The bank that lends to SMEs, Sasfin, says it expects its clients to weather the coronavirus storm, but if any of them need additional credit to keep their doors open or to deal with cash flow problems because they are struggling to sell as consumers self-isolate, it will assess cases on an individual basis and see if it can help.
The group, which has, over the years, carved out a niche to bank and lend to low-turnover businesses that bigger banks do not ordinarily service, has a hands-on approach when it comes to servicing its clients. As such, from initial interactions, the bank is quite confident that both its operations and those of its clients will be okay, said CEO Michael Sassoon.
"But businesses that require credit to keep their doors open, or at the very least to manage liquidity of their cash flows in the coming months, we’ll assess those on a case-by-case basis. And we are willing to engage with clients if we are confident that the client can absolutely weather the storm and recover," said Sassoon.
He said the bank would do what it could to manoeuvre within the regulatory framework and within sound business and governance principles.
Sassoon said Sasfin was obviously concerned about the state of SMEs in the face of Covid-19, and he was hoping that government would announce some sort of intervention to help small businesses.
"This is such a critical sector for job creation and preservation which we now need to talk about," said Sassoon, hours before the Department of Small Business Development announced a Debt Relief Fund on Thursday.
Sassoon said the businesses that Sasfin lends to typically have asset-backed credit, such as financing of equipment, stock or borrowing against their debtors’ books.
"We have no unsecured credit to the business community of any substance. Therefore, I think we are relatively well placed to weather this storm. My concern is that there’ll be less demand for credit because businesses won’t be buying stock, they won’t be buying equipment and won’t be creating debtors in the coming months," he said.
Sassoon said while Sasfin’s clients are "quite resilient", it was hard to tell what would happen with Covid-19. He said because of anticipated reduction in demand for credit from SMEs, the group was expecting a decline in its turnover for 2020. The bank also expects some clients to sit on cash as opposed to investing it with its other divisions, but at the same time, the extra cash will help the bank reduce its cost of funding.
Sasfin also has a wealth, asset management and capital division in the group, over and above the banking unit.
The group grew its earnings per share by 5.67% in the six months to 31 December 2019, but its headline earnings were down 2.27% due to adjustments in 2018 that did not recur in 2019.
Even though SMEs were under pressure as the South African economy contracted in both the last two quarters of 2019, Sasfin improved its credit loss ratio to 117 basis points from 123 in December 2018.