AT LEAST THIS BANK CAN CLAIM TO BE a survivor. Mercantile struggled through the small bank crises and took the knocks when South Africa’s other small banks were lining up to hand back their licences. Now, after a tough few years – when it appears many former clients decided paying back credit wasn’t a priority – it’s looking in much better shape. Survival is thanks largely to Caixa Geral de Depósitos SA, the Portuguese government-owned bank that moved in as majority shareholder and recapitalised Mercantile. But now that it’s back on its feet – as strong growth in earnings, advances and deposits seem to indicate – Mercantile is reclaiming its former charm as a service-orientated niche bank and spreading further into some corporate, mainly card-driven, operations.
For example, we hear unconfirmed reports that Mercantile is in bed with one of the large life companies underwriting a new savings product. This share will remain speculative in the staid banking sector for some time, but it’s worth a look. Survivors tend to come back stronger. OPPORTUNITIES • CA Ratings recently upgraded its long-term rating on Mercantile, and its share price has been moving up ever since. Directors have been buying shares, normally an encouraging sign. RISKS With more than 90% of its equity held by its major shareholder, liquidity is like the Kalahari on a hot day. Mercantile will be chasing “legacy” bad debts for a long time.