Capitec reveals intentions to buy Mercantile Bank
CAPITEC yesterday showed its intention to venture into business banking, tabling a non-binding offer to purchase Mercantile Bank.
Capitec chief financial officer Andre du Plessis yesterday said that the bank wanted to buy Mercantile as it offered numerous opportunities in the market to serve small-to-medium enterprises and owner-managed businesses better.
“A possible acquisition of Mercantile Bank will fast track our desire to expand our focus to a broader bank strategy.”
Capitec is mainly a consumer-focused personal lending bank, while Mercantile’s focus is largely business and commercial banking, specialising in serving entrepreneurs.
Mercantile said its parent company, Caixa Geral de Depósitos (CGD), had approved a shortlist of four potential buyers to participate in the second phase of the sale of Mercantile.
CGD, a Portuguese stateowned banking and financial services group, wanted to sell Mercantile as part of a plan to offload foreign assets.
Capitec yesterday said it would commence with a formal, in-depth due diligence exercise to determine whether the opportunity presented by Mercantile was in line with its expectation to build its business bank strategy.
Du Plessis said that the business bank strategy was geared to serve small to medium enterprises and owner-managed businesses.
“The problem with an acquisition strategy is that one could buy other’s problems, but we will be able to do a detailed due diligence to ensure that we understand what is for sale and what the major risks in the business are.
“The benefit of an acquisition is that we would not have to reinvent and create everything from scratch,” he said.
The Nedbank Group, a consortium comprising investment firm Arise and Grindrod Bank, and another comprising Public Investment Corporation and Bayport Financial Services, have also emerged as some of the top contenders to buy Mercantile.
Mercantile said approved buyers would conduct a due diligence process on its operations including a full-day strategic engagement with the 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,” Mercantile said.
Mercantile’s net profit after tax soared 20 percent to R213 million in the year to end December.
The bank said that its assets grew 9 percent in 2017 to R13.4 billion during the period.
Last August Capitec had the second highest number of customers among banks in the country.
Investment analyst Christopher Gilmour said Capitec’s interest in Mercantile came as a surprise, as the bank was expected to seek further growth in the consumer segment.
Gilmour said the interest could have been sparked by ready-made opportunities that Mercantile brought with.
“They still have a relatively small range of products. I would have expected them to introduce more consumer products,” said Gilmour.