Mercantile Bank aims to grow rental finance loan book to R1bn

MERCANTILE Bank, which focuses only on entrepreneurs, plans to grow its rental finance business’s loan book to R1bn in the next few years, which will in turn provide opportunities for cross-selling products.

The rental finance business, Custom Capital, had grown its lending book from R34m when Mercantile acquired it in 2011 to R448m now, Mercantile CEO Karl Kumbier said last week.

The bank has positioned itself to offer a full banking service to entrepreneurs earning above R5m a year, in what Mr Kumbier views as an underserviced market. “Business banking is a badly serviced segment because people don’t understand the needs of entrepreneurs and … they don’t deliver on what entrepreneurs are expecting,” he said.

As part of this full-service banking, Custom Capital, set to be rebranded Mercantile Rental Finance from tomorrow, offers small and medium-size enterprises (SMEs) financing to lease equipment they cannot afford to buy, such as security cameras or a forklift.

A loan book of R1bn would give Custom Capital 10,000 SMEs on its books, and Mercantile would be able to crosssell these clients other products, said Mr Kumbier.

Mercantile launched a securitisation vehicle in February to grow this business, through the issue of R240m of notes to the International Finance Corporation, which has been listed on the JSE.

The plan is to issue notes to the public in three years once Mercantile has built a track record. Mr Kumbier said that Mercantile was considering an acquisition which would bring another few thousand customers on board. While it would make sense for some of the smaller banks to merge, given the high costs of regulatory compliance and systems, this was unlikely to happen as none of the banks wanted to cede control, he said.

Mercantile and Sasfin discussed a merger in 2010, but the talks fell through. Two years ago, Bidvest made an unsolicited offer to buy Mercantile, but its Portuguese parent, Caixa Geral de Depósitos, turned it down.

“Our holding company has said we are not for sale, we are important to their strategy in Africa,” Mr Kumbier said.

Mercantile has spent the past few years ramping up its systems and products to match the offerings of the big four’s business banking units. It now offers transactional banking, payment streams, debit orders, point-of-sale machines, lending, foreign exchange and deposits. “If you can’t offer an entrepreneur everything, they have to go to another bank, and that gives another bank an ‘in’ on your customer,” Mr Kumbier said.

Mercantile’s goal was to double the size of its balance sheet and headline earnings, grow its non-interest revenue and attract and retain staff who see it as an attractive place to work, he said. Mercantile has 4,000 business and 12,000 personal customers.