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MTL
MTL
Mercantile - Unaudited interim results for the six months ended 30 June 2006
Mercantile Bank Holdings Limited
Member of CGD Group
Registration number 1989/000164/06
("Mercantile" or "the Group")
Share code: MTL & ISIN: ZAE000064721
Unaudited interim results for the six months ended 30 June 2006
Highlights
* Growth in profit before taxation and exceptional items of 102.5%
* Total asset growth of 47.5%
* Lending growth of 51.2%
* Deposit growth of 48.8%
Summarised Group Balance Sheet
30 June 30 June 31 December
2006 2005 2005
R"000 R"000 R"000
Unaudited Unaudited Audited
ASSETS
Intangible assets 5 349 4 473 7 020
Property and equipment 93 010 80 145 91 305
Investment properties - 720 350
Taxation 29 3 626 3 698
Other accounts receivable 66 385 27 680 14 887
Interest in associated companies 3 323 3 236 3 323
Other investments 1 929 2 940 2 365
Loans and advances 1 703 585 1 126 645 1 458 677
Derivative financial instruments 26 520 5 047 36 757
Negotiable securities 389 832 336 317 379 028
Cash and cash equivalents 2 094 301 1 381 925 1 408 972
Total assets 4 384 263 2 972 754 3 406 382
EQUITY AND LIABILITIES
Shareholders" equity 596 483 520 201 550 179
Share capital and share premium 1 207 032 1 208 032 1 207 032
Capital redemption reserve fund 3 788 3 788 3 788
Share-based payments reserve 2 121 444 847
General reserve 7 478 7 478 7 478
Property revaluation reserve 36 476 31 273 36 476
Available-for-sale reserve (70) (1 573) (76)
General credit-risk reserve 11 933 6 954 10 835
Accumulated loss (672 275) (736 195) (716 201)
Liabilities 3 787 780 2 452 553 2 856 203
Deposits 3 409 796 2 290 844 2 636 547
Derivative financial instruments 153 344 95 653 38 531
Provisions 26 406 30 039 31 647
Other accounts payable 198 200 35 973 149 478
Taxation 34 44 -
Total equity and liabilities 4 384 263 2 972 754 3 406 382
Summarised Group Income Statement
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2006 2005 2005
R"000 R"000 R"000
Unaudited Unaudited Audited
Interest income 155 460 117 331 248 290
Interest expense (78 361) (54 142) (113 144)
Net interest income before
credit recoveries 77 099 63 189 135 146
Net credit recoveries 6 161 13 319 21 287
Net interest income after
credit recoveries 83 260 76 508 156 433
Net (loss)/profit on disposal
of investments (36) 592 (498)
Non-interest income 69 086 57 056 117 903
Net interest and non-interest
income 152 310 134 156 273 838
Operating expenditure (111 956) (114 123) (230 477)
Profit before associated companies 40 354 20 033 43 361
Share of income from
associated companies 215 - 516
Profit before taxation and
exceptional items 40 569 20 033 43 877
Recovery of amounts previously
written-off
in respect of the release of the
CGD guarantee 4 455 23 119 23 119
Profit before taxation 45 024 43 152 66 996
Taxation - (31) -
Profit after taxation 45 024 43 121 66 996
Reconciliation between
profit after taxation
and headline earnings:
Profit after taxation 45 024 43 121 66 996
Adjustment for:
Realisation of available-for-sale
reserve on disposal of investments - (614) 885
(Profit)/Loss on
disposal of property
and equipment (17) 51 144
Headline earnings 45 007 42 558 68 025
Earnings per ordinary share
(cents) 1.1 1.1 1.7
Headline earnings per
ordinary share (cents) 1.1 1.1 1.7
Diluted earnings per
ordinary share (cents) 1.1 1.1 1.7
Diluted headline earnings per
ordinary share (cents) 1.1 1.1 1.7
Dividend per ordinary share
(cents) - - -
Financial Statistics
30 June 30 June 31 December
2006 2005 2005
Unaudited Unaudited Audited
Number of ordinary shares in issue:
- end of period ("000) 3 925 126 3 928 103 3 925 126
- weighted average ("000) 3 925 126 3 929 320 3 927 892
- weighted average - diluted ("000) 3 939 474 3 938 568 3 932 811
Return on average equity (%) 15.7 16.9 12.7
Return on average assets (%) 2.3 3.0 2.2
Cost to income (%) 76.6 94.4 91.3
Net asset value per
ordinary share (cents) 15.2 13.2 14.0
Capital adequacy ratio (%)
- Consolidated Group 32.2 39.8 31.3
- Mercantile Bank Limited 32.9 44.7 34.5
Group Contingent Liabilities and Commitments
30 June 30 June 31 December
2006 2005 2005
R"000 R"000 R"000
Unaudited Unaudited Audited
Guarantees and letters of credit 293 540 234 740 287 821
Conditional buy-back obligations - 18 480 7 707
Operating lease commitments 15 932 13 211 13 742
Summarised Group Statement of Changes in Equity
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2006 2005 2005
R"000 R"000 R"000
Unaudited Unaudited Audited
Balance at beginning of period 550 179 500 939 500 939
Transitional adjustments
on adoption of IFRS
Creation of credit risk
impairments - (22 952) (22 952)
Movements in reserves 2 378 (8 524) 8 925
Revaluation of owner-occupied
property - - 5 203
Net transfer to/(from)
general credit-risk reserve 1 098 (8 227) 2 119
Share-based payments expense 1 274 321 724
Net transfer to/(from)
available-for-sale reserve 6 (618) 879
Movements in accumulated loss 43 926 51 348 64 877
Profit after taxation 45 024 43 121 66 996
Net transfer (to)/from general
credit-risk reserve (1 098) 8 227 (2 119)
Movement in share capital and
premium
Treasury shares on consolidation
of share incentive trust - (610) (1 610)
Balance at end of period 596 483 520 201 550 179
Summarised Group Cash Flow Statement
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2006 2005 2005
R"000 R"000 R"000
Unaudited Unaudited Audited
Net cash inflow from
operating activities 43 016 41 112 66 401
Net cash inflow from
banking activities 648 363 193 000 209 973
Net cash outflow from
investing activities (6 050) (1 048) (16 263)
Net cash inflow for the period 685 329 233 064 260 111
Cash and cash equivalents
at beginning of period 1 408 972 1 148 861 1 148 861
Cash and cash equivalents at
end of period 2 094 301 1 381 925 1 408 972
Summarised Group Segmental Information
Six months Six months 12 months
ended ended ended
30 June 30 June 31 December
2006 2005 2005
R"000 R"000 R"000
Unaudited Unaudited Audited
Segment revenue: (1)
Retail banking 81 406 64 619 138 968
Treasury 20 957 16 028 31 999
Alliance banking, MBL credit card
and structured loans 26 219 16 892 39 470
Other services (2) 17 567 23 298 42 114
146 149 120 837 252 551
Profit after taxation:
Retail banking (3) 49 843 38 399 80 544
Treasury (3) 4 359 2 335 8 451
Alliance banking, MBL credit card
and structured loans (3) 15 143 8 074 14 739
Other services (3) (4) (24 321) (5 687) (36 738)
45 024 43 121 66 996
Notes:
(1)Segment revenue has been restated for the year ended 31 December 2005 and
now excludes net credit recoveries and exceptional items.
(2)"Other services" includes support divisions, insurance brokers and inter-
group eliminations.
(3)Excludes the allocation of attributable support costs.
(4)"Other services" includes support divisions, insurance brokers, inter-group
eliminations, associate income and exceptional items.
FINANCIAL OVERVIEW
The Group has continued to achieve strong growth in profit before taxation and
exceptional items during the first six months of the 2006 financial year which
saw these profits increase by 102.5% from R20.033 million (comparative six
months of 2005) to R40.569 million. Exceptional recoveries of amounts
previously written off in respect of the release of the CGD guarantee,
declined from R23.119 million for the six months ended 30 June 2005, to R4.455
million for the six months ended 30 June 2006. Due to this decline in
exceptional recoveries, headline earnings increased by a modest 5.8%. The
increase in profits is largely attributable to:
- 22% growth in funds profit generated by the increase of 51.2% in lending
and the growth of 48.8% in customer deposits;
- non-interest income growth of 21.1% largely in the areas of transactional
and alliance banking;
- cost containment in operating expenses which decreased by 1.9%.
ACCOUNTING POLICIES
The accounting policies applied in the preparation of the unaudited interim
financial statements are in accordance with International Financial Reporting
Standards ("IFRS") and are consistent with those applied in the annual
financial statements for the financial year ended 31 December 2005.
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
There were no changes to the Board of Directors during the period under
review.
OUTLOOK
Whilst tighter monetary conditions are expected to slow the rate of credit
growth over the balance of the year, the improvement in the Group"s
performance is expected to continue.
Projects evaluating the replacement of our core retail banking systems and
enhancements to our alliance banking systems, as referred to in our December
2005 results announcements, are well underway and should be concluded by year
end.
J A S de Andrade Campos D J Brown
Chairman Chief Executive Officer
Sandton
26 July 2006
Directors: J A S de Andrade Campos* (Chairman), D J Brown (Chief Executive
Officer), M J M Figueira* (Executive), J P M Lopes* (Executive), G P de Kock,
L Hyne, A T Ikalafeng, K B Motshabi, A M Osman**, S Rapeti
* Portuguese ** Mozambican
Group Secretary: R van Rensburg
Registered Office: Mercantile Bank, 142 West Street, Sandown, 2196
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited, 70
Marshall Street, Johannesburg, 2001
Sponsor: Bridge Capital Services (Pty) Limited, 1st Floor, Building 22A, The
Woodlands, Woodlands Drive, Woodmead, Sandton, 2196
Sponsor
Bridge Capital
www.mercantile.co.za
Date: 26/07/2006 04:00:16 PM Produced by the JSE SENS Department
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