By Alec Hogg
Mercantile Bank CEO Karl Kumbier admits to “eating, sleeping and drinking” his business. The former Standard Bank GM will need every ounce of that obsession in the next 12 months after being thrown a hospital pass late on Friday night.
___STEADY_PAYWALL___
His company’s Portuguese parent Caixa has erected “For Sale” boards outside its wholly owned South African subsidiary. Friday night’s announcement triggers a tortuous process of eliciting and confirming bids from buyers, all of whom get the chance to look under Mercantile’s skirt – in the name of “Due Diligence”.
While he’s doing his best to minimise the damage from this unwelcome prying, Kumbier will simultaneously require all his charm to retain Mercantile’s top talent. Competitors received a flood of CVs from Absa staff when rumours surfaced in December 2015 that Barclays would be selling control of its South African subsidiary.
Caixa, which has owned Mercantile since it was licenced 52 years ago as the Bank of Lisbon, is the third European parent in less than a year to announce it will be divesting from SA.
First was Barclays which officially confirmed last May it will be offloading most of its 62% stake in Absa. Last week Greece’s number two banking group, NGB, disclosed it had concluded the rather surprising sale of its 60-year-old SA subsidiary Bank of Athens to local agriculture group Afgri.
Kumbier is hopeful a suitable partner will be secured. He says in the past year unsolicited bids have been received from “some iconic South African and international brands.” He told Mercantile staff in a letter distributed last night that if one of these prospective buyers were to win the bid “I believe they would retain our structure, our people, our culture and our brand.”
But Mercantile’s strength is also sure to attract the kind of ownership interest its management team might find less appealing. With 19% in reserves backing a balance sheet of R12.2bn, it has almost twice the legislated minimum capital requirement. And last year Mercantile reported a 21% rise in taxed profit with lending up 20% and deposits by 26% – well ahead of other SA banks.
Politically influential cronies will be licking their lips at the prospect of buying their own profitable bank. On top of that, being State-owned Caixa will be aware of diplomatic imperatives to be considered, considering the Zuma Administration has made “radical economic transformation” its primary policy objective.
The disposals can be rationalised as the parent companies need the money. But the divestments suggest something darker. SA has always been the ideal springboard into Africa, but continental optimism has faded. And directly, bank profitability is correlated to the economies where they operate. SA’s 2016’s GDP growth was a pathetic 0.3% with only marginal improvement anticipated this year. Whichever way you want to interpret the Mercantile sale, it’s not good news.
