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MTL
MTL
MTL - Mercantile - Press release
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")
CA-Ratings
PROFESSIONALS IN RISK ANALYSIS
FAX +27 11 786-7022 TEL +27 11 786-7000
PO BOX 87266 HOUGHTON 2041 SOUTH AFRICA
PRESS RELEASE
Mercantile Bank receives a rating upgrade
27 February 2007
Contact: Leon Claassen and Gerdouw Steyn
Current credit ratings
Long-term: zaA+ from zaA
Outlook: Stable
Short-term: zaA1
CA -Ratings has raised the long-term rating of Mercantile Bank from zaA to zaA+
and affirmed the short-term rating of zaA1. The long -term rating indicates a
strong capacity to repay long-term obligations, and the short-term rating
reflects a very strong capacity to repay short-term debt. The factors
supporting the upgrade of the long-term rating are the continued strengthening
of Mercantile`s local franchise, improved profitability and growing depositor
base.
Mercantile Bank Limited is the main operating company of the Mercantile Bank
Holdings group, which is 91,75% owned by Caixa Geral de Depositos, a universal
banking group wholly owned by the Portuguese government. Caixa`s long-term
international rating from Moody`s is Aa3.Continued financial support from
Caixa is currently explicit and implied long-term, based on the size of its
shareholding in the group.
Mercantile Bank offers a full range of banking products and services. It has
three operational focus areas namely retail enterprise banking - banking
services to the small and medium sized enterprises, alliance banking - the
processing of third party credit and debit card transactions as well as ATM and
electronic banking services - and treasury services - money and capital
market as well as foreign exchange services.
Mercantile Bank is retaining its loyal retail customer base, especially the
Portuguese community, but loan growth is expanding into the broader South
African market.
During 2006 Mercantile Bank experienced strong growth of 42% in advances,
albeit still from a relatively low base. Loan growth is expected to continue
in 2007.
The quality of the loan portfolio is considered sound with most of the old
problem loans now out of the system and non-performing loans are well covered
by provisions.
Profitability has continued to improve, supported by sound growth in net
interest income derived from the growth in advances and a stable interest
margin , and non-interest income. Operating costs are tightly controlled. Net
income for the group rose to R100,6 million and return on equity improved to
16,5%. The relatively strong capital base, as reflected by its capital adequacy
ratio of 30%, adversely affects the return on capital calculation.
However, return on assets at 2,5% is considered good. The bank`s profitability
is expected to improve further over the short to medium term.
The bank remains very liquid with large cash and near cash holdings. During the
year Mercantile broadened its depositor base to the corporate and
institutional markets. Further improvement in its funding profile is expected
as depositor confidence in the bank improves.
The ratings reflect the group`s capacity to service and repay its liabilities
in SA Rand.
THIS MONITORING SERVICE DOCUMENT HAS BEEN PREPARED WITH DUE CARE USING
INFORMATION OBTAINED FROM SOURCES WE CONSIDER RELIABLE , BUT WE CANNOT
GUARANTEE ITS COMPLETENESS OR ACCURACY. RATINGS CONSTITUTE OPINIONS. THEY
ARE NOT RECOMMENDATIONS TO BUY OR SELL.
Date: 27/02/2007 13:15:00 Produced by the JSE SENS Department.
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