| Tue 27 Feb 2007, 12:53 | | MTL - Mercantile - Audited results for the year en |
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MTL
MTL
MTL - Mercantile - Audited results for the year ended 31 December 2006
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")
Audited Results for the year ended 31 December 2006
Highlights
Up - Growth in HEPS of 48.0%
Up - Total asset growth of 30.6%
Up - Lending growth of 41.7%
Up - Deposit growth of 34.2%
Financial overview
The Group has continued to achieve strong growth in attributable profit after
taxation which has increased by 50.2% for the 2006 financial year compared to
the 2005 financial year. Headline earnings per share have in turn increased by
48.0%. These increases have been achieved despite:
a reduction in net recovery of credit losses from R21.3 million in 2005
to R1.5 million in 2006; and
a reduction in recovery of amounts previously written off relating to
the CGD guarantees from R23.1 million in 2005 to R8.6 million for the 2006
financial year.
The growth in earnings is largely attributable to:
an increase in net interest income of 24.4% generated by growth in
lending (net of impairments) of 41.7% and deposits of 34.2%. Overall total
asset growth was 30.6%;
non-interest income growth of 32.1% mainly in the areas of transactional
banking, alliance banking card business and foreign exchange services;
continued recoveries of impaired and written off legacy debts. Legacy
debt with a gross value of R377.4 million was sold during the year under
review resulting in a net release of R7.3 million in impairments upon
conclusion of the sale; and
cost containment in operating expenses - year on year growth of 0.8%.
Accounting policies
Basis of preparation
The Group financial results from which these condensed financial statements
were derived have been prepared on the historical cost basis excluding
financial instruments and properties which are fair valued and conform to
International Financial Reporting Standards. The accounting policies are
consistent with those applied in the annual financial statements for the
financial year ended 31 December 2005. These condensed financial statements
have been prepared in terms of IAS 34 - Interim financial reporting.
Audit opinion
The auditors, Deloitte & Touche, have issued their opinion on the Group`s
financial statements for the year ended 31 December 2006. The audit was
conducted in accordance with International Standards on Auditing. They have
issued an unmodified audit opinion. A copy of their audit report is available
for inspection at Mercantile`s registered office. These summarised financial
statements have been derived from the Group financial statements and are
consistent in all material respects, with the Group financial statements.
Going concern
The annual financial statements have been prepared on the going concern basis.
Directorate
Khanya Motshabi resigned from the Board effective 10 November 2006 whilst
Manuel Figueira, a Caixa Geral de Depositos secondee, has resigned from the
Board effective 28 February 2007 in order to return to Portugal.
Outlook
With the sale of the bulk of the legacy book during the past year, recoveries
on legacy debt will be limited going forward.
Evaluations are still underway for the replacement of our core banking systems
at a current estimated cost of approximately R70 - R80 million. The increase
in this estimated cost since December 2005 is due to an expanded scope of the
project. These cost estimates remain preliminary calculations with a detailed
analysis in progress. The project (which is subject to final Board approval)
is expected to have a duration of 2 to 3 years.
Whilst tighter monetary conditions are expected to slow the rate of credit
growth, the improvement in the Group`s core performance is expected to
continue.
J A S de Andrade Campos D J Brown
Chairman Chief Executive Officer
Sandton
27 February 2007
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, A M Osman**, S Rapeti
* Portuguese ** Mozambican
Group Secretary: R van Rensburg
Registered Office: Mercantile Bank, 142 West Street, Sandown, 2196
Share code: MTL ISIN: ZAE000064721
Transfer Secretaries: Computershare Investor Services 2004 (Pty) Limited,
70 Marshall Street, Johannesburg, 2001
Sponsor: Bridge Capital Advisors (Pty) Limited, 1st Floor, Building 22A, The
Woodlands, Woodlands Drive, Woodmead Sandton, 2196
Group Balance Sheet
2006 2005
R`000 R`000
Audited Audited
ASSETS
Intangible assets 11 551 7 020
Property and equipment 94 956 91 305
Investment properties - 350
Taxation 29 3 698
Other accounts receivable 145 291 14 887
Interest in associated company 3 626 3 323
Other investments 7 209 2 365
Loans and advances 2 066 432 1 458 677
Derivative financial instruments 31 134 36 757
Negotiable securities 405 016 379 028
Cash and cash equivalents 1 683 974 1 408 972
Total assets 4 449 218 3 406 382
EQUITY AND LIABILITIES
Shareholders` equity 667 418 550 179
Share capital and share premium 1 207 046 1 207 032
Capital redemption reserve fund 3 788 3 788
Share-based payments reserve 3 025 847
General reserve 7 478 7 478
Property revaluation reserve 45 588 36 476
Available-for-sale reserve 5 216 (76)
General credit-risk reserve 13 954 10 835
Accumulated loss (618 677) (716 201)
Liabilities 3 781 800 2 856 203
Deposits 3 539 147 2 636 547
Derivative financial instruments 29 189 38 531
Provisions 38 994 31 647
Other accounts payable 174 435 149 478
Taxation 35 -
Total equity and liabilities 4 449 218 3 406 382
Group Income Statement
2006 2005
R`000 R`000
Audited Audited
(Restated)
Interest income 357 163 248 290
Interest expense (189 044) (113 144)
Net interest income before credit
recoveries 168 119 135 146
Net recovery of credit losses 1 520 21 287
Net interest income after credit
recoveries 169 639 156 433
Net loss on disposal and revaluation
of investments (347) (498)
Non-interest income (1) 147 520 111 712
Net interest and non-interest income 316 812 267 647
Operating expenditure (1) (226 040) (224 286)
Operating profit before exceptional item 90 772 43 361
Recovery of amounts previously
written-off in respect of the release
of the CGD guarantee 8 602 23 119
Operating profit 99 374 66 480
Share of income from associated company 1 269 516
Profit before taxation 100 643 66 996
Taxation - -
Attributable profit after taxation 100 643 66 996
Earnings per ordinary share (cents) 2.56 1.71
Diluted earnings per ordinary share (cents) 2.56 1.70
Dividend per share (cents) - -
Reconciliation between attributable profit
after taxation and headline earnings
Attributable profit after taxation 100 643 66 996
Adjustment for:
Realisation of available-for-sale reserve
on disposal of investments (2) 885
Loss on disposal of property
and equipment 2 144
Headline earnings 100 643 68 025
Headline earnings per ordinary
share (cents) 2.56 1.73
Diluted headline earnings per ordinary
share (cents) 2.56 1.73
Financial Statistics
2006 2005
Audited Audited
Number of ordinary shares in issue:
- end of period (`000) 3 925 208 3 925 126
- weighted average (`000) 3 925 145 3 927 892
- weighted average - diluted (`000) 3 925 145 3 932 811
Return on average equity (%) 16.5 12.7
Return on average assets (%) 2.6 2.2
Cost to income (%) 71.7 91.0
Net asset value per ordinary share (cents) 17.0 14.0
Capital adequacy ratio (%)
- Consolidated Group 26.4 31.3
- Mercantile Bank Limited 30.1 34.5
Group Contingent Liabilities and Commitments
2006 2005
R`000 R`000
Audited Audited
Guarantees and letters of credit 281 064 287 821
Conditional buy-back obligations - 7 707
Operating lease commitments 10 288 13 742
Summarised Group Statement of Changes in Equity
2006 2005
R`000 R`000
Audited Audited
Balance at beginning of year 550 179 500 939
Transitional adjustments on adoption
of IFRS
Creation of credit risk impairments - (22 952)
Movements in reserves 19 701 8 925
Revaluation of owner-occupied
property 9 112 5 203
Net transfer to general credit-risk
reserve 3 119 2 119
Share-based payments expense 2 178 724
Net transfer to available-for-sale
reserve 5 292 879
Movements in accumulated loss 97 524 64 877
Attributable profit after taxation 100 643 66 996
Net transfer to general credit-risk
reserve (3 119) (2 119)
Movement in share capital and share
premium
Treasury shares on consolidation
of share incentive trust 14 (1 610)
Balance at end of year 667 418 550 179
Summarised Group Cash Flow Statement
2006 2005
R`000 R`000
Audited Audited
Net cash inflow from operating activities 287 135 276 374
Net cash outflow from investing activities (12 133) (16 263)
Net cash inflow for the year 275 002 260 111
Cash and cash equivalents at beginning
of year 1 408 972 1 148 861
Cash and cash equivalents at end
of year 1 683 974 1 408 972
Summarised Group Segmental Information
2006 2005
R`000 R`000
Audited Audited
(Restated)
Segment revenue: (2)
Retail banking 180 975 138 586
Treasury 43 093 31 363
Alliance banking, MBL credit card,
electronic banking and structured loans 44 098 32 527
Other services (3) 47 126 43 884
315 292 246 360
Attributable profit after taxation:
Retail banking (4) 103 687 80 544
Treasury (4) 14 400 8 451
Alliance banking, MBL credit card,
electric banking and structured loans (4) 31 693 14 739
Other services (4) (5) (49 137) (36 738)
100 643 66 996
Notes:
(1)Certain costs incurred by Alliance partners are settled by Mercantile on
their behalf and subsequently reimbursed by these Alliance partners to
Mercantile. The reimbursements were previously treated as non-interest income
and the costs as operating expenditure (2005: R6.2 million). The accounting
treatment has been changed for the year ended 31 December 2006 whereby the
reimbursements received are offset against the costs incurred.
Comparatives have been restated.
(2)Segment revenue has been restated for the year ended 31 December 2005 and
now excludes net credit recoveries and exceptional items.
(3)"Other services" includes support divisions, insurance brokers and inter-
group eliminations.
(4) Excludes the allocation of attributable support costs.
(5)"Other services" includes support divisions, insurance brokers, inter-group
eliminations, associate income and exceptional items.
Sponsor
Bridge Capital
Mercantile Bank Holdings Limited
Member of CGD Group
Registration number 1989/000164/06
www.mercantile.co.za
Date: 27/02/2007 12:53:00 Produced by the JSE SENS Department.
