Sasfin withholds final dividend as COVID-19 weigh on earnings

Sasfin, the financial services provider, has recently reported a headline loss per share of 151 cents, a stark contrast to the headline earnings per share of 501 cents previously. The impact of the COVID-19 pandemic has significantly affected the company's earnings, leading to a difficult period of managing provisions and losses. CEO Michael Sassoon joined CNBC Africa to shed light on the challenges faced by Sasfin amidst the ongoing crisis. Sassoon highlighted that one of the biggest headaches of managing COVID-19 in the business has been creating provisions based on expected credit losses. The banking group had to factor in macroeconomic forecasts and the sectors they lend to while accounting for credit losses. The increase in credit losses led to a credit loss ratio of 300 basis points and a coverage ratio of 8%, reflecting extensive provisions made for loans on the balance sheet. These provisions accounted for both up-to-date loans and overdue and non-performing loans. Additionally, Sasfin faced a significant write-down in its private equity portfolio, considering forward-looking factors like forecast cash flows and risk environments. Despite these challenges, the wealth business performed well under the circumstances. The company's balance sheet was strengthened to weather the storm and capitalize on future opportunities. Sasfin is now considering a transaction to buy back shares from preference shareholders amounting to about 180 million rands. The preference shares have been trading at a discount to their par value, making them an expensive form of funding. By offering liquidity events at a premium to shareholders, Sasfin aims to enhance its funding mix and overall capital structure. The company's recent collaboration with the Dutch Development Bank, FMO, signals future growth opportunities and a focus on digitization. In a cautious update regarding a transaction with the efficient group, Sassoon mentioned positive engagement and progress in finalizing due diligence and legal agreements. Sasfin is currently working towards obtaining necessary waivers from other stakeholders involved in the transaction, inching closer towards completion. While challenges persist, Sasfin remains optimistic about navigating the current economic landscape and positioning itself for sustainable growth in the future.