulators in this regard,” Sasfin said yesterday.

Sasfin admits, though, that its former foreign exchange clients “operated as a syndicate that ran an unlawful scheme to facilitate the expatriation of money” out of South Africa. The syndicate had “colluded with former employees of Sasfin Bank who operated outside the scope” of their employment.

The hefty suit on Sasfin by Sars was now casting some uncertainty on the company’s going concern status, said market analysts, although the company said there had been no changes to its contingent liability position as it is engaging the South African taxman in relation to the sanction.

The company’s market capitalisation is at R508.8 million.

Sasfin’s plight was yesterday further compounded by a poor interim financial performance. It reported a 62.5% plunge in headline earnings for the half-year period to the end of December 2023 to R24.4 billion.

Sasfin said the fall in headline earnings was attributable to the impact of negative adjustments to the group’s fair value loans and private equity portfolio as well as an increase in credit impairments.

Total income for the half year period also decreased to R653.6m compared to R704.1m in the same period in 2022. This was “primarily a result of the fair value adjustments, while net interest income grew due to the healthy margins” within its book. Positively, though, Sasfin recorded a reduction in total costs of 5.70% to R547.7m.

Shares in the financial services holding company traded unchanged on the JSE at R15.75 yesterday as its cost to income ratio increased by 131 basis points to 83.79% against a 3.7% increase in its core funding of R9.8bn.

Assets under management and advice for Sasfin inched higher from R63bn to R64.3bn as the asset finance and wealth divisions posted “solid financial performance” during the half year period under review.

Operating profit from the asset finance segment of Sasfin benefited from higher income of R312.5m and was reported at a 10.5% elevation of R101.1m. Sasfin’s rental finance business continued “to operate at a healthy scale and is well positioned both in terms of financial and competitive” strength, the company said.

Its business and commercial banking operation was hobbled by headwinds in the operating environment, which saw the unit record an operating loss of R58.4m. Credit impairment charges for the business and commercial banking unit also increased.

Sasfin group CEO Michael Sassoon said, “While we continue to navigate challenges, I am confident that through our strategic reset, which is on track, Sasfin will emerge stronger and be able to deliver enhanced stakeholder value.”

He added that the “disposal of Capital Equipment and Commercial Property Finance businesses to African Bank subject to regulatory approval, as well as the exit of some of our non-core activities, are important steps in providing strategic flexibility” for the company.