| Mon 1 Jul 2002, 0:00 | | Mercantile Lisbon Bank Holdings Limited - Audited |
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MERCANTILE LISBON BANK HOLDINGS LIMITED - AUDITED RESULTS FOR THE YEAR ENDED
31 MARCH 2002
("MLBH")
A subsidiary Company of Caixa Geral de Depositos
Audited Results for the year ended 31 March 2002
Summarised Group Income Statement
31 March 31 March2001
Interest income 353,815 424,837
Interest expense (235,397) (283,513)
Net interest income before provision
for credit losses 118,418 141,324
Provision for credit losses (506,778) (95,450)
Net interest (expense)/income (388,360) 45,874
Non-interest income 179,039 230,662
Net profit on sale and revaluation
of investments 67,929 5,725
Total operating (loss)/income (141,392) 282,261
Operating expenses (489,643) (353,309)
Share of loss from associated
Companies (3,530) (864)
Loss before taxation (634,565) (71,912)
Taxation (12,198) (12,247)
Attributable loss (646,763) (84,159)
Continuing operations (479,784) (106,176)
Discontinued operations (166,979) (22,017)
Headline loss (529,520) (95,901)
Determination of headline loss
Attributable loss for the year (646,763) (84,159)
Adjustment for discontinued operations 117,243 (11,742)
Headline loss (529,520) (95,901)
Summarised Group Balance Sheet
31 March 31 March
2002 2001
R` 000 R` 000
Assets
Cash & short-term funds 212,047 198,022
Negotiable securities 242,997 345,060
Loans & advances 1,475,609 2,792,954
Interest in associated companies 3,246 19,678
Investments 19,560 45,126
Other assets 233,531 123,852
Property, equipment and intangible assets 121,832 184,759
Total assets 2,308,822 3,709,451
Liabilities
Deposit & credit balances 2,085,712 3,094,538
Other liabilities 207,193 64,854
Deferred taxation - 2,886
Long term liabilities - 10,517
Total liabilities 2,292,905 3,172,795
Shareholders` equity
Share capital 866,865 747,786
Reserves (850,948) (211,130)
Total shareholders` funds 15,917 536,656
Total liabilities and shareholders`
Funds 2,308,822 3,709,451
Contingent liabilities 186,829 203,459
Summarised Group Cash Flow Statement
31 March 31 March
2002 2001
R` 000 R` 000
Cash flow from operating activities (125,896) 35,483
Cash flow from operating funds (560,460) (327,882)
Taxation paid - -
Cash flow from investing activities 581,302 (29,625)
Cash flow from financing activities 119,079 (34,236)
Aggregate of cash inflows and
outflows 14,025 (356,260)
Cash and short-term funds at
beginning of period 198,022 554,282
Cash and short-term funds at end
of period 212,047 198,022
Summarised Group Statement of Change in Shareholders` Interest
31 March 31 March
2002 2001
R` 000 R` 000
Opening balance 536,656 655,051
Movements in share capital and share premium 119,079 (31,138)
Movements in non-distributable reserves 6,945 -
Movements in distributable reserves (646,763) (89,045)
Movements in the capital redemption
reserve fund - 3,788
Movements in shareholders` loan - (2,000)
Shareholders` interest 15,917 536,656
Supplementary Information
31 March 31 March
2002 2001
R` 000 R` 000
Valuation of investments
Listed - at market value 1,537 1,821
Unlisted - at directors` valuation 18,023 43,305
19,560 45,126
Operating lease commitments
Due within one year 7,059 9,810
Thereafter 14,933 24,281
21,992 34,091
Depreciation 36,811 32,746
Financial statistics
31 March 31 March
2002 2001
Shares in issue
Number of ordinary shares in issue
- end of period (` 000) 855,585 427,014
- weighted average (` 000) 427,014 442,164
Headline loss per ordinary share (cents) (124.0) (21.7)
Net asset value per ordinary share (cents) 1.86 125.70
Capital ratio relative to 10% (2001 - 8%)
requirement in terms of Banks Act (%) 1.05 15.49
Adjusted capital ratio after
re-capitalisation (%) 10 -
CAIXA GERAL DE DEPOSITOS ("CGD") ESTABLISHED AS CONTROLLING SHAREHOLDER
UNDERTAKING BY CGD TO RECAPITALISE GROUP FURTHER CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
The second half of the financial year to 31 March 2002 has seen:
- the conclusion of an extensive re-grading exercise on all advances; and
- the implementation of the disposals of the registrars` business and the
asset finance book.
These issues are more fully set out below.
Arrangements establishing Caixa Geral de Depositos ("CGD") as the
controlling shareholder of Mercantile have been concluded. CGD is the
largest financial group in Portugal. As of 31 December 2001, CGD had assets
in excess of EUR 66 billion (R660 billion) and an equity base of over EUR 5
billion (R50 billion). CGD holds the highest rating of all Portuguese
banking groups, being rated (Aa3/P-1) by Moody`s, (A+/A-1) by S&P and (AA-
/F1) by Fitch IBCA.
2. REGRADING OF ALL ADVANCES
As part of ongoing efforts to improve risk management and the quality of
management information, management commenced a comprehensive review of the
advances book, in January 2002, with a view to ensuring that the book is
appropriately graded ("the re-grading exercise"). This exercise involved the
risk-grading of each individual advance as well as an evaluation of the
securities held against such.
The re-grading exercise has revealed a need for further provisions, details
of which are set out in paragraph 4 below. However, management is now
confident that non-performing advances have been properly identified,
adequate provisions in this regard have been created and that foundations
have been laid, through the installation of appropriate preventative and
detective controls, to ensure a more pro-active management of credit risk.
3 DISPOSAL OF THE REGISTRARS` BUSINESS AND THE ASSET FINANCE BOOK
All conditions precedent to the disposal of the Registrars` business were
fulfilled in March 2002 and the disposal consideration of R110 million was
received in early April 2002.
Further, on 19 November 2001, agreement was reached for the disposal of the
asset finance book comprising an aggregate of R465 million of advances to
Citibank N.A. for a consideration of R451 million, which consideration was
received in November 2001. This advances book was sold with recourse,
appropriate provision for which has been made as part of the re-grading
exercise.
4. RESULTS FOR THE YEAR ENDED 31 MARCH 2002
The results for the year ended 31 March 2002 are dominated by new provisions
for credit losses. In addition to the provision for credit losses of R266
million raised in the six months ended 30 September 2001, a new provision of
R242 million has been raised, comprising specific provisions of R189 million
in aggregate and a general provision of R53 million.
The specific provisions of R189 million have been raised primarily as a
result of the re-grading exercise. The existing general provision of R20
million has been increased by R53 million to R73 million, representing 4% of
net advances. The industry norm and the South African Reserve Bank ("the
SARB") requirement of 1.7% and 1%, respectively, of net advances has been
increased in order to appropriately recognise the inferior quality of
Mercantile`s present advances book. This policy will be reviewed during the
course of the 2003 financial year as the quality of the group`s risk
management procedures and information systems improves.
Whilst the results for the year ended 31 March 2002 are dominated by the
creation of substantial provisions for credit losses, the operating result
for the year is, nevertheless, a loss. Although some stabilisation of losses
has been evident, the group`s cost base remains unacceptably high and
management is vigorously exploring a number of opportunities to reduce costs
and improve efficiencies. There are also some opportunities to grow income
and these will be similarly explored.
The results for the financial year ended 31 March 2002 have been prepared in
accordance with Statements of Generally Accepted Accounting Practice in
South Africa.
The accounting policies as set out in the financial statements for the year
ended 31 March 2001 have been consistently applied in producing the
financial results.
No dividend, was declared or was proposed for the year under review.
Authorised share capital comprises 1 billion shares of 25 cents each.
Issued share capital comprises 855,585,190 ordinary shares of 25 cents each
(2001: 427,013,762).Unissued shares are under the control of the directors
of the company until the next annual meeting of the shareholders.
428,571,428 shares were issued during the period at 28 cents per share.
5. FURTHER RECAPITALISATION OF MERCANTILE
5.1 Introduction
As a consequence of the losses reported for the 2002 financial year [and in
addition to the initial recapitalisation in the form of an issue of shares
for cash to CGD in March 2002], Mercantile requires further recapitalisation
in order to meet the capital adequacy requirements set by the SARB and to
meet the future capital needs of Mercantile Bank Limited ("the
recapitalisation"). The board of directors of Mercantile has appointed
advisers to assist it in evaluating options in this regard.
In order to comply with the prudential requirements in respect of capital
adequacy, the board has received a formal written undertaking that CGD will
recapitalise or procure the recapitalisation of Mercantile to the extent
required by the SARB. This undertaking is in the process of being confirmed
by a guarantee the terms of which are being determined by CGD and the SARB.
5.2 CGD`s commitment to Mercantile
In March 2002, shareholders in general meeting passed all the resolutions
necessary to establish CGD as Mercantile`s controlling shareholder. Capital
in the amount of R120 million was injected into the group by way of an issue
of shares for cash on 27 March 2002, taking CGD`s shareholding in Mercantile
from 28% to 64.1%.
As indicated in the cautionary announcement dated May 2002, Mercantile
shareholders, depositors and other customers are assured of the continued
support of CGD, who has confirmed to the SARB and the Board and management
of Mercantile their willingness to safeguard the financial soundness and
stability of Mercantile, including the maintenance of capital adequacy.
6. FURTHER CAUTIONARY ANNOUNCEMENT
Details of the recapitalisation will be announced in due course, until which
time shareholders are advised to continue to exercise caution when dealing
in their Mercantile shares.
7. AUDIT REPORT
The results as set out in this announcement have been audited. The auditors
have issued an unqualified opinion which is available for inspection at the
company`s registered office and which has been modified with the following
emphasis of matter paragraph:
"Without qualifying our opinion, we draw your attention to the Income
Statement which indicates that the group incurred a net attributable loss of
R 646,8 million for the year ended 31 March 2002, and as of that date, the
Bank`s prudential requirements in respect of capital adequacy are not being
met. We refer to the directors` report which states that:
In order to comply with the prudential requirements in respect of capital
adequacy, the board has received a formal written undertaking that Caixa
Geral de Depositos, SA ("CGD") will recapitalise or procure the
recapitalisation of Mercantile to the extent required by the SARB. This
undertaking is in the process of being confirmed by a guarantee the terms of
which are being determined by CGD and the SARB.
As at the date of our report a guarantee approved by the South African
Reserve Bank is not in place. In the absence of such an agreement a
material uncertainty exists which may cast significant doubt about the Group
and company`s ability to continue as a going concern."
BY ORDER OF THE BOARD
BT WOODS, CHAIRMAN
RJ SYMMONDS, GROUP MANAGING DIRECTOR
F VICENTE COELHO, GROUP SECRETARY
JOHANNESBURG, 28 JUNE 2002
Corporate Advisor and Sponsor to Mercantile:
Bridge Capital
Reporting Accountants and Auditors:
Pricewaterhousecoopers
Mercantile Lisbon Bank Holdings Limited
(Registration number 1989/000164/06)
Registered Office:
Mercantile Lisbon House, 142 West Street, Sandown, 2196
Share Transfer Secretary:
Computershare Investment Services Ltd, 11 Diagonal Street,
Johannesburg, 2001
Directors: BT Wood (Chairman), RJ Symmonds (Group Managing Director)
(Executive), GP de Kock, Dr AMSA Soares**, BR van Rooyen, SR Bruyns, GK
Chadwick, Dr JHR Pereira**(Executive), WH Meyer (Executive), MJ Shaw, A
Steyn (Executive)
Group Secretary: F Vicente Coelho**
** Portuguese
www.mercantile.co.za
Date: 01/07/2002 09:16:57 AM Produced by the SENS Department
