Johannesburg — MERCANTILE Bank Holdings CEO Dave Brown said yesterday he was not proud to report a 32% decline in headline earnings in the six months to last month, but predicted a positive outcome in the last half of the financial year.

He told Business Day the reduced earnings were "not unexpected" given the tough trading conditions lenders had endured in recent months.

The group is opening the reporting season for bankers whose results are being keenly awaited by market watchers wanting to see how they have performed since the economy came out of recession at the end of last year.

Mr Brown, whose group is in merger talks with Sasfin Holdings, said he was comforted by the fact that Mercantile had survived the recession with a fairly stable business and robust debtors book.

"There is no doubt the market has remained difficult from a growth and opportunities point of view and I think in the context of that we are not saying the results are good in any way, but, given the difficult conditions, they are not unexpected," Mr Brown said.

He said the decline in headline earnings per share to 1,4c from 2,1c was mainly attributable to a decrease in net interest income before credit losses of 7,7%, and the general low business activity as evidenced by the small growth in loans and advances of 1,9%.

In addition, the loss of revenue from Woolworths Financial Services - sold to Absa - had affected noninterest income, which fell more than 20% in the reporting period.

Net interest income after credit losses during the period under review fell to R129,86m from R133,04m, while noninterest income was down from R138,3m to R125,3m.

Operating profit was R78,16m (R114,57m) and profit after tax was R55,85m from R82,4m.

Mr Brown said talks with Sasfin were continuing and a planned black economic empowerment deal had been suspended pending the outcome of these negotiations.