SA business bank up for sale

Karl Kumbier, CEO of Mercantile Bank.
Karl Kumbier, CEO of Mercantile Bank.

Cape Town – Mercantile Bank is being sold by its parent company in Portugal, Caixa Geral de Depósitos.

Mercantile Bank, which was founded in South Africa in 1965 and focuses on small and medium sized businesses, said in a statement on Sunday that it is aware of the intention by Caixa Geral de Depósitos to put the bank up for sale.

“Mercantile Bank Limited cannot presently divulge any information relating to the sale or expressions of interest from potential buyers,” it said.

“The bank does, however, want to give its reassurance that its board of directors will only support a decision that benefits all of its stakeholders, the most important of whom are its staff and clients.”

“Caixa Geral de Depósitos is owned by the Portuguese government and will, as a result, have to follow a very strict and transparent sale process in Portugal and, locally, in South Africa.”

For the year ending 31 December 2016, the bank grew net profit after tax by 21%, lending by 20%, deposits by 26% and long term funding by 30%, it explained.

The bank’s total balance sheet is now at R12.2bn with R2.2bn in capital, which equates to a capital adequacy ratio of 19% - nearly double the amount of capital required by the regulatory authorities.

“While the planned sale would represent the end of a long-held relationship with our parent company, Caixa Geral de Depósitos, we believe it will open the door for new and exciting opportunities. We still have a very strong segment focus on the Portuguese community and this will not change,” Mercantile told stakeholders in a letter.

The Mercantile board of directors said it is confident that the bank will find the right partner to assist it in continuing its growth journey.

The reason for the sale is as a result of the economic difficulties experienced in Europe following the 2008 global credit crisis.

Portugal was among those countries that the European Central Bank provided funding to and it is required to make some structuring changes to sustain its recovery, Mercantile explained.

Caixa Geral de Depósitos had to make plans to sell some its subsidiaries and announced the decision to sell Mercantile on 10 March 2017.

“While the decision to sell has only recently been formalised, the board of directors, based on our interaction with Caixa Geral de Depósitos in recent times, anticipated that Mercantile was likely to be sold at some point.

“As such, we have, over time, had discussions with interested potential buyers who, possibly following the advice of investment bankers, have approached the bank to make strong expressions of interest.

“Due to confidentiality agreements with these parties, we are unable to reveal their identities but, as a board of directors, we have been impressed by their calibre.

“We are committed to working to achieve a transaction that is fair to all of Mercantile’s stakeholders.

“As such, as a board of directors, we confirm that we will not support any transaction that does not protect our staff and our clients, particularly our depositors.

“In discussions, the South African Reserve Bank has affirmed that it would not easily approve a transaction that is not supported by Mercantile’s board of directors and management team, which we trust will give our stakeholders comfort.”

Caixa Geral de Depósitos posted a record 2016 loss of €1.86bn and "expects to cut its international assets to no more than €12bn by 2020 from €23bn last year, while targeting a rise in return on equity from the operations to more than 15% from 13%", Reuters reported.

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