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SASFIN HOLDINGS LIMITED - Sasfin Holdings Limited / Sasfin Bank Limited Capital Adequacy Quarterly Report 30 Sept 2018

Release Date: 03/12/2018 17:10
Code(s): SFNP SFN     PDF:  
 
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Sasfin Holdings Limited / Sasfin Bank Limited Capital Adequacy – Quarterly Report 30 Sept 2018

SASFIN HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration Number 1987/002097/06)
Ordinary share code: SFN ISIN: ZAE000006565
Preference share code: SFNP ISIN: ZAE000060273
(“the Group”)


SASFIN HOLDINGS LIMITED / SASFIN BANK LIMITED CAPITAL ADEQUACY – QUARTERLY REPORT 30 Sept 2018


Sasfin Holdings Limited and Sasfin Bank Limited are required in terms of Regulation 43(1)(e)(ii) of the Banks Act, No 94 of 1990, as amended, of South Africa, and Regulations, to report on their capital management plan, capital
strategy, capital structure, capital adequacy and leverage ratio publicly.

The Group's capital management plan and strategy are fully disclosed in the Group's 2018 Integrated Report and the 2018 Audited Annual Financial Statements which are available at www.sasfin.com or from the Company Secretary.

Sasfin Holdings Limited and Sasfin Bank Limited capital structure, capital adequacy, leverage and liquidity coverage ratios at 30 September 2018 are disclosed below.



          KM1 - Key metrics (at consolidated
                                                                                                                                                                                                                          Sasfin Bank Limited
          group level)                                                   Sasfin Holdings Limited                                            Sasfin Bank Limited and Subsidiaries
                                                         R'000        R'000        R'000           R'000            R'000         R'000        R'000        R'000            R'000         R'000         R'000       R'000        R'000         R'000            R'000
                                                          Sept        June         March       December        September     September         June         March        December     September     September        June         March     December        September
                                                          2018         2018         2018            2017             2017          2018         2018         2018             2017          2017          2018        2018         2018          2017             2017
          Key metrics                                       (T)        (T-1)        (T-2)           (T-3)            (T-4)           (T)        (T-1)        (T-2)            (T-3)         (T-4)           (T)       (T-1)        (T-2)         (T-3)            (T-4)
          Available capital (amounts)
    1     Common Equity Tier 1 (CET1)                 1 290 756    1 470 934    1 470 810          1 481 239    1 426 762     1 075 686     1 203 943    1 223 238        1 229 436    1 218 815       853 029     934 416       956 118         969 229       929 470
    2     Tier 1                                      1 365 989    1 546 166    1 546 044          1 575 282    1 520 805     1 075 686     1 203 943    1 223 238        1 229 436    1 218 815       853 029     934 416       956 118         969 229       929 470
    3     Total capital                               1 433 741    1 581 082    1 564 265          1 597 780    1 545 327     1 143 437     1 235 189    1 242 248        1 254 507    1 246 365       913 516     958 148       971 088         990 258       953 172
          Risk weighted assets (amounts)
    4     Total risk-weighted assets (RWA)            8 968 383    9 739 147    9 188 478          8 860 353    8 857 511     7 289 956     8 173 516    7 527 461        7 411 225    6 883 776     6 063 420    6 733 325    6 219 936        6 147 604    5 498 747
          Risk-based capital ratio's as a
          percentage of RWA
    5     Common Equity Tier 1 ratio (%)                14.392       15.103        16.007            16.718        16.108        14.463       14.730        16.250          16.589        17.706        14 068      13.877        15.372          15.766        16.903
    6     Tier 1 ratio (%)                              15.231       15.876        16.826            17.779        17.170        14.463       14.730        16.250          16.589        17.706        14.068      13.877        15.372          15.766        16.903
    7     Total capital ratio (%)                       15.986       16.235        17.024            18.033        17.447        15.374       15.112        16.503          16.927        18.106        15.066      14.229        15.613          16.108        17.334

          Additional CET1 buffer requirements
          as a percentage of RWA

          Capital conservation buffer requirement
    8     (2.5% from 2019) (%)                           1.875        1.875         1.875             1.250         1.250         1.875        1.875         1.875           1.250         1.250         1.875       1.875         1.875           1.250         1.250
    9     Countercyclical buffer requirements (%)        0.000        0.000         0.000             0.000         0.000         0.000        0.000         0.000           0.000         0.000         0.000       0.000         0.000           0.000         0.000

          Total of bank CET1 specific buffer
    `     requirements (%)                               1.875        1.875         1.875             1.250         1.250         1.875        1.875         1.875           1.250         1.250         1.875       1.875         1.875           1.250         1.250

          CET1 available after meeting the bank's
    12    minimum capital requirements (%)               8.892        9.603        10.507            10.718        10.108         8.963        9.230        10.750          10.589        11.706         8 568       8.377         9.872           9.766        10.903
          Basel III leverage ratio
          Total Basel III leverage ratio exposure
    13    measure                                    13 022 234   14 359 382   13 907 040      13 338 513      13 046 766    11 805 504    12 443 407   11 995 049      11 488 764    10 641 153     8 611 399    8 713 981    8 546 668        7 873 029    7 539 578
          Basel III leverage ratio (%) (row 2/ row
    14    13)                                           10.490       10.768        11.117            11.810        11.657         9.112        9.675        10.198          10.701        11.454         9.906      10.723        11.187          12.311        12.328
          Liquidity Coverage Ratio
    15    Total HQLA                                                                                                                                                                                   830 415     669 498       743 380         842 637       592 868
    16    Total net cash outflow                                                                                                                                                                       618 221     369 234       377 798         348 891       295 782

    17    LCR ratio (%)                                                                                                                                                                                    134         181          197              242           200
         Net Stable Funding Ratio
    18   Total available stable funding                                                                                                                                                         4 509 473   4 984 714   5 082 731   4 901 061   4 565 397
    19   Total required stable funding                                                                                                                                                          4 666 482   4 802 770   4 420 682   4 159 529   4 203 833

    20   NSFR ratio (%)                                                                                                                                                                               97         104         115         118         109

         OV1 - Overview of Risk Weighted
                                                                                                                                                               Sasfin Bank Limited
         Assets                                             Sasfin Holdings Limited                 Sasfin Bank Limited and Subsidiaries
                                                          R'000        R'000           R'000           R'000         R'000          R'000             R'000            R'000           R'000

                                                                                  Minimum                                        Minimum                                           Minimum
                                                          Risk          Risk        capital            Risk           Risk         capital            Risk             Risk           capital
                                                      weighted      weighted    requiremen         weighted       weighted    requirement         weighted         weighted    requirements
                                                        assets        assets            ts *         assets         assets             s*           assets           assets                 *

                                                      Sept 2018    June 2018      Sept 2018                      June 2018      Sept 2018                         June 2018
         Risk weighted assets                                (T)        (T-1)            (T)    Sept 2018 (T)         (T-1)            (T)     Sept 2018 (T)           (T-1)   Sept 2018 (T)
         Overview of Risk weighted assets

         Credit risk (excluding counterparty
1        credit risk) (CCR)                           6 085 631     6 574 987         677 026      5 199 606     5 760 393        578 456         4 518 086        5 016 007         502 637
2        Of which: standardised approach (SA)         6 085 631     6 574 987         677 026      5 199 606     5 760 393        578 456         4 518 086        5 016 007         502 637

         Of which: foundation internal ratings-
3        based (F-IRB) approach                                -            -               -               -             -                -               -               -                -
4        Of which: supervisory slotting approach               -            -               -               -             -                -               -               -                -

         Of which: advanced internal ratings-
5        based (A-IRB) approach                                -            -               -               -                              -               -               -                -
6        Counterparty credit risk (CCR)                 100 044      134 684           11 130        105 773       134 684         11 767            98 952          128 869          11 008

         Of which: standardised approach for
7        counterparty credit risk                       100 044      134 684           11 130        105 773        34 684         11 767            98 952          128 869          11 008
8        Of which: internal model method (IMM)                 -            -               -               -             -                -               -               -                -
9        Of which: other CCR                                   -            -               -               -             -                -               -               -                -
10       Credit valuation adjustment (CVA)                5 729         5 729            637           5 729         5 729            637             5 729            5 729             637

         Equity positions under the simple risk
11       weight approach                                       -            -               -               -             -                -               -               -                -

         Equity investments in funds - look-
12       through approach                                      -            -               -               -             -                -               -               -                -

         Equity investments in funds - mandate-
13       based approach                                        -            -               -               -             -                -               -               -                -
         Equity investments in funds - fall back
14       approach                                              -            -               -               -             -                -               -               -                -
15       Settlement risk                                       -            -               -               -             -                -               -               -                -
         Securitisation exposures in banking
16       book                                           425 126      592 511           47 295        452 551       592 511         50 346           425 126          592 511          47 295

         Of which: securitisation internal ratings-
17       based approach (SEC-IRBA)                             -            -               -               -             -                -               -               -                -

         Of which: securitisation external ratings-
         based approach (SEC-ERBA), including
18       internal assessment approach (IAA)                    -            -               -               -             -                -               -               -                -

         Of which: securitisation standardised
19       approach (SEC-SA)                              425 126      592 511           47 295        452 551       592 511         50 346           425 126          592 511          47 295
20       Market risk                                    202 374      162 594           22 514        202 374       162 594         22 514             3 196            1 606             356
21       Of which standardised approach (SA)            202 374      162 594           22 514        202 374       162 594         22 514             3 196            1 606             356
         Of which internal model approaches
22       (IMM)                                                 -            -               -               -             -                -               -               -                -

         Capital charge for switch between
23       trading book and banking book                         -            -               -               -             -                -               -               -                -
24       Operational risk                             1 340 884     1 491 169         159 484        940 176       956 476         89 938           755 807          755 807          51 390
         Amounts below the thresholds for
         deduction (subject to 250% risk
25       weight)                                        417 680      450 139           46 467        287 257       310 688         31 957                  -               -                -
26       Floor adjustment                                390 916        327 337          43 489           96 490        250 441          10 734          256 524        232 797            28 538
27       Total                                         8 968 383      9 739 147       1 008 043       7 289 956       8 173 516         796 352        6 063 420      6 733 325          641 862


* The minimum capital requirement per risk category is 11.125% which comprises the Base minimum (8.000%) plus the Pillar 2A systemic risk Add-on (1.250%) plus the Capital Conservation Buffer (CCB) (1.8750%).


                                                           R'000          R'000                           R'000           R'000                            R'000          R'000
                                                            Sept          June                             Sept           June                              Sept
                                                            2018           2018                            2018            2018                             2018     June 2018
                                                              (T)          (T-1)                             (T)           (T-1)                              (T)         (T-1)
         Qualifying capital and reserves
         Tier 1 capital                                1 365 989      1 546 166                       1 075 686       1 203 943                          853 029        934 416
         Common equity tier 1 capital                  1 290 756      1 470 934                       1 075 686       1 203 943                          853 029        934 416
         Share capital and premium                       163 681        160 103                         463 476         463 476                          463 476        463 476
         Distributable reserves and other              1 241 028      1 303 975                         642 261         672 965                          399 687        446 288

         Prescribed deductions and non-
         qualifying reserves                             -60 228          6 886                           33 121         81 699                           10 134         24 653
         Intragroup investments                          -53 725             -30                         -63 172        -14 198                                 -              -
         Additional tier 1 capital
         Non-redeemable preference share
         capital                                          75 234         75 234                                -               -                                -              -
         Tier 2 capital                                   67 751         34 915                           67 751         31 246                           60 487         23 732
         Sub-ordinated debt                                     -         2 980                                -          2 998                                 -         2 998
         General allowance for credit impairment          67 751         31 935                           67 751         28 248                           60 487         20 734
         Total qualifying capital and reserves         1 433 741      1 581 082                       1 143 437       1 235 189                          913 515        958 148
         Minimum required capital and
         reserves                                      1 008 043      1 077 072                         796 352         892 835                          641 862        716 388


         Capital adequacy ratios
         Tier 1 capital (%)                               15.231         15.876                           14.463         14.730                           14.068         13.877
         Common equity tier 1 (%)                         14.392         15.103                           14.463         14.730                           14.068         13.877

         Additional tier 1 (%)                             0.839          0.772                                -               -                                -              -
         Tier 2 capital (%)                                0.755          0.359                            0.911          0.382                            0.998          0.352
         Total capital adequacy ratio (%)                 15.986         16.235                           15.374         15.112                           15.066         14.229
         Minimum required capital adequacy
         ratio (%)                                        11.125         11.125                           11.125         11.125                           11.125         11.125




         LR1 - Summary comparison of
         accounting assets vs leverage ratio
         exposure measure                                  R'000          R'000                           R'000           R'000                            R'000          R'000

                                                      Sept 2018      June 2018                                       June 2018                                       June 2018
                                                             (T)          (T-1)                    Sept 2018 (T)          (T-1)                    Sept 2018 (T)          (T-1)

         Total consolidated assets as per the
1        published financial statements               13 819 714     14 321 086                      11 897 290      12 362 383                        8 601 295      8 646 719
         Adjustment for investments in banking,
         financial, insurance or commercial
         entities that are consolidated for
         accounting purposes but outside the
2        scope of regulatory consolidation                      -              -                               -               -                                -              -
         Adjustment for fiduciary assets
         recognised on the balance sheet
         pursuant to the operative accounting
         framework but excluded from the
3        leverage ratio exposure measure                        -              -                               -               -                                -              -
         Adjustments for derivative financial
4        instruments                                     110 796        218 168                         110 796         218 168                          145 733        199 102
         Adjustment for securities financing
         transactions (i.e. repos and similar
5        secured lending)                                      0               0                      1 217 604                0                                -              -
         Adjustment for off balance sheet items
         (i.e. conversion to credit equivalent
6        amounts of off balance sheet exposures         105 013       109 656                         133 944        149 588                          106 433       124 790
7        Other adjustments                           1 013 289 )    (289 528 )                    (1 554 130 )     (286 732 )                       (242 062)      (256 630)
8        Leverage ratio exposure measure             13 022 234    14 359 382                      11 805 504     12 443 407                        8 611 399      8 713 980




         LIQ1 - Liquidity Coverage Ratio                                                                                                                R'000         R'000

                                                                                                                                                                  Sept 2018
                                                                                                                                                Sept 2018 (T)            (T)

                                                                                                                                                       Total           Total
                                                                                                                                                 unweighted        weighted
                                                                                                                                                      value           value
         High- quality liquid assets
    1    Total HQLA                                                                                                                                   830 415       830 415
         Cash outflows

         Retail deposits and deposits from
    2    small business customers, of which:                                                                                                        1 619 644       101 681
    3    Stable deposits                                                                                                                            1 016 809       101 681
    4    Less stable deposits                                                                                                                         602 835              0
         Unsecured wholesale funding, of
    5    which:                                                                                                                                     3 493 697      1 088 044
         Operational deposits (all counterparties)
         and deposits in networks of cooperative
    6    banks                                                                                                                                              0              0
         Non-operational deposits (all
    7    counterparties)                                                                                                                            3 493 697      1 088 044
    8    Unsecured debt
    9    Secured wholesale funding                                                                                                                                   54 336
    10   Additional requirements, of which:                                                                                                           837 880       331 241

         Outflows related to derivative exposures
    11   and other collateral requirements                                                                                                             28 978        28 978

         Outflows related to loss of funding on
    12   debt products                                                                                                                                       -             -
    13   Credit and liquidity facilities                                                                                                              515 820        47 521
    14   Other contractual funding obligations                                                                                                        248 442       248 442
    15   Other contingent funding obligations
    16   TOTAL CASH OUTLOWS                                                                                                                                        1 575 302
         Cash inflows
    17   Secured lending                                                                                                                            1 691 242        54 336
         Inflows from fully performing
    18   exposures                                                                                                                                    850 163       834 377
    19   Other cash inflows                                                                                                                           107 342        68 368
    20   TOTAL CASH INFLOWS                                                                                                                         2 648 747       957 081



                                                                                                                                                                      Total
                                                                                                                                                                   adjusted
                                                                                                                                                                      value
    21   Total HQLA                                                                                                                                                 830 415
    22   Total net cash outflows                                                                                                                                    618 221
    23   Liquidity Coverage Ratio (%)                                                                                                                                  134%


         CR7- IRB- Effect on RWA of credit derivatives used as CRM techniques
         Sasfin does not use the internal ratings based, but rather the standardised approach, in the calculation of credit risk-weighted assets. This template is therefore not completed.
         CR8 - Risk weighted assets flow statements of credit risk exposures under IRB
            Sasfin does not use the internal ratings based, but rather the standardised approach, in the calculation of credit risk-weighted assets. This template is therefore not completed.
            CCR7 - Risk weighted assets flow statements of CCR exposures under Internal Model Method (IMM)
            Sasfin does not use an internal model method, but rather the standardised approach, in the calculation of counterparty credit risk. This template is therefore not completed.
            KM2- Key metrics - TLAC requirements
            Sasfin is not a G-SIB. This template is therefore not completed.

            MR3 - IMA values for trading portfolio's
            Sasfin does not use an internal model approach, but rather the standardised approach, in the calculation of market risk. This template is therefore not completed.



Following the finalisation of the regulatory audit in October 2018 and the introduction of IFRS 9 with effect from 1 July 2018, the Group's Regulatory Capital has reduced from R1.581bn as reported for June to R1.439bn at 30 September 2018. This also resulted in a
reduction in the Capital Adequacy Ratio (“CAR”) from 16.23% to 15.99%, which is well above the minimum prescribed CAR. The restated Regulatory Capital post the audit adjustments (excluding IFRS 9) at 30 June was R1.469bn with an adjusted CAR of 15.14%.

The primary contributors to the reduction in capital for the quarter are -

- Goodwill and Intangible Assets were historically treated as a deduction against capital net of deferred tax. Management have reviewed this treatment and, in consultation with our auditors, considered that the gross amount for Goodwill and Intangible Assets to be
more appropriate.

- The day one impact of IFRS9 on retained earnings. The Group elected to implement the full IFRS 9 provision in year one, as opposed to the three-year option allowed by the SARB.

Sasfin's performance for the quarter has been positive and is in line with expectations and profits have not yet been appropriated. Post the end of September, the Sasfin Holdings Board approved the appropriation of R55m of profits, which will enhance the Group’s
CAR.

Further to the regulatory audit, the Net Stable Funding Ratio (NSFR) was revised downwards to 95.88% primarily due to certain interpretative matters on the treatment of specific deposit balances. Management actions have been implemented to remediate the
NSFR above the regulatory threshold. Furthermore, we have engaged with the SARB-PA in respect of some of the abovementioned deposits and a process has commenced internally in this regard, the result of which should positively impact the NSFR. In addition,
given the revisions to the NSFR, there were consequential impacts to the LCR resulting in a decline in the ratio, which remains well above the regulatory threshold.

3 December 2018
Johannesburg




Sponsor
Sasfin Capital (a member of the Sasfin group)

Independent Sponsor
Deloitte & Touche Sponsor Services (Pty) Ltd

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