Sasfin warns things could get worse for struggling businesses

Financial-services provider Sasfin Holdings expects the first half of the year to be particularly tough on SA’s small businesses, as the coronavirus hits in an environment that has already seen a sharp rise in insolvencies over the past year.

Sasfin said it was adopting a cautious approach to issuing credit and would work closely with clients who had fallen on tough times, as it waited to see how the government responds to an environment in which some businesses are struggling with limited to no cash flow.

Sasfin CEO Michael Sassoon said the group often had senior officials engage deeply with good companies that may be too small to get similar attention from larger banks.

Sasfin is also engaging with the Banking Association SA (Basa) and the Reserve Bank, in expectations that there may be support for businesses — or changes in lending regulation — similar to efforts in other countries seeking to combat the effects of the coronavirus, Sassoon said.

“We want to be able to support our clients to the degree that is possible.”

“There has been a marked increase in business insolvencies in SA over the past 12 months, “and it would seem as though this is not going to abate”, the group said.

Group profit rose about 5.4% to R87m in its six months to end-December, with the group benefiting from improved profitability in its banking division, where impairments decreased by almost a third.

The group’s banking pillar grew profit 17% to R68.15m.

Sassoon said impairments had risen over the past few years, and the decrease had brought levels more or less in line with the company’s historical averages.

SA banks, including Standard Bank and FirstRand, recently warned that credit impairment charges had risen, Standard Bank saying those rose by almost a quarter in its year to end-December.

Sasfin said that while some of its clients were struggling in this economic environment, it had managed to enhance the overall credit quality of its book by reducing exposure to high-risk clients, while ensuring book growth from better credit-quality clients.

The group’s wealth pillar saw a slight decline in profit, reporting that it continued to be hit by lower brokerage and portfolio management fees, due to the state of SA’s equity markets.

Things were undoubtedly getting tougher for SA business, particularly smaller businesses without deep pockets, but it was questionable just how much the government could afford, given the state of the budget deficit, said an analyst who asked not to be named.  — BusinessLIVE

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