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MTL
MTL
MTL - Mercantile Bank Holdings Limited - Condensed Unaudited interim results for
the six months ended 30 June 2010
MERCANTILE BANK HOLDINGS LIMITED
Member of the CGD Group
("the Group")
Registration number 1989/000164/06
Share code: MTL ISIN: ZAE000064721
SALIENT FEATURES
Growth in NAV per share of 10.7%
Headline earnings down by 32.0%
Net recovery in credit impairments
CONDENSED UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2010
FINANCIAL OVERVIEW
The Group recorded a decrease of 32.0% in headline
earnings for the six months ended 30 June 2010 compared to
the six months ended 30 June 2009.
This decline is mainly attributable to:
a decrease in net interest income (before credit losses)
of 7.7% as a result of the negative endowment effect on
the Group`s significant capital base and other
non-interest-bearing deposits;
the general lower level of business activity in the
reporting period with loans and advances increasing by
1.9% and deposits by 3.3%;
a decline in net non-interest income of 20.1%, primarily
due to the termination by Woolworths Financial Services of
its card processing agreement in October 2009 following
the sale of a controlling stake in its financial services
business to a competitor bank; and
an increase in operating expenditure of 10.4% largely
driven by a higher depreciation charge following the
implementation of a new core banking system.
A net recovery of credit impairments reflects the ongoing
sound performance of the loans and advances book.
Cost to income increased from 49.7% in June 2009 to 63.1%
in June 2010 whilst both ROE at 7.6% (June 2009: 12.6%)
and ROA at 1.9% (June 2009: 2.9%) declined reflecting the
weaker market conditions, a higher systems cost base and
lower earnings of the Group.
CREDIT RATINGS
Moody`s Investors Service confirmed the following RSA
national scale issuer ratings of Mercantile Bank Limited
on 11 June 2010:
Short term P-1.za
Long term A2.za
Outlook Stable
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 the accounting policies are in accordance
with 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 2009.
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.
BLACK ECONOMIC EMPOWERMENT AND MERGER NEGOTIATIONS
Discussions with the two short-listed candidates for the
sale of 10% of the Group`s equity have been deferred
pending the outcome of the proposed merger negotiations
underway with Sasfin Holdings Limited.
NEW BANKING SYSTEM
The new core banking system went live in April 2010 at a
cost of R242 million.
DIRECTORATE
Mr K R Kumbier was appointed as Executive Director:
Finance and Business with effect 1 June 2010.
Ms A de Villiers was appointed as company secretary with
effect 1 January 2010.
OUTLOOK
The ongoing uncertainty in the rate of recovery in local
and global markets makes the remainder of 2010
challenging. In addition, the termination of the
Woolworths Financial Services card processing agreement
will continue to place pressure on fee income. Cost
pressures will in turn be experienced with the ongoing
depreciation charge for the new banking system.
The outlook for the Group over the medium term remains
positive.
J A S de Andrade Campos D J Brown
Chairman Chief Executive Officer
Condensed consolidated statement of financial position
30 June 30 June 31 December
2010 2009 2009
R`000 R`000 R`000
Unaudited Unaudited Audited
ASSETS
Intangible
assets 218 349 125 171 170 325
Property and
equipment 128 477 125 641 131 483
Tax 26 - 256
Other accounts
receivable 112 181 40 585 29 539
Other
investments 21 312 12 121 23 590
Deferred tax
assets 82 052 125 104 102 936
Non-current
assets held for
sale 3 234 3 234 5 510
Loans and
advances 3 737 952 3 667 891 3 629 574
Derivative
financial
instruments 15 498 71 279 21 406
Negotiable
securities 261 555 293 112 267 902
Bank term
deposits 243 372 93 277 35 276
Cash and cash
equivalents 1 129 091 1 080 317 1 400 937
Total assets 5 953 099 5 637 732 5 818 734
EQUITY AND
LIABILITIES
Shareholders`
equity 1 492 203 1 350 606 1 437 671
Share capital
and share
premium 1 202 571 1 202 571 1 202 571
Share-based
payments reserve 2 613 5 170 1 894
Property
revaluation
reserve 52 708 46 364 52 708
Available-
for-sale reserve 11 374 10 551 13 883
Capital
redemption
reserve fund 3 788 3 788 3 788
General reserve 7 478 7 478 7 478
Retained income 211 671 74 684 155 349
Non-current
liability
Deferred tax
liabilities 19 747 14 854 18 870
Liabilities 4 441 149 4 272 272 4 362 193
Deposits 4 281 326 4 143 743 4 246 598
Derivative
financial
instruments 15 322 22 693 16 230
Provisions 29 525 28 937 38 142
Other accounts
payable 114 976 76 415 61 153
Tax - 484 70
Total equity
and liabilities 5 953 099 5 637 732 5 818 734
Condensed consolidated statement of comprehensive income
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2010 2009 2009
R`000 R`000 R`000
Unaudited Unaudited Audited
Interest
income 224 358 291 684 529 584
Interest
expense (95 361) (151 891) (261 315)
Net interest
income 128 997 139 793 268 269
Net recovery
of/(charge
for) credit losses 864 (6 749) (9 323)
Net interest
income after
credit losses 129 861 133 044 258 946
Net gain on
disposal of
available-for-sale
investments 885 1 583 1 583
Net non-interest
income 79 758 99 814 200 059
Non-interest
income 125 271 138 290 287 909
Fee and
commission
expenditure (45 513) (38 476) (87 850)
Net interest and
non-interest
income 210 504 234 441 460 588
Operating
expenditure (132 346) (119 872) (247 578)
Operating
profit 78 158 114 569 213 010
Share of
income from
associated company - - 4 059
Profit before
tax 78 158 114 569 217 069
Tax (22 307) (32 172) (54 867)
Profit after
tax 55 851 82 397 162 202
Other
comprehensive
(loss)/income
Revaluation of
owner-occupied
properties - - 8 812
(Losses)/Gains
on remeasurement
to fair value (2 033) (1 308) 2 576
Release to
income on
disposal of
available-for-sale
financial
assets (885) (1 583) (1 583)
Tax relating
to other
comprehensive
loss/income 409 406 (2 614)
Other
comprehensive
(loss)/income
net of tax (2 509) (2 485) 7 191
Total
comprehensive
income 53 342 79 912 169 393
Profit after tax
attributable to:
Equity
holders of
the Group 55 851 82 397 162 202
Total
comprehensive income
attributable to:
Equity holders of
the Group 53 342 79 912 169 393
Earnings per
ordinary
share (cents) 1.4 2.1 4.1
Diluted earnings
per ordinary
share (cents) 1.4 2.1 4.1
Headline earnings
Restated
reconciliation
between profit
after tax and
headline
earnings (1)
Profit after tax 55 851 82 397 162 202
Adjustment for
non-headline items:
Realisation of
available-for
-sale reserve
on disposal of
investments (885) (1 583) (1 583)
Loss on disposal
of property and
equipment - 14 14
Tax on non-headline
items (1) 124 218 218
Restated headline
earnings (1) 55 090 81 046 160 851
Headline earnings
per ordinary
share (cents) 1.4 2.1 4.1
Diluted headline
earnings per ordinary
share (cents) 1.4 2.1 4.1
Financial statistics
30 June 30 June 31 December
2010 2009 2009
Unaudited Unaudited Audited
Number of ordinary
shares in issue:
- end of the
period (`000) 3 911 114 3 911 114 3 911 114
- weighted
average (`000) 3 911 114 3 911 114 3 911 114
- weighted
average -
diluted (`000) 3 936 208 3 911 114 3 928 895
Return on
average equity (%) 7.6 12.6 12.0
Return on
average assets (%) 1.9 2.9 2.8
Cost to income (%) 63.1 49.7 52.7
Net asset value
per ordinary
share (cents) 38.2 34.5 36.8
Tangible net asset
value per ordinary
share(cents) 32.6 31.3 32.4
Condensed consolidated statement of changes in equity
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2010 2009 2009
R`000 R`000 R`000
Unaudited Unaudited Audited
Share capital
and share premium
Balance at
beginning and
end of the
period 1 202 571 1 202 571 1 202 571
Share-based
payments reserve
Balance at
beginning of
the period 1 894 4 650 4 650
Share-based
payments expense 719 520 (2 756)
Balance at
end of the period 2 613 5 170 1 894
Property
revaluation reserve
Balance at
beginning of
the period 52 708 46 364 46 364
Other
comprehensive
income - - 8 812
Tax relating
to other
comprehensive
income - - (2 468)
Balance at
end of the
period 52 708 46 364 52 708
Available-for-
sale reserve
Balance at
beginning of
the period 13 883 13 036 13 036
Other
comprehensive
(loss)/income (2 918) (2 891) 993
Tax relating
to other
comprehensive
loss/income 409 406 (146)
Balance at
end of the period 11 374 10 551 13 883
Capital
redemption
reserve fund
and general reserve
Balance at
beginning and
end of the
period 11 266 11 266 11 266
Retained
income/(Accumulated
loss)
Balance at
beginning of
the period 155 349 (8 857) (8 857)
Profit after tax 55 851 82 397 162 202
Share-based
payments
expense 471 1 144 2 004
Balance at
end of the
period 211 671 74 684 155 349
Total equity
Balance at
beginning of
the period 1 437 671 1 269 030 1 269 030
Share-based
payments expense 1 190 1 664 (752)
Profit after tax 55 851 82 397 162 202
Other
comprehensive
(loss)/income
net of tax (2 509) (2 485) 7 191
Balance at
end of the
period 1 492 203 1 350 606 1 437 671
Condensed consolidated statement of cash flows
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2010 2009 2009
R`000 R`000 R`000
Unaudited Unaudited Audited
Net cash
(outflow)/inflow
from operating
activities (212 572) (332 947) 41 241
Net cash
(outflow) from
investing
activities (59 274) (51 695) (105 263)
Net cash
(outflow) for
the period (271 846) (384 642) (64 022)
Cash and cash
equivalents
at beginning
of the period 1 400 937 1 464 959 1 464 959
Cash and cash
equivalents
at end of the
period 1 129 091 1 080 317 1 400 937
Condensed Group segmental information
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2010 2009 2009
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 136 225 145 325 291 779
Treasury 29 602 25 202 45 224
Alliance
banking, MBL
credit card and
electronic
banking 15 823 33 672 63 055
Other
services (2) 27 990 36 991 69 853
209 640 241 190 469 911
Segment result -
operating
profit (3)
Retail and
Commercial
banking 89 114 96 407 197 583
Treasury 19 181 14 247 25 888
Alliance
banking, MBL
credit card and
electronic
banking 3 429 21 354 39 583
Other
services (2) (33 566) (17 439) (50 044)
Operating
profit 78 158 114 569 213 010
Share of
income from
associated company - - 4 059
Profit before tax 78 158 114 569 217 069
Tax (22 307) (32 172) (54 867)
Profit after tax 55 851 82 397 162 202
Material related party balances and transactions
30 June 30 June 31 December
2010 2009 2009
R`000 R`000 R`000
Unaudited Unaudited Audited
Net balances with
Caixa Geral de
Depositos S.A. 442 488 702 220 614 222
Interest
received from
Caixa Geral de
Depositos S.A. 550 8 423 10 518
Condensed Group contingent liabilities and commitments
30 June 30 June 31 December
2010 2009 2009
R`000 R`000 R`000
Unaudited Unaudited Audited
Guarantees,
letters of
credit and
committed
undrawn
facilities 411 502 577 134 506 678
Operating lease
commitments 9 380 11 108 24 355
Capital
commitments 16 251 66 733 51 628
Explanatory notes
(1) The tax effect on non-headline items was omitted for
June 2009 but reported HEPS remained unchanged.
(2) Other services includes support divisions, surplus
capital, insurance brokers and inter-group eliminations.
(3) Segment results represent the operating profit earned
by each segment without the allocation of tax or
attributable support costs.
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), K R Kumbier (Executive),
J P M Lopes* (Executive), L Hyne, A T Ikalafeng,
G P de Kock, T H Njikizana, S Rapeti
* Portuguese Zimbabwean
Group secretary: A de Villiers
Sandton
29 July 2010
Registered office: Mercantile Bank, 142 West Street,
Sandown, 2196
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: 29/07/2010 14:50:36 Produced by the JSE SENS Department.
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