Bank sale opens door for black owners

Cape Town – Black investors seeking to gain market share in the banking industry have been given an opportunity to enter the market, following an announcement that Mercantile Bank has been put up for sale.

READ: SA business bank up for sale

The 100% owner of Mercantile is Portugal’s largest bank Caixa Geral de Depósitos, which announced that it would be selling the South African bank as part its restructuring process to adhere to European Central Bank conditions, which bailed out the bank during the 2008 global credit crisis.

Fin24 asked Mercantile Bank CEO Karl Kumbier whether this would be an opportunity for black investors, especially in light of the heightening narrative of radical (or inclusive) economic transformation.

“It’s definitely an opportunity, a massive opportunity,” he said. “From a board level, we haven’t had a discussion as such, but we definitely had a discussion that this is an ideal opportunity to have a decent black economic partner in the bank (with) a decent share in the bank, to help us transform the bank as a whole.”

Kumbier said there was opportunity for all sectors of South Africans to get involved.

“There is a massive opportunity in general,” he said. “There are a lot of entrants or potential players who want to enter the industry: Whether it's big black economic empowerment consortiums...  big retailers, whether it is telco’s... insurers…”  

“It’s very difficult to get into banking with the highly regulated environment,” he said. “We are the only small bank that is part of every payment stream. We are a fully-fledged bank. There is nothing we don’t offer.

“I think there are lots of local buyers that have deep pockets that can absorb a bank the size of Mercantile.”

PODCAST: Interview with Mercantile Bank CEO Karl Kumbier and Fin24's Matthew le Cordeur

Seeking investors with deep pockets

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.

Kumbier said they are looking for investors with deep pockets. “Deep pockets mean you are able to guard our capital,” he said. “That’s why I think it’s quite an exciting prospect. You can get a fully-fledged bank for a NAV (net asset value) of R2.5bn, which is much more doable than trying to do a massive transaction.”

Rigorous proper assessment

Asked how they will guard against investors that could damage their brand or strip the assets of the bank to make profit, Kumbier said: “As a board, we would put certain criteria together that we would want a potential partner to meet. 

“Any potential buyer has to present back to our board how they see a partnership going forward and how they are going to assist us in our goal.

“As a board, if we are not happy with a potential buyer, we won’t support it.

“It will be very difficult for the SA Reserve Bank to support a transaction that a board is not happy with,” he said. “We would look at any potential party and ask what value you will bring: do you have deep pockets.”

Kumbier said the SA Reserve Bank will ensure the shareholder has deep pockets and can inject more capital into the business.

“Any potential partner will go through a very rigorous proper assessment to ensure they are the right shareholder, they are going add value, (and) they can bring capital when required,” he said.

Kumbier said the transaction process will be extremely transparent, as it involves Portugal’s state bank, and that the process could take around nine months.