| Fri 27 Jul 2007, 12:36 | | MTL - Mercantile - Unaudited Interim Results For T |
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MTL
MTL
MTL - Mercantile - Unaudited Interim Results For The Six Months Ended 30 June
2007
MERCANTILE BANK HOLDINGS LIMITED
Registration number 1989/000164/06
Share code: MTL & ISIN: ZAE000064721
("Mercantile" or "the Group")
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2007
Highlights
* Growth in attributable profit of 65.3%
* Growth in HEPS of 57.4%
* Lending growth of 35.6%
* ROE 21.1%
* Improvement in cost to income from 75.7% to 61.5%
Financial overview
The Group has again recorded a strong growth in attributable profit after
taxation which increased by 65.3% for the first six months of 2007 compared to
the six months ended June 2006. Headline earnings per share in turn increased by
57.4%. These increases are largely attributable to:
* an increase in net interest income of 25.2% as a result of higher capital due
to profit retention together with a growth in lending of 35.6%;
* growth in recurring non-interest income of 25.9% from core business
activities with strong contributions from all the business segments;
* non-recurring income of R12.8 million pertaining to legacy business.
Costs for the period under review increased by 11.4% versus the comparable six
months of 2006. Of this increase, 4% relates directly to costs incurred in
generating increased fee income. Efficiency continues to improve with the
overall cost to income ratio reducing from 75.7% in June 2006 to the current
ratio of 61.5%.
Return on average equity ("ROE") improved to 21.1% (June 2006: 15.7%) whilst
return on average assets ("ROA") was at 3.4% (June 2006: 2.3%). These
performance ratios benefited from the non-recurring income mentioned above -
adjusting for this non-recurring revenue, the ratios would be cost to income
65.9%, ROE 17.5% and ROA 2.8%, all of which still reflect significant
improvements since June 2006.
Total balance sheet growth was constrained due to fluctuations in wholesale
treasury activities which reflected a decrease in wholesale deposits as at June
2007 of circa R400m and R200m compared to the end of June 2006 and December
2006, respectively.
Accounting policies
The Group financial results have been prepared on the historical cost basis
excluding financial instruments and properties which are fair valued and conform
to International Financial Reporting Standards. The accounting policies are
consistent with those applied in the annual financial statements for the
financial year ended 31 December 2006. These condensed financial statements have
been prepared in terms of IAS 34 - Interim Financial Reporting.
The interim results have not been reviewed or audited by the Group`s auditors.
Going concern
The financial statements have been prepared on the going concern basis.
Directorate
As advised in our SENS announcement on 10 January 2007, Manuel Figueira resigned
from the Board effective 28 February 2007. There were no further changes to the
Board of Directors during the period under review.
Outlook
The evaluations underway for the replacement of our core banking systems at a
current estimated cost of approximately R70m - R80m are expected to be completed
prior to year-end, when a decision on this project will be finalised.
Whilst the higher interest rate environment is expected to slow the rate of
credit growth, economic conditions remain positive and the Group`s core
performance is expected to continue to improve.
J A S de Andrade Campos D J Brown
Chairman Chief Executive Officer
Sandton
27 July 2007
GROUP BALANCE SHEET
30 June 30 June 31 December
2007 2006 2006
R`000 R`000 R`000
Unaudited Unaudited Audited
ASSETS
Intangible assets 11 939 5 349 11 551
Property and equipment 92 494 93 010 94 956
Taxation - 29 29
Other accounts receivable 33 894 66 385 145 291
Interest in associated company 3 626 3 323 3 626
Other investments 2 331 1 929 7 209
Loans and advances 2 309 437 1 703 585 2 066 432
Derivative financial instruments 34 411 26 520 31 134
Negotiable securities 341 902 389 832 405 016
Cash and cash equivalents 1 548 543 2 094 301 1 683 974
Total assets 4 378 577 4 384 263 4 449 218
EQUITY AND LIABILITIES
Shareholders` equity 740 228 596 483 667 418
Share capital and share premium 1 207 074 1 207 032 1 207 046
Capital redemption reserve fund 3 788 3 788 3 788
Share-based payments reserve 4 536 2 121 3 025
General reserve 7 478 7 478 7 478
Property revaluation reserve 45 588 36 476 45 588
Available-for-sale reserve 2 059 (70) 5 216
General credit-risk reserve 16 551 11 933 13 954
Accumulated loss (546 846) (672 275) (618 677)
Liabilities 3 638 349 3 787 780 3 781 800
Deposits 3 531 320 3 409 796 3 539 147
Derivative financial instruments 14 998 153 344 29 189
Provisions 34 677 26 406 38 994
Other accounts payable 57 233 198 200 174 435
Taxation 121 34 35
Total equity and liabilities 4 378 577 4 384 263 4 449 218
GROUP INCOME STATEMENT
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2007 2006 2006
R`000 R`000 R`000
Unaudited Unaudited Audited
(Restated)
Interest income 213 885 155 460 357 163
Interest expense (117 346) (78 361) (189 044)
Net interest income 96 539 77 099 168 119
Net (charge for)/recovery
of credit losses (339) 6 161 1 520
Net interest income after credit
losses/ recoveries 96 200 83 260 169 639
Net profit/(loss) on disposal
and revaluation of investments 3 493 (36) (347)
Non-interest income(1)
Recurring 80 168 63 696 147 520
Non-recurring 12 790 - -
Net interest and non-interest income 192 651 146 920 316 812
Operating expenditure(1) (118 730) (106 566) (226 040)
Operating profit before exceptional item 73 921 40 354 90 772
Recovery of amounts previously
written-off in respect of the
release of the CGD guarantee - 4 455 8 602
Operating profit 73 921 44 809 99 374
Share of income from associated company 536 215 1 269
Profit before taxation 74 457 45 024 100 643
Taxation (29) - -
Attributable profit after taxation 74 428 45 024 100 643
Earnings per ordinary share (cents) 1.90 1.15 2.56
Diluted earnings per ordinary
share (cents) 1.90 1.14 2.56
Dividend per share (cents) - - -
Reconciliation between attributable
profit after taxation and headline earnings
Attributable profit after taxation 74 428 45 024 100 643
Adjustment for:
Realisation of available-for-sale
reserve on disposal of investments (3 500) - (2)
(Profit)/Loss on disposal of property
and equipment (11) (17) 2
Headline earnings 70 917 45 007 100 643
Headline earnings per ordinary
share (cents) 1.81 1.15 2.56
Diluted headline earnings per ordinary
share (cents) 1.81 1.14 2.56
FINANCIAL STATISTICS
30 June 30 June 31 December
2007 2006 2006
Unaudited Unaudited Audited
Number of ordinary shares in issue:
- end of period (`000) 3 925 373 3 925 126 3 925 208
- weighted average (`000) 3 925 366 3 925 126 3 925 145
- weighted average - diluted (`000) 3 925 366 3 939 474 3 925 145
Return on average equity (%) 21.1 15.7 16.5
Return on average assets (%) 3.4 2.3 2.6
Cost to income (%) 61.5 75.7 71.7
Net asset value per ordinary share (cents) 18.9 15.2 17.0
Capital adequacy ratio (%)
- Mercantile Bank Limited 31.2 32.9 30.1
GROUP CONTINGENT LIABILITIES AND COMMITMENTS
30 June 30 June 31 December
2007 2006 2006
R`000 R`000 R`000
Unaudited Unaudited Audited
Guarantees and letters of credit 408 646 293 540 281 064
Operating lease commitments 8 741 15 932 10 288
SUMMARISED GROUP STATEMENT OF CHANGES IN EQUITY
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2007 2006 2006
R`000 R`000 R`000
Unaudited Unaudited Audited
Balance at beginning of period 667 418 550 179 550 179
Movements in reserves 951 2 378 19 701
Revaluation of owner-occupied property - - 9 112
Net transfer to general
credit-risk reserve 2 597 1 098 3 119
Share-based payments expense 1 511 1 274 2 178
Net transfer (from)/to available-for-sale
reserve (3 157) 6 5 292
Movements in accumulated loss 71 831 43 926 97 524
Attributable profit after taxation 74 428 45 024 100 643
Net transfer to general
credit-risk reserve (2 597) (1 098) (3 119)
Movement in share capital and share premium
Treasury shares on consolidation
of share incentive trust 28 - 14
Balance at end of period 740 228 596 483 667 418
SUMMARISED GROUP CASH FLOW STATEMENT
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2007 2006 2006
R`000 R`000 R`000
Unaudited Unaudited Audited
Net cash (outflow)/inflow from operating
activities (134 059) 691 379 287 135
Net cash (outflow) from investing
activities (1 372) (6 050) (12 133)
Net cash (outflow)/inflow for the period (135 431) 685 329 275 002
Cash and cash equivalents at beginning
of period 1 683 974 1 408 972 1 408 972
Cash and cash equivalents at
end of period 1 548 543 2 094 301 1 683 974
SUMMARISED GROUP SEGMENTAL INFORMATION
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2007 2006 2006
R`000 R`000 R`000
Unaudited Unaudited Audited
(Restated)
Segment revenue: (1)
Retail banking 107 940 81 406 180 975
Treasury 26 228 17 273 43 093
Alliance banking, MBL credit card, electronic
banking and structured loans 31 912 20 829 44 098
Other services (2) 26 910 21 251 47 126
192 990 140 759 315 292
Attributable profit after taxation:
Retail banking (3) 75 709 49 843 103 687
Treasury (3) 9 724 4 359 14 400
Alliance banking, MBL credit card, electronic
banking and structured loans (3) 13 726 15 143 31 693
Other services (4) (24 731) (24 321) (49 137)
74 428 45 024 100 643
(1) Certain costs incurred by Alliance partners are settled by Mercantile on
their behalf and subsequently reimbursed by these Alliance partners to
Mercantile. The reimbursements were previously treated as non-interest income
and the costs as operating expenditure. The accounting treatment changed for the
year ended 31 December 2006 whereby the reimbursements received are offset
against the costs incurred.
Comparatives for the six months ended 30 June 2006 have therefore been restated.
(2) "Other services" includes support divisions, insurance brokers and inter-
group eliminations.
(3) Excludes the allocation of attributable support costs.
The lower attributable profit from Alliance banking is mainly due to certain
allocated costs in 2006 now treated as direct costs. In addition this segment
benefited from a provision release in the first six months of 2006 against
provisions raised in the current period.
(4) "Other services" includes support divisions, insurance brokers, inter-group
eliminations, associate income and exceptional items.
Directors: J A S de Andrade Campos* (Chairman),
D J Brown (Chief Executive Officer) J P M Lopes* (Executive),
G P de Kock, L Hyne, A T Ikalafeng, A M Osman**, S Rapeti
* Portuguese ** Mozambican
Group Secretary: R van Rensburg
Registered Office: Mercantile Bank, 142 West Street, Sandown, 2196
Share code: MTL ISIN: ZAE000064721
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited,
70 Marshall Street, Johannesburg, 2001
Sponsor: Bridge Capital Advisors (Pty) Limited,
2nd Floor, 27 Fricker Road, Illovo, 2196
www.mercantile.co.za
Date: 27/07/2007 12:36:52 Produced by the JSE SENS Department.
