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MTL
MTL
MTL - Mercantile - Condensed Unaudited Interim Results For The Six Months Ended
30 June 2009
Mercantile Bank Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 1989/000164/06)
Share code: MTL ISIN: ZAE000064721
("Mercantile" or "the company")
KEY PERFORMANCE HIGHLIGHTS
Growth in NAV per share of 38.2%
Growth in lending of 19.3%
Growth in net non-interest income of 18.2%
HEPS before taxation down by 0.7%
CONDENSED UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2009
FINANCIAL OVERVIEW
Before taxation performance
The Group has produced solid headline earnings for the six-month period ended
30 June 2009 reflecting a comparative period decline of only 0.7% per share
under difficult market conditions. The main contributing factors that have
impacted on these results are:
the sharp reduction of 4.5% in the repo rate since December 2008. Given the
Group`s substantial capital base and other non-interest-bearing funding sources
this rapid decline in interest rates resulted in a significantly negative
endowment effect;
credit losses increased by R7.5 million year-on-year whilst still reflecting
a low 0.4% (annualised) loss ratio to average loans and advances;
strong growth in net non-interest income of 18.2% due to increased business
activity in retail, commercial and electronic banking; and
costs for the period under review were contained to an increase of 4.0%
largely due to a reduction in employee bonus provisions as a result of the
Group`s financial performance being below agreed incentive targets.
Earnings per share showed a decline of 7.3% compared to the previous period.
This is mainly due to the surplus on realisation of Visa shares of R9.8 million
in the prior period.
After taxation performance
A deferred taxation asset of R162.2 million was recognised by the Group in
December 2008. Conversely, a taxation charge of R32.2 million was raised for
the period ended 30 June 2009 whereas no taxation charge was raised for the
comparative period ended 30 June 2008. Therefore, the after taxation financial
results for 30 June 2009 are not directly comparable to the after taxation
financial results for 30 June 2008.
Interim period taxation has been accrued at the estimated annual effective
taxation rate of 28.1% (June 2008: 0%).
ACCOUNTING POLICIES
These condensed consolidated financial statements have been prepared under the
historical cost conventions excluding financial instruments and properties
which are fair valued and conform to International Financial Reporting
Standards. These condensed financial statements have been prepared in
accordance with IAS 34 - Interim Financial Reporting. The same accounting
policies, presentation and methods of computation have been followed in these
condensed financial statements as were applied in the preparation of the
Group`s financial statements for the financial year ended 31 December 2008,
except for the impact of the adoption of Standards and Interpretations
described below.
IAS 1 (revised 2007) - Presentation of Financial Statements (effective for
annual periods beginning on or after 1 January 2009) has introduced a number of
terminology changes and has resulted in a number of changes in presentation and
disclosure. However, the revised Standard has had no impact on the reported
results or financial position of the Group.
IFRS 8 Operating Segments (effective for annual periods beginning on or after
1 January 2009) which is a disclosure Standard, requires operating segments to
be identified on the basis of internal reports about components of the Group
that are regularly reviewed by the chief operating decision-maker in order to
allocate resources to the segment and to assess its performance. The adoption
of IFRS 8 has had no impact on the identification of the Group`s reportable
segments, reported results or financial position.
Improvements to IFRS (issued in May 2008) include 35 amendments across 20
different Standards that largely clarify the required accounting treatment
where previous practice had varied, and have resulted in a number of changes in
the detail of the Group`s accounting policies. These amendments have had no
material impact on the Group`s accounting policies.
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.
NEW BANKING SYSTEM
The implementation of the replacement of the core retail banking systems and
upgrade/enhancement of current systems architecture is still under way with a
scheduled go-live date planned for the first quarter of 2010. Expenditure of
R46.8 million was capitalised on this project during the period under review
and as at 30 June 2009 capitalised expenditure is as follows:
Property and equipment R21.3 million; and
Intangible assets R121.3 million.
Expenditure on the project is currently not expected to exceed the amount of
R210 million as previously reported in the 31 December 2008 results of the
Group.
DIRECTORATE
There were no changes to the Board of Directors during the period under review.
In accordance with the JSE Listings Requirements the Group has commenced a
search for a Financial Director. The JSE has granted the Group an extension
until 31 December 2009 to comply with this requirement.
As advised in our SENS announcement on 4 May 2009, Ronell van Rensburg resigned
as Company Secretary effective 31 July 2009.
OUTLOOK
The ongoing difficult domestic and global economic conditions will continue to
increase the levels of credit stress on borrowers and depress economic
activity. This together with the lower interest rate environment (negative
endowment) will impact adversely on the Group`s performance over the remainder
of 2009.
J A S de Andrade Campos D J Brown Sandton
Chairman Chief Executive Officer 22 July 2009
Condensed consolidated statement of financial position
30 June 30 June 31 December
2009 2008 2008
R`000 R`000 R`000
Unaudited Unaudited Audited
ASSETS
Intangible assets 125 171 53 454 76 894
Property and equipment 125 641 116 047 128 672
Other accounts receivable 40 585 47 122 39 273
Interest in associated company - 4 251 -
Other investments 12 121 15 150 12 315
Deferred taxation assets 125 104 - 157 275
Non-current assets held for sale 3 234 - 5 289
Loans and advances 3 667 891 3 074 152 3 403 789
Derivative financial instruments 71 279 32 869 56 873
Negotiable securities 293 112 244 299 247 141
Bank term deposits 93 277 172 372 324 295
Cash and cash equivalents 1 080 317 1 374 970 1 464 959
Total assets 5 637 732 5 134 686 5 916 775
EQUITY AND LIABILITIES
Shareholders` equity 1 350 606 981 553 1 269 030
Share capital and share premium 1 202 571 1 207 518 1 202 571
Share-based payments reserve 5 170 1 654 4 650
Property revaluation reserve 46 364 53 705 46 364
Available-for-sale reserve 10 551 13 672 13 036
Capital redemption reserve fund 3 788 3 788 3 788
General reserve 7 478 7 478 7 478
Retained income/(Accumulated loss) 74 684 (306 262) (8 857)
Non-current liability
Deferred taxation liabilities 14 854 - 15 259
Liabilities 4 272 272 4 153 133 4 632 486
Deposits 4 143 743 4 022 427 4 389 347
Derivative financial instruments 22 693 14 273 95 091
Provisions 28 937 36 269 48 596
Other accounts payable 76 415 80 048 98 958
Taxation 484 116 494
Total equity and liabilities 5 637 732 5 134 686 5 916 775
Condensed consolidated statement of comprehensive income
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2009 2008 2008
R`000 R`000 R`000
Unaudited Unaudited Audited
Interest income 291 684 297 667 661 776
Interest expense (151 891) (154 219) (337 813)
Net interest income 139 793 143 448 323 963
Net (charge for)/recovery of
credit losses (6 749) 763 (6 618)
Net interest income after credit
losses/recoveries 133 044 144 211 317 345
Net gain on disposal and
revaluation
of available-for-sale investments 1 583 9 838 9 837
Net non-interest income 99 814 84 423 183 035
Non-interest income 138 290 117 033 260 003
Fee and commission expenditure (38 476) (32 610) (76 968)
Net interest and non-interest
income 234 441 238 472 510 217
Operating expenditure (119 872) (115 305) (253 154)
Operating profit 114 569 123 167 257 063
Share of income from associated
company - 1 073 735
Profit before taxation 114 569 124 240 257 798
Taxation (32 172) - 162 175
Profit after taxation 82 397 124 240 419 973
Other comprehensive income
Share-based payments expense 1 664 3 583 8 251
Revaluation of owner-occupied
properties - - 10 689
(Losses)/Gains on remeasurement
to fair value (1 308) 23 558 25 121
Reclassification: Release to
income on disposal
of available-for-sale financial
assets (1 583) (9 838) (9 837)
Taxation relating to other
comprehensive income 406 - (20 230)
Other comprehensive income (821) 17 303 13 994
Total comprehensive income 81 576 141 543 433 967
Profit after taxation
attributable to:
Equity holders of the parent 82 397 124 240 419 973
Total comprehensive income
attributable to:
Equity holders of the parent 81 576 141 543 433 967
Earnings per ordinary share after
taxation (cents) 2.11 3.16 10.70
Earnings per ordinary share
before taxation (cents) 2.93 3.16 6.57
Diluted earnings per ordinary
share after taxation (cents) 2.11 3.16 10.70
Diluted earnings per ordinary
share before taxation (cents) 2.93 3.16 6.57
Dividend per share (cents) - - -
Reconciliation between profit
before taxation
and headline earnings
Profit before taxation 114 569 124 240 257 798
Adjustment for:
Realisation of available-for-sale
reserve on
disposal of investments (1 583) (9 838) (9 837)
Loss/(Profit) on disposal of
property and equipment 14 (29) (29)
Headline earnings before taxation 113 000 114 373 247 932
Taxation (32 172) - 162 175
Headline earnings after taxation 80 828 114 373 410 107
Headline earnings per ordinary
share after taxation (cents) 2.07 2.91 10.45
Headline earnings per ordinary
share before taxation (cents) 2.89 2.91 6.32
Diluted headline earnings per
ordinary share after taxation
(cents) 2.07 2.91 10.45
Diluted headline earnings per
ordinary share before taxation
(cents) 2.89 2.91 6.32
Financial statistics
30 June 30 June 31 December
2009 2008 2008
Unaudited Unaudited Audited
Number of ordinary shares in issue:
- end of period (`000) 3 911 114 3 927 165 3 911 114
- weighted average (`000) 3 911 114 3 926 792 3 924 414
- weighted average - diluted (`000) 3 911 114 3 926 792 3 924 414
Return on average equity after
taxation (%) 12.6 27.3 39.8
Return on average equity before
taxation (%) 19.4 27.3 26.2
Return on average assets after
taxation (%) 2.9 5.1 7.9
Return on average assets before
taxation (%) 4.1 5.1 4.9
Cost to income (%) 49.7 48.5 49.0
Net asset value per ordinary share
(cents) 34.5 25.0 32.4
Tangible net asset value per
ordinary share (cents) 31.3 23.6 30.5
Condensed Group contingent liabilities and commitments
30 June 30 June 31 December
2009 2008 2008
R`000 R`000 R`000
Unaudited Unaudited Audited
Guarantees, letters of credit and
committed undrawn facilities 577 134 596 538 670 100
Operating lease commitments 11 108 13 487 12 302
Capital commitments 66 733 - 93 018
Condensed consolidated statement of changes in equity
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2009 2008 2008
R`000 R`000 R`000
Unaudited Unaudited Audited
Share capital and share premium
Balance at beginning of the period 1 202 571 1 207 422 1 207 422
Reduction/(Increase) of treasury
shares - 96 (4 851)
Balance at end of the period 1 202 571 1 207 518 1 202 571
Share-based payments reserve
Balance at beginning of the period 4 650 7 019 7 019
Other comprehensive income 520 1 654 4 650
Transfer to retained
income/accumulated loss - (7 019) (7 019)
Balance at end of the period 5 170 1 654 4 650
Property revaluation reserve
Balance at beginning of the period 46 364 53 705 53 705
Other comprehensive income - - 10 689
Taxation relating to other
comprehensive income - - (18 030)
Balance at end of the period 46 364 53 705 46 364
Available-for-sale reserve
Balance at beginning of the period 13 036 (48) (48)
Other comprehensive income (2 891) 13 720 15 284
Taxation relating to other
comprehensive income 406 - (2 200)
Balance at end of the period 10 551 13 672 13 036
Capital redemption reserve fund
and general reserve
Balance at beginning and end of
the period 11 266 11 266 11 266
General credit-risk reserve
Balance at beginning of the period - 19 403 19 403
Transfer to retained
income/accumulated loss - (19 403) (19 403)
Balance at end of the period - - -
Retained income/(Accumulated loss)
Balance at beginning of the period (8 857) (458 853) (458 853)
Profit after taxation 82 397 124 240 419 973
Other comprehensive income 1 144 1 929 3 601
Transfer from share-based
payments and general
credit-risk reserve - 26 422 26 422
Balance at end of the period 74 684 (306 262) (8 857)
Total equity
Balance at beginning of the period 1 269 030 839 914 839 914
Reduction/(Increase) of treasury
shares - 96 (4 851)
Profit after taxation 82 397 124 240 419 973
Other comprehensive income (821) 17 303 13 994
Balance at end of the period 1 350 606 981 553 1 269 030
Condensed consolidated statement of cash flows
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2009 2008 2008
R`000 R`000 R`000
Unaudited Unaudited Audited
Net cash (outflow)/inflow from
operating activities (332 947) 168 173 291 296
Net cash (outflow) from investing
activities (51 695) (45 579) (78 713)
Net cash (outflow)/inflow for the
period (384 642) 122 594 212 583
Cash and cash equivalents at
beginning of the period 1 464 959 1 252 376 1 252 376
Cash and cash equivalents at end
of the period 1 080 317 1 374 970 1 464 959
Condensed Group segmental information
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2009 2008 2008
R`000 R`000 R`000
Unaudited Unaudited Audited
Segment revenue net of fee and
commission expenditure
Revenue from external customers
Retail and Commercial banking 145 325 159 793 347 155
Treasury 25 202 22 008 59 612
Alliance banking, MBL credit card
and electronic banking 33 672 22 412 53 799
Other services(1) 36 991 33 496 56 269
241 190 237 709 516 835
Segment result - operating
profit(2)
Retail and Commercial banking 96 407 129 709 268 249
Treasury 14 247 13 452 41 638
Alliance banking, MBL credit card
and electronic banking 21 354 11 245 30 801
Other services(1) (17 439) (31 239) (83 625)
Operating profit 114 569 123 167 257 063
Share of income from associated
company - 1 073 735
Profit before taxation 114 569 124 240 257 798
Taxation (32 172) - 162 175
Profit after taxation 82 397 124 240 419 973
Material related party balances and transactions
30 June 30 June 31 December
2009 2008 2008
R`000 R`000 R`000
Unaudited Unaudited Audited
Net balances with Caixa Geral de
Depositos S.A. 701 102 1 067 673 1 345 707
Interest received from Caixa Geral
de Depositos S.A. 8 423 20 833 41 063
Explanatory notes:
(1) "Other services" includes support divisions, surplus capital, insurance
brokers and inter-group eliminations.
(2) Segment profit represents the profit earned by each segment without the
allocation of taxation. This is the measure reported to the chief operating
decision-maker for the purposes of resource allocation and assessment of
segment performance.
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, T H Njikizana**, S Rapeti
Group Secretary: R van Rensburg *Portuguese **Zimbabwean
Registered Office: Mercantile Bank, 142 West Street, Sandown, 2196
Share code: MTL ISIN: ZAE000064721
Transfer Secretaries: Computershare Investor Services (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: 22/07/2009 08:26:01 Produced by the JSE SENS Department.
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