Portuguese government announces shortlist of buyers for Mercantile Bank Holdings Limited - June 2018
The Portuguese government has approved a shortlist of four potential buyers to participate in the second phase of the sale process of Mercantile Bank Holdings Limited (“Mercantile”). This approval allows the sale process of Mercantile by Caixa Geral de Depósitos, S.A. (“CGD”), a Portuguese State-owned banking and financial services group, to progress to the next phase.
CGD has received 18 non-binding offers for Mercantile, the bank controlling company and sole shareholder of Mercantile Bank Limited (“Mercantile Bank”), a niche business and commercial bank which specialises in serving entrepreneurs. CGD announced its intention to sell Mercantile last year as part of a strategic plan approved by the European Commission, requiring CGD to reduce its foreign assets. Mercantile is 100% owned by CGD.
Pursuant to the recommendation of CGD, the Portuguese Government approved the shortlist of potential buyers after a thorough evaluation process by CGD and its advisors of the non-binding offers received.
The following potential buyers were selected based on the criteria set out in the Portuguese Decree-Law No. 153/2017 of 28 December 2017 which approved the sale process. The criteria included – amongst others – price, financial capacity and strategy.
- A consortium comprising Arise B.V. and Grindrod Bank Limited. Arise is an African investment company backed by the following shareholders: Norfund, a Norwegian investment fund for developing countries; FMO, a Dutch development bank; and Rabobank, a Dutch cooperative bank.
- Capitec Bank Limited. Capitec is South Africa’s largest retail bank based on the number of customers who use it as their main bank. It has a market capitalisation of over R101 billion and PSG Group as its largest shareholder.
- Nedbank Group Limited. Nedbank is the fourth largest bank in South Africa, ranked by assets. It has a market capitalisation of over R140 billion with Old Mutual plc as its majority shareholder.
- A consortium comprising Public Investment Corporation SOC Limited (“PIC”) and Bayport Financial Services (Pty) Limited. The PIC is Africa’s largest asset manager, managing public sector funds in excess of R1.9 trillion. Bayport Financial Services is one of the largest non-bank providers of unsecured credit and allied products in South Africa.
These approved potential buyers will now be allowed to conduct a due diligence process on Mercantile, including a full-day strategic engagement with Mercantile’s Board and management. This will be followed by the submission of binding offers. The entire process is expected to be finalised by the end of 2018, with the final approval by the Portuguese Government and with the completion being subject to South African regulatory approvals.
Karl Kumbier, CEO of Mercantile, says Mercantile is pleased by the quality of the potential buyers on the list. “I believe interest in Mercantile from companies of this calibre is not only testament to the quality of our business, but also of our team. It is their hard work and commitment which has underpinned our success and strong growth trajectory over the past 5 years. I am excited that each of these potential buyers could open up new opportunities for Mercantile and add great value to our business, just as we can add great value to theirs.”
He adds it is also an encouraging sign for the South African economy to see a foreign corporation member of a consortium selected as one of the final four potential buyers. “It is very positive for South Africa to see foreign players willing to make a long-term investment here. Their interest in Mercantile not only shows that they believe in the growth potential of our business, but also in the potential of the South African entrepreneurs we serve.”
Mercantile’s latest financial results for the year ending 31 December 2017 saw its net profit after tax climb by 20% to R213 million. This follows growth in net profit after tax of 21% in 2016 and 15% in 2015. Mercantile’s assets grew by 9% in 2017 to R13.4bn and deposits grew by 10% to R9.3bn.
Mercantile congratulates Trudi Makhaya - April 2018
Mercantile Bank would like to congratulate Trudi Makhaya on her appointment as economic advisor to President Cyril Ramaphosa and to wish Trudi well in her new role.
Trudi has been Consulting Economist to Mercantile since 2015, when she founded an advisory firm focused on competition policy and entrepreneurship. She has served as an advisor to several companies and has worked for Deloitte South Africa, Genesis Analytics and AngloGold Ashanti.
As an entrepreneur herself, Trudi truly understands the challenges and opportunities faced by small and medium-sized businesses in South Africa. As Mercantile Bank, we see her appointment as an encouraging indication that government recognises the importance of this sector in stimulating job creation and economic growth.
Mercantile Bank shows continued growth in 2017 - March 2018
Mercantile Bank Holdings Limited (Mercantile) has again delivered a solid set of annual results, posting double digit growth in net profit after tax for the third consecutive year.
Mercantile’s net profit after tax for the year to 31 December 2017 climbed by 20% to R213 million. This follows growth in net profit after tax of 21% in 2016 and 15% in 2015. Mercantile’s total assets have more than doubled since 2011 and grew by 9.3% in 2017 to reach R13.4 billion. At the same time, Mercantile’s deposits increased by 10% to R9.34 billion.
Karl Kumbier, CEO of Mercantile, says the company consolidated its growth during 2017 and each business unit exceeded targets for the year. Specifically, Mercantile Rental Finance continued its strong performance, increasing its assets by 33% to R918 million, and Mercantile Payment Solutions grew its net non-interest income by 26%, the Card division by 50% and the Foreign Exchange trading division by 21%.
According to Mr Kumbier, “these results show that Mercantile remains on the positive growth curve it has exhibited over the past few years. We have worked hard to develop a clear strategy for our business and to ensure we create an organisational culture to support it. I believe we are reaping the benefits of the investments we have made.”
Growing net non-interest income has been and will continue to be a key focus for the company; this is reflected in a second consecutive year of double digit growth in net non-interest income of 15% (2016: 16%) to R336 million in 2017.
The quality of Mercantile’s lending portfolio also remains sound with a credit loss ratio of 0.4%. Non-performing loans increased from 2.1% to 3.4% mainly as a result of one large exposure that went into Business Rescue in December 2017. Loans and advances increased by 9% to R9.5 billion during the year.
Kumbier says Mercantile will continue its focus on understanding and meeting the unique banking needs of entrepreneurs, including providing access to financing. In December 2017, Mercantile concluded a committed R740 million seven-year term loan with the International Finance Corporation (IFC), the main purpose of which is to enable growth in SME lending and, specifically, in black-owned and/or women-owned enterprises.
Mercantile is also one of only two South African banks to have been upgraded by Moody’s in 2017. The ratings agency placed Mercantile on positive review for a possible further upgrade. After climbing two notches, Mercantile’s crediting rating stands at Baa1.
The release of these annual results coincides with the current process by Caixa Geral de Depósitos (CGD), a Portuguese state-owned banking and financial services group, to sell its entire stake in Mercantile. It was announced in 2017 that CGD intended to sell its holding in Mercantile as part of a restructuring deal with the European Commission, which required it to reduce its foreign assets. Mercantile is 100% owned by CGD.
“We are optimistic that the sale will serve to further Mercantile’s strategy of becoming South Africa’s number one Business Bank. That said, stakeholder relationships form the core of our business philosophy and Mercantile’s board of directors is committed to only supporting a transaction that will benefit all of our stakeholders - particularly our staff and clients.”
IFC extends R740 million in finance to Mercantile Bank to expand its lending to SMEs - January 2018
The International Finance Corporation (IFC), a member of the World Bank Group, has announced that it will extend a seven-year R740 million term loan to Mercantile Bank Limited, allowing the bank to grow its lending to South African Small and Medium Enterprises (SMEs) and with a focus on women-owned SMEs.
This is a great opportunity for the bank as the loan will not only allow Mercantile to expand its own business, but will also enable us to help SMEs to sustainably grow their businesses and contribute more effectively to boosting productive economic activity and job creation. “A lack of access to finance is one of the biggest barriers to their success and ability to grow to create employment and wealth,” says Karl Kumbier, CEO of Mercantile.
According to the Global Entrepreneurship Monitor’s 2015/2016 country report on South Africa, in 2015, only six women for every ten men were engaged in early-stage entrepreneurial activity. This number was down from eight women for every 10 men in 2014. Unfortunately, this highlights that there remains a substantial divide between representation of men and women in the business world.
Karl Kumbier, CEO of Mercantile, says the bank’s sole purpose is to grow entrepreneurs and it is expanding this purpose to focus on supporting female entrepreneurs. “At Mercantile, we are already privileged to count a number of successful female entrepreneurs among our clients - we have worked with them and seen their businesses grow. This has led us to recognise the importance of providing financing to specifically help women take their businesses to the next level.”
Kumbier says early-stage entrepreneurs and other women involved in SMEs and business are steadily working to increase the level of female participation in the economy, but much more remains to be done to realise a more equitable economic future for the working female population of South Africa. He adds that while start-ups and micro enterprises make a vital contribution to addressing unemployment in South Africa, it is critically important to ensure the growth of established small and medium-sized businesses. “Established small businesses generate much-needed jobs and help to improve the lives of far more people than just the business owner.”
“It is so encouraging to see an institution like the IFC continuing to recognise the opportunity for growth in South Africa, despite the current tough economic climate in the country. Mercantile is also very proud of the continued confidence the IFC has shown in the bank over an extended period. This loan will not only allow us to assist other businesses, but also enable us to expand our own business further,” says Kumbier. Mercantile has doubled its lending to SMEs over the past five years and this loan will position Mercantile to sustain its growth momentum and reach its goal of being the number one Business and Commercial bank in South Africa.
Mercantile and the IFC have previously concluded a landmark securitisation deal (in 2014). The transaction valued at R240 million, saw the securitisation of Mercantile Rental Finance contracts and was the first of its kind in sub-Saharan Africa. Mercantile is also one of only two South African banks to be upgraded by Moody’s in 2017 and the agency has placed the bank on positive review for a possible further upgrade. After climbing two notches, the bank’s crediting rating now stands at Baa1.
Portuguese government gives go-ahead for sale of Mercantile Bank - December 2017
The official process of the sale of Mercantile Bank Limited by Caixa Geral de Depósitos (CGD), a Portuguese state-owned banking and financial services group, can now proceed following legal approval by the Portuguese government.
Mercantile is 100% owned by CGD, which announced in March 2017 that it intends to sell the South African bank as part of a restructuring plan required and approved by the European Commission. The reduction of its foreign assets forms part of a CGD agreement with the Commission.
Today the Portuguese Government, via its Council of Ministers, signed the decree-law required to begin the official process of privatising or selling an asset owned by CGD as a Portuguese state-owned entity. The country’s president now has to promulgate this decree within a period of 30 days, after which the formal process of selling Mercantile Bank will officially begin.
As part of this formal process, the interest parties will be brought into contact with CGD’s financial advisers which have already been appointed to facilitate the sale, namely the Deutsche Bank South Africa and Caixa Banco de Investimento Portugal.
The process will consist of different phases and is expected to take at least one year to complete. During that long process the Mercantile Board, CGD and ultimately the Government of Portugal will look into potential buyers which have a suitable ethical profile and reputation, as well as the ability to expand Mercantile’s business model through supporting its existing and future client base and the development of current staff and management.
Mercantile wishes to reiterate that its Board will only support a decision that benefits all of its stakeholders, the most important of whom are its staff and clients.
Karl Kumbier, CEO of Mercantile, says the bank is not reliant on any additional capital funding from CGD and the sales process should not affect Mercantile’s operations. “We will continue to focus on our strategy to become the number one business bank in South Africa. Mercantile is confident that we will find the right partner who will not only give us the opportunity to expand our own business further, but also to continue to grow the businesses of South African entrepreneurs.”
Over the past few years, Mercantile has already achieved outstanding results through the successful implementation of its growth strategy. As the largest of South Africa’s small banks by assets, Mercantile has seen its assets grow from just over R6 billion in 2011, to over R13 billion today. It also holds R9 billion in deposits, compared to deposits of R4.2 billion in 2011. This growth in the size of its business also coincided with increases in profit of more than 15% per annum over the past three years. Mercantile is also one of only two South African banks to be upgraded by Moody’s this year.