Behind the scenes: Capitec CFO explains the Mercantile Bank acquisition strategy

Capitec CFO André du Plessis says they've been doing their business banking homework for some time.

The Portuguese Council of Ministers on Thursday announced its approval of the sale by Caixa Geral de Depósitos (CGD) of its entire stake in Mercantile Bank to Capitec Bank. Capitec plans to use its acquisition of Mercantile Bank to formally enter the business banking space.

We caught up with Capitec CFO André du Plessis in a very busy week to get some insight into what went into their offer, and what happens next for the rapidly evolving bank.

“In South Africa, there’s an outcry from small and medium operations that they don’t feel that they get the attention that they need from banks. For us, expanding into business banking was a natural next step in our offering, after having by and large fulfilled the needs of our retail bank clients. We had already been doing our homework on developing the banking systems we would need. And then the Mercantile opportunity came our way.”

Capitec went through a formal due diligence with Mercantile, meeting with management and going through the extensive documentation that was presented to them.

“We got some specialists in where necessary, when we thought we needed to enhance our skills, and then we put in an offer and a detailed strategy. The combination of winning price and considered strategy made us the successful bidder.”

While the deal has made headline news in the financial press this last week, André cautions that the deal has not been signed off by the regulators. 

“It still needs to go through the regulatory process. As soon as we have a signed contract, in the next day or so, we will be able to start having discussions with Mercantile’s management. We will not get involved in the management of the company until the deal is signed off by all the regulators. But by then, we want to have a very clear strategy of what we want to do and how we want to do it. The next step after that is to start implementing the strategy we set out.” 

He says the most important element of this strategy is to scale the bank, after which they will most probably change the name from Mercantile to Capitec Business Bank.

“The two divisions will run separately because they are very different, and we don’t want to clog our retail branches with another type of organisation.”

One of the strongest messages that has emerged as the news of the accepted offer broke was that Mercantile employees needn’t fear for their jobs. “We’re not planning to scale down the business; we’re planning to scale it up. We need all the skilled people we could possibly have available to us,” says André.

On a personal level, he relishes the prospect of wrapping his head around a business bank.

“I was involved in business banking before we started Capitec, but on other people’s terms. This is a journey of really tailor-making an offer that delivers what our clients really, really want, and I think that’s going to be our differentiator. We’ve already done a lot of homework on that, asking hundreds of owner managers what they really need.”

Read more: Capitec’s CFO: “You need to see your clients to see what they need”