Sasfin plans to use its relatively small size as a competitive advantage to disrupt business banking in SA by offering more personalised services to corporate clients whose loan requirements are below the threshold that occupies most of the attention of its larger rivals.
The niche business bank and asset manager says it is targeting medium-sized corporates seeking loans of R20m-R150m, a segment of the business banking market it believes doesn’t get enough personal attention at larger banks. By offering greater interaction between its clients and its senior credit decisionmakers, as well as various new capabilities it is rolling out, Sasfin believes it can win more medium-sized business clients from the big five banks.
“If you speak to medium-sized businesses they’ll tell you they often can’t get access to a credit decisionmaker at the big banks,” Sasfin CEO Michael Sassoon told Business Day after the bank released its interim results showing headline earnings rose 104% to R54.83m in the six months to end-December 2021.
“The big banks are very good at lending to the very large clients, say those looking for facilities of R150m plus, but if a client needs a R50m loan ... and you need to get the credit team on side to understand your balance sheet and your risk profile, it’s not always an easy space for that segment of the market.”
In November 2020, Sasfin partnered with Dutch development bank FMO, which is providing guarantees to enable it to offer more loans to small and medium-sized businesses that are ultimately the lifeblood of the economy. Sasfin has already deployed more than R100m worth of loans under this scheme and has bulked up its senior personnel to help deepen its market share.
“To solve for that credit need you require access to a specialised transactor who can come up with a solution to fit your needs, which often requires access to the credit decisionmakers,” says Sassoon. “If it’s an obvious credit decision, the big banks can solve for it pretty well. But usually when it takes a bit more understanding of the business to put together a solution, those guys often struggle.”
Sasfin has also upgraded its digital platform to include new foreign exchange capabilities; it has rolled out a new revolving credit facility; and it will soon be offering overdrafts for the first time. While the overdraft facility is still in pilot phase, Sasfin plans to launch it within the next few months and hopes it will enable it to become the primary bank for more of its clients.
The group also appointed former TymeBank CEO Sandile Shabalala as its new head of business and commercial banking in January 2022 to spearhead its ambitious growth plans. Shabalala, who was the managing executive of business banking at Nedbank for 11 years, is a strong addition to Sasfin’s team given his experience in traditional business banking and the growing digital banking space.
Shabalala says a key focus will be to get more senior executives involved in crafting credit solutions that support business clients: whether they need working capital facilities, trade and debtor finance or property loans. Property finance is an area where Sasfin can use its niche business-focused offering to its advantage, he says.
Property finance isn’t usually integrated into the business banking units of larger banks, meaning loan decisions are typically decided by simply processing a debt application through a credit-scoring model. By contrast, Sasfin’s property finance division is integrated into its business banking offering and benefits from senior decisionmakers applying their judgment to applications based on an understanding of a client’s balance sheet.
“I do think there’s an element missing right now in the business banking landscape,” Shabalala says. “There’s a lot of value to add in terms of bringing a relationship model into the business banking segment to add value beyond just processing a loan application through a credit-scoring model. Those [business banking] customers are wanting a relationship-based model but that’s not what they’re experiencing.”
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