Grindrod Bank eyes SME market for expansion
Grindrod says the SME sector offers attractive opportunities for the lender
Grindrod, the JSE-listed freight and financial services company, said it would reposition its retail bank to focus on the small and medium enterprise (SME) sector.
The proposed change of direction comes amid what Grindrod executives on Friday said was a competitive retail banking environment.
“We have capitalised the bank and deposits keep growing. We see good growth there. We are now repositioning the retail bank to focus on the SME business, which we think is so important for us,” Grindrod CEO Andrew Waller said.
The lender’s services include cash deposits, commercial property finance and lending, corporate finance and debtor finance.
In the six months ended June 30, core deposits — which excluded retail — increased by 7% to R9.4bn, up from R8.9bn in December 2018.
Grindrod Bank MD David Polkinghorne said the bank was confident that its focus on the SME market would succeed. “For us it is about defining the area we want to target and do it well. We will not try to be all things to all people. We are not big enough to solve the country’s SME problems,” Polkinghorne said.
He said the lender typically benefited when the rest of the industry struggled. “We have always been positioned to be countercyclical. In markets like this, we often benefit and we can increase margin especially on the lending side with clients that come to us after they had tried the other banks”.
“In the retail space, we are not trying to create another massive retail bank. What we can do is to continue playing the role we have done in the past as a platform banking partner by offering a partnership role to fintechs and anybody else who wants to play in the financial services space. That, for us, is our future proofing strategy and model,” Polkinghorne said.
In the six months, Grindrod’s headline earnings grew by 118% to R136.7m compared with R62.6m in 2018. The group made a total loss after tax of R476.8m in the first half of 2019, from a profit of R2.5bn previously because of its discontinued operations.
On August 16, Grindrod's share price tumbled 16.10%, its biggest one-day fall since October 2008, after the group announced that its marine fuel and agricultural investments businesses were up for sale.
Grindrod’s agricultural assets were 20% stakes in agrilogistics and support businesses Senwes and NWK. “(Senwes and NWK) are very good businesses and are making money. I do not think we will have a problem (with the disposal of the two businesses),” Waller said.
Grindrod said the agricultural investments reported good results in the six months ended June 30 despite the late planting season in SA.
Waller said United Arab Emirates (UAE) authorities were investigating impropriety involving the company’s marine fuel business in that country. He said several employees had been dismissed and that legal proceedings were under way.
Waller said the company had notified insurers of a potential claim.
“I am not able to communicate too much on what happened there because the matter is under UAE authorities’ control,” he said.
The decision to sell the marine fuel and agricultural investments businesses follows the unbundling and separate listing in New York of the shipping business during the 2018 financial year.