Companies and Deals

Group maintains that Sars’s R4.9bn summons for unlawful offshore flows has little chance of success.

SASFIN

Sasfin elected not to pay an interim dividend. Image: Moneyweb

Boutique banking and wealth management firm Sasfin reported a steep 62.5% slide in headline earnings for the six months ended 31 December 2023 on Wednesday.

The group, which has asset finance, business and commercial banking, and wealth segments in its portfolio, ascribed the decrease in overall earnings to higher credit impairments due to challenging economic conditions and negative adjustments to its fair value loans and private equity portfolio.

Sasfin’s share price closed over 3.17% down on Wednesday at R15.25.

Sars summons update

In its interim results announcement, Sasfin gave an update on the summons it received from the South African Revenue Service (Sars) in February, involving two damages claims of R1.97 billion and R2.9 billion.

Sars argues that several of Sasfin Bank’s clients were assisted by bank staff in unlawfully shipping billions of rands offshore.

Read: Sars targets Sasfin over dealings with alleged ‘Gold Mafia’ clients

According to Sars, the ultimate responsibility is that of Sasfin Bank executives and directors, who must ensure compliance with the relevant legislation when transfers are made to persons outside of South Africa.

Sasfin CEO Michael Sassoon said earlier that the group would defend the claims and that they had no merit.

Read: Sasfin rejects R4.8bn claim from Sars

“The summons, according to Sasfin, arises from Sars’ purported inability to collect income tax, VAT [value-added tax], and penalties allegedly owed by former foreign exchange clients of Sasfin Bank. Former foreign exchange clients of Sasfin Bank operated as a syndicate that ran an unlawful scheme to facilitate the expatriation of money out of South Africa and colluded with former employees of Sasfin Bank who operated outside the scope of their employment,” it said in its results statement.

The group reiterated that Sasfin Bank took decisive action when it became aware of this unlawful scheme, which led to the termination of relationships with the implicated clients and employees and the opening of criminal cases against them.

The legal opinion Sasfin obtained on Sars’s claim stated it “falls outside of the parameters of applicable law and has a remote likelihood of success”.

The group, however, continues to engage with Sars on the matter. The value of the claim is more than 10 times the group’s market capitalisation on the JSE.

Group focusing on core businesses

As for the group’s operations, Sasfin said it is focusing on its core businesses while exiting non-core activities.

It advised shareholders in October last year that it was selling its capital equipment finance and commercial property finance business to African Bank. The sale is expected to be finalised before the end of the current financial year.

Read: African Bank’s expansion boosted by Sasfin deal

Sasfin’s total assets decreased by 1.63% to R13.4 billion for the six months under review, while core funding increased by 3.78% to R9.9 billion. Net available cash and near cash increased by 40.39% and ended at R2.1 billion.

The group’s asset finance segment recorded an upswing in operating profit of 10.5%, thanks to income growth and efficiencies that led to a marginal reduction in operating costs.

Its business and commercial banking business, however, experienced an operating loss of R58.5 million (2022: R50 million loss) due to lower non-interest income and higher credit impairment charges. Total income dropped by 22.6%.

Operating profit at Sasfin Wealth declined marginally to R59.4 million for the six months (2022: R59.8 million). The unit’s private client business showed growth in assets under management, including in its offshore offerings.

There is no dividend payable to shareholders in the reporting period.