| Thu 28 Jul 2011, 12:39 | | MTL - Mercantile Bank Holdings Limited - Condensed Unaudited Interim results for |
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MTL
MTL
MTL - Mercantile Bank Holdings Limited - Condensed Unaudited Interim results for
the six months ended 30 June 2011
Mercantile Bank Holdings Limited
Registration number 1989/000164/06
Share code: MTL
ISIN: ZAE000064721
("Mercantile" or "the Group")
CONDENSED UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2011
SALIENT FEATURES
- HEPS unchanged
- Growth in loans and advances of 4.7%
- Growth in tangible NAV per share of 8.0%
- High level of capital adequacy and liquidity available
FINANCIAL OVERVIEW
The tough trading environment experienced in 2010 has continued into 2011 with
no clear signs of recovery in both domestic and international economic
conditions. Headline earnings per share remained unchanged when comparing the
six months ended 30 June 2011 to the six months ended 30 June 2010 with the main
contributing factors as follows:
- although the lending book growth is 4.7%, net interest income reduced by 4.2%
as a result of the negative endowment effect resulting from the lower interest
rate environment in South Africa and the Group`s high level of unleveraged
capital;
- the net charge for credit losses increased by R6.4 million, however, the
credit loss ratio of 0.28% remains well below industry averages;
- a 40.4% increase in net non-interest income largely attributable to the
recognition of profits of R26.3 million generated from the exercising of equity
options in the structured loan portfolio in addition to a strong performance
from the electronic banking business; and
- costs increased 16.6% mainly as a result of the higher charge in amortisation
and depreciation on the Group`s new core banking system as well as increased
staff costs which resulted in the cost to income ratio increasing from 63.1% to
65.5%.
CREDIT RATINGS
Moody`s Investors Service ("Moody`s") confirmed the following RSA national scale
issuer ratings to Mercantile Bank Limited ("the Bank") on 3 April 2011:
Short term P-2.za
Long term A3.za
Outlook On 20 June 2011, Moody`s placed the Bank on ratings review for
possible downgrade based on Moody`s review of the standalone
rating of Caixa Geral de Depositos S.A. (the Group`s holding
company). Currently embedded in the Bank`s ratings is a one
notch uplift (on the international scale) attributable to
parental support.
BUSINESS ACQUISITIONS
During the period under review the Bank acquired 74.9% of Custom Capital (Pty)
Ltd ("Custom"), a rental finance business, effective 1 April 2011. The
acquisition was structured by way of the vendors transferring rental finance
assets from their existing businesses to Custom to the value of R34 million on
loan account in exchange for their equity holding. Mercantile invested R102
million on loan account in respect of its proportionate shareholding. The
transaction included no goodwill and the purpose of the acquisition was to focus
on growing assets and transactional banking in the SME sector. The loss
attributable to the non-controlling interest for the three-month period since
acquisition is R0.476 million.
Effective 1 July 2011, Mercantile acquired 51% of Multi Risk Investment Holdings
(Pty) Ltd ("MultiRisk"), a short-term insurance broker. The final consideration,
which is currently estimated at R51 million, is dependent on a closing statement
which will be based on MultiRisk`s audited financials as at 30 June 2011.
Comprehensive details of the transaction were communicated on SENS on 19 May
2011 and further details, as appropriate, will be provided in the next reporting
period. This acquisition will enhance product offering, diversify revenue
streams and increase the potential to cross-sell banking products to the
customer bases of the Group.
INTERNATIONAL FINANCE CORPORATION ("IFC") LOAN FACILITY
The Group signed a Euro 50 million (R491 million) seven-year term loan facility
with the IFC on 30 June 2011 to support growth in finance to small and medium
sized enterprise clients as well as finance qualifying energy efficient and
renewable energy projects. The term nature of the loan enhances the funding
structure of the Group`s balance sheet to support this lending growth.
DIRECTORATE
There were no changes to the Board of Directors during the period under review.
BASIS OF PRESENTATION AND ACCOUNTING POLICIES
These condensed consolidated financial statements have been prepared under the
historical cost conventions excluding financial instruments and properties which
are fair valued. The condensed financial information has been prepared in
accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards ("IFRS"), the AC 500
standards as issued by the Accounting Practices Board and the information as
required by IAS 34: Interim Financial Reporting. The report has been prepared
using accounting policies that comply with IFRS which are consistent with those
applied in the financial statements for the year ended 31 December 2010 and in
compliance with the Listings Requirements of the JSE Limited and in the manner
required by the Companies Act.
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.
DIVIDENDS
The Group has not finalised its evaluation or secured approvals for a share
consolidation and odd lot offer which has a bearing on dividend declarations
being considered.
OUTLOOK
The anticipated 2011 economic recovery has not materialised. Even though the
economic outlook remains uncertain for the next six to 12 months, the Group is
confident it will grow lending and transactional revenue as a result of
strategic growth initiatives and new business flows from the integration of the
business acquisitions. Further recognition of income on equity options during
the second half of 2011 is not anticipated.
J A S de Andrade Campos D J Brown Sandton
Chairman Chief Executive Officer 28 July 2011
Condensed consolidated statement of financial position
30 June 30 June 31 December
2011 2010 2010
R`000 R`000 R`000
Unaudited Unaudited Audited
ASSETS
Intangible assets 215 270 218 349 224 402
Property and equipment 121 736 128 477 126 887
Tax 224 26 101
Other accounts receivable 54 607 112 181 49 021
Other investments 39 799 21 312 10 969
Deferred tax assets 40 963 82 052 62 382
Non-current assets held for sale - 3 234 -
Loans and advances 3 912 125 3 737 952 3 720 907
Derivative financial instruments 14 859 15 498 34 717
Negotiable securities 235 569 261 555 265 028
Bank term deposits - 243 372 -
Cash and cash equivalents 1 369 277 1 129 091 1 759 897
Total assets 6 004 429 5 953 099 6 254 311
EQUITY AND LIABILITIES
Total equity attributable to equity
holders of the parent 1 593 897 1 492 203 1 539 394
Share capital and share premium 1 202 840 1 202 571 1 202 760
Share-based payments reserve 1 662 2 613 3 190
Property revaluation reserve 54 547 52 708 54 547
Available-for-sale reserve 12 478 11 374 10 502
Capital redemption reserve fund 3 788 3 788 3 788
General reserve 7 478 7 478 7 478
Retained earnings 311 104 211 671 257 129
Non-controlling interest (476) - -
Total equity 1 593 421 1 492 203 1 539 394
Liabilities 4 411 008 4 460 896 4 714 917
Deferred tax liabilities 21 344 19 747 21 038
Deposits 4 227 427 4 281 326 4 563 988
Derivative financial instruments 7 974 15 322 28 122
Provisions and other liabilities 37 423 29 525 29 920
Other accounts payable 116 840 114 976 71 849
Total equity and liabilities 6 004 429 5 953 099 6 254 311
Commitments and contingent liabilities 433 881 437 133 467 808
Condensed consolidated statement of comprehensive income
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2011 2010 2010
R`000 R`000 R`000
Unaudited Unaudited Audited
Interest income 215 547 224 358 450 918
Interest expense (91 971) (95 361) (194 558)
Net interest income 123 576 128 997 256 360
Net (charge for)/recovery of credit
losses (5 566) 864 (3 422)
Net interest income after credit losses 118 010 129 861 252 938
Net gain on disposal of
available-for-sale investments - 885 885
Net non-interest income 111 959 79 758 168 485
Non-interest income 170 821 125 271 271 587
Fee and commission expenditure (58 862) (45 513) (103 102)
Net interest and non-interest income 229 969 210 504 422 308
Operating expenditure (154 367) (132 346) (278 804)
Operating profit 75 602 78 158 143 504
Share of income from associated company - - 567
Profit before tax 75 602 78 158 144 071
Tax (22 203) (22 307) (43 045)
Profit after tax 53 399 55 851 101 026
Other comprehensive income/(loss)
Revaluation of owner-occupied properties - - 2 554
Gains/(Losses) on remeasurement to
fair value 2 298 (2 033) (3 331)
Release to income on disposal of
available-for-sale financial assets - (885) (885)
Tax relating to other comprehensive
income/loss (322) 409 120
Other comprehensive income/(loss)
net of tax 1 976 (2 509) (1 542)
Total comprehensive income 55 375 53 342 99 484
Profit after tax attributable to:
Equity holders of the parent 53 875 55 851 101 026
Non-controlling interest (476) - -
53 399 55 851 101 026
Total comprehensive income
attributable to:
Equity holders of the parent 55 851 53 342 99 484
Non-controlling interest (476) - -
55 375 53 342 99 484
Earnings per ordinary share (cents) 1.4 1.4 2.6
Diluted earnings per ordinary share
(cents) 1.4 1.4 2.6
Headline earnings
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2011 2010 2010
R`000 R`000 R`000
Unaudited Unaudited Audited
Reconciliation between profit after
tax and headline earnings
Profit after tax attributable to
equity holders of the parent 53 875 55 851 101 026
Adjustment for non-headline items:
Realisation of available-for-sale
reserve on disposal of investments - (885) (885)
Loss on disposal of property and equipment - - 6
Tax on non-headline items - 124 122
Headline earnings 53 875 55 090 100 269
Headline earnings per ordinary
share (cents) 1.4 1.4 2.6
Diluted headline earnings per
ordinary share (cents) 1.4 1.4 2.5
Financial statistics
30 June 30 June 31 December
2011 2010 2010
Unaudited Unaudited Audited
Number of ordinary shares in issue:
- end of the period (`000) 3 912 287 3 911 114 3 911 959
- weighted average (`000) 3 912 055 3 911 114 3 911 255
- weighted average - diluted (`000) 3 934 680 3 936 208 3 935 365
Return on average equity (%) 6.9 7.6 6.8
Return on average assets (%) 1.7 1.9 1.7
Cost to income (%) 65.5 63.1 65.5
Net asset value per ordinary share
(cents) 40.7 38.2 39.4
Tangible net asset value per
ordinary share (cents) 35.2 32.6 33.6
Condensed consolidated statement of changes in equity
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2011 2010 2010
R`000 R`000 R`000
Unaudited Unaudited Audited
Share capital and share premium
Balance at beginning of the period 1 202 760 1 202 571 1 202 571
Decrease of treasury shares held
within the Group 80 - 189
Balance at end of the period 1 202 840 1 202 571 1 202 760
Share-based payments reserve
Balance at beginning of the period 3 190 1 894 1 894
Vesting of shares in the
conditional share plan (1 486) - (104)
Share-based payments (write
back)/expense (42) 719 1 400
Balance at end of the period 1 662 2 613 3 190
Property revaluation reserve
Balance at beginning of the period 54 547 52 708 52 708
Other comprehensive income - - 2 554
Tax relating to other comprehensive
income - - (715)
Balance at end of the period 54 547 52 708 54 547
Available-for-sale reserve
Balance at beginning of the period 10 502 13 883 13 883
Other comprehensive income/(loss) 2 298 (2 918) (4 216)
Tax relating to other comprehensive
income/loss (322) 409 835
Balance at end of the period 12 478 11 374 10 502
Capital redemption reserve fund and
general reserve
Balance at beginning and end of the
period 11 266 11 266 11 266
Retained earnings
Balance at beginning of the period 257 129 155 349 155 349
Profit after tax attributable to
equity holders of the parent 53 875 55 851 101 026
Share-based payments expense 100 471 754
Balance at end of the period 311 104 211 671 257 129
Total equity attributable to equity
holders of the parent
Balance at beginning of the period 1 539 394 1 437 671 1 437 671
Decrease of treasury shares held
within the Group 80 - 189
Vesting of shares in the
conditional share plan (1 486) - (104)
Share-based payments expense 58 1 190 2 154
Profit after tax attributable to
equity holders of the parent 53 875 55 851 101 026
Other comprehensive income/(loss)
net of tax 1 976 (2 509) (1 542)
Balance at end of the period 1 593 897 1 492 203 1 539 394
Non-controlling interest
Balance at beginning of the period - - -
Change in non-controlling interest (476) - -
Balance at end of the period (476) - -
Total equity 1 593 421 1 492 203 1 539 394
Condensed consolidated statement of cash flows
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2011 2010 2010
R`000 R`000 R`000
Unaudited Unaudited Audited
Net cash (outflow)/inflow from
operating activities (386 625) (212 572) 420 749
Net cash outflow from investing
activities (3 995) (59 274) (61 789)
Net cash (outflow)/inflow for the
period (390 620) (271 846) 358 960
Cash and cash equivalents at
beginning of the period 1 759 897 1 400 937 1 400 937
Cash and cash equivalents at end of
the period 1 369 277 1 129 091 1 759 897
Condensed Group segmental information
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2011 2010 2010
R`000 R`000 R`000
Unaudited Unaudited Audited
Segment revenue net of fee and
commission expenditure
Revenue from external customers
Business and commercial banking 161 356 136 225 277 440
Treasury 30 978 29 602 60 340
Alliance banking, MBL credit card
and electronic banking 20 089 15 823 35 650
Support divisions, surplus capital,
insurance brokers, rental
finance business and inter-group
eliminations 23 112 27 990 52 300
235 535 209 640 425 730
Segment result - operating profit
Business and commercial banking 92 512 89 114 173 676
Treasury 16 239 19 181 34 545
Alliance banking, MBL credit card
and electronic banking 14 866 3 429 9 893
Support divisions, surplus capital,
insurance brokers, rental
finance business and inter-group
eliminations (48 015) (33 566) (74 610)
Operating profit 75 602 78 158 143 504
Share of income from associated
company - - 567
Profit before tax 75 602 78 158 144 071
Tax (22 203) (22 307) (43 045)
Profit after tax 53 399 55 851 101 026
Material related party balances and transactions
30 June 30 June 31 December
2011 2010 2010
R`000 R`000 R`000
Unaudited Unaudited Audited
Net balances with Caixa Geral de
Depositos S.A. 67 740 442 488 1 084 434
Interest received from Caixa Geral
de Depositos S.A. 1 604 550 1 353
Directors: J A S de Andrade Campos* (Chairman), D J Brown (Chief Executive
Officer), K R Kumbier (Executive), J P M Lopes* (Executive), G P de Kock,
L Hyne, A T Ikalafeng, T H Njikizana-
Group secretary: A de Villiers *Portuguese -Zimbabwean
Registered office: Mercantile Bank, 142 West Street, Sandown, 2196
Transfer secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall
Street, Johannesburg, 2001
Sponsor: Bridge Capital Advisors (Pty) Ltd, 2nd Floor, 27 Fricker Road,
Illovo, 2196
28 July 2011
www.mercantile.co.za
Date: 28/07/2011 12:39:01 Produced by the JSE SENS Department.
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