Board of Directors` Report - Mercantil Capital Markets (Panamá)

Transcription

ANNUAL REPORT
2 0 0 7
C ONTENTS
Mercantil’s Stock Performance
4
Financial Highligths
5
Board of Directors and Administration
6
Notice of Ordinary General Shareholders’ Meeting
7
Board of Directors’ Report
9
Statutory Auditors’ Report
21
Financial Statements
23
Economic Climate
29
Strategic Positioning
33
Management Discussion and Analysis
35
Bussines Management Report
45
Quality of Service and Operating Efficiency
61
Human Resources
67
Risk Management
71
Performance of Subsidiaries
81
Credit Ratings
89
Prevention and Control of
Money Laundering
91
Internal Auditing
93
Social Commitment
95
Corporate Governance
99
Report of the Board of Directors on
Compliance with Corporate Governance
107
Awards and Acknowledgements
108
New Brand Strategy for 2007
111
Management
115
Subsidiaries and
Corporate Contacts
120
GOLDSCHMIDT, Gertrud (GEGO)
Esfera 2 • 1976 • Stainless steel wire • 103 x 103 x 103 cm
Is Venezuela’s leading financial services
provider with equity of Bs. 3,408 billion (US$
1,589 million). It operates in 10 countries in
the Americas and Europe and its shares are
listed on the Caracas Stock Exchange (MVZ.A and MVZ.B) and in the over the counter market
(OTC) in the United States of America through a Level 1 ADR program (MSFZY and MSFJY).
The mission of Mercantil Servicios Financieros is to “fulfill the expectations of individuals and
the community where it operates, by providing excellent financial products and services in different
market segments, adding value for its shareholders through the efficient use of available
resources.”
Mercantil Servicios Financieros concentrates on developing its key financial business
(banking, insurance and asset management) in Venezuela and the United States, mainly in
Florida (excluding insurance).
Mercantil Banco Universal, founded 83 years ago (1925), is Mercantil’s main subsidiary in
Venezuela. As of December 31, 2007, it has a network of 319 branches, one agency in Coral
Gables, Florida, USA, a branch in Curaçao and six representative offices, in Bogota, Lima,
Mexico, Sao Paulo, London and New York; Mercantil Commercebank, N.A., a commercial
bank in the United States with 13 offices in South Florida, a branch in New York, one in
Houston and a loan production office in Weston, Florida; Mercantil Bank (Schweiz) AG in
Switzerland; Mercantil Bank Curaçao N.V. in Curaçao, Mercantil Bank (Panama) in Panama,
Mercantil Bank Cayman Limited and Mercantil Merinvest, C.A., an investment banking and
brokerage company in Venezuela; Mercantil Seguros which offers equity life insurance and
health insurance policies; and Mercantil Inversiones y Valores, a holding for other minority
investments.
Since its foundation, Mercantil has played an active role in the country’s development by
financing trade, agriculture and industry in Venezuela. Moreover, it demonstrates its social
commitment by helping different sectors of the community in Venezuela through Fundación
Mercantil, and in South Florida, USA, through its subsidiary Mercantil Commercebank, N.A.
M e r c a n t i l
3
S e r v i c i o s
F i n a n c i e r o s
Mercantil’s
Stocks Performance
"Caracas Stock Exchange: MVZ.A & MVZ.B
NYSE Level 1 ADR’s : MSFZY & MSFJY"
Earnings per share
2007
2007
2006
2005
2004
2003
US$(4)
bolivars
bolivars
bolivars
bolivars
bolivars
3.7
7,958
5,756
7,564
3,785
2,534
14.5
15.4
31,000
33,000
42,890
43,259
17,896
18,244
16,091
16,087
11,736
11,590
3.9
4.1
7.5
7.5
2.4
2.4
4.3
4.3
4.6
4.6
32,771
25,884
21,619
21,238
14,871
0.9
1.0
1.7
1.7
0.8
0.8
0.8
0.8
0.8
0.8
60,335,793
43,645,654
41,476,057
30,043,282
41,679,888
30,108,375
29,882,714
21,612,751
29,995,885
25,004,047
43,299
6,792
56,307
35,865
34,683
21,343
10,419
23,575
6,399
5,970
2 for each 5
780
1.900
2 for each 5
1.380
590
2 for each 5
500
2.5
2.4
4.4
4.4
7.7
7.6
3.7
3.7
4.3
4.3
(1)
Closing Price (2)
Class A share
Class B share
Market price/ Earnings per share
(1)
Class A share
Class B share
Book value per share (3)
Market price / book value
15.3
(3)
Class A share
Class B share
Number of outstanding shares
Class A share
Class B share
Daily Average Traded Volume (Shares)
Class A share
Class B share
Paid Dividends
In stock (new shares for each shared held)
In cash (Bs. per share)
0.36
Cash dividends for the year / Market price (%)
Class A share
Class B share
(1) Calculated over weighted average shares (issued shares minus repurchased shares) adjusted by stock dividend
(2) Recalculated considering stock dividend paid in May 2007 to facilitate price comparisons for the periods reported
(3) Calculated over outstanding shares (issued shares minus repurchased shares) adjusted by stock dividend and by the conversion of 10 common shares into 1 new common share
(4) Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs. 2,144.60/1US$. There is an exchange control in place in Venezuela since
February 2003.
Market Quote for Mercantil Class A and B Shares
vs. Caracas Stock Exchange (CSE) Index
50,000
Price MVZ/A
Adjusted CSEI
Price MVZ/B
45,000
40,000
25,000
20,000
15,000
10,000
5,000
A n n u a l
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R e p o r t
2 0 0 7
Dec-07
Jun-07
Dec-06
Jun-06
Dec-05
Jun-05
Dec-04
Jun-04
Dec-03
Jun-03
Dec-02
Jun-02
Dec-01
Jun-01
Dec-00
Jun-00
0
Dec-99
Bolivars
35,000
30,000
Financial Highlights
Earnings Consolidated
(In millons, except percentages and other indicators)
Year Ended
2007
2007
2006
2005
2004
2003
US$(4)
bolivars
bolivars
bolivars
bolivars
bolivars
18,208
9,017
14,589
1,589
39,049,552
19,338,492
31,287,613
3,407,614
31,716,967
14,572,267
25,246,872
2,589,423
24,274,508
11,294,697
19,479,501
2,168,526
17,112,859
7,312,323
13,814,593
1,699,337
11,970,642
4,572,842
9,598,905
1,242,039
909
399
942
365
1,951,172
855,951
2,019,535
783,333
1,330,407
857,851
1,625,319
555,734
969,911
938,285
1,204,404
721,578
794,088
501,182
932,864
375,924
602,845
371,450
723,151
253,330
7.1%
33.2%
27.4%
2.2%
6.3%
40.3%
23.6%
2.1%
5.8%
50.1%
37.1%
3.6%
6.7%
40.0%
24.2%
2.6%
8.2%
34.8%
23.4%
2.4%
16.7%
16.7%
8,7%
16.3%
16.4%
8.2%
17.0%
17.2%
8.9%
18.0%
19.0%
9.9%
20.0%
20.9%
10.4%
0.6%
285.7%
1.8%
0.7%
264.3%
2.0%
0.3%
632.8%
2.0%
0.8%
306.0%
2.6%
1.9%
234.4%
4.4%
5.4%
61.3%
5.8%
64.2%
5.7%
55.4%
6.3%
63.7%
6.5%
59.9%
19.6%
56.3%
15.1%
62.5%
9.9%
61.3%
9.4%
65.7%
10.8%
69.9%
62.9%
79.5%
99.2%
58.9%
84.2%
105.8%
59.2%
88.5%
110.3%
54.3%
88.9%
110.1%
49.8%
86.6%
108.0%
9,114
1,018
8,647
900
7,841
771
7,181
694
6,899
665
351
20
6
341
21
6
332
21
5
332
18
5
329
22
5
1,436
32,278
1,222
25,987
1,025
19,022
830
11,323
713
9,184
Balance Sheet (1)
Total Assets
Loan Portfolio (Net)
Deposits
Shareholders’ Equity
Income Statement (2)
Net Interest Income
Commissions and Other Income
Operating Expenses
Net Income
Profitability Indicators (%)
Net Interest Income / Average Financial Assets
Commissions and Other Income / Total Income
Net Earnings for the Year / Average Equity (ROE)
Net Earnings for the Year / Average Assets (ROA)
Capital Adequacy Indicators (%)
Equity / Risk-Weighted Assets (regulatory minimum 8%) (3)
Equity / Risk-Weighted Assets (BIS) (4)
Equity / Assets
Loan Portfolio Quality Indicators (%)
Past-Due and Non-Performing Loans / Gross Loan Portfolio
Allowances for Loan Losses / Past-Due + Non-Performing Loans
Allowances for Loan Losses / Total Income
Efficiency Indicators (%)
Operating Expenses / Average Total Assets
Operating Expenses / Total Income
Liquidity Indicators (%)
Cash and Due from Banks / Deposits
Cash and Due from Banks and Investment Portfolio / Deposits
Other Indicators (%)
Gross Loans / Deposits
Financial Assets / Total Assets
Financial Assets / Deposits
Number of Employees
Employees in Venezuela
Employees Abroad
Banking Distribution Network
Branches in Venezuela
Branches Abroad
Representative Offices
Automatic Teller Machines (ATM)
Point of Sale Terminals (POS)5
(1) And (2) Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs. 2,144.60/1US$. There is an exchange control in place in Venezuela
since February 2003.
(3) In accordance with the standards of the Venezuelan National Securities Commission (CNV)
(4) Calculated using Consolidated Financial Statements adjusted for inflation up to 1999 in accordance with international Accounting Standard No. 29 (IAS-29) and following the standards of the Basel Committee on Banking Supervision of the Bank for International Settlements.
(5) Physical points of sale
M e r c a n t i l
5
S e r v i c i o s
Board of Directors
Principal Directors
Administration
Gustavo A. Marturet
President
Gustavo A. Marturet *
President
Alejandro González Sosa
Executive President
Alejandro González Sosa *
Executive President
Global Chief Financial Officer
Gustavo J. Vollmer H.2
Alfredo Travieso P.2
Luis A. Romero M.1
Víctor J. Sierra A.2
Gustavo Vollmer A.3
Jonathan Coles1
Roberto Vainrub3
Alternate Directors
Nerio Rosales Rengifo *
Global Commercial and Personal Banking Manager
Philip Henríquez S. *
Global Corporate and Investment
Banking Manager
Luis A. Sanabria U.2
Oscar A. Machado K.1
Eduardo Mier y Terán1
Luis Esteban Palacios W.2
Gustavo Galdo C.3
Miguel A. Capriles L.3
Gonzalo Mendoza M.2
Germán Sánchez Myles2
Luis A. Marturet M.3
Carlos Hellmund B.3
Gustavo Machado C.1
Francisco Monaldi M.1
Federico Vollmer A.1
Guillermo Sosa S.3
Claudio Dolman1
Carlos Zuloaga T.3
Nerio Rosales R.
Armando Leirós R.
Secretary
Rosa M. de Costantino *
Global Private Banking and Asset
Management Manager
Alberto Benshimol *
Insurance and New Financial Businesses Manager
Armando Leirós R. *
Global Operations and Technology Manager
Guillermo Villar *
Global International Operations Manager
Millar Wilson *
Global Chief Risk Officer
Luis Alberto Fernandes *
Global Chief Legal Counsel
Guillermo Ponce Trujillo
Alternate Secretary
Luis Calvo Blesa *
Office of the Presidency Manager
Julio Peña Bacalao
Principal
Statutory Auditor
Eduardo Elvira
Francisco Torres Pantin
Alternate
Statutory Auditor
Leopoldo Machado Espinoza
Umberto Chirico
Legal Counsel
Toribio Cabeza León
Global Audit Manager
Salvador Chang
Global Strategic Planning Manager
Secretary of the Board of Directors
Luis Alberto Fernandes
Alternate Legal Counsel
Pedro Reyes O.
1
2
3
Member of the Audit Committee
Member of the Compensation Committee
Member of the Risk Committee
Note: The Audit, Compensation and Risk Committees
were created pursuant to the provisions of the By-laws
and in accordance with a resolution by the Board of
Directors. These committees are made up of Independent Directors, which are attended by the President and the Executive President (ex-oficio).
A n n u a l
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R e p o r t
2 0 0 7
Julio Peña Bacalao
Alternate Secretary
* Member of the Executive Committee
Notice of Ordinary General
Shareholders’ Meeting
MERCANTIL SERVICIOS FINANCIEROS, C.A.
Authorized Capital Bs.F. 314,493,101.40
Subscribed and Paid-in Capital Bs.F. 156,479,039,10
Caracas - Venezuela
Notice of an Ordinary General Meeting of Shareholders by agreement of the Board of Directors, to be held at the Company’s head office
located at Avenida Andrés Bello N° 1, Edificio Mercantil at 4 p.m. on March 28, 2008 The items on the agenda are:
1. Examine the Report submitted by the Board of Directors and the Company’s Audited Financial Statements at December 31, 2007, following
a review of the Statutory Auditors’ Report.
2. Examine the Report by the Board of Directors on the Level of Compliance with Corporate Governance Principles, contained in Resolution
N° 19-1-2005 issued by the National Securities Commission on February 2, 2005.
3. Consider the “Proposal to partially amend the Bylaws of Mercantil Servicios Financieros, C.A., presented by the Board of Directors of
Mercantil Servicios Financieros, C.A. for consideration by the Ordinary General Shareholders’ Meeting on March 28, 2008.”
4. Appoint the Board’s Officers and their Alternates in accordance with the Company Bylaws and set their remuneration.
5. Appoint the Statutory and Alternate Auditors and set their remuneration.
6. Consider the “Proposal for the Seventeenth Phase of the Company’s Stock Repurchase Program,” submitted by the Board of Directors of
Mercantil Servicios Financieros, C.A. for consideration by the Ordinary General Shareholders’ Meeting on March 28, 2008.”
7. Consider the “Proposal to declare Mercantil Servicios Financieros, C.A. dividends for 2008, submitted by the Board for consideration by
the Ordinary General Shareholders’ Meeting on March 28, 2008.”
N.B. The shareholders are hereby informed that the Balance Sheet, Income Statement, Statement of Capital Account Movement and
Statement of Cash Movements for the year ended December 31, 2007, duly examined by External Auditors Espiñeira, Sheldon y Asociados;
the Statutory Auditors’ Report; the Board of Directors Report; the Report by the Board of Directors on the Level of Compliance with Corporate
Governance Principles; the “Proposal to partially amend the Bylaws of Mercantil Servicios Financieros, C.A.,” submitted for consideration by
the Ordinary General Shareholders’ Meeting on March 28, 2008”; the “Proposal for the Seventeenth Phase of the Company Stock Repurchase
Program, submitted by the Board of Directors of Mercantil Servicios Financieros, C.A. for consideration by the Ordinary General Shareholders’
Meeting on March 28, 2008”; the “Proposal to declare dividends for 2008 of Mercantil Servicios Financieros, C.A. submitted by the Board of
Directors for consideration by the Ordinary General Shareholders’ Meeting on March 28, 2008”; and the short-list of candidates for the
positions of Statutory and Alternate Auditors, will be available at the Secretariat of the Board of Directors of the Company, located at Avenida
Andrés Bello N° 1, Edificio Mercantil, 35th floor, Caracas. In accordanace with the provisions of the Company Bylaws, the shareholders are
hereby informed that for each group of Common “A” shares representing at least twenty percent (20%) of the capital subscribed by those
shares, they are entitled to nominate and appoint the corresponding Directors and their Alternates.
Caracas, March 12, 2008
On Behalf of Mercantil Servicios Financieros, C.A.
Secretary of the Board of Directors
M e r c a n t i l
7
S e r v i c i o s
Tejedura (89/22) • 1989 • Paper strips and crayon • 23,9 x 20,5 cm
Board of
Directors’ Report
Caracas, March 12, 2008
Dear Shareholders,
We are pleased to submit for your consideration Mercantil Servicios Financieros’ consolidated
results and main activities for the second semester of 2007 as well as for the whole year.
The Financial Statements of Mercantil Servicios Financieros included in this report,
consolidate the activities of its subsidiaries and were prepared in accordance with the
standards of the National Securities Commission (CNV). They are also included as
supplemental information in keeping with the accounting standards generally accepted in
Venezuela and have been examined by the Company’s external auditors Espiñeira, Sheldon y
Asociados, whose separate report can be found in the inside back cover of this report.
Financial Results
MERCANTIL reported net income of Bs. 783.333 million (US$ 365 million*), in 2007, of which
Bs. 238,958 million correspond to the first semester and Bs. 544,375 million to the second.
The main contributors to these profits were Mercantil, C.A., Banco Universal with Bs. 472,889
million; Mercantil Seguros, C.A. with Bs. 70,121 million; Mercantil Commercebank Holding
Corporation with Bs. 65,843 million and Mercantil Merinvest, C.A. with Bs. 8,395 million. net
income the year is 41.0% higher than the Bs. 555,734 million recorded at December 31, 2006.
Total assets reached Bs. 39,049,551million (US$ 18,208 million), 23.1% higher than the level
registered as of December 31, 2006. Equity closed at Bs. 3,407,614 million (US$ 1,589 million),
31.6% higher than in December 2006.
The loan portfolio increased 32.6% to Bs. 19,338,493 million (US$ 9,017 million), compared
with Bs. 14,580,274 million (US$ 6,799 million) at the close of 2006. The quality of the loan
portfolio remained highly favorable. The ratio of Past Due and In Litigation Loans to Gross
Loan Portfolio was 0.6%, considering the overall loan portfolio of Mercantil Servicios
Financieros, which consolidates the portfolios of Mercantil, C.A., Banco Universal, Mercantil
Commercebank Holding Corporation, Mercantil Bank (Schweiz) AG, Mercantil Bank Curaçao
N.V. and Banco del Centro S.A. This ratio was 0.7% at the close of 2006. The ratio of
Allowances for Loan Losses over Past Due and Non-performing Loans was 285.7%, compared
with 264.3% at December 31, 2006.
* All figures stated in US$ are converted at the official exchange rate of Bs. 2,144.60 per US$
M e r c a n t i l
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S e r v i c i o s
The efficiency ratio measured by calculating operating expenses as a percentage of average
assets, was 5.4%, compared to 5.8% in 2006; while the efficiency ratio, measured by
calculating operating expenses as a percentage of total income was 61.37%, compared to
64.9% in 2006.
The Equity/Risk-Weighted Assets ratio was 17.7% (regulatory minimum 8%). This ratio was
16.3% in 2006 and it is determined according to the guidelines of the National Securities
Commission (CNV) which are based on the standards of the Basel Committee on Banking
Supervision of the Bank for International Settlements.
MERCANTIL’s audited financial statements at the close of 2005, prepared according to US-GAAP
have been available on MERCANTIL’s website since September 2006. The statements at the close
of 2006 are also available on the same page. Mercantil Servicios Financieros is the only financial
institution in Venezuela that, in addition to presenting its financial statements in accordance
with Venezuelan accounting standards, presents them according to US-GAAP, providing
international investors with a useful tool for making financial decisions. As planned, the Company
will also be presenting the full year 2007 financial statements of Mercantil Servicios Financieros
and Mercantil C.A., Banco Universal in accordance with US GAAP in April 2008.
Net income per share in 2007 was Bs. 7,959 (US$ 3.7), 38.4% higher than in 2006.
As stated in the Board of Directors First Semester 2007 Report to the Shareholders, Mercantil
Servicios Financieros launched a Public Stock Offering in July and August 2007, of 45 million
common Class “A” and “B” shares distributed into 26.1 million common Class “A” shares and
18.9 million common Class “B” shares. This share issue was fully subscribed and paid in. The
purpose of the Offering was to increase Mercantil’s shareholder base in order to enhance its
operations and expand its business. The funds generated were added to Mercantil’s existing
funds and used principally to finance the equity growth of the Mercantil, C.A. Banco Universal
subsidiary and shore up Mercantil’s insurance and asset management businesses.
During the second semester, the third and fourth portions of the ordinary cash dividend
totaling Bs. 24,455,643,024.00 (Bs. 12.00 per share) were paid. These amounts, in addition to
the sums paid out in the first half of the year, corresponding to the first and second portions
of the ordinary cash dividend of Bs. 17,126,853,240.00 (Bs. 12.00 per share), and the
extraordinary cash dividend of Bs. 29,945,807,820.00 (Bs.30.00 per share), totaled Bs.
71,528,304,084.00. An additional dividend of 2 shares for every 5 held was made, totaling Bs.
42,779,725,350.00. This sufficiently exceeded the statutory requirements of the Capital Market
Law on this matter. With the payment of the first and second portions of the ordinary cash
dividend and the extraordinary cash dividend paid in the first semester of 2007, the
requirements of the Capital Market Law regarding the payment of cash dividends for 2007
were more than satisfied.
Between May and December 2007, Mercantil Servicios Financieros, C.A. placed two unsecured
bond issues. The 2007-I issue was for Bs. 100 billion bolivars (Bs. 100,000,000,000.00) and was
fully subscribed, and the 2007-II issue was for Bs. 180 billion, of which Bs. 80 billion had been
fully subscribed as of December 31 and Bs. 44,375.7 billion had been placed. These issues were
offered in installments ranging from eighteen (18) and sixty (60) months and were rated A2 by
the rating agencies FITCH Venezuela S.A., Sociedad Calificadora de Riesgo and CLAVE,
Sociedad Calificadora de Riesgo, C.A. Two issues of commercial papers were also offered, 2007I and 2007-II, for a total of Bs. 120 billion of which Bs. 100,592.4 billion had been placed at the
close of the year.
A n n u a l
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R e p o r t
2 0 0 7
The Stock Repurchase Program initiated in May 2000, is currently in its Sixteenth Phase, which
was approved at the Shareholders’ Meeting held on September 28, 2007, and will expire on
April 1, 2008. As of December 31, 2007 a total of 183,428 common Class “A” shares and 153,838
common Class “B” shares constitute Treasury stock.
MERCANTIL’s Board of Directors at its
September 6, 2007 meeting, as authorized by the
The sixteenth phase of the Stock Repurchase Program will
respective General Shareholders’ Meetings,
agreed to redeem 3,364,665 common Class “A”
end on April 1, 2008.
shares and 1,752,079 common Class “B” shares
held as treasury shares, thus redeeming all the
treasury shares acquired during the twelfth,
thirteenth and fourteenth phases. This redemption resulted in a Bs. 767,511,600.00 reduction
in the Company’s paid-in capital, bringing it to Bs. 156,479,039,100.00.
Furthermore, at its December 13, 2007 meeting, the Board of Directors as authorized by the
General Shareholders’ Meeting, agreed to redeem 1,826,959 common Class “A” shares and
1,529,365 common Class “B” shares held as treasury shares acquired during the fifteenth phase
and during the period elapsed since the start of the sixteenth phase, up to December. As a
result of this redemption, the company’s paid-in capital decreased by Bs. 503,448,600.00 to
155,975,590,500.00.
In view of the scope of the Monetary Conversion Act which came into effect on January 1,
2008, the Extraordinary General Shareholders Meeting held on December 10, 2007, approved
the Board of Directors’ proposal to increase the nominal value of the company’s shares from
Bs. 150.00 to Bs. 1,500.00, through the exchange of 10 shares with a nominal value of Bs. 150.00
per share with a nominal value of Bs. 1,500.00, thereby reducing the number of shares
comprising the capital stock by ten (10). This exchange, in accordance with the terms of the
proposal presented and approved by that Extraordinary Shareholders Meeting took place on
December 20. All the necessary changes were made to the Company’s ADR program to bring
it in line with the adjustments resulting from this change. By virtue of the provisions of the
above-mentioned decree, the nominal value of Mercantil Servicios Financieros’ shares as of
January 1, 2008, is Bs. F 1.50.
In order to highlight the value of the Mercantil brand in the field of Banking, Insurance and
Asset Management in Venezuela and abroad, the Board of Directors at its August 23, 2007
meeting, approved the use of the Mercantil brand name by all its subsidiaries in Venezuela
and abroad. Therefore the name Mercantil replaces the former names of the subsidiaries in
order to align their corporate identities. This change took effect at the end of 2007.
M e r c a n t i l
11
S e r v i c i o s
Given the volume and complexity of the Company’s activities and in accordance with its
succession policy, last December the Board of Directors agreed to separate the positions of
President and Executive President which, according to the statutory provisions since the
Company was incorporated, had been held by Dr. Gustavo A. Marturet. Dr. Marturet will
continue as President of the Company, while the position of Executive President will be held
by Mr. Alejandro González Sosa.
Based on the recommendations of the Compensation Committee which in turn received advice
for this purpose from the consulting firm McKinsey & Co., the Board of Directors decided to
assign the following responsibilities to the President, in addition to those stipulated in the
company’s by-laws: Legal Counsel, Strategic Planning, Global Risk, Human Resources,
Institutional Marketing and Corporate Communications. The Audit Unit and the Secretariat,
which report directly to the Board of Directors, will continue to be administratively dependent
on the Office of the President. The Executive President will report to the President of the
Company.
The following global business and support units will report to the Executive President:
Commercial and Personal Banking; Corporate and Investment Banking; Private Banking and
Asset Management; Insurance and New Business; Operations and Technology and
International Operations. The Executive President will also be responsible for the Executive
Coordination of all Mercantil’s subsidiaries.
The Extraordinary General Shareholders’ Meeting held in December
2007 approved the proposal to increase the nominal value of
Mercantil’s stock from Bs. 150 to Bs. 1,500.
A n n u a l
12
R e p o r t
2 0 0 7
Economic Climate
Global
During 2007 the world economy remained favorable, despite the uncertainty as a result of
recent adjustments in the real estate markets of a number of countries and their potential
effects on credit and derivatives markets. The sub-prime mortgage crisis and its repercussions
on internationally traded packaged products during the second semester was one of the
clearest reflections of the risks of financial globalization. New sources of risk have also arisen
in the area of inflation due to the rapid increase in the demand for internationally traded
commodities and their limited supply. Even so,
the dynamism of emerging countries like China,
India, Brazil, Russia and the Asia-Pacific region
Despite the uncertainty of real estate markets in a number of
countries, the world economy registered favorable results in 2007
as a whole have more than offset the expected
slowdown of the mature economies, and in
particular the North American and European
economies. In effect, China’s economy grew
11.3% and India’s 8.8%, both higher than
foreseen.
United States
The US economy was affected since the second semester of 2006 by the adjustment in the
sale and construction of homes. Despite some signs of a recovery in the first three quarters of
2007, during the last quarter of the year the potential threats to US consumer confidence seem
to have heightened. This loss of confidence, combined with higher energy prices and the
deterioration of the (adjustable rate) sub-prime mortgage portfolio, are undermining the
spending capacity of households already under pressure to make mortgage repayments. Fourth
quarter 2007 unemployment rose to 4.8%, closing at 5% in December (its highest level in the
last 2 months). The residential property market, on the other hand, is still in recession, as can
be seen from: the increase in single family used homes (4,453,000 homes in October, 15
percentage points up on 2006). This situation contributed to the fall in residential investment
for the sixth quarter running, in what appears to be a clear sign that the supply is adjusting to
the weak demand. Faced with this situation, in September the Federal Reserve, decided for
the first time in 4 years to reduce the short-term lower interest rate by 50 basis points (to
4.75%).This was followed by drops of 25 basis points in October and December.
M e r c a n t i l
13
S e r v i c i o s
Latin America
The region continued to grow satisfactorily, averaging 5.6%, similar to the 2006 level. This
expansion was favored by the growth of the global economy, the high prices of its main exports,
above all basic commodities, and the strength of domestic consumer and investment demand.
Despite the significant increase in imports (18.1), better terms of regional trade (2.6%) and a
slight increase in the volume of exports enabled the current account to show a surplus of 0.7%
of the GDP (1.7% in 2006). The expansion of public spending, despite revenue growth, resulted
in a turnaround of the global surplus of 0.1% of the 2006 GDP into a 0.1% deficit. However, the
majority of the countries registered primary surpluses (excluding public debt interest). High
energy costs, the boom in agricultural prices and demand pressures, rising to 6.1% compared
with 5% in 2006. Unemployment fell from 8.6% to 8% and real wages rose by 1.5%.
Venezuela
The Venezuelan economy grew 8.4% en 2007. Tradables are still the most dynamic sectors:
Communications 21.7%, Financial Institutions and Insurance 20.6%, Commerce 17.3%,
Transportation and Storage 13.7% and Construction 10.2%, while tradable activities increased
moderately: Manufacturing 7.5% and Mining 1.4%. Oil products fell dropped 5.3%.
Unemployment to November 2007 closed at just 6.3% (8.8% during the same period in 2006).
However, GDP expanded slower than aggregate demand which grew 18.7%, in terms of
consumption (16.1%), and fixed capital formation (24.5%), resulting in faster rising inflation.
Thus, despite the increase in imports (32% in real terms), point inflation closed at 22.5% (17%
in 2006), with a market upturn in the fourth quarter.
High oil prices (the Venezuelan basket averaged US$ 65.2/bbl vs. US $56.4/bbl in 2006),
enabled the comfortable trade balance surplus to be repeated (US$ 24.993 million, US$ 7.7
billion less than in 2006), despite the fact that imports grew US$ 12 billion. The Capital and
Financial account deficit, due above all to the accumulation of external assets in public and
private sector savings funds (PDVSA bond and Bono del Sur II and III placements) and debt
payments resulting from the nationalization of the electric, telephone and oil companies, led
to a global balance of payments deficit of US$ 5,922 million (compared with a US$ 5,138 million
surplus in 2006).
Fiscal management behaved differently during the previous three-year period, reflecting a
clear slowdown in spending (an estimated real reduction of 2%), closing with a financial deficit
of just 1%. This gap was easily financed through domestic debt issuances and amounts drawn
on previously accumulated national treasury surpluses.
A n n u a l
14
R e p o r t
2 0 0 7
This fiscal moderation attenuated the monetary injection generated by fiscal spending which,
together with PDVSA’s and Central Government‘s debt issues and the rise in the demand of
monetary liquidity: 31.5% compared with 69.3% in 2006. The monetary policy adjusted to the
fiscal policy and to the public indebtedness strategy, by permitting the net maturity of
monetary absorption instruments (Certificates of Deposit and Repos). The balance of those
paper issues fell by around 61.4% during the year. This monetary strategy was complemented
by the increase in the reserve ratio and adjustments in low-interest deposit rates (from 6.5%
to 10% on savings deposits and liquid assets and 10% to 11% on time deposits). Lending rates
averaged 16.7%, 200 basis points higher than in 2006, despite the significant increase in
November (19.9%) and December (21.7%), in response to the rise in the cost of deposits and
the application of the Tax on Financial Transactions. Despite those average increases in all
interest rates, rapid inflation made them negative in real terms.
Products and Services
New products and services were developed and made available in 2007 to meet customers’
growing needs.
During the first half of 2007, the Mercantil, C.A., Banco Universal subsidiary included the new
Gold and Platinum “Visa and MasterCard New Professionals” credit cards in its product
portfolio.
Additionally, as of August 2007, the Llave Mercantil debit card holders have the opportunity
to set their Credit Card’s password through the Mercantil Call Center, automatically and
immediately without having to go to an administrative office.
Mercantil, C.A., Banco Universal, maintaining its technological leadership, is the first
institution to develop a tool that allows carrying out electronic transactions more securely by
making available a new authentication instrument to Personal On-line Clients through the
“E-Security Card” which replaces the former authentication method.
As of October 10, all the Bank's customers can consult their loan balances and transactions
electronically through Mercantil Personal On-line Banking and the Mercantil Call Center
(CAM) which allows them to consult immediately and automatically Mortgage Loans, Vehicle
Loans, Microenterprise Loans (only via Mercantil Personal On-line Banking) and Personal
Loans.
In addition to the loan query option, Personal On-line Banking includes Credit Card Activation
options; direct debits (Mercantil Banco Universal is Venezuela’s first bank to offer this facility);
and Improvements to the Affiliation module which enables changes to be made to the
affiliated services data and to increase the number of third party accounts and the number of
other accounts affiliated from National Banks for transferring purposes.
M e r c a n t i l
15
S e r v i c i o s
Since December 1, 2007 the Bank has been offering the “Mercantil Purchases Club” to its
clients. This scheme was designed to grant benefits such as discounts and promotions at
participating stores, to Mercantil debit and/or credit card holders through Mercantil points
of sale in these establishments.
The Venezuelan Standardization and Quality
Certification
Fondonorma approved the ISO 90001:2000 certification for
customer transactions carried out through cashiers at type “A”
branches and ratified eight lines of services.
approved
the
Institute
ISO
(FONDONORMA
9001:2000
Quality
Management Systems certification for customer
transactions through cashiers at Mercantil, C.A.
Banco Universal’s 93 “A” category offices
nationwide. These transactions were audited by
the Institute.
FONDONORMA had already
certified another eight lines of service and will be continuing with its policy to certify the
quality of all the bank’s products and services.
In August 2007, Mercantil Seguros C.A. introduced an efficient new “Automobile Claim
Reporting Telephone Service” so policyholders can make vehicle claims quickly and easily.
The “Combined Residential Policy” is now available for homeowners to safeguard property
and occupants in the event of loss or damage caused by unforeseen events.
The Mercantil Commercebank subsidiary is one of the largest privately owned banks in South
Florida with fifteen offices, including a branch in Manhattan, New York and another in
Houston, Texas. Mercantil Commercebank offers a wide variety of Personal, Business and
Corporate banking services at home and abroad, including equity and trust fund management
through its Mercantil Commercebank Investment Services Inc. and Mercantil Commercebank
Trust Company, N.A. subsidiaries. At year end the Bank registered US$ 5.5 billion in assets,
11.4% more than the previous year. Deposits increased 16% while loans grew 17%, closing the
year at US$ 3 billion. Capital increased US$ 76 million (19%), closing the year at US$ 471 million.
Net income was US$ 42 million, 14% down on 2006, due to a drop in the financial margin as
a result of the slowdown of the US economy and lower interest rates.
For MERCANTIL the bank’s presence in Switzerland through the Mercantil Bank (Schweiz)
subsidiary is an asset to the European market and a major contribution to its goal to meet its
clients’ global financial needs. Cooperation with its subsidiaries in Venezuela and the United
States remains the basis of its business model and it continues to develop its management
capacity in order to provide efficient services, principally in the field of Private and Corporate
Banking and Foreign Trade.
A n n u a l
16
R e p o r t
2 0 0 7
At the close of 2007, this subsidiary has CHF 379 million in assets, 10.9% more than in 2006,
while managed assets rose 24% year over year to total CHF 808 million.
Acknowledgements
The US magazine Global Finance, which specializes in the analysis of international financial
markets, awarded Mercantil. C.A., Banco Universal its prizes as the “Best Foreign Trade
Services and Products Provider in Venezuela” and the “Best Trade Finance Bank in Venezuela”
Mercantil Servicios Financieros is the only Venezuelan institution on the list of the Top 2000
Leading Companies in the World published by Forbes magazine. The position obtained was
based on the evaluation of income, profitability, asset growth and market capitalization.
Mercantil Commercebank Holding Corporation, a subsidiary of Mercantil Servicios
Financieros in the United States, was awarded the Greater Miami Chamber of Commerce’s
prize as the finalist in the Good to Great 2007 program of regional prizes which acknowledges
companies operating in South Florida for carrying out the ideas expressed in the bestselling
book Good to Great by Jim Collins.
Working Environment
For the third year running the prestigious Great Place to Work® Institute which is recognized
in more than 28 countries and three continents on the analysis of human resources-related
topics was commissioned to assess the working environment and human resources
management practices among the staff of all the subsidiaries of Mercantil Servicios
Financieros in Venezuela and abroad. Each year the Institute issues a list of the 10 best
companies to work for in each of the countries in which it is involved. The Mercantil, C.A.
Banco Universal subsidiary was ranked eighth and was the only Venezuelan company from the
banking system included in the ranking.
Mercantil and its subsidiaries in Venezuela and abroad carry out ongoing training and
development programs that allow all their staff to improve their professional training and
keep their knowledge up to date. These programs are implemented using on-site and ELearning methods, with adequate control and supervision. More than 414,000 teaching hours
were clocked up in 2007, at an approximate investment of Bs. 10,517 Million. A total of 35,920
workers took part in the training which included almost 100% of the staff, averaging
approximately 39 hours of training per worker.
M e r c a n t i l
17
S e r v i c i o s
Social Responsibility
Mercantil’s social commitment is one of the main principles of its strategic vision, “to be an
integral institution and an important factor in the development of the communities it serves.”
Mercantil’s direct social investment in 2007 through Fundación Mercantil and its Venezuelan
subsidiaries Mercantil Banco Universal, Mercantil Seguros and Mercantil Merinvest in
Venezuela, and its US subsidiary Mercantil Commercebank, totaled Bs. 11,961million. It also
delivered Bs. 1 billion to Fundación Mercantil to strengthen the equity fund that finances
donations and sponsorship.
To further the country’s economic and social development and enhance the quality of life of
the communities, through a joint effort between non-governmental organizations, official
institutions and MERCANTIL’s employees and their families, the Company’s contributions
were distributed as follows: 57% for educational institutions and 43% for social development,
health, cultural and religious institutions
The 25th anniversary of the “Ponle Cariño a tu Colegio” (Give your School a Helping Hand)
highlighted the importance of its development activity implemented in conjunction with the
Foundation for Educational Buildings – FEDE – and is a program that supports Venezuelan
education and community action and is a national benchmark in this field. Equally important
is the nationwide support given to educational projects on a nationwide scale by the “Fe y
Alegría” institution and the Venezuelan Scout Association.
A number of agreements were signed and contributions made to various higher education
institutions, mainly the following universities: Universidad Católica Andrés Bello, Central de
Venezuela, Simón Bolívar, Zulia, Metropolitana, in addition to direct support for several
academic development initiatives promoted by the students,
Direct support was given to the social and cultural programs implemented by a number of
organizations, in particular Fundación de Amigos del Niño con Cáncer,
Fundación
Cardioamigos, Comedores Madre Teresa de Cálcuta, Cáritas de Venezuela, Fundación
Camerata de Caracas and Fundación para la Educación Eclesiástica Juan Pablo II.
Mercantil continues to develop its “Social Capital Funds” program which seeks to strengthen
the beneficiary institutions and make them self-sustainable.
In the United States, and mainly in South Florida, support was given to the programs of the
following organizations: March of Dimes, Habitat for Humanity, American Red Cross and the
Anti-Cancer League, as well as the scholarship agreement with Florida International
University.
Commercebank, MERCANTIL’s subsidiary in the United States, continued its social
commitment in support of the work undertaken by social, religious and healthcare institutions
in southern Florida, New York and Houston, such as the American Red Cross, Habitat for
Humanity, Junior Achievement, Catholic Charities and Community Partnership for the
Homeless.
Special mention is due to the important and growing voluntary participation of MERCANTIL’s
staff during 2007 in the different educational and social activities of various institutions in the
communities in which it operates.
A n n u a l
18
R e p o r t
2 0 0 7
Prevention and Control of Money Laundering
Money laundering prevention and control is a priority for MERCANTIL and is part of the
organizational culture. The Company has maintained the internal control and monitoring
standards necessary to ensure the early detection of money laundering operations in each of
the activities of its subsidiaries and has stepped up staff training in this area.
To ensure compliance with anti-money laundering legislation, Mercantil has a
“Comprehensive Money Laundering Prevention and Control System” in place in Venezuela
and its foreign subsidiaries, as well as Operational and Follow-Up, and Monitoring and
Oversight plans. It systematically applies its “Know your Customer” policy which is the pivotal
point of its anti-money laundering program.
Relations between bank officials and employees have continued to evolve within the
traditional spirit of harmony and cooperation and the Board of Directors wishes to
acknowledge them for their efficiency and dedication.
Pursuant to a Resolution passed by the National Securities Commission (CNV), the contents
of form CNV-FG-010 shows remunerations paid to Company Directors and Executives during
the first semester amounting to Bs. 2,741,338,654.09.
During the semester, a number of Alternate Directors attended Board meetings, either
standing in for Directors in their absence, or as invitees. On the occasion of the Chairman's
temporary absences, some of his CEO functions were delegated to members of the Executive
Committee.
Yours sincerely,
Gustavo A. Marturet
Gustavo Vollmer H.
Alfredo Travieso P.
Luis A. Romero M.
Gustavo Vollmer A.
Jonathan Coles W.
Víctor J. Sierra A.
Roberto Vainrub A.
M e r c a n t i l
19
S e r v i c i o s
Sin título • 1968 • Ink on paper • 38 x 33 cm
Statutory Auditors’ Report
February 25, 2008
Letter to
Shareholders of
Mercantil Servicios Financieros, C.A.
Dear Shareholders,
In our capacity as Statutory Auditors of this Company, and in conformity with the provisions
of Articles 287 and 311 of the Commercial Code, we are pleased to inform you that we have examined the consolidated balance sheet of Mercantil Servicios Financieros, C.A. and its subsidiaries as of December 31, 2007 and the related consolidated income statements and statement
of shareholders’ equity and cash flows for the period then ended. The preparation of these financial statements and their notes is the responsibility of the management of Mercantil Servicios Financieros, C.A. Our responsibility is to express an opinion on these financial
statements based on our audits.
Our examination was conducted in accordance with generally accepted auditing standards and
therefore included selective tests of the accounting records and other audit procedures we deemed necessary in the circumstances. We have also taken into account the Report of external
auditors Espiñeira, Sheldon y Asociados for the same period, which should be treated as an integral part of this report, with whose content we agree, and which we attach hereto.
Based on our analysis, we take the liberty of pointing out that the Company maintains adequate controls over its loan and investment portfolios which are subject to ongoing analysis
and monitoring so that the appropriate provisions can be created. The Company likewise maintains the provisions prescribed in its Bylaws and declares and pays the dividends to which it is
obligated under its Bylaws and the Law. Furthermore, the Company’s internal accounting controls and policies justify our view that there is no current or potential risk of conditions that
are likely to weaken its financial position.
In our opinion, the aforementioned consolidated financial statements present fairly the financial position of Mercantil Servicios Financieros, C.A. and its subsidiaries at December 31, 2007
and the results of their operations and cash flows for the period then ended, in conformity
with the National Securities Commission’s (CNV) standards. The Company presents as supplemental information, financial statements prepared in accordance with the generally accepted
accounting standards of the Federation of Venezuelan Public Accounting Associations.
Yours faithfully,
Eduardo Elvira
Francisco Torres Pantin
Statutory Auditor
Statutory Auditor
Encl. Report of Espiñeira, Sheldon y Asociados.
M e r c a n t i l
21
S e r v i c i o s
Nexus • 1991 • Serigraph on paper • 76,8 x 57,7 cm
Financial Statements
(Pursuant to the standards of the
Venezuelan National Securities Commission - CNV)
Balance Sheet
Unconsolidated
(in millions of Bs.)
2007
2006
2005
Year Ended
bolivars
bolivars
bolivars
6,543
3,881,759
100,520
3,988,822
148
3,129,895
54,482
3,184,525
280
2,512,074
18,871
2,531,225
Total Liabilities
394,968
186,240
581,208
283,871
311,231
595,102
175,748
186,953
362,701
3,407,614
2,589,423
2,168,524
Total Liabilities and Shareholders’ Equity
3,988,822
3,184,525
2,531,225
Assets
Cash and Due from Banks
Investment Portfolio
Other Assets
Total Assets
Liabilities and Shareholders’ Equity
Unsecured Bonds and Commercial Papers
Other Liabilities
Income Statement
Unconsolidated
(in million of Bs.)
2007
2006
2005
Year Ended
bolivars
bolivars
bolivars
23,470
18,628
8,853
916,787
940,257
636,663
655,291
781,143
789,996
Total Expenses
89,988
66,936
0
156,924
56,500
43,057
0
99,557
31,516
36,811
91
68,418
Net Income
783,333
555,734
721,578
Income
Financial Income
Equity Investments
in subsidiaries
Total Income
Expenses
Operating
Financial
Income Tax
M e r c a n t i l
23
S e r v i c i o s
Consolidated
Balance Sheet
(in millions of Bs. and US$)
Year Ended
Assets
2007
2007
2006
2005
2004
2003
US$ (1)
bolivars
bolivars
bolivars
bolivars
bolivarss
197
2,431
2
52
177
0
422,006
5,213,551
4,238
110,590
378,624
(315)
346,024
2,911,146
2,867
60,277
499,530
(230)
279,218
1,245,753
2,654
99,434
303,895
( 186)
188,687
939,503
222
52,803
121,877
( 3)
168,682
721,574
1,727
68,349
79,856
( 1,249)
2,858
6,128,694
3,819,614
1,930,768
1,303,089
1,038,939
121
2,756
512
16
1,863
82
260,393
5,910,348
1,096,678
33,520
3,995,194
176,074
398,438
6,272,875
657,125
16,294
4,305,053
309,436
122,553
5,769,223
812,221
76,512
3,096,957
123,179
10,362
3,870,128
814,594
304,343
2,350,023
422,582
14,392
2,597,331
729,555
132,518
2,028,590
167,072
5,349
11,472,207
11,959,221
10,000,645
7,772,031
5,669,458
152
324,579
92,808
0
0
0
9,114
12
55
4
19,545,543
24,644
116,978
7,779
14.726.303
28.414
103.767
7.283
11.457.264
30.583
31.723
4.531
7.384.726
57.974
52.625
10.657
4.595.660
97.484
78.634
10.904
9,184
( 166)
9,017
19,694,944
( 356,452)
19,338,492
14,865,767
( 293,500)
14,572,267
11,524,101
( 229,404)
11,294,697
7,505,982
( 193,659)
7,312,323
4,782,682
( 209,840)
4,572,842
115
27
10
199
482
245,939
57,318
22,462
426,255
1,033,606
186,174
36,784
5,068
319,368
725,663
157,619
26,107
6,633
267,556
590,483
125,921
23,968
12,628
236,190
326,709
116,705
16,867
16,417
222,136
317,278
18,208
39,049,552
31,716,967
24,274,508
17,112,859
11,970,642
Central Bank of Venezuela
Venezuelan Banks and other Financial Institutions
Foreing Banks and Other Financial Institutions
Pending Cash Items
(Allowance for Cash and Due from banks)
Invesments Portfolio
Invesments in Trading Securities
Invesments in Securities Available-for-Sale
Invesments in Securities Held-to-Maturity
Share Trading Portfolio
Invesments in Time Deposits and Placements
Restricted Investments and Repos
Financial Direct Assets
Loan Portfolio
Current
Restructured
Past-Due
In Litigation
(Allowance for losses on Loan Portfolio)
Interest and Commissions Receivable
Long-Term Investments
Assets Available for Sale
Property and Equipment
Other Assets
Total Assets
February 2003.
A n n u a l
24
R e p o r t
2 0 0 7
Consolidated
Balance Sheet
Year Ended
Liabilities and Shareholders’ Equity
2007
2007
2006
2005
2004
2003
US$ (1)
bolivars
bolivars
bolivars
bolivars
bolivars
3,098
3,818
4,093
3,80
6,644,492
8,188,269
8,777,472
7,677,380
5,128,745
6,221,425
7,160,491
6,736,211
3,326,303
4,670,412
5,316,585
6,166,201
2,324,085
3,748,700
3,870,420
3,871,387
1,600,699
2,686,936
2,952,028
2,359,242
14,589
31,287,613
25,246,872
19,479,501
13,814,593
9,598,905
166
356,144
259,087
170,583
102,131
93,550
166
356,144
259,087
170,583
102,131
93,550
75
34
30
37
274
318
54
2
161,279
72,000
64,597
80,081
588,320
681,983
115,049
3,488
267,726
100,000
163,367
83,711
395,286
581,313
140,046
5,168
176,537
45,000
83,653
189,173
0
261,955
78,422
138,858
121,977
32,122
59,468
295,818
0
39,493
50,206
34,128
31,035
3,031
3,629
251,345
0
1,233
18,949
47,916
824
1,766,797
1,736,617
973,598
633,212
357,138
22
903
114
47,771
1,936,796
244,656
37,130
1.576,382
268,247
40,080
1,246,326
193,186
20,616
667,616
172,521
22,116
516,399
137,655
16,618
35,639,777
29,124,335
22,103,274
15,410,690
10,725,763
1
2,161
3,209
2,708
2,832
2,840
73
90
94
78
156,479
191,709
201,668
166,715
107,717
191,709
52,304
166,715
113,352
191,709
53,890
166,715
82,490
191,709
56,582
163,673
82,928
191,709
55,833
163,673
128
1,141
(6)
273,672
2,447,230
(12,900)
267,820
1,823,396
(13,950)
275,270
1,492,805
(139,197)
260,536
882,269
(129,767)
166,633
542,891
(12,029)
(14)
(29,127)
(25,170)
(25,292)
(23,875)
(15,623)
6
12,168
18,882
39,274
215,720
66,024
1,589
3,407,614
2,589,423
2,168,526
1,699,337
1,242,039
18,208
39,049,552
31,716,967
24,274,508
17,112,859
11,970,642
Liabilities
Deposits
Non-Interest Bearing Checking Accounts
Interest Bearing Cheking Accounts
Saving Deposits
Time Deposits
Debt Authorized by the
National Securities Commission
Publicly Offered
Debt Securities
Financial Liabilities
Obligations with Banks and Savings and Loan Institutions
In Venezuela up to one year
In Venezuela for more than one year
Abroad up to one year
Abroad for more than one year
Financial liabilities indexed to Securities
Liabilities Under Repurchase Agreements
Other Liabilities up to one year
Other Liabilities for more than one year
Interest and Commissions Payable
Other Liabilities
Subordinated Debt
Total Liabilities
Minority Interest in Consolidated Subsidiaries
Capital
Paid-Up Capital
Maintenance of Paid-In Capital
Premium for Issuing Stock
Capital Reserves
Adjustment for Conversion of Net Assets
by Subsidiaries Abroad
Retained Earnings
Shares Repurchased and Held by Subsidiaries
Repurchased shares restricted
for employees´ stock option plan
Unrealized Gain from Adjustment at
Market Value of Investments
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
(1) Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs. 2,144.60/1US$. There is an exchange control in place in Venezuela
M e r c a n t i l
25
S e r v i c i o s
Consolidated
Income Statement
Year Ended
2007
2007
2006
2005
2004
2003
US$ (1)
bolivars
bolivars
bolivars
bolivars
bolivars
5
371
1,111
14
11,525
796,618
2,383,451
29,838
16.505
678,562
1,585,296
1,132
9,176
618,697
1,043,729
0
4,612
509,014
650,036
0
9,655
488,911
578,886
0
1,501
3,221,432
2,281,495
1,671,602
1,163,662
1,077,452
Interest on Demand and Savings Deposits
Interest on Time Deposits
Interest on Securities issued by the institution
Interest on Financial Liabilities
248
183
41
61
532,103
392,150
88,407
130,703
361,659
374,582
29,180
77,289
227,307
324,709
17,240
66,220
131,446
134,981
15,778
34,468
100,603
166,308
20,485
26,661
Total Interest Espenses
533
1,143,363
842,710
635,476
316,674
314,057
Net Interest Income
968
2,078,069
1,438,785
1,036,126
846,988
763,395
59
126.897
108.378
66.215
52,900
160,550
909
1,951,172
1,330,407
969,911
794,088
602,845
19
2
85
15
19
(1)
82
178
40,682
3,765
181,808
32,576
41,333
(1,537)
176,560
380,764
38,816
2,020
153,105
24,622
32,909
9,494
149,389
447,496
33,680
1,250
99,250
21,080
22,644
126,427
324,231
309,723
23,351
935
72,762
15,821
16,030
78,846
49,072
244,365
17,149
3,361
69,603
7,263
6,508
48,993
34,955
183,618
399
855.951
857,851
938,285
501,182
371,450
495
(413)
1,061,618
(885,954)
675,611
(562,175)
443,353
(341,618)
286,952
(222,975)
213,461
(178,280)
82
175,664
113,436
101,735
63,978
35,181
1,390
2,982,787
2.301,694
2,009,929
1,359,248
1,009,476
Salaries and Employee Benefits
Depreciation, Property and Equipment Expenses,
Amortization of Intangibles and Other
Fees Paid to Regulatory Agencies
Other Operating Expenses
422
904,364
734,526
514,299
360,820
284,560
105
53
362
225,053
113,320
776,798
169,523
77,280
643,990
148,955
53,868
487,282
128,963
33,137
409,944
121,933
22,383
294,275
Total Operating Expenses
942
2,019,535
1,625,319
1,204,404
932,864
723,151
Net before Income taxes, Extraordinary items
and Minority Interest
449
963,252
676,375
805,527
426,383
286,325
Current
Deferred
(88)
4
(188,552)
9,183
(124,699)
5,938
(80,138)
(2,721)
(51,871)
2,539
(38,083)
5,742
Total Taxes
(84)
(179,369)
(118,761)
(82,859)
(49,332)
(32,341)
0
(550)
(1,880)
(1,090)
(1,127)
(654)
365
783,333
555,734
721,578
375,924
253,330
Interest Income
Income from Cash and Due from Banks
Income from Investment Portfolio
Income from Loan Portfolio
Income from Financial Assets
Total Interest Espenses
Interest Espenses
Provision for Losses on Loan Portfolio
Net Financial Margin
Trust Fund Operations
Foreing Currency Transactions
Commissions on Customer account Transactions
Commissions on Letters of Credit and Guarantees Granted
Equity in Long-Term Investment
Exchange Gains
Income on Sale of Investments Securities
Other income
Total Commissions and Other Income
Insurance Premiums, Net of Claims
Premiums
Claims
Total Insurance Premiums, Net of Claims
Operating Income
Operating Expenses
Taxes
Minority Interest
Net Income for the Year
(1)
Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs. 2,144.60/1US$. There is an exchange control in place in Venezuela
A n n u a l
26
R e p o r t
2 0 0 7
Chorro reticulárea • 1988 • Stainless steel wire • 200 x 100 x 70 cm
Sin título • 1966 • Lithograph on paper • 56 x 56 cm
Economic Climate
Global
The positioning of the global economy
remained very favorable, although it carried a
substantially greater risk given the recent conditions of real estate markets in a number of
countries and the repercussions that the adjustments made are likely to have on credit markets
and their derivatives. The subprime mortgage crisis and the repercussions these instruments
will have towards year end in terms of asset-backed securities, reflect the risks involved in
financial globalization. Additionally, with the rapid rise in the demand for and cost of
internationally-traded commodities, new sources of essentially inflationary risk are now
practically part of the economy. Even so, the dynamism of emerging economies like China,
India, Brazil, Russia and practically the whole of the Asia-Pacific region has offset the expected
slowdown of the mature economies and especially the economies of Europe and the United
States. Compared to the first half of the year, the economies of Asian giants China and India
registered outstanding growth, 11.3% in the case of the former and 8.8% in the case of the latter.
United States
The US economy which since the second semester of 2006 had been affected by the adjustment
of sales and the construction of homes, is estimated to have grown by around 2% in 2007.
Although during the first quarter, GDP growth looked as though it was picking up, the potential
threats that have loomed over US investors in the last quarters appear to have worsened during
the fourth quarter. The increase in energy prices and the loss of consumer confidence, among
other factors, combined with the loss in the value
of the mortgage portfolio in the subprime,
Since the second semester of 2006 the US economy has been
significantly affected by the adjustments in the real estate market
(sales and construction).
adjustable rate mortgage segment, have led
households that are already under greater
pressure to make their mortgage repayments, to
spend very cautiously. Unemployment in the
fourth quarter of 2007 was up 4.8%, closing at 5%
in December (the highest level in the last 25
months). Key residential real estate market indicators indicate that with the decline in sales, the
recession is not letting up in that segment. Inventories of single-family home resales have been
rising consistently reached 4,453,000 homes in October which is 15 percentage points higher
than the previous year. This situation has contributed to the fall in investment registered for 6
successive quarters in what appears to be a clear sign that supply is adjusting in response to a
most significant fall in demand and sales.
M e r c a n t i l
29
S e r v i c i o s
Faced with signs of a slowdown and the threat of recessionary adjustment, the Federal Open
Market Committee (FOMC) made a rapid decision (on September 18 and for the first time in 4
years) to lower short-term interest 50 basis points, from 5.25% to 4.75%, and again by 25 basis
points in October and December.
Latin America
The Latin American and Caribbean region continued to grow satisfactorily, averaging 5.6% (similar
to 2006). Thanks to this expansion the region enjoyed its fifth year of uninterrupted economic
growth. This favorable real performance was particularly significant in the case of Panama (9.5%),
Argentina (8.6%), Venezuela (8.4%), Peru (8.2%) and Uruguay (7.5%) and was largely responsible
for bringing unemployment down from 8.6% to 8% and pushing up wages and salaries by 1.5% in
real terms, in other words without taking inflation into account.
The gross regional product expanded, largely due to the sustained growth of the world economy,
high prices of its main exports, especially primary commodities, and strong domestic demand
(consumption and investment).
Regional terms of trade improved for the sixth consecutive year. At round 2.6%, this is almost 18%
more than at the beginning of the decade. The external purchasing power of Venezuela, Chile and
Peru thanks to their exports has doubled since 2000. Higher oil basket prices and a slight rise in
the volume of exports meant that despite a considerable increase in imports (18.1%), the current
account surplus was 0.7% of the GDP (1.7% in 2006). The net transfer of incoming funds to the
region from the rest of the world was close to US$ 7,300 billion. Direct foreign investment of US$
77,126 million played a key role in the positive behavior of the capital account, the highest for
this item since 1999. The countries responsible for three fourths of that total capital flow were
Brazil (US$ 32,000 million), Mexico (US$ 16,900 million) and Chile (US$ 8,411 million).
In the past year, the expansion of public spending in the region as a whole, despite the
simultaneous growth of fiscal revenues turned the Central Governments’ global surplus of 0.1%
of GDP in 2006 into a deficit of 0.1%. However, primary surpluses were recorded in most of the
countries (excluding public debt interest).
High energy prices, the boom in agricultural prices and pressure from demand, reversed the
inflation rate’s downward trend since 2004 from 5% in 2006 to 6.1% (expressed as point
inflation from November to November). Only five countries in the region registered two-digit
price variations: Venezuela (20.7%), Nicaragua (12.8%), Bolivia (11.9%), Guyana (10.4%) and
Costa Rica (10.1%).
A n n u a l
30
R e p o r t
2 0 0 7
Venezuela
The Venezuelan economy grew 8.4% in 2007. The most dynamic sectors are still non-tradables:
communications 21.7%, financial institutions and insurance 20.6%, commerce 17.3%,
transportation and storage 13.7% and construction 10.2%, while tradable activities increased
moderately: manufacturing 7.5% and mining 1.4%. Oil fell 5.3%. Unemployment to November
2007 closed at just 6.3% (8.8% during the same period in 2006). However, GDP expanded
slower than aggregate demand which grew 18.7% in terms of consumption (16.1%) and fixed
capital formation (24.5%), resulting in faster rising inflation. Thus, despite the increase in
imports (32% in real terms), point inflation closed at 22.5% (17% in 2006), with a marked
upturn in the fourth quarter.
Summary of Economic Performance
2006
2007
High oil prices (the Venezuelan oil basket averaged US$65.2/bbl
versus US$56.4 /bbl in 2006) enabled the comfortable trade
Percentage variation of Gross
Domestic Product%
Total
Oil Sector
Non Oil Sector
balance surplus to be repeated (US$ 24.993 million, US$ 7.7 billion
less than in 2006), despite the fact that imports grew US$12
10,3
-2,0
11,7
8,4
-5,3
9,7
2.150,0
2.150,0
2.150,0
2.150,0
-
-
deficit of US$ 5,922 million (compared with a US$ 5,138 million
Inflation
Cumulative Variation
Annualized Variation
17,0
24,4
22,5
47,5
Fiscal management behaved differently during 2007, reflecting a
Interest Rates.
Average Lending rates (6 main Banks)
90 day Time Deposits (6 main Banks)
15,2
10,0
21,7
11,2
Exchange Rate. Bs./US$
Year End
Average
billion. The Capital and Financial account deficit, due above all to
the accumulation of foreign assets in public and private sector
savings funds (PDVSA bond and Bonos del Sur II and III) and debt
payments resulting from the nationalization of the electric,
telephone and oil companies, led to a global balance of payments
Exchange Rate Variation %
Year End
Average
surplus in 2006).
clear slowdown in spending (an estimated real reduction of 2%),
closing with a financial deficit of just 1%. This gap was easily
financed through domestic debt issuances and amounts drawn on
previously accumulated national treasury surpluses.
Source: Central Bank of Venezuela and own calculations
This fiscal moderation attenuated the monetary injection generated by fiscal spending which,
together with PDVSA’s and Central Government’s debt issues and the rise in the volume of
foreign currency authorized by Cadivi slowed down money supply: 31.5% versus 69.3% in 2006.
The monetary policy adjusted to the fiscal policy and the public indebtedness strategy by
permitting the net maturity of monetary absorption instruments (Certificates of Deposit sold
under repurchase agreements). The volume of securities sold fell by around 61.4% during the
year. This monetary strategy was complemented by the increase in the reserve ratio and
adjustments in low-interest deposit rates (from 6.5% to 10% in savings deposits and liquid assets
and from 10% to 11% in time deposits). Lending rates averaged 16.7%, 200 basis points higher
than in 2006 despite the significant increase in November (19.9%) and December (21.7%) in
response to the rise in the cost of deposits and the application of the Tax on Financial
Transactions. Despite those average increases in all interest rates, rapid inflation rendered them
negative in real terms.
M e r c a n t i l
31
S e r v i c i o s
Sin título • 1968 • Ink on paper • 71 x 101 cm
Strategic
Positioning
Mercantil’s business strategy is aligned to its
corporate mission and medium-term strategic
vision.
Based on these strategic guidelines, in 2007 Mercantil continued to improve the quality of its customer service by providing a timely and efficient response to their financial needs and improving
the availability of products and services through an expanded branch network and electronic
channels.
The strategy’s success lies in developing a dif-
Mission
ferentiated value proposal to meet customers’
To fulfill the expectations of individuals and the community where
it operates, by providing excellent financial products and services
in different market segments, adding value for its shareholders through
the efficient use of available resources.
needs and expectations, thereby raising their
level of satisfaction and recall and improving
efficiency and the impact on marketing and
distribution through more cost-efficient and
user-friendly channels.
Therefore the supply of products and services
in the different segments and businesses has
Vision
been expanded and adapted to customers’ re-
To be the independent financial institution of reference
in the areas of banking, asset management and insurance,
in the markets where we serve.
quirements, and the mix of insurance, trust, investment and brokerage products for
traditional clients is constantly being increased through cross selling. New products and
services have triggered new business opportunities and increased inter-relations among client
communities by integrating online banking services, financing and fund remuneration thanks to
a comprehensive channel system.
The development of these differentiated service models In the United States and Latin America
based on customer segmentation has expanded relations with clients in commercial, personal and
corporate banking businesses in those countries and, as of 2007, in the investment services and
private banking business where the strategy has focused on consolidating a high quality differentiated service platform.
Growth of the branch’s network, ATMs and points of sale, along with the incorporation of online
banking and IVR system new services and functionalities, has led to an increase in the volume of
transactions and the development of an integrated strategy consisting of payment systems, debit
and credit cards and channels such as points of sale, that boosts the relationship with the business and personal banking sector through a strategy focused on promotions and business alliances designed to serve payment requirements and consumer financing.
Through these initiatives it has been possible to further strategic positioning, build an integrated customer relationship and satisfy clients’ need for banking, insurance and investment
services.
M e r c a n t i l
33
S e r v i c i o s
Sin título • 1981 • Chine-collé on paper • 46.2 x 41.4 cm
Management
Discussion and Analysis
Balance Sheet
A summarized balance sheet for 2007 is shown below and the main variations by comparison
with 2006 are commented on.
Summary of Consolidated
Balance Sheet
2007 Vs. 2006
2007 Vs. 2005
Increase/
(Decrease)
bolivars
%
Increase/
(Decrease)
bolivars
%
2007
2007
2006
2005
US$(1)
bolivars
bolivars
bolivars
18,208
39,049,552
31,716,967
24,274,508
7,332,585
23.1
14,775,044
60.9
5,349
11,472,207
11,959,221
10,000,645
(487,014)
(4.1)
1,471,562
14.7
Loan Portfolio, Net
9,017
19,338,492
14,572,267
11,294,697
4,766,225
32.7
8,043,795
71.2
14,589
31,287,613
25,246,872
19,479,501
6,040,741
23.9
11,808,112
60.6
1,589
3,407,614
2,589,423
2,168,526
818,191
31.6
1,239,088
57.1
Trust Fund Assets
3,733
8,006,657
7,,897,496
5,852,655
109,161
1.4
2,154,002
36.8
(In millons of Bs. and US$.
except percentages)
Total Assets
Deposits
The audited financial statements and their notes can be found in the inside back cover of this
Report. The accounting standards used are summarized at the end of this chapter.
Total Assets
Total assets are Bs. 39,049,552 million (US$ 18,208 million)1, 23.1% higher than in 2006. The
total consolidated assets of the Mercantil Banco Universal subsidiary, including overseas
Assets by Currency
agencies is Bs. 24,757,560 million (US$ 11.544 million)1, Bs. 5,650,217 million (29.6%) more than
Bs. 39,049,552 million
(US$ 18,208 million)
Year 2007
in 2006. The Mercantil Commercebank Holding subsidiary posted US$ 5,563 million1 (Bs.
11,930,922 million) in total assets, 10.8% more than in 006 in dollar terms.
At December 31, 2007, Mercantil Banco Universal ranked second in the Venezuelan financial
system in terms of total assets with a 10.6% market share. The first institution accounted for
12.8% of the market and the four main banks 43%.
Mercantil Seguros asset accounts at December 31, 2007 grew Bs. 1,067 million (29.4%) year
over year.
The Swiss subsidiary, Mercantil Bank (Schweiz) AG. had CHF 379 million in assets at the close
of 2007, 10.9 % more compared to 2006.
Bolivars
63.1%
US Dollars
36.9%
(1) Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs. 2,144.60/1US$. There is an exchange control in place in Venezuela since February 2003.
M e r c a n t i l
35
S e r v i c i o s
Investments in Securities
by Issuer
At the close of 2007, investments were Bs. 11,472,207 million, down Bs. 487,015 million (4.1%)
compared with 2006 when they registered Bs. 11,959,221 million. This increase includes: a)
(US$ 5,349 million)
Year 2007
3.9% reduction in the domestic operation, and b) 0.2% reduction in foreign trade operations
in dollar terms.
Total investments in securities issued or guaranteed by the Venezuelan government
(excluding the Venezuelan Central Bank - BCV) represent 0.6 times Mercantil’s equity and
5.6% of its assets. According to Ministry of Finance figures, at September 30, 2007 Mercantil
owned 2.5% of the domestic and foreign public debt securities issued by the Venezuelan State,
which correspond mainly to the domestic and foreign public debt balance.
Investments by Maturity and Yield
(in billions of Bs. except percentages)
Venezuelan Central Bank
28.5%
U.S. Government
12.2%
U.S. Government
Sponsored Agencies
22.0%
International Private Sector
14.0%
Venezuelan Government
19.0%
Venezuelan Private Sector
4.3%
Trading
Maturity
(years)
Bs. 1
Available for
Sale
Bs. 1
Bs. Less than 1
From 1 to 5
Over 5
US$ Less than 1
From 1 to 5
Over 5
%3
567
405
308
590
268
3,772
260
260
10.8%
10.7%
13.0%
6.1%
5.4%
5.8%
5,910
Held to
Maturity
Bs. 2
Shares
Bs. 1
%3
287
399
66
11
183
151
9.2%
8.4%
5.9%
5.9%
5.7%
6.2%
1,097
Time Deposits
and Placements
Bs. 1
Restricted
Investments
Bs. 1
%
TOTAL
%3
24
3,431
11.3%
40
1
10.4%
11.0%
10
453
2
109
4.1%
6.2%
5.0%
127
6
2
4.7%
4.8%
5.6%
34
3,995
4,349
805
374
1,451
459
4,034
11,472
176
1
Market Value
Amortized cost
The yield of securities is based on amortized cost at year-end. Yield is calculated by dividing income from securities (including premium
amortization or discounts) by amortized cost or market value
2
3
Investments during the first quarter of 2008 by company, by issuer and by currency are
distributed as follows:
Breakdown of Investments by Issuer and Currency at December 31, 2007
(In billions of Bolivars and millions of US$, except percentages)
Venezuelan
U.S.
U.S. Agencies
Central
Government
Bank
Bolivars
Mercantil Banco Universal
Mercantil Seguros and others
Total Bs.
US Dollares
Mercantil Commercebank
Mercantil Seguros and others
Total US$
Breakdown %
Venezuelan
Int’l
Government2 Venezuelan
Private
Private
Total
Bs.
3,275
0
3,275
0
0
0
0
0
0
63
0
63
1,295
434
1,729
365
119
484
0
0
0
0
8
569
76
653
5
1,162
7
1,174
25
559
137
721
104
0
106
210
0
0
3
3
4,998
553
5,551
Total
en US$ 1
142
2,291
329
2,761
28.5
12.2%
22.0%
14.0%
19.0%
4.3%
100%
(1) Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs.
2,144.60/1US$. There is an exchange control in place in Venezuela since February 2003.
(2) Bs. 181 billion include US$ indexation clause.
A n n u a l
36
R e p o r t
2 0 0 7
Loan Portfolio
Loan Portfolio by
Business Segment
At year end the loan portfolio totaled Bs. 19,338,492 million, which represents a 32.7% increase
(US$ 9,017 million)
Year 2007
a) 25.8% growth in the domestic operation, and b) 6.9% increase in the overseas operation in
compared with a consolidated level of Bs. 14.572.267 million in 2006. This increase includes:
dollar terms.
Loan portfolio quality remains very favorable. The ratio of past-due and non-performing loans
to total loans is 0.6%. In the case of Mercantil Banco Universal it is 0.5%, compared with 1.2%
for the Venezuelan financial system as a whole and 0.8% at Mercantil Commercebank.
At December 31, 2007, 99.3% of Mercantil’s loan portfolio is outstanding.
Mercantil Banco Universal is Venezuela’s leading bank in terms of agricultural and mortgage
loans, with market shares of 15.9% and 16.9% respectively. Loans to the tourism sector account
for 18.3% of the market.
Mercantil Banco Universal’s total loans increased 44.4% over December 2006 to Bs. 12,432,519
million. This growth is made up as follows: 11.5% commercial, 5.8% agricultural, 4.8% industrial,
Large Corporations
33%
SME’s
42%
4.7% credit cards, 5.1% vehicle loans, 4.2% construction sector and 8.3% others.
Individuals
25%
The legal requirements in force stipulate that banks must earmark a proportion of their loan
portfolio to the agricultural, mortgage and tourism sectors. The overall percentage is 37% of
total loans at the close of 2006.
Dec-07
Sector
Agrículture
Mortgage
Percentage of Compliance
Calculated on the gross loan portfolio
at December, 2005 and 2006. Maximum per customer 5% of the current
portfolio. Requires minimum number of
new customers.
at December 31, 2006, distributed as follows: 5% in longterm loans and 5% in
short-term loans: Each term is also distributed according to family wage. Annual Compliance.
%
reached
24,4%
12,8%
1
%
required
21,0%
10,0%
3% Calculated on the gross loan portfo-
Microcredits lio at December 31, 2006. Quarterly
5,0%
3,0%
3,1%
3,0%
Compliance.
Tourism
1
at December 31, 2006. Quarterly Compliance.
Interest rates applicable
at December 2007
Set weekly by the Central Bank
(BCV), based on the weighted average lending rate of leading banks.
At Dec 31, 2007 rate is 17,28%.
Set semi-annualy by the Housing
and habitat Ministry, based on the
weigted average lending rate of
leading banks. Currently set at
10,11%.
Within minimum and maximum
rates established by the Central
Bank. the rate could not be higher
than 28%.
Set monthly by the Central Bank,
based on the weighted average lending rate of leading banks. Between
15,93% and 17,92% at Dec 31, 2007,
depending on the geographical region of the project.
The long-term mortgage sector for individuals with family wage under 150 Tax Units maintains 1.4% instead of the 2.5% previously set
Mercantil Commercebank‘s loan portfolio grew 16.2% in 2007 to US$ 3,014 million and
consists mainly of commercial and corporate loans. Mercantil Commercebank total loans are
made up as follows: commercial loans 6%, mortgages loans 53%, corporate loans 26%,
commercial acceptances and advances 15%.
M e r c a n t i l
37
S e r v i c i o s
Loan Portfolio
Classified by Status
Millions of Bolivars
Current
Restructured
Past Due
In Litigation
Total Gross Loans
2007 %
2006 %
2005 %
bolivars
bolivars
bolivars
19,545,543
24,644
116,978
7,779
19,694,944
99.3
0.1
0.6
0.0
100.0
14,726,303
28,414
103,767
7,283
14,865,767
99.1
0.2
0.7
0.0
100.0
11,457,264
30,583
31,723
4,531
11,524,100
99.4
0.3
0.3
0.0
100.0
Deposits
Consolidated Deposits at year end registered a year-over-year increase of 23.9% from
Bs. 25,246,872 million to Bs. 31,287,613 million. This increase includes: a) 18.2% growth of the
domestic operation, and b) 5.7% increase in the overseas operation in dollar terms.
Mercantil Banco Universal in Venezuela is the leading institution in the national banking
system with a 16.6% market share in terms of savings deposits and second in terms of deposits
Deposits by
Business Segment
including investments sold under repurchase agreement with 11.4% of the market.
(US$ 14,589 million)
Year 2007
16.1% growth over the figure at the close of December 31, 2006 in dollar terms.
Mercantil Commercebank’s deposits at the end of 2007 were US$ 4,475 million, representing
At year end, Shareholders’ Equity rose 31.6% to Bs. 3,407,614 million (US$ 1,589 million)1 from
Bs. 2,589,423 million (US$ 1,207 million)1 at the end of 2006. This increase is mainly due to net
earnings of Bs. 783,333, representing a Bs. 150,750 million increase in capital (including a
premium on the stock issuance), Bs. 1,407 million due to amortizations under the employee
stock option plan, Bs.6,359 million in earnings on the sale of Mercantil’s stock and Bs. 5,852
million due to the effect of converting the net assets of foreign subsidiaries. The reductions
correspond to cash dividends of Bs. 71,529,088 million paid out, Bs. 24,116 million set aside to
28%
cover the minimum cash dividend payable in accordance with the provision of the Capital
SME’s
24%
Market Law, Bs. 27,151 million in repurchased shares and Bs. 6,714 million for adjusting
Individuals
48%
available-for-sale investments to their market value.
Large Corporations
Mercantil’s Equity/Assets ratio at December 31, 2007 is 8.7% and its equity/risk-weighted
assets ratio is 16.7%. The minimum requirement is 8%, based on National Securities
Commission (CNV) standards. For Mercantil Banco Universal, at December 31, 2007, the
Equity/Assets ratio is 9.6%2 and the Equity/Risk-weighted Assets ratio is 14.0%, according to
the standards of the Superintendency of Banks of Venezuela. For Mercantil Commercebank,
N.A., these indicators are 7.7% and 12.5% respectively, based on the standards of the Office
of the Comptroller of the Currency (OCC). The equity ratios of Mercantil and its subsidiaries
exceed the minimum regulatory requirements.
(1) Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs. 2,144.60/1US$. There is an exchange control in place in Venezuela since February 2003.
(2)
Obtained by dividing shareholders equity by total assets less investments in Government Debt Securities.
A n n u a l
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R e p o r t
2 0 0 7
Income Statement
The main variations between the figures for December 31, 2007 and December 31, 2006 are
summarized below.
2007 Vs. 2006
Financial Margin
2007 Vs. 2005
Increase/
Increase/
2005
(Decrease)
(Decrease)
% bolivars
%
bolivars bolivars
2007
2007
2006
US$(1)
bolivars
bolivars
Interest Income
1,501
3,221,432
2,281,495
1,671,602
939,937
41.2
1,549,830
Interest Expense
533
1,143,363
842,710
635,476
300,653
35.7
507,887
79.9
Net Interest Income
968
2,078,069
1,438,785
1,036,126
639,284
44.4
1,041,943
100.6
Year Ended
(In millions of Bs. and US$, except for percentages)
"Provision for losses on loan Portfolio"
92.7
59
126,897
108,378
66,215
18,520
17.1
60,683
91.6
909
1,951,172
1,330,407
969,911
620,765
46.7
981,260
101.2
(1)
Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs. 2,144.60/1US$. There is an exchange control in place in Venezuela since
February 2003.
Net Interest Income
As of December 31, 2007 the Net Interest Income registered a year-over-year increase of 44%
from Bs. 1,438,785 million to Bs. 2,078,069 million. This was mainly due to: a) 40.3% increase
in the domestic operation, and b) 4.1% increase in the overseas operation in dollar terms.
The increase in the Net Interest Income compared with 2006 is mainly attributable to the
increase in average volumes of financial assets and liabilities of 25.3% and abroad of 12.9%, in
dollar terms.
Loan Portfolio Provision
During 2007, expenses for Loan Portfolio provisions were recorded at Bs. 126,897 million (US$
59 million), bringing the accumulated provision to Bs. 356,452 billion as of December 31, 2007,
1.8% upon on the gross loan portfolio. This amount represents 285.7% coverage of past-due
and non-performing loans. Write-offs for the year were Bs. 42,811 million in Venezuela and
US$ 9.4 million abroad.
Commissions, Other Income and
Insurance Premius
2007 Vs. 2006
2007 Vs. 2005
Increase/
(Decrease)
bolivars
%
Increase/
(Decrease)
bolivars
%
2007
2007
2006
2005
US$(1)
bolivars
bolivars
bolivars
909
1,951,172
1,330,407
969,911
620,765
46.7
981,261
101.2
399
855,951
857,851
938,285
(1,900)
(0.2)
(82,334)
(8.8)
82
175,664
113,436
101,735
62,228
54.9
73,929
72.7
1,390
2,982,787
2,301,694
2,009,929
681,093
29.6
972,858
48.4
Year Ended
(In millions of Bs. and US$, except percentages)
Insurance Premiums, Net of Claims
Operating Income
(1)
Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs. 2,144.60/1US$. There is an exchange control in place in Venezuela since
February 2003.
M e r c a n t i l
39
S e r v i c i o s
Commissions and Other Income during 2007 fell 0.2% (Bs. 1.9 billion) with respect to 2006.
This was mainly due to:
• Bs. 27,171 million increase in gains from the sale of investments in securities. Note that
figures for 2006 include the effect of the sale of a minority stockholding which produced
an extraordinary gain of Bs. 61,505 million.
• Bs. 28,703 million increase in commissions on client account operations due to higher
volume of transactions.
• Bs. 49,640 million decline in recoveries for loans registered as write-offs in previous periods.
• Bs. 27,038 million reduction in the sale of realizable assets and property and equipment.
Insurance premiums net of commissions, reinsurance and claims during 2007 were Bs. 175,664
million, 54.9% higher than the Bs. 113,436 million recorded in 2006. This result is mainly
attributable to 57% premium growth to Bs. 1,061,618 million in 2007, with a 57% increase in
claims over the same period, which reached Bs. 640,604 million.
Distribution of Total Income
(US$ 1,450 million)
Year 2007
2007
2006
Financial Margin
67%
60%
Commissions and Insurance Premiums, Net
19%
20%
Earnings on sale of Investments in Securities
6%
6%
Other Income
8%
14%
A n n u a l
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R e p o r t
2 0 0 7
Operating Expenses
Net Income
2007 Vs. 2006
2007 Vs. 2005
Increase/
(Decrease)
bolivars
%
Increase/
(Decrease)
bolivars
%
2007
2007
2006
2005
US$(1)
bolivars
bolivars
bolivars
1,390
2,982,787
2,301,694
2,009,929
681,093
29.6
972,858
Personal Expenses
422
904,364
734,526
514,299
169,838
23.1
390,065
75.8
Operating Expenses
520
1,115,171
890,793
690,105
224,378
25.2
425,066
61.6
Taxes (Current and Deferred)
Year Ended
(In millons of Bs. and US$, except percentages)
Earnings from Financial Operation
48.4
(84)
(179,369)
(118,761)
(82,859)
(60,608)
51.0
(96,510)
116.5
Minority Interests
(0)
(550)
(1,880)
(1,090)
1,330
(70.7)
540
(49.5)
Net Income for the Year
365
783,333
555,734
721,578
227,599
41.0
61,755
8.6
(1)
Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs. 2,144.60/1US$. There is an exchange control in place in Venezuela since February 2003.
Operating and personnel expenses rose 24.3% (Bs. 394,216 million) year over year due mainly to:
• Bs. 169,838 million (23.1%) increase in personnel expenses which includes: employee salary
increase, application of the new collective bargaining agreement for the employees of
Mercantil Banco Universal which was signed by its unions and will be in force for three
years from January 1, 2007, and an increase of 585 employees (467 in Venezuela and 118
abroad), from 9,547 to 10,132 to meet the growing volume of domestic and global
operations. In Venezuela, Mercantil Banco Universal increased its payroll by 386 employees,
mainly in its branches, to meet the growing demand for services and business. Assets per
employee rose from Bs. 2.3 billion in 2006 to Bs. 3.0 billion in 2007. In Venezuela, Mercantil
Seguros signed the first Collective Bargaining Agreement with representatives of the
Federal District and Miranda State Workers Union of Seguros Mercantil, C.A., in 2006,
improving working conditions and labor benefits for its employees and extending benefits
to cover employees all over the country. It also added 78 employees from the business and
operations area to the payroll to meet increased activity which was responsible for Net
Collected Premium growth from Bs. 820 million/employee in 2006 to Bs. 1,116 million in
2007. In the case of the overseas business, Assets rose from US$ 6.0 million per employee
in 2006 to US$ 5.9 million per employee in 2007. It should be noted that in the first half of
2006 non-recurring expenses of around Bs. 51 billion are included due to the application of
the new defined contributions plan called the “Plan de Ahorro Previsional Complementario”
which replaced the previous pension scheme, in order to bring the benefit in line with the
country’s new market trends, improve management control over future associated costs
and reduce the risk exposure of defined benefits plans.
• Bs. 55,530 million (32.8%) increase over 2006 due to increased expense for Depreciation,
Property and Equipment, Amortization of Intangibles and Others.
• Bs. 36,040 million increase in contributions to regulatory bodies, 46.6% higher than in 2006,
mainly due to the growth of operations in Venezuela.
M e r c a n t i l
41
S e r v i c i o s
• Bs. 132,808 million (20.6%) increase in Other Operating Expenses compared with 2006,
which includes Bs. 49,698 million increase in taxes and contributions (mainly resulting from
application of the new Tax on Financial Transactions; Bs. 20,237 million increase in
commissions for services due to larger volume of operations; Bs. 19,779 million increase in
advertising expenses and Bs. 18,300 increase in communications, among other expenses.
During 2007 Venezuela registered 22.5% inflation which has had a significant effect on
Mercantil’s operating costs.
Taxes and Contributions
For the year ended December 31, 2007 Mercantil and its subsidiaries reported significant
expenses for various types of taxes and contributions.
For operations carried out in Venezuela, these were: Bs. 131,281 million in estimated Income
Tax, Bs. 63,181 million in Value Added Tax, Bs. 59,581 million in Municipal Taxes, Bs. 28,216
million in Financial Transactions Tax, Bs. 81,401 million in contributions to the Deposit
Guarantee and Banking Protection Fund, Bs. 22,227 million in contributions to the
Superintendency of Banks and Other Financial Institutions, Bs. 2,926 million in contributions
to the Superintendency of Insurance, Bs. 6,330 million to comply with statutory obligations
under the Science, Technology and Innovation Act and Bs. 6,182 million for obligations under
the Narcotics and Psychotropic Substances Act.
For operations carried out outside Venezuela, Bs. 50,504 million in expenses was recorded
for Corporate Income Tax, Bs. 4,230 million for municipal taxes and other contributions and
Bs. 7,023 million for contributions to regulatory agencies.
Total taxes and contributions in Venezuela and abroad amounted to Bs. 463,082 million.
A n n u a l
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Summary of the Accounting Principles
Used to Prepare the Financial Statements
Venezuelan National Securities Commission (CNV)
Mercantil’s financial statements are presented in accordance
with the accounting standards of the CNV. A summary of some
of the main accounting principles applied is given below:
Consolidation
Investments in Trading Securities – Recorded at their fair
The consolidated financial statements include the accounts of
value. Unrealized gains or losses resulting from differences
Mercantil and the subsidiaries and other institutions in which
in fair values due to market fluctuations are included in the
Mercantil has a controlling share. Its main subsidiaries are:
results for the period. Investments in Securities Available for
• Mercantil, C.A. Banco Universal, universal bank in Vene-
Sale – Recorded at their fair value. Unrealized gains or losses
resulting from differences in fair value and exchange rate
fluctuations are included in shareholders’ equity. Investments in Securities Held to Maturity – Recorded at their acquisition cost, adjusted for amortization of premiums or
discounts. For all portfolio investments, permanent losses
resulting from decreases in fair value, are recorded in the results for the period in which they occur
zuela and its overseas agencies and branches.
• Mercantil Commercebank, N.A., bank in the United States
of America and its subsidiaries Mercantil Commercebank
Investment Services, Inc. and Mercantil Commercebank
Trust Company, N.A.
• Mercantil Bank (Schweiz) AG, bank in Switzerland and its
subsidiary Mercantil Bank Cayman Limited, in the Cayman
Islands.
• Mercantil Seguros, C.A., insurance company in Venezuela
Loan Portfolio
Loans are classified as overdue 30 days after their maturity
date. The allowances for losses on loan portfolio is determined
• Mercantil Bank Curaçao, N.V., bank in Curaçao and its subsidiary Banco del Centro, S.A. in Panama.
based on a collectibility assessment to quantify the specific
• Mercantil Merinvest, Casa de Bolsa, C.A., a securities bro-
allowance to set aside for each loan. Evaluations take into ac-
kerage company in Venezuela, Mercantil Servicios de In-
count such aspects as economic conditions, customer’s credit
versión, C.A. and Mercantil Sociedad Administradora de
risk, credit history and guarantees received. When evaluating
Entidades de Inversión Colectiva, C.A.
loans for small amounts of an equal nature, these are grouped
together to determine provisions.
Inflation Adjustment
According to CNV standards, Mercantil’s financial statements
Recognition of income and expenditure
must be presented in historic figures as of December 31, 1999.
Income, costs and expenses are recorded as earned or incurred
Therefore, as of that date, Mercantil ceased to adjust for infla-
respectively. Interest earned on loan portfolios is recorded as
tion in its primary financial statements. As a result, fixed as-
income when collected. Fluctuation in the market value of de-
sets, among others, are shown at their inflation-adjusted value
rivatives is included in the income statement for the period. In-
up to December 31, 1999. The market value determined by in-
surance premiums collected are recorded as income when
dependent assessments is greater than the cost adjusted for
earned.
inflation. New additions are recorded at their acquisition value.
M e r c a n t i l
43
S e r v i c i o s
TAM-1856 • 1966 • Lithograph on paper • 28 x 27,9 cm
Business Management Report
Global Commercial and
Personal Banking
During 2007, Global Commercial and
Personal Banking strengthened its strategy
to satisfy the needs of customers in the
domestic market through Mercantil Banco
Universal and in the international market through Mercantil Commercebank in the USA and
Mercantil Bank (Schweiz) AG in Switzerland, expediting operations and achieving greater
competitiveness, thus growing its customer base to over 3,000,000.
This Global Unit increased its contribution to the company’s figures, reaching 71.6% of total
deposits and 75% of total loans. This represents Bs. 22,371 billion (US$ 10,431 million) in
deposits and Bs. 14,580 billion (US$ 6,798 million) in loans to Personal and Commercial
Banking clients, respectively.
Commercial and Personal Banking
Deposits
Commercial and Personal Banking
Loans
Individuals
70%
Individuals
47%
Companies
30%
Companies
53%
In Venezuela, during 2007 the customer base increased by 16.7% to more than 2,900,000,
served by a segmented sales base of 1,600 executives. Through the strategy implemented,
Management achieved Bs. 10,743 billion in net loans, 78.9% of Mercantil Banco Universal’s
loan portfolio, representing 71.5% growth compared to 2006. Over the same period, deposits
grew 23.5% to Bs. 14,487 billion.
The loan portfolio of Commercial and Personal Banking in the United States grew 11.8%
compared with the end of 2006, reaching $ 1,785 million. Deposits also increased by around
7.9%, closing at US$ 3,667 million. To facilitate relations between the business executives and
their current and potential clients, management reorganized 5 of their regions in southern
Florida (South, East, West, Central and Broward).
M e r c a n t i l
45
S e r v i c i o s
As part of its strategy to maintain an active economic presence in southern Florida, the company
continued to support the different communities with which it is involved, by participating in
trade associations such as the Coral Gables Chamber of Commerce, the Miami Dade Chamber,
the Hialeah Chamber of Industry and Commerce, among others. Additionally, some of the
executives are on the boards of these organizations.
Commercial and Personal Banking in Venezuela also continued to implement its strategy of
forming alliances with the communities of clinics, universities, embassies, consulates and firms
by holding special events to serve the needs of the people in those communities.
Personal Banking
During 2007, Personal Banking increased its global customer base by over 17%. This unit has
endeavored to conserve and strengthen its customer relationship by establishing a differentiated
services model through the Affluent and Mass Market segments in Venezuela, and Personal
Banking segment in the United States, which enhances customer service and product
development.
Personal Banking deposits grew by more than 19% with respect to 2006, reaching Bs. 15,096
billion (US$ 7,039 million) at year end. This growth was possible thanks to Venezuelan
management’s effort achieving a 24% increase over 2006, closing the year with 69% of Personal
Banking deposits in Mercantil Banco Universal and 31% in Mercantil Commercebank.
The most significant contribution towards Personal Banking deposits was the Bs. 1,225 billion
(US$ 571 million) growth registered in savings accounts in Venezuela, while in the United States
it was in interest-earning current accounts with US$ 230 million, largely by international clients,
particularly in the Optima Account product which is a checking account with low-cost
maintenance that earns high interest on a rising scale.
The Personal Banking loan portfolio increased 47% compared with 2006, closing at Bs. 5,837
billion (US$ 2,743 million). It is made up as follows: Personal Banking in Venezuela 90% and
Personal Banking in the United States 10%.
Personal Banking in Venezuela managed to increase its loan portfolio by over Bs. 1,563 billion, of
which 80.6% was in consumer products. The main products grew in the following proportions;
mortgage loans (30%), automobile loans (53%) and credit cards (69%).
Part of the achievements of Personal Banking in Venezuela was due to participation in the
insurance banking business in which the network’s executives sold more than 110,000 Vital
Mercantil policies, representing 140% growth in relation to the close of 2006. Additionally, more
than 7,000 loans were arranged under the Mutual Housing Fund (Fondo Mutual Habitacional)
which represented Bs. 321 billion.
A n n u a l
46
R e p o r t
2 0 0 7
One of the main growth strategies implemented in Venezuela consisted of 424 massive sales
events being held within companies to cover and satisfy customer needs, offering savings,
investment and consumer financing alternatives, thereby promoting their sense of affiliation
with Mercantil. .
Personal Banking
Loans
Personal Banking
Deposits
Mercantil Banco Universal 52%
Mercantil Commercebank 33%
Other Affiliates
14%
Commercial Banking
Commercial Banking strengthened Mercantil’s leadership through timely responses to its clients’
financial needs, through a customized services model, offering short and long term financing
opportunities through the Middle Market and the Small and Mid-Size Companies Segment in
Venezuela and Commercial Banking and Middle Market in the United States.
Commercial Banking deposits closed the year at Bs. 6,564 billion (US$ 3,060 million), 75% of
which were in Mercantil Banco Universal and 25% in Mercantil Commercebank, with 18% growth
in Venezuela and 7.6% in the United States, and a global growth of 16% higher than in 2006.
Growth was mainly determined by the increase in checking account deposits in Venezuela:
24.6% for 2007. In the United States the largest increase was in time deposits: 14%, of which
80% came from international clients as a result of the strategy to expand towards other
countries in Latin America and the creation of a new point of service for trade finance clients
at the New York office.
Corporate Banking’s loan portfolio grew 39% closing at Bs. 6,644 billion (US$ 3,097 million) at the
end of 2007. Venezuela accounted for 53% of that growth and the United States for 8%. The
quality of the portfolio is outstanding, particularly the low non-performing loan ratio, as is the
diversity of economic sectors served: commerce, agriculture, construction, manufacturing and
services, among others.
M e r c a n t i l
47
S e r v i c i o s
Portfolio growth in Venezuela was led by the Pronto Crédito Empresarial Mercantil product which
reached approved credit limits of Bs. 1,441 billion, enabling clients’ short and medium term
financial needs to be met and making cash surpluses profitable.
At the close of 2007, Commercial Real Estate in the United States reached US$ 1,003 million,
16.9% more than in 2006. The real estate portfolio was concentrated mainly in Miami Dade
County with US$ 555 million, followed by other areas in southern Florida with US$ 252 million,
Houston US$ 106 million and New York with US$ 90 million.Commercial Banking in Venezuela
continued with its strategy to expand the number of Business Online Banking users by activating
3,013 new groups and migrating 9,345 clients to a new platform offering additional innovative
services.
In 2007 the service through which foreign exchange is handled through Cadivi continues to be
an important source of business in Venezuela. Some US$ 1,178 million in imports and US$ 50
million in exports are handled for our clients.
In Venezuela the agreement with Conindustria (the Venezuelan Confederation of Industrialists)
was extended. Its purpose is to support Venezuelan companies through an advisory program
that strengthens competitiveness. So far 197 companies have participated in the program and
Mercantil Banco Universal has provided Bs. 960 million, for a total of Bs. 132 billion in loans.
Commercial Banking
Loans
Commercial Banking
Deposits
Other Affiliates
3%
A n n u a l
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R e p o r t
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Global Corporate and
Investment Banking
During 2007 Global Corporate and Investment Banking focused its strategy on the continuous
improvement of quality of service for its clients around the world through the Corporate, Oil and
Gas, and Financial Institutions segments at Mercantil Banco, Mercantil Commercebank and other
Mercantil’s subsidiaries. Through the development of innovative solutions and benchmark
products, global businesses were promoted with emphasis on the Venezuelan, US and Latin
American markets.
Global Corporate and Investment Banking has
evolved towards a mixed organizational model for
In 2007, the Global Corporate and Investment Banking Unit
closed the year with Bs. 8,360 billion (US$ 3,888 million) in
total deposits.
international markets, maintaining a sectoral
model in order to help close gaps in terms of
priority markets, commercial practices and the
delivery of key products. This has led to the
creation of the US Corporate Domestic Banking
Unit and the International Corporate Banking Units.
To maximize the organizational changes made, these have been complemented with actions
aimed at improving client management, account plans and performance management,
standardized everywhere
In Venezuela, the USA and the different countries in which Mercantil operates, the Global
Corporate and Investment Banking contributed towards the 2007 closing balance. Total loans
reached Bs. 6,295 billion (US$ 2,928 million), accounting for 32% of Mercantil’s gross loan
portfolio. In terms of total deposits, Corporate and Investment Banking culminated the year with
a total volume of Bs. 8,360 billion (US$ 3,888 million), representing 27% of Mercantil’s total
deposits.
Banking / Loan Portfolio
Mercantil
Global Corporate and Investment Banking
Deposits (including investments sold under repurchased agreement)
Mercantil
Bs.6,295 billion
(US$ 2,928 million)
Bs. 8,360 billion
(US$ 3,888 million)
Corporate
Financial Institutions
Oil and Gas
62%
Corporate
55%
25%
17%
13%
Public Sector
15%
Oil and Gas
13%
M e r c a n t i l
49
S e r v i c i o s
The Global Corporate and Investment Banking Unit maintained commercial relations at the close
of 2007 with over 1,080 economic groups at Mercantil Banco Universal and more than 390
economic groups in the USA and Latin America served from Mercantil Commercebank, N.A.
Banking / Distribution according to
Economic Groups
Banking /Distribution according to
Economic Groups
Dec. 2007 (1,086 groups)
Dec. 2007 (393 groups)
54%
Corporate
14%
Public Sector
12%
Oil and Gas
Oil and Gas
20%
Corporate
52%
5%
43%
In 2007, implementation of the segmented value proposal was intensified on a global basis and
the segmented value proposal for Corporate and Investment Banking clients was implemented,
strengthening the product areas to cover its emerging needs through the Corporate Product and
Corporate Finance and Capital Market Units.
The corporate credit risk policies and processes continued to be implemented through a proactive
attitude by specialists broken down by industry and region. The staff’s level of training in the
area of credit was reinforced by the Credit Course created at Mercantil Commercebank, N.A., as
well as the traditional Credit Training Course which has been held in Venezuela since 1968.
Global Corporate and Investment Banking continued to promote various management
methodologies to follow up the results of the business and products segments and align projects
and initiatives to the strategic goals set. It also continued to develop a corporate information
system to support strategic and business decision making.
Corporate Banking
Mercantil Servicios Financieros’ Total Deposits in 2007 in the different countries in which
Corporate Banking provides services grew 31%, closing at Bs. 4,620 billion (US$ 2,149 million),
93% of which correspond to Venezuela Corporate Banking, 6% to International and 1% to U.S.,
according to the new organizational structure.
The highest level of growth was attained in Venezuela with 44% based mainly on an adequate mix
of products attracting the attention of the clients’ needs in terms of liquidity and yield in a
fluctuating market.
A n n u a l
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R e p o r t
2 0 0 7
The loan portfolio of the Corporate Banking Unit in 2007 grew 13% with respect to 2006, closing
the year with Bs. 3,900 billion (US$ 1,814 million), with a better balance distributed among the
different segments (57% in Venezuelan Corporate Banking, 21% in International Corporate
Banking and 22% in U.S. Corporate Banking).
Corporate Banking Venezuela grew 30% in line with the growth strategy of the Venezuelan
corporate market and with the weighted policy in terms of the use of cross-border risk, which met
the needs of customers everywhere.
In 2007 Corporate Banking Venezuela promoted the activity of Mercantil Merinvest, developing
asset and liability products at a lower cost and with less regulatory impact. The mutual asset and
liability products were established through Mercantil Banco Universal, closing 2007 with a
volume of Bs. 97 billion and Bs. 182 billion respectively, and through Mercantil Merinvest reaching
volumes of Bs. 183 billion in mutual assets Bs. 200 billion in mutual liabilities at the year end.
Oil and Gas
Mercantil’s oil sector loan portfolio grew 4% in 2007 to Bs. 827 billion (US$ 385 million). Despite
the reduction in Venezuela’s oil GDP, this growth was the result of the increased penetration of
current customers, the exchange control system in force, the liquidity requirements of companies
in the process of migrating and new international clients captured.
The oil sector’s deposits with Mercantil grew 50% compared with 2006, closing the year at Bs.
1,081 billion (US$ 503 million), mainly due to PDVSA’s new method of paying operating companies
for production contracts applied since mid-2005, in addition to the high price of oil deliveries
and the capture of a high proportion of the new mixed public/private companies in the pipeline.
The international operation was stimulated by the visits to Peru, Mexico and Brazil, and
participation in the Oil & Money Conference in London.
The portfolio of dollar-denominated loans to oil sector clients gave Venezuela a cross-border
exposure equivalent to US$ 50.2 million. Contingencies for letters of credit and guarantees
totaled US$ 5.4 million at year end.
Financial Institutions and Institutional Relations
Results for the Financial Institutions segment in Venezuela were valuable due to the ongoing
effort at cross-selling products and services to insurance companies, securities brokerages, banks
and diplomatic representations, alongside growth of the Venezuela financial system per se. As
of December 2007 the loan portfolio reached Bs. 270 billion and deposits Bs. 860 billion, with 48%
and 38% year-over-year growth respectively. The quality of the portfolio remained excellent.
Latin America’s volume of investments over the same period, rose very significantly (37%) to US$
545 million.
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S e r v i c i o s
Management was able to maintain a good level of credit facilities for Mercantil Banco Universal
in Venezuela which allowed it to handle all the international trade operations of its clients in
Venezuela, and other operations in foreign currency as well as facilities for Mercantil
Commercebank and Mercantil’s other international units.
Talks, seminars and conference were also held for Mercantil’s customers and officers to help
pinpoint opportunities and threats for their business and activities.
Public Sector
The Public Sector Unit maintained its traditional service quality for public sector clients. At the
close of 2007, Mercantil Banco Universal’s Public Sector Deposits amounted to Bs. 1,235 billion,
of which 5.8% were account for by the institution’s total deposits and a 4.1% market share of
government deposits in the Venezuelan financial system.
With that level of penetration, Mercantil Banco Universal now serves more than 150 centralized
government entities and over 400 decentralized government entities and State bodies. It offers
them a wide range of products that include: payment to employees and suppliers; domestic tax
collection amounting to Bs. 7.855 billion; investment trust funds, managed funds and pension
funds amounting to Bs. 5,397 billion.
Corporate Finance and Capital Market
In 2007, through the Mercantil Merinvest subsidiary maintained its position of leadership in the
Corporate Finance and Capital Market sector in terms of bolivar-denominated fixed-income
investments in the primary market. It placed Bs. 686 billion of long-term and Bs. 160 billion of
short-term fixed income securities issued by Venezuelan corporations. Mercantil Merinvest
structured 96% (Bs. 809 billion) of all the securities placed.
The Andean Development Contribution (CAF) accounted for Bs. 123 billion of that total and was
the first multilateral organization to place an issue in the country.
In the equity market area, Mercantil Servicios Financieros, C.A. structured and placed a public
stock offering of Bs. 150 billion, increasing its stockholding base by more than 5,000 new
shareholders.
It provided financial advice to a State institution on asset valuation for the sale and auction of
interests in Venezuelan companies.
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Mercantil, on the other hand, was given financial advice on a stock issue under the Stock
Repurchase Plan, the change in the nominal value of shares within the framework of the
Monetary Conversion process, the Price Stabilization Plan and others matters.
Corporate Products
The Corporate Products Unit focused its efforts in 2007 on strengthening the concept of quality
of service in general, consolidating the customer service model and formulating proposals to
intensify the corporate strategies for customizing service, sales and new business development
and promote the use of service-oriented competitive tools to meet new challenges.
All the technological platforms related to corporate services required in the monetary conversion
process were reviewed and updated in 2007 and Management kept clients and employees
abreast of the move to the new monetary system. It also furthered the strategy to link products
and services to portfolios in order to add value to the relationship and satisfy customers’ needs,
particularly with the new Online Banking service.
Mercantil maintained its leadership in the area of trade finance, especially operations through
ALADI. In August, the last month for which statistics are available, Mercantil Banco Universal
handled a market share of around 22% as well as 17% of customer transactions channeled through
Cadivi.
The Corporate Products Unit continued to take part in events and to sponsor companies in the
segment, in particular in designing and organizing the “IDEA” competition for entrepreneurs
whose objective is to boost Mercantil’s image in the corporate company segment in Venezuela.
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S e r v i c i o s
Global Private Banking and
Asset Management
The Global Private Banking and Asset Management unit serves high net worth clients and the
investment services business in the different countries where Mercantil operates.
The management structure of this unit in Venezuela comprises private banking, trust funds, and
Mercantil’s investment and brokerage services.
In the United States it consists of private banking at Mercantil Commercebank, investment
services at Mercantil Commercebank Investment Services (MCIS), trust fund services at Mercantil
Commercebank Trust Company (MCTC) and in Switzerland, private banking at Mercantil Bank
(Schweiz).
The asset management business is reflected off the balance sheet and includes: trust fund
services, securities brokerage services, mutual fund management and portfolio management
services. The volume of net managed assets as of December 31, 2007 was Bs. 10,999 billion, as can
be seen below:
Asset Management
(in billion Bs.)
Year 2007
TOTAL
Trust
Housing Mutual Funds
Mutual Funds
Brokerage
Financial Advisory
Managed
Total Managed Assets
7,343
1,316
201
1,790
338
12
10,999
The unit’s main achievements in 2007 were the migration of customers in the Private Banking
segment in all the countries where the company operates, the maintenance as the mutual fund
industry leader in Venezuela with a 44% market share and grown in securities brokerage and
investment advisory service in the USA by 35%.
This year the process of migrating clients to the new differentiated private banking service was
implemented and the customer base expanded as a result. The segment also increased its
deposits and investments. Compared with the previous period, the volume/customer ratio was
outstanding and the goal was met.
Mercantil remains the mutual fund industry leader in Venezuela. During 2007 the customer base
of the Portafolio Mercantil Renta Fija (fixed-income investment portfolio) grew 22%, while its
equity declined 44% to Bs. 200.6 billion. The Plan Crecer product, based on the programmed
acquisition of investment units expanded its assets by 43% and the number of clients by 39%.
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In the area of portfolio management, in 2007 managed assets declined 13%, closing at
approximately Bs. 3,684 billion.
In the United States the asset base of the securities brokerage and investment advisory activity
grew 35% during 2007. The individual customer base grew by 20% and the corporate client base
by 69%, reinforcing a value proposal based on high-quality investment services. The incorporation
of new suppliers, products and trained human resources has paved the way for a sustained
expansion towards new markets and segments.
The activities undertaken by the Brokerage Services and Capital Market Unit in Venezuela have
stimulated the Investment Brokerage Account to secure entry to the capital market, bringing in
15,000 new clients. For instance, Unsecured Bonds and Mercantil Stock order were placed
through Mercantil Online Banking.
The business strategy implemented to expand the
During 2007, The Mercantil Banco Universal Trust Fund
range of investment products includes the new
continued to be one of the country’s leading trust funds.
InverTítulos
and
InverPréstamo
products
leveraged through a mutual fund.
Mercantil Banco Universal’s Trust funds continued to be one of the country’s main fiduciary
businesses, thanks to excellent quality and customer service. Its product offering was adapted to
the market’s needs, and different options made available to small and medium size business, as
well as the middle market segment and large corporations.
In the area of US fiduciary activities, Mercantil continued to implement its new business
development strategy by expanding its relations in keeping with its mission to provide trust
services to high net-worth individuals and families. Managed assets were up 86% at the end of
the semester. During the year the client base continued to expand, in close cooperation with
Mercantil Commercebank’s Private Banking Unit.
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S e r v i c i o s
Insurance
Mercantil Seguros, whose goal is to be the country’s best insurance company, offers excellent
products and services to meet the needs of clients in the different market segments in which it
operates, on a timely basis.
Net premium in 2007 grew 44.9% to Bs. 1,413.8 billion, which reflects a major sales effort by the
company. At year end Mercantil Seguros was the third largest insurance company in Venezuela
in terms of net earned premiums, with a 9.2% market share, according to Superintendency of
Insurance report for 2007.
Mercantil Seguros strengthened the infrastructure and resources of its business model through
its nationwide commercial network. Its specialized units assist Intermediaries, recruit the sales
force, liaise with brokerage companies and support producers, and a team of regional managers,
branch managers and business executives that provide support to insurance advisers and clients,
based on a structure of 32 branches organized under 7 regional offices: Occidental, Andina,
Centro Occidental, Centro, Centro Llanos, Gran Caracas and Sur Oriental. Premium income
obtained in the provinces grew 63.6% and accounts for 40% of the company’s net corporate
business portfolio. Since 2005 the proportion has been increasing substantially, starting at 4%.
At the close of 2007, Mercantil Seguros had a
Premiums income in 2007 increased by 44.9% to Bs. 1,413.8
billion, reflecting the company’s important sales effort.
portfolio of around 600,000 policyholders and
more than 2,500 production advisors made up of
brokerage companies, brokers and exclusive
agents.
The high level of technical and financial management was instrumental in the company’s ability
to increase its earnings to Bs. 69 billion compared to the previous year. The financial statements
show how well it has fulfilled its goal to maintain and consolidate a strong equity level to protect
policyholders and meet its commitments on a timely basis.
Diligent satisfaction of obligations towards policyholders, producers and other stakeholders is
a priority and ever effort is made to manage the company with strict adherence to the statutory
and regulatory provisions in force. Mercantil Seguros monitors and oversees its business,
reviews national economic circumstances and endeavors to predict events liable to affect
insurance activity.
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Global Finance
During 2007 the main activity of Mercantil’s Treasury Unit was market risk management,
particularly interest rate risk and liquidity risk. This helped to optimize the institution’s financial
margin.
As of the second half of the year, liquidity surpluses in Venezuela’s financial system fell
substantially as a result of the Central Bank’s (BCV) monetary policies and auctions of bolivardollar government bonds. In the second half of the year, lending and deposit rates started to rise.
In the Venezuelan money market Mercantil Banco Universal, a subsidiary of Mercantil,
maintained its active participation through interbank operations and absorption instruments
offered by the BCV.
Interest Rates of the Venezuelan Market
25,00
Interest Rate
20,00
15,00
10,00
5,00
TAM
YTM DPN 1Y
YTM DPN 4Y
YTM LT
05/12/2007
05/11/2007
05/10/2007
05/09/2007
05/08/2007
05/07/2007
05/06/2007
05/05/2007
05/04/2007
05/03/2007
05/02/2007
05/01/2007
0,00
Subastas
*TAM:
Average lending rate for the 6 largest
banks
YTM DPN 1Y: Yield to maturity of 1 year Government
Debt
YTM DPN 4Y: Yield to maturity of 4 years Government
Debt
Also in the second half of the year the Finance Ministry began auctioning Government Debt
Bonds, initially TIF (fixed-income) and TICC bonds, and as of October, it started auctioning 2010
and 2011 Venezuelan government bonds (Vebonos). In September the first auction of the year, of
90-day Treasury Bills, was held, and a total of Bs. 792.5 million was placed during the semester.
Mercantil, through its subsidiaries Mercantil Banco Universal and Mercantil Merinvest Casa de
Bolsa, participated actively in the weekly auctions and as a market maker in the secondary market
for debt securities. The effective yields of these securities rose significantly, following the market
trend, as did 90 day Treasury Bills whose annual weighted yield was 7.96%, reaching 11.14% per
annum at year end. The 2011 Vebonos auctioned at the end of October, with an average annual
weighted yield of 7.06% per annum, rose to 16.76% per annum in December 2007 auction
assignments.
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S e r v i c i o s
Through its subsidiary Banco del Centro in Panama, Mercantil participated actively in the
international market for securities, mainly Venezuelan government bonds and securities issued
by Petróleos de Venezuela (PDVSA). During the year the Ministry held five auctions of bonds
payable in bolivars and Mercantil participated in these processes mainly as an intermediary for
its clients through the Venezuelan subsidiaries mentioned above.
In the US money market, as of the second half of 2007, the Federal Reserve (FED) implemented
a series of interest rate reductions in response to problems in the mortgage markets that caused
several of the most important financial institutions in the world to lose money. This went hand
in hand with a significant drop in money supply in the market and wider credit spreads.
The Fed Fund marker rate which stayed at 5.25% during the first half of the year closed at 4.25%,
and is expected to follow that downward trend during the first half of 2008. As a result, decisions
affecting financial vehicles with dollar exposure, focus mainly on preserving capital and
positioning balances in accordance with those forecasts.
Uncertainty over the performance of the US economy and its effect on the FED’s decisions
continued, causing changes in the market’s interest rates. During the first half of 2007 US
treasury yield curve rates fell by almost 35 basis points compared with 2006. In the second
semester, the decline in the credit quality of assets connected with the mortgage sector and
possible cuts in the FED rate drove yield curve rates for bonds down almost 125 basis points
compared with the first half of the year, leaving the final net effect almost 90 basis lower than at
the close of 2006.
Federal Reserve Interest Rates and US Treasury Bonds
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
Nov-07
Dec-07
Sep-07
Oct-07
Jul-07
Ago-07
May-07
Jun-07
Mar-07
Apr-07
Jan-07
Feb-07
Nov-06
Dec-06
Sep-06
Oct-06
Jul-06
Ago-06
May-06
Jun-06
Mar-06
Apr-06
Jan-06
Feb-06
Nov-05
Dec-05
Sep-05
Oct-05
Jul-05
Ago-05
Jun-05
May-05
Mar-05
Apr-05
Jan-05
Feb-05
0.0%
Treasury 2 years
Treasury 10 years
Fed Funds
*Treasury 2 years and 10 years: US Treasury bonds, 2 and 10 years maturity
Fed Funds: Federal reserve Interest Rates
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The Treasury Unit is responsible for handling interest rate risk exposures through the composition
and structure of the investment portfolio and the use of interest-rate derived instruments. In
2007 the duration of the lending rate was extended beyond the duration of the deposit rate in
line with the strategy to bring interest rates down.
Mercantil Commercebank’s investment portfolio accounted for 41% of the bank’s assets, on
average, during 2007. Short-term investments continue to average US$ 600 million, representing
around 11% of the bank’s total assets. The composition of the investment portfolio changed, with
emphasis on US government-backed mortgage instruments which increased the portfolio’s credit
quality
Effort continued to be addressed at developing and strengthening securities trading activity, and
contributed significantly to the institution’s results. This activity is closely monitored by the
Market Risk Unit to ensure that exposure to potential losses is within the limits approved.
Portfolio of Available for Sale and Held to maturity Investments
Commercebank, NA
1,200,000
Thousand of US$
1,000,000
800,000
600,000
400,000
200,000
Held to Maturity
Private Mortgages
Other Investments
Short Term
Investments
Government
Sponsored
Enterprises
Guaranteed
US Agencies
0
December 2007
December 2006
M e r c a n t i l
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S e r v i c i o s
Tejedura (88/18) • 1988 • Paper strips • 12.8 x 11 cm
Service Quality and
Operating Efficiency
Global Operations and
Technology
During 2007, the Global Operations and
Technology Unit of Mercantil Servicios
Financieros continued to develop its strategy
to deliver products and services in Venezuela
and abroad by implementing initiatives to improve quality of service, reduce operating risks and
expedite operations. Further attention was paid to dimensioning distribution channels and
improving products and services using lean-banking process factory design. At the same time
new lines of service were incorporated in the area of quality management under ISO 9001:2000,
and system functionalities and models were also developed to orientate Mercantil’s technology,
applications, and information and process architectures.
Mercantil Distribution Channels
Mercantil Servicios Financieros’ distribution channels expanded during the period in line with
growth in the level of transactions and the improvement in customer service through the 351
offices (Mercantil Banco Universal, Mercantil Commercebank and Mercantil Seguros), 1,436
ATMs, 35,989 physical merchant and e-commerce points of sale, 464 Call Center operators, 528
IVR ports and Personal Online Banking and Business Online Banking services.
During the year Mercantil Banco Universal opened 11 new offices: Caracas (Capital Region),
Barquisimeto, Cabudare (Lara), Valencia (Carabobo), Ejido (Merida), Puerto La Cruz (Anzoategui)
and Petrolera Regional del Lago Perla (Zulia).
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S e r v i c i o s
Major Projects
Mercantil Banco Universal has incorporated system functionality to support the delivery of
products and services, particularly:
• Implementation of the Teller Productivity System at offices, with an 8% increase in teller
productivity at year end, and a 23% increase in the demand for customer transactions,
compared with 2006.
• Introduction of the E-Security Card for Mercantil Personal Online Banking users to provide
added security for payments and transfers.
• Inclusion of new automated services using the IVR system; application and extension of
the Llave Mercantil telephone password; requests for an ATM password for use with credit
cards; querying of Internet quota availability through Cadivi for 2007 and previous years;
request for Mercantil cash advance and partial and total payments; credit card activation;
recharging Digitel cellphone credit, and querying, exchanging and affiliating Mercantil
points (bolos).
During 2007, Mercantil Servicios Financieros through Mercantil Banco, brought its quality
management system in line with the principles and requisites of the ISO 9001:2000
International Quality Standard. All teller transactions processed through the nationwide
network of 94 (type ‘A”) offices now carry this quality certification granted by the Venezuelan
Standardization and Quality Certification Institute FONDONORMA. Additionally, the
ratification of the quality certifications obtained prior to 2007 ensures that the quality
requirements and standards of company’s different units are complied with.
Major Projects:
The main projects that are designed to support the functionalities of the information system
are:
• EVP Electronic Vendor Program allows clients to use a B2B supply platform to increase cycle
efficiency when paying bills through payment instruments managed by Mercantil
Commercebank.
• Lockbox allows clients to debit and credit their accounts remotely, directly from their
offices, which generates an efficient cash flow by reducing collection time.
• Nationwide mass use of credit cards with attributes that allow customers to send their
payments directly to a P.O. Box; online payment of credit cards after 4 pm, basic information
on credit cards at all branches; ability to credit points earned for online payments with “Visa
Extras” to their accounts online.
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In the operational and technological infrastructure area, Mercantil Commercebank has included the following:
The new platform which operates as a multi-channel contact center (IVR) and provides customers with an interactive voice solution with high levels of security and service quality. It integrates the transactional comments that currently serve Mercantil Commercebank Personal
Online Banking, with a sophisticated channeling and reporting system and new user-friendly
tools to ensure that customers received a rapid response from trained agents who provide a
personalized service, through customer identification and segmentation.
E-business Solutions
The new version of the Mercantil Online Business Banking product is up and running on the
TODO1 electronic webpage. It will enable Mercantil Banco Universal, to migrate 100% of its
corporate, middle market and SME clients to this new platform, offering additional
functionalities in 2007: statements of account, trust fund management, direct debits, check
security (security circle), among others. A similar result was obtained with Mercantil
Commercebank Online Business Banking, completing the migration of its clients to this new
platform.
Transactions through Mercantil Banco Universal Online Personal Banking grew 60% over
2006. A range of functionalities was developed to support its product sales strategies,
increase the volume of payments and strengthen security on the Internet platform. Use of the
Epiphany tool for sending and presenting segmented campaigns to Online Banking clients
was intensified. Mercantil Commercebank Online Personal Banking consolidated its level of
transactions.
TODO1 continued its substantial contribution to the development of e-commerce in
Venezuela through its E-Payment tool which is evidenced by the 40% increase in transactions
during 2007.
Todo1 Services was evaluated for the third time under SAS No. 70 developed by the American
Institute of Certified Public Accountants (AICPA) which ratifies compliance with the
provisions of the Sarbanes-Oxley Act, which confirms its maturity in the development of
world-class systems.
Mercantil Seguros
During 2007, Mercantil Seguros, a subsidiary of Mercantil Servicios Financieros in Venezuela,
continued to improve service quality to meet the needs of its clients, intermediaries and
suppliers by expanding its office network and adapting its processes and information systems,
as well as enhancing its physical infrastructure and services in different parts of the organization.
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S e r v i c i o s
The use of customer and intermediary service areas changed with the opening of new
premises San Cristobal (Tachira state) and Valle de la Pascua (Guarico state) and the creation
of an Immediate Service Center for Indemnities at the Acarigua (Portuguesa state) branch
and the refurbishment of the new premises for back-office operations in Caracas.
Products and services were adapted in the individual, automobile and equity insurance
portfolios. The online service was consolidated for use by independent insurance advisors,
as was the collective automobile and individual policy renewal service to facilitate handling
of insurance certificates, acceptance of renewals, financing and direct debits.
Customer segmentation progressed so that a platform could be created to capitalize on
potential business, increase trade relations and offer policyholders more customized services.
Large corporate clients choose to insure their property with Mercantil Seguros because it has
the backing of world class reinsurance companies.
In the personal product area, the Mercantil Banco Universal
Online Personal Banking reflects 60% growth of transactions
compared to 2006.
Dibujo sin papel #6 • 1976 • Stainless steel wire and metallic cord • 50,5 x 49,5 x 18 cm
TAM-1857 • 1966 • Lithograph on paper • 28 x 28 cm
Human Resources
Human Resource activities were channeled at
the different activities undertaken to support
Mercantil’s business plans. They consisted of
providing the staff needed; maintaining the
competitive remuneration positioning; implementing new schemes to prepare and recruit talent;
adapting labor standards; boosting employees’ quality of life; improving organizational climate;
encouraging employee involvement in social responsibility and supporting the launch of the
new brand.
At December 31, 2007 Mercantil Servicios Financieros has 10,132 employees, 90% of whom
working for Mercantil Banco Universal, Mercantil Seguros, Mercantil Merinvest and Mercantil
subsidiaries in Venezuela and 10% abroad, mainly at Mercantil Commercebank in the United
States. The number of people on the payroll in 2007 grew 6%. The majority of them work in
customer service related areas. Pursuant to a
decision by the Board of Directors and within
Human Resource activities focus on furthering the different
initiatives implemented to support the business plans
of Mercantil’s subsidiaries.
the framework of the 80th anniversary of
Mercantil’s
foundation,
Mercantil
implemented its General Stock Purchase
Program whereby 7,623 workers in Venezuelan
companies became new owners of Mercantil
Servicios Financieros stock.
A total of Bs. 8,700 million was invested in training through 1,795 courses, with 38,500
participants and 410,000 man/hours of training. A total of 10,500 workers took part in training
events averaging 39 hours of training per person: Operational Specialization Course, Advanced
Operational Program, Training Course for Credit Analysts, Management Training Program,
Monetary Conversion Program and Anti-Money Laundering Programs, the majority of them
given through distance training. During 2007, competency models were approved for all
Mercantil’s subsidiaries with advice from the Hay Group, and the competencies and levels
expected of each of the roles representing the company’s macro-activities and positions
associated with each one.
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S e r v i c i o s
Mercantil and its subsidiaries in Venezuela have traditionally maintained good relations with the
unions, both in the case of Seguro Mercantil’s union (Sindicato Único de Trabajadores de Seguros
Mercantil) and the National Federation of Workers (Federación Nacional de Trabajadores) and
their unions affiliated to Mercantil Banco Universal. The company reiterates the importance of
union relations over the years with the union representation, during which time the parties have
worked together to improve the benefits received by workers according to market conditions
and the company’s capacities.
Considerable attention is paid to the organizational climate aspect in all Mercantil’s companies.
In 2007, for the third year running, the company conducted an Organizational Climate survey, in
conjunction with the Great Place to Work Institute in which 74.4% of the 10,132 employees
participated. The staff has sound personal and professional ethical principles and values which
are reflected by the opinions of 87% of the employees who see Mercantil as a serious, honest
organization that follows its Code of Ethics. The results of the survey reveal that 85% of the staff
feels that Mercantil is “a great place to work.”
Within the framework of the project to improve the technological
platform and encourage employees to use it on a self-service basis,
during 2007 several initiatives were implemented so that a series
of processes and services could be introduced for Mercantil’s
companies in Venezuela.
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The Corporate Communications and Institutional Marketing Units and the Human Resources
Unit worked together on the launching of a new brand strategy to reaffirm the attributes of the
Mercantil brand to all Mercantil’s employees and make them all aware of the brand’s new graphic
identity. This effort involved a face-to-face communication program with over 9,000 employees.
Within the framework of the project to improve the technological platform and encourage
employees to use it on a self-service basis, during 2007 several initiatives were implemented so
that a series of processes and services could be introduced for Mercantil’s companies in
Venezuela. The Project for the New SAP Human Resources Technological Platform for Mercantil
Venezuela, which will be concluded in 2008 for use by the organization and all Mercantil
employees worldwide was introduced.
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Dibujos sin papel 83/13 y 85/21 • 1983 y 1985
Stainless steel wire, copper, aluminum and iron • 128 x 78 x 8 cm
Risk Management
Good risk management is key to Mercantil’s
strategic activity and its ability to generate
value
for
shareholders.
During
2007,
Mercantil’s Risk Management Unit furthered
its consolidation plans in search of excellence. It applied best practices within the tolerance limits
defined by the Corporation, while strengthening its organizational structure as an independent
unit, providing the support necessary to achieve the plans of the different subsidiaries of the
group and pinpointing business opportunities capable of creating value without affecting risk
exposure.
Risk reporting policies, processes and systems and risk-adjusted return on capital (RAROC)
indicators were strengthened and standardized. Value at Risk (VaR), Earnings at Risk (EaR) and
Economic Value methodologies were consolidated and stress testing applied to the market and
credit risk analysis, in order to evaluate the impact of adverse scenarios on provisions and capital.
Methodological
In 2007, through the Monetary Conversion, Mercantil faced
one of its greatest challenges in terms of operational, legal
and reputational risk exposure
improvements
were
intensified so that a new rating model could be
implemented for business clients and rating
models could be improved to support
consumer credit portfolio management.
Development of the internal models used for
the analysis, quantification and control of risk exposures in the group’s different business lines
was ongoing.
Operational risk assessments were carried out on the process, products and services of the
subsidiaries in different countries; the horizons of the business continuity plans were extended
and the organization’s risk culture was measured.
The acquisition of a new technological risk-management platform was completed, and is in the
process of being implemented. In the future this will facilitate the move towards accurate
automated risk management, with streamlined tools, historic databases and integrated
information systems to feed the different projected loss-measurement and capital-assignment
systems for the risks implicit in Mercantil’s businesses and to satisfy the demanding requirements
of the New Basel Accord.
Lastly, in 2007 Mercantil faced one of its greatest challenges in terms of operational, legal and
reputational risk exposure. This called for action from the point of view of Operational Risk to
identify, analyze and evaluate existing operational threats depending on the probability of them
occurring and the potential impact on the organization, in order to design preventive strategies
and contingencies to mitigate risks and ensure business continuity.
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S e r v i c i o s
Credit Risk
Credit risk is conceived globally at Mercantil and its function responds to common principles and
organizational criteria shared by its different subsidiaries. In order to develop it appropriately, a
series of credit policies, procedures and management tools have been established and are
constantly being improved to guarantee better and more sophisticated global risk management.
With the progress achieved in Credit Risk management Mercantil was able to keep loan portfolio
growth to an acceptable risk level during 2007. This gave the institution a satisfactory level of
credit quality with a variation of 32.9%.
During 2007 the new Master Scale Rating was applied at Mercantil Banco Universal and the
internal ratings of the different models available were streamlined and benchmarked against the
rating agencies’ external ratings.
Loan portfolio provisioning processes were improved in the different companies and scenario
analyses were included in the calculation of provisions so that the impact of different variables
on the current portfolio risk level could be measured.
The constant need to apply best risk management practices, has kept alive the interest in
following up the New Basel Accord This has meant that significant progress was made during the
year to further the progress already made and reduce the amount by which some subsidiaries are
lagging behind Basel II.
The following graph shows in detail how total credit risk exposure is distributed and includes
direct, contingent and issuer risk by country and type of client with the breakdown of credit risk
as of December 2007.
Breakdown of Credit Risk by Geographic Region and Type of Customer
25%
20%
15%
10%
5%
Venezuela
USA
Other Countries
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Government
Sponsored
Agencies
Real Estate
Loans
Financial
Other Assets
Individuals
Government
Large
Corporations
Other Companies
BCV
0%
In 2007 67.3% of the credit risk exposure is accounted for by Venezuela, 25.9% by the USA and
6.83% Other Countries. The main changes were in Venezuela and the United States, the
former with a 7.0% increase in its share compared with the previous year, mainly due to the
country’s economic growth, and a 6.8% reduction in the USA’s share due to the slump in the
property market.
The credit risk exposure of the Personal Banking and Central Bank segment grew. The Personal
segment portion share increased 1.7% from 11.1% to 12.8%, mainly in the case of consumer
credit products (credit cards, vehicle loans) and the BCV’s portion rose 1% from 18.9% to
19.9%, due to a larger volume of deposits given Mercantil Banco Universal’s higher liquidity
levels.
The share of US government-sponsored agencies, as well as real estate loans (construction)
in Venezuela dropped from 1.7% and 1.5% respectively, by 2.4% in the case of the former and
5.1% in the case of the latter, as a result of the reduction of the limits in these segments given
the economic downturn experienced by this sector during 2007.
No significant variation was registered in other clients as a proportion of total loans.
The distribution of Mercantil’s loan portfolio by clients’ Economic Activity is shown below:
Distribution of Mercantil’s loan portfolio by economic activity
ELECTRICITY, GAS AND WATER
0.1%
0.8%
MINING EXPLOITATION AND HYDROCARBONS
1.0%
Activity
TRANSPORTATION, WAREHOUSING, TELECOMMUNICATIONS
SOCIAL AND PERSONAL COMMUNITY SERVICES
1.7%
NON SPECIFIED ACTIVITIES
3.5%
MANUFACTURING INDUSTRIES
5.9%
CONSTRUCTION
6.6%
AGRICULTURE, FISHING AND FORESTRY
8.6%
FINANCIAL INSTITUTIONS AND INSURANCE
32.9%
TRADE, RESTAURANTS AND HOTELS
39.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Percentage
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The following figure shows that 39.0% of the loan portfolio is made up by the wholesale and
retail trade, restaurants and hotels, followed by the financial sector, insurance, real estate and
service to companies (32,9%); this is due to the personal loans portion of the loan portfolio which
is comprised by people whose activities are inherent to this rating (self-employed professionals,
recreational services, personal services, etc.). The third largest sector is agriculture, fisheries and
forestry with 8.6%.
Loan portfolio quality has remained favorable over the last few years, with a ratio of past due
and non-performing loans to total loans below 1% in the last 7 semesters. This it grew from Bs.
111 billion to Bs. 125 billion, a 12.3% variation, while total loans increased 32.6%, with a 0.65%
variation.
Past due and Non-Performing Loans/
Gross Loans
Market Risk
The market risk materializes in an organization when market conditions deteriorate, affecting
the liquidity and value of the financial instruments held by the company in investment portfolios
or contingent positions, resulting in a loss for the company. There are two fundamental types of
risk: price and liquidity.
Each market factor and its effect on the financial organization’s risk profile is measured daily.
Mercantil has a technological infrastructure and early warning systems that the Treasury uses to
monitor and follow up market risk. These systems produce a range of reports for the Treasury’s
risk-taking units and the corresponding management levels.
Mercantil focuses its analysis on different methodologies for measuring market risk, such as
Value at Risk (VaR), Financial Margin Sensitivity due to interest rate changes Repricing Gap, Risk
Gains, Liquidity Gap and a series of other measures and ratios for managing market risk
effectively.
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Value at Risk (VaR). The maximum potential loss due to adverse changes in market factors in the
positions taken in the different Treasury activities at a level of statistical confidence and for a
given period is estimated. Mercantil uses the Variance - Covariance method to estimate the VaR
of its trading and positioning activities, based on a normal statistical distribution of portfolio
asset yields, with a 98% interval of confidence and a one-day time horizon. This model is
periodically reviewed and compared with backtesting studies which involves checking whether
the potential loss estimations (VaR), calculated under the assumption of normal market
conditions, are in line with the values observed in the market. To complement the VaR,
simulations are run, adding stress situations based on extreme market conditions to estimate
the potential loss the Treasury would face if this situation were to materialize.
Market Risk in Trading Activities in 2007
Mercantil’s trading and positioning activities were carried out in the fixed-income securities in
Venezuela denominated in bolivars and in the fixed-income securities in emerging markets, the
latter concentrated in Venezuelan government debt securities issued by Petróleos de Venezuela
(PDVSA); and also the US market with trading activities, mainly Mortgage Backed Securities MBS
and Collateralized Mortgage Obligations (CMO) and Credit Default Swaps (CDS). Mercantil
maintained its position of leadership, participating actively in the Venezuelan government debt
market in 2007 through primary issues of treasury bills and bolivar and US$ denominated
government bonds and global bonds.
Trading in the bolivar-denominated Fixed-Income Securities Market
In 2007, the Venezuelan financial market increased its interest rates based on the monetary
policies decisions taken by the Central Bank which reduced excess liquidity levels in the
financial system and stimulated an increase in the government bond yields. Vebonos maturing
April 2010 which yielded 3.48% at the end of 2006 closed at 13.43% in 2007. This increase in
yield occurred with the price of securities being registering higher average volatility levels
than in 2006 (0.28% in 2006 versus 0.96% in 2007).
Global fixed-income trading activity in bolivars maintained an average VaR of Bs. 1,215 million
during the year of (maximum Bs. 7,171 million, minimum Bs. 9 million), versus an average VaR
of Bs. 1,612 million in 2006 (maximum Bs. 2,954 million, minimum Bs. 528 million).
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Trading in Fixed-Income securities in emerging markets
The Venezuelan government launched two bond issues maturing in 2038 on the international
market during 2007 and a global offer of US$ 1,250 million in which Mercantil participated
actively. The yield of Venezuelan debt securities increased during the year. One example is the
global 2027 bond that yielded 6.74% at the close of 2006, and 9.19% at the close of 2007. This
bond’s daily price volatility during the year averaged 0.83%, which exceeded the average in 2006
by 0.51%.
The average VaR of this activity was US$ 0.256 million in 2007 (maximum US$ 0.694 million and
minimum US$ 0.006 million). These values increased compared with the previous year (average
VaR of US$ 0.133 million, maximum US$ 0.0376 million, minimum US$ 0.005 million).
Trading in the Fixed Securities market in the US Market
One of the highlights in this market in 2007 was the FED’s decision to systematically reduce
the Fed Funds rate (from 5.25% in December 2006 to 4.25% in December 2007) revealing an
increase in the market’s volatility. For instance for 3 and 5 year Treasury bills the rate increased
from 0.85% in December 2006 to 1.53% in December 2007.
Mercantil participated in this market through CMO, MBS and CD trading activities whose
VaR at the close of 2007 was US$ 0.107 million, with maximum and minimum values of US$
0.215 million and US$ 0.002 million respectively in the data series for the year. CMOs in this
portfolio have no subprime mortgage exposure. The company also participated in the Credit
Default Swap, reflecting a VaR of US$ 0.031 million at year end, an average value of US$ 0.045
million, and a maximum and minimum of US$ 0.107 million and US$ 0.011 million respectively.
Market Risk in Positioning Activities in 2007
The average VaR of Mercantil’s positioning activities (98% confidence) for the consolidated
investment portfolio classified as available for sale during 2007 was Bs. 21,707 million – equivalent
to US$ 10.7 million – which accounted for 0.3% of the total securities position on the balance
sheet and held as available for sale. These figures grew compared with 2006 when the average
VaR was Bs. 14,860 million – approximately US$ 7.0 million – representing 0.2% of the available
for sale securities position.
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Price risk in interest rates gap position
The price risk in the gap position of interest rates arises from balance sheet asset and liabilities
timing differences. When adverse changes occur in the interest rate market, this gap can impact
the institution’s financial margin. To manage this, a repricing gap is applied to the financial assets
and liabilities. This takes into account the sensitivity of the financial margin to changes in interest
rates (in the Venezuelan market this is done with 100, 200, 300, 500 and 1000 basis points; while
in the US market it is calculated with 100 and 200 basis points over a 12 month period, which are
measured and compared with the interest rate limits designed. Additionally, the sensitivity of
the financial margin to interest rate variations caused by their historic volatility, the economic
value of the capital and an analysis of the duration are calculated.
Liquidity Risk
Liquidity risk depends on the likelihood that a company will be unable to deliver funds or financial
assets, as agreed with a client or market counterpart, at any time or in any place or currency. This
risk is one of the major ones a financial institution could face in its intermediation activity because
it can trigger a host of different risks, one of the worst being reputational (or franchise) risk.
Therefore, for Mercantil Servicios Financieros and its subsidiaries, managing and measuring
liquidity risk is considered a priority for the global management of an organization’s risks and
business.
The Treasury has responsibility for liquidity risk which follows the liquidity policy parameters for
organization outlined by the Board of Directors, through the Board of Directors Risk Committee,
the Global Risk Committee and the Assets and Liabilities Committee. An organization’s global
liquidity risk environment monitored periodically and is the outcome of the liquidity management
process exercised by the Treasury in each of the financial vehicles in which it participates.
The Assets and Liabilities Committee meets monthly and must make decisions on the liquidity
and structure of the financial balance sheet by presenting the evolution and trends of the main
factors affecting liquidity, measured by a series of tools and reports for optimizing the
management of assets and liabilities (analysis of liquid assets, short, medium and long-term
liquidity gap, liquidity indicators (evolution of balance sheet items), among others.
These analysis and methodologies are complemented by reports known as Contingency Funding
Plans.
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Operational Risk
During 2007 Mercantil continued to evolve in line with its achievements, the standards of the
regulatory entities and recommendations on best practices
Framework Implementation for operational Risk %
95%
Venezuela
USA
80%
Switzerland
80%
60%
Panama
30%
Other Countries
78%
Total Average
0%
20%
40%
60%
80%
100%
The Operational Risk Unit is constantly optimizing the tools needed to manage operational risks,
aware that this is the best way to deal with changes in the environment, meet current needs and
prepare for new challenges. A technological tool was acquired and configured to reinforce the
integration of the business units and a qualitative and quantitative analysis, while adjusting
capital calculation and allocation using advanced methods that increase risk sensitivity, including
scenario analysis and considering the inclusion of external data events.
Identifying operational, legal and reputational risks and controlling risk exposure is crucial, as
can be seen from the risk assessments carried out on new products before they are launched on
the market in order to mitigate and control potential operational risks.
In response to the risks identified, a fundamental part of operational risk management involves
following up of action plans, particularly plans designed to prevent high-frequency risks involving
electronic fraud and mitigate risks derived from data security violations. Insurance policy
programs and business continuity plans are strengthened to handle high-severity or catastrophic
risks.
Mercantil continues to expand its operational risk management activity in all the countries where
it operates.
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Its action, which is based on the best management practices proposed by the Basel Committee,
gives it a sound risk culture which ensures that the operational risks existing in the organization
are identified, evaluated, controlled, mitigated and monitored.
The point of interaction of the Operational Risk, business, support and other units is the
Operational Risk Committee whose mission is to review and recommend policy matters, tools,
methodologies and other aspects that facilitate operational risk management and minimize real
or potential losses that might arise due to unexpected events in the operational and technological
environment. This is undertaken by following up the behavior of the different risk factors and the
corresponding action plans.
The frequent changes in national and international regulations mean that organizations must
adapt their business processes, technological infrastructure and data systems to meet the
requirements and deadlines. Monetary Conversion in 2007 involved a major change for
Mercantil’s companies in Venezuela. This process called for action from the point of view of
operational risk to identify, analyze and assess potential threats, the probability of them occurring
and their impact, to design preventive strategies and contingencies to mitigate them and ensure
operational continuity.
At Mercantil, the development of operational risk management has boosted the institution’s
preparedness for extraordinary and exogenous events that threaten its processes, leading the
company to ensure that its response complies with the requirements of the regulatory entities.
For Mercantil, training and refresher courses for its staff on operational risk is key to its success
in preventing this type of risk, which is why programs are continually being developed to increase
awareness among the different companies. These include talks and cineforums.
Risk Management in Non-banking Activities
During 2007, Mercantil Seguros continued to implement its risk management strategy in line
with Corporate Operational Risk Management Unit’s guidelines, focusing its efforts on
identifying, analyzing, evaluating and following up the risks implicit in the products offered and
those associated with underwriting, reinsurance and indemnity processes, in other words the
processes that make up the value chain of the business, thus helping to reduce the institution’s
risk levels.
Distribution of Operational Risk Events (year 2007)
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
External Fraud
Execution, delivery and
process management
Impact on business
and system
mal functioning
Damage to
physical assets
Internal Fraud
Work practices and
security in the working
environment
Practices related with
clients and products
Severity- Amount
Frequency - Number of Events
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Sin título • Sin fecha • Lithograph on paper • 56,8 x 56,4 cm
Performance of Subsidiaries
Mercantil operations take place in Venezuela and abroad and its management results are
reviewed in the Consolidated Financial Statements Review chapter.
A summary of Mercantil’s operations carried out through each subsidiary as of December 31,
2007, according to the accounting standards of the Venezuelan National Securities Commission
(CNV) is presented below.
Mercantil Servicios Financieros (1)
(In millions)
Shareholders’ Equity Bs. 3,407,614 (12/31/2007)
Equity
Mercantil, C.A.
Banco Universal
Bs. 2,004,877
Venezuelan
Main Activity
Universal
Bank
Main Subsidiaries
Mercantil
Commercebank
Holding Corp.
Bs. 782,526
Holding
Mercantil
Internacional
Bs. 176,073
Mercantil
Seguros, C.A.
Bs. 269,310
Mercantil
Merinvest, C.A.
Bs. 92,760
Others
Bs. 82,068
Commercial Bank,
Brokerage and
Trust
Services
in USA
International
Bank
Mercantil
Commercebank
N.A.
Mercantil Bank
(Schweiz), AG.
Switzerland
Mercantil Merinvest
Casa de Bolsa, C.A.
Mercantil
Commercebank
Investment
Services (MCIS)
Mercantil Bank
(Cayman)
Cayman Islands
Mercantil
Servicios de
Inversión, C.A.
Mercantil
Commercebank
Trust Company
(MCTC)
Mercantil Bank
Curaçao NV
(Curaçao)
Merinvest
Sociedad
Administradora
de Entidades
de Inversión
Colectiva, C.A.
Insurance in
Venezuela
Investment
Banking, Mutual
Funds, Trading &
Brokerage in
Venezuela
Banco del
Centro, S.A.
(Panamá)
Other Non
Financial
Businesses
Total
(In millions of Bs.) 1
24,576,131
5,312,265
12,336,125
21,108,057
11,930,922
4,912,790
6,462,820
9,398,648
888,243
308,819
539,547
780,908
995,612
667,006
0
0
308,664
72,356
0
0
349,980
198,971
0
0
39,049,552
11,472,207
19,338,492
31,287,613
472,887
65,843
73
70,121
8,395
166,014
783,333
Total Assets
Investments
Loan Portfolio, Net
Deposits
Net Income
for the Year
11,459
2,477
5,751
9,842
5,563
2,291
3,014
4,383
414
144
252
364
465
311
0
0
144
34
0
0
164
92
0
0
18,208
5,349
9,017
14,589
220
31
0
33
4
77
365
Number of Employees
7,741
947
52
1,268
42
82
10,132
Total Assets
Investments
Loan Portfolio, Net
Deposits
Net Income
for the Year
(In millions of US$.) 2
(1)
Financial Information presented in accordance with the standards of the Venezuelan National Securities Commission (CNV). Figures net of elimination of intercompany transactions.
February 2003.
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Comments and a summary of the financial statements of Mercantil’s main subsidiaries are
presented below, based on the accounting standards applicable to each of them, which explains why
they differ from the consolidated information presented according to the accounting standards of
the National Securities Commission (CNV). Mercantil C.A. Banco Universal presents its information
in accordance with the standards of the Superintendency of Banks in Venezuela; Mercantil
Commercebank Holding Corp according to USGAAP; Mercantil Seguros C.A., according to the
standards of the Superintendency of Insurance in Venezuela Mercantil Merinvest C.A., in
accordance with the standards of the National Securities Commission (CNV).
The total assets of Mercantil Banco Universal grew Bs. 5,999,748 million (35.3%) compared to
December 2006. During 2007 the net loan portfolio grew Bs. 3,823.085 million (44.4%) and
government deposits by Bs. 5,060,647 million (34.4%). Loan portfolio quality remains very
favorable. The ratio of past-due and non-performing loans to total loans is 0.5%, while for the
Venezuelan financial system as a whole it is 1.2%.
At year end Mercantil Banco Universal ranked second in the Venezuelan financial system in
terms of total assets, with a 10.6% market share. The institution with the largest share of the
market has 12.8% and the four main banks account for 43%. It is also second in Venezuela
with 11.4% in terms of total deposits plus investments sold under repurchase agreement.
Mercantil is Venezuela’s leading bank in terms of savings deposits, agricultural credits and
mortgage loans (Special Mortgage Act) with market shares of 16.6%, 15.9% and 16.9%,
respectively.
As of December 31, 2007 investments in securities were made up as follows: Certificates of
Deposit and other securities issued by the BCV, 61.6%; securities issued or guaranteed by the
Venezuelan government, 32.8%, US government-backed securities, 0.3% and securities issued
by the Venezuelan and international private sector and US government-backed agencies,
5.3%.
Shareholders’ equity grew Bs. 572,630 million (37.7%) compared with December 31, 2006. This
increase includes mainly Bs. 534,952 million in net earnings during 2007. It also includes a Bs.
133,948 million increase in capital, Bs. 79,986 million which correspond to cash dividends paid
out and Bs. 16,284 million to the adjustment to market value of investments available for sale.
Mercantil Banco Universal, Consolidated
Year Ended
(In millions of Bs. and US$)
2007
2007
2006
2005
US$(1)
bolivars
bolivars
bolivars
10,723
22,997,523
16,997,775
10,848,554
1,682
3,608,182
3,886,047
1,648,167
Loan Portfolio, Net
5,797
12,432,519
8,609,434
6,762,736
Deposits
9,213
19,757,310
14,696,663
8,972,559
Equity
975
2,091,272
1,518,642
1,200,200
Net Earnings for the Year
249
534,952
424,124
471,874
Total Assets
Historic figures presented in accordance with the standards of the Superintendency of Banks and Other Financial Institutions
(2) Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs. 2,144.60/1US$.
There is an exchange control in place in Venezuela since February 2003.
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The equity/assets ratio as of December 31, 2007 is 9.6%1 (minimum requirement 8%) and the
equity/risk-weighted assets according to the standards of the Superintendency of Banks in
Venezuela is 14.0% (minimum requirement 12%).
Net earnings for 2007, amounted to Bs. 534,952 million and represented a Bs. 110,828 million
(26.1%) increase over 2006. This is associated with a 46% (Bs. 490,955 million) increase in Net
Interest Income from Bs. 1,066.400 million recorded as of December 31, 2006. It is mainly
attributable to the increase in the average volumes of financial assets and liabilities in Venezuela
compared with the first half of 2006 and to the interest rates in Venezuela.
Operating expenses increased Bs. 244,771 million, 24.4% by comparison with 2006, mainly due
to the Bs. 85,302 million (16.9%) increase in personnel expenses following the application of a
wage increase, the effect of the new collective bargaining agreement signed between the workers
and their unions and valid for three years starting January 1, 2007, and an increase in the size of
the payroll from 7,355 to 7,741 employees (386 more); an additional Bs. 32,455 (116.0%) in taxes and
other contributions, Maintenance Expenses, Depreciation of Property and Equipment and
Amortization of Intangibles Bs. 32,335 million (45.4%), Travel and Communications Expenses Bs.
16,842 million (26.3%) and Advertising Expenses Bs. 14,929 million (20.5%). Figures for 2006
include non-recurring expenses due to the application of the new defined contributions plan:
“Plan de Ahorro Previsional Complementario.”
Inflation in Venezuela in 2007 was 22.5%. This variable has a significant effect on Mercantil Banco
Universal’s operating expenses.
Mercantil Commercebank Holding
At December 31, 2007 Mercantil Commercebank Holding registered total assets of US$ 5,567
million, which represents a 10.9% increase compared to December 2006. The Investment
Portfolio maintained similar levels to the previous year, reaching US$ 2,291. It is made up
mainly of highly liquid instruments issued by the US Government or government-sponsored
agencies and the remainder of securities issued by the international private sector. Net loans
grew 16.2% to US$ 3,014 million. The loan portfolio remains very favorable with a ratio of pastdue and non-performing loans of 0.8%. Mercantil Commercebank has no exposure to
subprime mortgages. Total deposits as of December 31 are US$ 4,475 million, reflecting a yearon-year variation of 16.1%.
Mercantil Commercebank Holding registered US$ 35 million in earnings in 2007 compared to
US$ 43 million in 2006. This decline is mainly due to loan portfolio provisions, despite a Net
Interest Income derived from higher average volumes of assets as a result of the fall in interest
rates over that period.
Operating and personnel expenses in 2007 totaled US$ 28 million, 25% higher than the previous
year, mainly because the infrastructure was expanded to handle new strategies such as the
expansion of new services and improvements to the quality of the services offered.
(1)
Obtained by dividing shareholders equity by total assets less investments in Government Debt Securities.
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S e r v i c i o s
The results represent a Return on Assets (ROA) of 0.8% (1.1% in 2006) and a Return on Capital
(ROE) of 9.6% (14.0% in 2006). The main capital adequacy indicators for Mercantil
Commercebank N.A. are an equity/assets ratio of 7.7% and an equity/risk-weighted assets ratio
of 12.5% according to the standards of the Office of Comptroller of the Currency (OCC).
The Office of Comptroller of the Currency has once again rated Mercantil Commercebank, N.A.’s
performance “Outstanding” under the Community Reinvestment Act (CRA). This is the highest
rating granted to any banking institution.
Holding Corporation Consolidated
2007
2007
2006
2005
US$(1)
bolivars
bolivars
bolivars
Total Assets
5,567
11,940,508
10,764,375
9,065,213
Invesments in Securities
2,291
4,912,790
4,805,621
4,390,963
Loan Portfolio, Net
3,014
6,462,820
5,559,923
4,253,178
Deposits
4,475
9,597,330
8,269,906
7,207,517
370
792,111
624,145
521,604
35
75,451
93,112
79,995
Year Ended
(In millions of Bs. and US$.)
Equity
(1)
Figures according to the accounting principles generally accepted in the United States (US GAAP)
Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs. 2,144.60/1US$. There
is an exchange control in place in Venezuela since February 2003.
(2)
Mercantil Seguros
In 2007, premium income grew 45%, to Bs.1,413,800 million, reflecting an outstanding sales effort.
At year end Mercantil Seguros, a subsidiary of Mercantil in Venezuela, was Venezuela’s third
insurance company in terms of net premiums, with a 9.2% market share. The leading institution
has 12.2% of the market.
The company’s total assets were Bs. 1,154,223 million at year end. Net assets of Bs. 358,436 million
reflected a level of solvency that meets the statutory requirements.
The figures presented include all the mandatory and voluntary reserves required to guarantee the
company’s operations, including claims reserves pending settlement and end-of-year payments.
Guarantees and reserves amount to Bs. 681,186 million.
At the close of December 31, the company’s investment was Bs. 980,228 million. Total investments
representing technical reserves reached Bs. 746,756 million and liquidity levels comply with the
requirements regarding commitments towards policyholders, insurance advisers and reinsurers.
Net earned premiums rose 57%, from Bs. 433,400 million in 2006 to Bs. 679,600 million in 2007,
mainly due to growth in the health and automobile business.
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Net earned premiums in the collective insurance business increased 54% to. Bs. 636,100 million
compared to 2006. This segment represents an important proportion of the company’s portfolio
(45% market share).
The technical result closed at Bs. 37,900 million in 2007, with a combined ratio (COR) of 96.7%.
Net income was Bs. 69,056 million.
Mercantil Seguros, C.A.
2007
2007
2006
2005
US$(1)
bolivars
bolivars
bolivars
Total Assets
538
1,154,223
828,134
554,954
457
980,228
719,277
464,097
Equity
167
358,436
265,527
185,122
32
69,056
57,350
52,148
659
1,413,800
975,544
670,127
Year Ended
Net Earnings for the Yaer
Net Premiums
(1)
Figures in accordance with the standards of the Venezuelan Superintendency of Insurance.
Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs. 2,144.60/1US$. There
(2)
Holding Mercantil Internacional
Holding Mercantil Internacional consolidates four overseas financial institutions: Mercantil Bank
Curaçao, N.V., in Curaçao; Banco del Centro S.A., in Panama; Mercantil Bank (Schweiz) AG, in
Zurich, Switzerland and Mercantil Bank Cayman Limited in the Cayman Islands.
The activity of Mercantil Bank (Schweiz) AG, which includes the Mercantil Bank Cayman Limited
subsidiary, increased in 2007. The level of assets increased US$ 56 million in relation to December
2006 to US$ 336 million. This increase is due to US$ 19 million (16%) growth of the investment
portfolio and the US$ 29 million (20%) growth of the loan portfolio.
Banco del Centro, S.A., changed the International License it had held since 1977 for a General
License. This was approved by the Superintendency of Banks of Panama and allows it to operate
in Panama, carrying out transactions that took place abroad. This authorization enables Banco
del Centro S.A. to offer its financial services to Panamanian residents and foreigners alike.
Holding Mercantil Internacional’s assets were US$ 477 million at December 31, 2007, much the
same as the previous year when they totaled US$ 473 million.
Net income for the period includes a reduction in earnings on the sale of securities, which is due
to a fall in the market price of fixed-income securities (mainly securities issued by the Venezuelan
government, autonomous companies owned by the Venezuelan State and sovereign
governments.
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Holding Mercantil International C.A.
Consolidated
2007
2007
2006
2005
US$(1)
bolivars
bolivars
bolivars
Total Assets
477
1.023.245
1.014.698
817.865
206
440.936
576.064
484.578
Year Ended
Loan Portfolio, Net
252
539.548
413.062
305.376
Deposits
386
828.684
871.370
695.017
82
176.072
124.852
94.197
0
74
8.708
14.914
Equity
(1)
Figures in accordance with the standards of the Venezuelan National Securities Commission (CNV)
Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs. 2,144.60/1US$.
(2)
Mercantil Merinvest
Mercantil Merinvest’s subsidiaries include a securities brokerage company, a mutual fund and
an investment portfolio management company.
As of December 31, 2007 Mercantil Merinvest attained Bs. 328,877 million in total consolidated
assets, 103% more than in 2006. This growth is reflected in the investment portfolio which
increased to Bs. 91,723 million (29% more than in 2006) and mutual fund operations (indexed
financial assets) carried out through Mercantil Merinvest Casa de Bolsa, C.A. which rose 169%
compared with the previous year to Bs. 228,156 million at the end of 2007 Earnings for the year
totaled Bs. 8,458 million.
Net income for the period includes a reduction in earnings on the sale of securities due to a
fall in the market price of fixed-income securities (mainly securities issued by the Venezuelan
government, autonomous companies owned by the Venezuelan State and sovereign
governments.
Mercantil Merinvest, Casa de Bolsa, C.A., continued to offer the Cuenta de Corretaje
Merinvest (CCM) product, which at the close of December 2007 had attracted 30,225 new
clients compared with 17,097 at December 31, 2006.
Mercantil Merinvest, C.A.
Consolidated
2007
2007
2006
2005
US$(1)
bolivars
bolivars
bolivars
Total Assets
153
328,877
161,808
58,515
43
91,723
71,177
54,285
Indexed Financial Assets
106
228,156
84,801
0
43
92,760
59,042
52,311
4
8,458
17,335
22,480
Year Ended
(In millions of Bs. y US$.)
Equity
(1)
Figures in accordance with the standards of the Venezuelan National Securities Commission (CNV)
Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs. 2,144.60/1US$.
(2)
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Other Non-Financial Business
Mercantil Inversiones y Valores
Mercantil Inversiones y Valores comprises Mercantil Servicios Financieros’ non-financial
companies, such as Servibien, Almacenadora Mercantil and other investments in securities. It
also has a 19% stake in Servicio Panamericano de Protección (Serpaproca), an armored
transportation business. In 2007, Serpaproca declared a dividend of Bs. 3,216 million representing
21.7% of the company’s earnings.
Servibien, a subsidiary of Mercantil Inversiones y Valores whose core business involves trading
in real and personal property owned by Mercantil and its subsidiaries sold Bs. 11,902 million worth
of property in 2007, 43% of which belonged to Mercantil Banco Universal, 32% to Mercantil
Seguros and 24% to Mercantil Inversiones y Valores. Automotive vehicles recovered by Mercantil
Seguros were sold at auction. Ten auctions produced a total of Bs. 16,170 million (54.1% more
than the Bs. 10,492 million produced in 2006).
At the close of 2007, Mercantil Inversiones y Valores, C.A. registered assets and liabilities of Bs.
51,207 million and Bs. 47,790 million respectively. Earnings were down because some minority
investments had been transferred to Mercantil Servicios Financieros.
Mercantil Inversiones y Valores
Consolidated
Year Ended
(In millions of Bs. and US$. )
2007
2007
2006
2005
US$(1)
bolivars
bolivars
bolivars
Total Assets
24
51,207
101,842
92,769
Invesments in Securities
18
38,896
86,645
79,229
Equity
22
47,790
92,153
81,420
(2)
(3,426)
30,151
115,262
(1)
Figures in accordance with the accounting Principles Generally Accepted in Venezuela
(2) Dollar figures are given for reference purposes only and are converted at the controlled exchange rate at December 31, 2007 of Bs. 2,144.60/1US$. There
M e r c a n t i l
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S e r v i c i o s
Sin título • 1963 • Lithograph on paper • 45.5 x 38 cm
Credit Ratings
During 2007 credit ratings were conducted on
Mercantil
Banco
Commercebank
Universal,
Holding
and
Mercantil
Mercantil
Commercebank N.A., as well as on Mercantil
Servicios Financieros (Mercantil). These ratings reflect the solidity of Mercantil and its institutions
in the countries where they are present.
The following table summarizes the credit ratings that Clave Sociedad Calificadora de Riesgo,
Fitch Ratings and Moody's Investors Service gave to Mercantil Servicios Financieros, Mercantil,
C.A. Banco Universal, Mercantil Commercebank Holding and Mercantil Commercebank N.A.
The national rating for Mercantil Servicios Financieros reflects its leadership in the Venezuelan
financial sector through its main subsidiaries in Venezuela: Mercantil Banco Universal, Mercantil
Seguros and Mercantil Merinvest as well as its growing market position in the State of Florida in
the United States, through Mercantil Commercebank Holding and Mercantil Commercebank
N.A. Sound risk management and the constant improvement of its organizational structure were
key to this achievement.
All the ratings for Mercantil’s issues are among the best assigned to a Venezuelan issuer and
reflect the low risk of those instruments based on the institution’s capacity to make capital and
interest payments under the agreed terms and conditions.
The national risk ratings for Mercantil Banco Universal reflect a sound market position, optimum
risk management, a stable and diversified deposit base, and adequate levels of capitalization and
liquidity. They are also the best ratings of a financial institution in Venezuela. The international
ratings are largely dependent on the sovereign risk of Venezuela, currently rated BB- by Fitch
and B2 by Moody’s.
The rating for Mercantil Commercebank Holding and Mercantil Commercebank N.A. is
investment grade and the credit risk is low. This is an excellent rating and reflects the bank’s
efficient management of liquidity, sound quality of its assets and stable financing profile.
Mercantil Servicios Financieros
National Ratings
Long Term
Short Term
Unsecured Bonds (Long Term)
Commercial Paper (Short Term)
National Ratings
Long Term
Short Term
International Ratings
Long Term (foreing currency)
Short Term (foreing currency)
Individual
Mercantil Commercebank Holding and
Mercantil Commercebank N.A.
National Ratings
Long Term (Deposits)
Long Term
Short Term
Individual
Fitch Ratings
Clave
AA+ (Ven)
F1+ (Ven)
A2
A1
A2
A1
Fitch Ratings
Moody’s
AA (Ven)
F1 (Ven)
-
B+
B
D
B3
D–
Fitch Ratings
BBB
BBBF3
B/C
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Sin título • Sin fecha • Watercolor on paper • 53 x 42 cm
Prevention and Control of
Money Laundering
The mission of Mercantil’s Prevention and
Control of Money Laundering Unit is to ensure
compliance with the Money Laundering
legislation in force in Venezuela and abroad,
supporting the organization through a systematic, professional approach, to detect, follow up and
manage reputational risk due to money laundering and to provide data, analysis and
recommendations to guarantee that its performance adheres to the regulations and best
international practices in that field, such as the recommendations of the Financial Action Task
Force (GAFI), the Caribbean Financial Action Task Force (GAFIC), the Wolfsberg Principles and the
Customer Due Diligence for Banks of the Basel Committee on Banking Supervision of the Bank
for International Settlements.
The control and oversight mechanisms in
place, especially at Mercantil’s subsidiaries
The “Know your Customer” policy is crucial to the timely
detection of operations presumed to involve money laundering.
Mercantil Banco Universal, Mercantil Seguros,
Mercantil Merinvest, Mercantil Sociedad
Administradora de Entidades de Inversión
Colectiva, Mercantil Bank Curaçao, Banco del
Centro S.A. (Panama),
Mercantil Bank
(Schweiz) AG in Switzerland and Mercantil
Commercebank subsidiaries, facilitate on the one hand the timely detection of operations which,
because of the nature of their activities, are presumed to involve money laundering, and on the
other to report them to the appropriate authorities.
The “Know your Customer” policy is crucial to the timely detection of operations presumed to
involve money laundering. Anti-money laundering compliance processes are reviewed on a
regular basis by the supervisory authorities of the different jurisdictions where Mercantil
Servicios Financieros operates and also by the Independent and Internal Auditors.
There is a “Comprehensive System for the Prevention and Control of Money Laundering” that
ensures compliance with the regulations in force. It is comprised by a Compliance Officer, a
multidisciplinary committee, a Prevention and Control Unit and a Compliance Unit whose staff
is responsible for areas liable to involve money laundering risks. There are also operational, followup, evaluation and control plans, a Code of Ethics, a manual of Policies, Standards and Procedures
for the Prevention and Control of Money Laundering, and training programs.
During 2007, its action was concentrated mainly on strengthening and minimizing moneylaundering risks, through the approval and establishment of policies and updating of the Policy,
Standards and Procedures and Anti-Money Laundering Manual.
Additionally, new staff appointments in administrative areas, implementation of new monitoring
and control process in administrative and operating areas, staff training with particular emphasis
on preparing people to work in the most risk-sensitive areas and acquisition of cutting-edge
technology, has provided the organization with an efficient and effective structure and a high
level of professional competency in the field of risk management, within an environment of
continuous improvement.
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Employees from the Legal Counsel, Risk Management, Human Resources, Corporate and
Investment Banking, Private Banking, Asset Management, Commercial and Personal Banking,
Finance, Operations and Technology, New Financial Business, Internal Audit and Compliance
areas attended national and international conferences on money laundering and terrorism
financing.
Mercantil Servicios Financieros developed an extensive program of training courses and
workshops in which 8,300 employees participated.
Mercantil Banco Universal’s “Knowing is Winning” program included a program of activities
designed to discourage workers and their friends and relatives from involvement in drugtrafficking activities and drug use in accordance with the provisions of Article 96 of the Law
against Against Illicit Traffic and Use of Narcotic Drugs and Psychotropic Substances in
Venezuela.
Mercantil Servicios Financieros liaises constantly with the regulatory bodies and the
communication between them is smooth and effective.
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Internal Auditing
Mercantil Servicios Financieros (Mercantil)
has an Internal Audit Unit that evaluates the
effectiveness of the internal control system,
risk management and corporate governance
through a systemic, professional and independent approach and the efficient use of resources.
This unit provides information, analysis and issues recommendations, on a regular basis, on operations, finance, systems, regulations, taxation and quality (ISO 9001-2000) in offices, branches,
agencies, units and central processes for all the subsidiaries and affiliates in Venezuela and
abroad, in order to ensure that any action taken complies with the law and with the policies, standards and procedures established by the organization. All this is implemented in coordination
with the Board of Directors Audit Committee.
Mercantil’s Internal Audit Unit is made up of the Audit Units of Mercantil Banco Universal, Mercantil Seguros, Asset Management and Mercantil Commercebank. When deemed necessary the
services of independent consultants are also engaged. During 2007, a total of 1,208 audits were
conducted. These were distributed as follows:
Audit Type
General
Special
Follow-up
Quality
Central
Processes
Branches
and
Agencies
Money Laundering Prevention and Control
MERCANTIL BANCO UNIVERSAL 499
57
13
82
41
308
1,000
AUDITS
Total
ASSET MANAGEMENT
16
-
-
-
4
1
21
MERCANTIL SEGUROS
44
15
1
-
7
31
98
MERCANTIL COMMERCEBANK
73
8
5
-
3
-
89
6632
80
19
82
55
340
1,208
TOTAL Mercantil
Mercantil’s Internal Audit Unit strengthened the internal controls applied in the different units,
affording priority to processes with the greatest risk impact. Resources were used mainly to identify shortcomings and risks; following up the corrective action taken by the unit and process administrators; supporting the independent auditors during their audits; carrying out evaluations
in the area of Prevention and Control of Money Laundering; ascertaining that the process units
certified or to be certified by Fondonorma comply with the Quality Standards (ISO 9001-2000)
and supporting the development and implementation of the Monetary Conversion and Tax on Financial Transactions (ITF) projects.
The Internal Audit Unit of Mercantil Banco Universal checked compliance by the processes certified by Fondonorma in 2007: Handling and Processing of Bank Teller Transactions at the main
(“Type A”) offices in each region nationwide; Change in the Scope of the Certified Process of the
Mercantil Call Center (CAM) in Caracas; Mercantil Personal Online Banking and Mercantil Business Online Banking, and maintenance of the processes certified in previous years.
M e r c a n t i l
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Sin título • 1966 • Lithograph on paper • 56,5 x 56,8 cm
Social Commitment
A Corporate Value
In line with the Social Commitment of
Mercantil Servicios Financieros, the institution made direct social investments through
Fundación Mercantil and its subsidiaries Mercantil Banco Universal, Mercantil Seguros and
Mercantil Merinvest in Venezuela, and Mercantil Commercebank in the United States, which
totaled Bs. 10,972 million. An additional contribution of Bs. 1 billion was made to Fundación
Mercantil in Venezuela to strengthen the equity fund from which donations and sponsorships
are disbursed.
In 2007, Mercantil continued to honor its Social Commitment to support programs and
projects aimed at attaining the UN Millennium Development Goals. These included school
education and healthcare programs. Mercantil earmarked 50% of its contributions in this area
for educational institutions and 50% for social development, cultural, healthcare and religious
institutions.
Mercantil’s Social Contributions
Additionally, in keeping with the provisions of the Anti-Money Laundering Act and the and
Year 2007
Science and Technology Act, Mercantil made donations of Bs. 989 million to support research
programs, train human talent and encourage innovative capacities in the communities.
Education
As part of Mercantil’s ongoing support for school education, the 25th anniversary of the
“Ponle Cariño a tu Escuela” (Give your School a Helping Hand) program highlighted the
importance of the development activity implemented in conjunction with the Foundation for
Educational Buildings (FEDE), which operates under the Ministry for Housing and Habitat
and supports Venezuelan education and community action. It is a national benchmark in this
field.
Education
50%
During 2007 a number of programs were implemented at national public and private
Social Welfare
25%
universities in Venezuela: Universidad Central de Venezuela, Simón Bolívar, Metropolitana,
Culture
14%
Católica Andrés Bello and Monteávila in Caracas, and Universidad de Los Andes in Zulia state.
Health
7%
Religious Institutions
4%
A scholarship agreement was signed with Florida International University in the United States
to support a series of activities at those Venezuelan universities in order to promote
professional development projects for their students.
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S e r v i c i o s
Social and healthcare programs
The public and private social development organizations are implementing some important
projects, programs and activities to tackle nutritional problems among children and youth,
prevent illness, drug abuse and to encourage this population not to drop out of school or to
return to the education system. Mercantil has directly supported the social and cultural
programs implemented by a number of organizations, in particular Comedores Madre Teresa
de Cálcuta, Centro El Portal, Fipan, Una Mano Amiga, Asociación Civil Un Mundo Mejor, Salud
y Familia, Programa de Atención Comunitaria a la Infancia, Instituto de Capacitación Profesional
para la Mujer, Unamos al Mundo por la Vida and Organización Social Católica San Ignacio.
Through Asociación Civil Cáritas de Venezuela, Mercantil created a mechanism to assist the
population in the event of natural disasters. During 2007 several such situations were tackled
in Venezuela, Peru and Bolivia.
The company also supported various institutions and foundations involved in different
programs and projects to address the health needs of the population, children and youngsters
in particular. Especially worthy of mention are the Friends of Children with Cancer Foundation
(Fundación Amigos del Niño con Cáncer), Cardioamigos, Centro de Salud Santa Inés, Hospital
Ortopédico Infantil, Hospital San Juan de Dios, Centro de Salud Santa Inés, Hospital Clínico
Universitario de Caracas, Fundación Cardiológica Cardiocentro Sociedad Anticancerosa de
Aragua and Hogar Clínica San Rafael.
Quality of life and environment
During the year, the company provided backing for various educational programs to foster
environmental awareness, promote initiatives and improve the quality of life of communities
through environmental conservation and cultural activities. Mercantil supported the
Fundación Tierra Viva’s “Communication for Sustainable Development” programs; the
awareness activities of the Friends of the Tree Society (Sadarbol) and projects of the
Venezuela Audubon Society.
Culture
Mercantil also sponsored numerous cultural initiatives in the area of plastic art, music,
literature and theatre, through the Museo de Arte Colonial, Fundación Camerata de Caracas
and the Fundación Ballet Contemporáneo de Caracas and exhibitions by Venezuela painter
Armando Reverón at the Museum of Modern Art (MoMA) and by the Venezuelan Youth
Orchestra at Carnegie Hall, both in New York.
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Support for the social work of religious institutions
Because it is essential to disseminate moral and ethical values to foster the healthy
development of society, Mercantil has been supporting the social programs of the Venezuelan
Episcopal Conference and in particular the pastoral programs for families, as well as the
sacerdotal vocation programs in Venezuela promoted by the John Paul II Ecclesiastical
Education Foundation, FESE (Fundación para la Educación Eclesiástica Juan Pablo II) and the
Friends of the Seminary Foundation (Fundación Amigos del Seminario).
Social Development Funds
In 2004 Mercantil created the “Social Capital Funds Program,” whose purpose is to set up trust
funds to strengthen and encourage the self-sustainability of the beneficiary institutions:
Cardioamigos, FESE, Fundación de Amigos del Niño con Cáncer and Fundación Scout de
Venezuela. Contributions to these programs between 2004 and 2007 totaled Bs. 2,100 million.
Through this program those institutions must contribute towards a long-term trust fund.
Special mention should be made of the voluntary work undertaken by Mercantil employees
in Venezuela and abroad in numerous educational and community activities, and in particular
employees of Mercantil Banco Universal and Mercantil Seguros as school instructors in
programs implemented by the Young Entrepreneurs Institution in Venezuela (Junior
Achievement) which benefited more than 2,000 pupils; and visits, musical performances and
gifts of toys to children from low-income families at hospitals and children’s homes, in a joint
effort with the Mercantil Choir.
In the United States the company’s social commitment in southern Florida, USA, involved
support for the programs of the following organizations: March of Dimes, Habitat for
Humanity, American Red Cross, American Cancer Society, Junior Achievement, American
Development Smiles, Coral Gables Community Foundation, Museum of fine Arts Houston
and The Julliard School New York.
Mercantil earmarked 50% of its contributions during 2007 to
education institutions, 25% to social development
institutions; 14 % to cultural institutions; 7 % to healthcare
institutions and 4 % to religious institutions.
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TAM-1854 • 1966 • Lithograph on paper • 28 x 28 cm
Corporate Governance
Mercantil Servicios Financieros is registered
in Venezuela and its shares are listed on the
Caracas Stock Exchange. It also has a
program of Level 1 ADRs which are traded
over the counter in the USA.
Mercantil’s Corporate Governance structure is based on its By-Laws, the Capital Market Law, the
Code of Commerce and the Resolutions issued by the National Securities Commission (CNV) on
the subject.
Ever since Mercantil was incorporated, its Administrators have maintained a close relationship
with their shareholders, customers, creditors and employees, marked by the highest professional
and ethical principles to guarantee transparent, efficient and proper management. The Corporate
Governance structure has been designed to facilitate the supervision and work of the Board of
Directors and Management to safeguard the interests of shareholders, customers, creditors and
staff alike.
In the area of Corporate Governance Mercantil has not restricted its activities to the requirements
of the standards. To remain at the forefront in this field, the Board of Directors and Management
of Mercantil study the latest trends in this field so that the Company’s Corporate Governance
structure can be adapted to current best practices.
Given the volume and complexity of Mercantil’s activity and in line with the Company’s
succession policy, last December the Board of Directors agreed to separate to appoint two
different people to the positions of President and Executive President, which, according to the
Bylaws, since the company was incorporated, had been held by Gustavo A. Marturet. Dr. Marturet
will continue to be President, while the position of Executive President will be held by Mr.
Alejandro González Sosa.
Following the recommendations of the Compensation Committee, which receives advice from
management consulting firm McKinsey & Company, decided to add to the President’s current
responsibilities under the Bylaws the coordination of activities closely connected with his
fiduciary function, which are undertaken by the following units that report to him: Legal
Counsel, Strategic Planning, Global Risk Management, Human Resources, Institutional
Marketing, Corporate Communications. The Audit Unit and the Secretariat will continue to
report to the President on administrative matters.
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S e r v i c i o s
The following Global Business and Support Units will report to the Executive President:
Commercial and Personal Banking, Corporate and Investment Banking, Private Banking and Asset
Management, Finance, Insurance and New Business, Global Operations and Technology. The
Executive President is also responsible for the executive coordination of all Mercantil’s
subsidiaries.
All Mercantil’s activities are carried out according to the strictest ethical and professional
principles. Mercantil and its subsidiaries have a Code of Ethics that encompasses a series of
ethical principles and values that guide decisions and actions.
It covers fundamental duties such as probity, loyalty, efficiency, co-fraternity, honesty, sincerity,
dignity and law abidance. It also sets standards on conflict settlement in the event of conflicts of
interest and complements the provisions of the Bylaws in this area which stipulate how such
situations should be handled and ban Board Members from taking part in discussions on any
matters in which they, or their partners in civil or mercantile companies have a personal interest,
requiring that directors remain outside the meeting room until a final resolution is reached.
Mercantil’s governance structure is comprised by the Shareholders’ Meeting, followed by the
Board of Directors, with its Audit, Risk and Compensation Committees, the Executive Committee,
the President and Executive President, the Internal Auditor and the Compliance Officer.
Mercantil’s governance structure consists of the Meeting of Shareholders followed by the Board
of Directors with its Audit, Risk and Compensation Committees, the Executive Committee, the
President and the Executive President, the Internal Auditor and the Compliance Officer.
Board of Directors
The Board of Directors must act efficiently and in the interests of its shareholders, creditors,
customers, employees and the community in general. It is responsible for defining corporate
strategies, determining business policies and establishing and controlling the strategic direction
of the institution. The Board supervises management of the Organization’s different business
and support areas and evaluates results by comparing them against previously approved plans
and strategies, performance in previous years and the general banking environment.
The majority of the Directors on the Board are independent of the Mercantil’s Administration, in
keeping with best corporate governance practices, This further demonstrates their commitment
to meet international management standards.
The Directors are highly qualified and well-versed in business and finance which guarantees their
performance. The Board of Directors is made up of 9 directors and 18 alternate directors. It
appoints a President and an Executive President from its members and these positions may be
held by the same person.The Board meets once a month and whenever else the President deems
necessary.
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To ensure better transparency and control over management procedures, Mercantil’s By-Laws
have provided for the creation of the Compensation and Audit Committees whose functions are
governed thereby. Since 1981, the Bylaws of Mercantil Banco Universal have stipulated that both
these Committees must exist. An Ordinary Shareholders’ Meeting held in March 2006 passed a
proposal submitted by the Board of Directors to amend the stipulation in the Bylaws that had
been approved at a Board meeting on May 31, 2001 to give the Risk Committee legal status. These
Committees are comprised mainly of Directors who are independent from the bank’s
Administration.
Additionally, as a result of its tradition to adhere to best Corporate Governance practices, the
Audit Committee approved the Bylaws. This document describes the purpose of the Committee
and its functions and responsibilities in detail. It also states that its members must evaluate
compliance therewith each year and affirms the obligation that the majority of its members must
be independent from the bank’s administration, adding that at least one of them must have
considerable accountancy or financial management experience.
Sin título • 1966 • Lithograph on paper • 56,5 x 56.2 cm
Board of Directors Compensation Committee
Members
This Committee is responsible for setting the organization’s remuneration and benefits policy, approving the remune-
Gustavo J. Vollmer H. (Coordinador)
Alfredo Travieso P.
ration of the President and senior management and notifying the Board of Directors thereof. In 2007 the Compensa-
Víctor J. Sierra
Gonzalo Mendoza
Germán Sánchez Myles
President and members of the Executive Committee; review of the succession policy; scope and eligibility of the com-
Luis Esteban Palacios W.
Luis Alfredo Sanabria U.
Gustavo Marturet (Ex oficio)
Alejandro González Sosa (Ex oficio)
tion Committee met 11 times to report on the following matters: review of the remuneration and bonus payments of the
pany’s short-term incentive program; follow-up phases IV and V of the employee stock purchase plan; report on special
staff financing programs; annual performance-based salary increase policy for employees of local and overseas subsidiaries; consider the Mercantil retirement pension plan; review fees for advice on legal, fiscal and migration matters,
make recommendation on the setting of the fees of the Directors on the Boards and Committees of Mercantil and its
subsidiaries’ Board and Committee meetings; report on the 2007 organizational environment results; General Special
and Sole Stock Purchase Plan for employees of subsidiaries in Venezuela on the occasion of the 80th anniversary of the
company’s foundation; consider increasing the nominal value of Mercantil shares in the individual trust fund related to
the Long-Term Incentive Plan and on participants in the general stock purchase plan; impact of the ruling by the Supreme
Court of Justice on Corporate Income Tax in Venezuela; scope of the Working Conditions and Environment Act; review
staff turnover and present Mercantil’s new strategic branding plan.
Board of Directors Audit Committee
Members
The Committee has responsibility for reviewing and discussing accounting and management policies, opinions and re-
Luis A. Romero M. (Coordinador)
Jonathan Coles W.
Eduardo Mier y Terán
Federico Vollmer A.
Gustavo Machado C.
Francisco Monaldi
Oscar Machado K.
Claudio Dolman
ports of the organization’s internal and external auditors, establishing Reserves, reviewing the Financial Statements
and their Notes and formulating recommendations to the Board on matters incumbent upon it. It also approves the engagement and remuneration of external auditors. In 2007 the Audit Committee met nine times and discussed the following topics: review of the financial statements of Mercantil and its subsidiaries, the internal auditing activities of
Mercantil’s different subsidiaries and anti-money laundering activities, strategic risk agenda, strategic brand project, consideration of the IFRS, considerations on the financial consolidation of the BMA Foundation and Pro Atheneum Foundation, consideration of the remuneration of external auditors; consideration of implementation of Sox best practices,
follow-up of the project to present financial statements in accordance with US GAAP, review of the financial statements
of Mercantil Banco Universal at the close of 2006 also under US GAAP, comparing them with the requirements of the
Superintendency of Banks and other Financial Institutions and of the National Securities Commission, and consideration of internal oversight aspects.
Board of Directors Risk Committee
Members
Approves Mercantil’s risk profile, policies and limits. Optimizes the use of capital to support the approved risk profile. In 2007
Gustavo J. Vollmer A. (Coordinador)
Roberto Vainrub
the Risk Committee met five times and dealt with the following topics: review and discussion of loan portfolio revisions; re-
Miguel Ángel Capriles L.
Gustavo Galdo
diaries, cross-border sovereign risk limits and internal credit limits of the Business Committees; review of progress reports
Luis A. Marturet
Guillermo Sosa S.
Carlos Hellmund B.
Carlos Zuloaga T.
ports on market risk and trading activity, and on operational risk; establishment of market risk limits for the different subsion compliance with the program of activities scheduled planned for the different Risk Management Units for 2006 and planning for 2007, progress reports on the asset recovery plan, approved application of the Basic Basel II Indicator, the insurance
policy management report at Mercantil, approval of financing exposure limits through the Mutual Assets product at Mercantil Merinvest, Casa de Bolsa; consideration of the strategic brand product and the strategic risk agenda; report on the
Stress Test Investment Portfolio methodology and Mercantil Commercebank’s market risk methodology; establishment of
the asset management liquidity policy and the credit risk policy of Mercantil and its subsidiaries Mercantil Banco Universal
and Mercantil Commercebank; review of the results of measuring the risk and oversight culture; restructuring of the Master Scale Rating for clients and agreement to homologate Mercantil’s Banking Business Lines in Venezuela according to
Basel guidelines.
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Executive Committee
Mercantil has an Executive Committee comprising a President and Executive President plus nine
senior managers from the Business and Support areas of the organization, which guarantees the
timely implementation of Mercantil’s decisions and strategies.
The Committee meets once a week and holds extraordinary meetings as required. It is responsible
for evaluating options and formulating recommendations on policy matters, objectives, strategies
and organization and submitting them to the Board of Directors for consideration. It must advise
Management on the implementation of the policies adopted and is responsible for evaluating the
result of this.
President
The President of the Company chairs the Board of Directors and, together with the Executive
President and the other Board members, is responsible for managing the company’s activities and
businesses. He chairs the shareholders’ meetings, board meetings and meetings of the Executive
Committee, and assisting and advising them on policies and objectives, strategies and major
decisions, as well as representing the company before political and administrative authorities
and other public or private entities or individuals.
In addition to the functions stipulated in the Bylaws, the Board of Directors decided to add to the
President’s responsibilities under the Bylaws the coordination of the activities undertaken by
the following units: Legal Counsel, Strategic Planning, Global Risk Management, Human
Resources, Institutional Marketing, Corporate Communications. The Audit Unit and the
Secretariat report directly to the Board of Directors and reports to the Office of the President on
administrative matters.
Executive President
The Executive President is responsible for the executive management and coordination of the
company; submitting to the consideration of the Board of Directors and the Executive Committee
any major policies, objectives, strategies and decisions and informing both bodies periodically of
the results of their operations, as well as designing, establishing and developing the company’s
organizational structure and appointing and removing general managers, consultants and
advisers as necessary.
The following Global and Business Support Units report to the Executive President: Commercial
and Personal Banking, Corporate and Investment Banking, Private Banking and Asset
Management, Finance, Insurance and New Business, and Global Operations and Technology. The
Executive President is also responsible for the executive coordination of all Mercantil’s
subsidiaries.
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Internal Auditor
In accordance with the regulations applicable to Mercantil and its subsidiaries, Mercantil has an
Internal Audit Manager who works in conjunction with the Audit Committee when the overall
operations of Mercantil and its subsidiaries are examined.
The Internal Audit Manager heads the Global Internal Audit Unit, which designs Mercantil’s
internal audit plan together with the Audit Committee. This plan is executed throughout the
year. The results of the internal audits are reviewed and discussed periodically by the Audit
Committee and the Board of Directors, so that any corrective actions necessary may be taken.
acciones requeridas para corregir las deficiencias detectadas.
Compliance Officer
In accordance with the regulations on the matter, Mercantil has a Compliance Officer who chairs
the Committee on the Prevention and Control of Money Laundering and is responsible for
designing the Annual Operating Plan for Prevention and Control of Money Laundering,
coordinating and supervising the Anti Money-Laundering Committee and the Money Laundering
Prevention and Compliance Unit, coordinating staff training activities on anti-money laundering
and maintaining institutional relations with the regulatory bodies on the matter. The Compliance
Officer also advises the Audit Committee and the Board of Directors on compliance with their
anti-money laundering obligations under the legislation in force.
Disclosure of Information
In keeping with the standards of the regulatory organizations, Mercantil prepares and publishes
the company’s financial statements on a semi-annual basis. In compliance with the pertinent
regulations, the company prepares a quarterly report containing detailed and precise information
on economic and financial data, as well as other relevant data for the market, which is disclosed
to the public, the National Securities Commission and the Caracas Stock Exchange through
nationwide distribution methods, and by e-mail to analysts and participants in the local and
international markets.
Information is also distributed periodically to the Securities and Exchange Commission in
accordance with its obligation to maintain Mercantil’s Level 1 ADR program in the United States
of America. Financial information on the company is also available on the website of the Mercantil
Banco Universal subsidiary at www.bancomercantil.com. Thus Mercantil fulfills the regulations
on immediate dissemination of any information that may materially affect the price of its shares.
Lastly, but certainly not least, Mercantil has an Investor Relations Unit, whose functions include
the timely dissemination of information to investors by different means, including events and
presentations.
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Cubo en esfera • 1966 • Iron and paint • 57,4 x 50,5 x 45 cm
TAM-1855 • 1966 • Lithograph on paper • 27,9 x 27,9 cm
Report of the Board of Directors of Mercantil Servicios Financieros
on Compliance with the Corporate Governance Principles adopted
by the Venezuelan National Securities Commission (CNV)
Pursuant to Resolution N° 19-1-2005 of the
National Securities Commission (CNV) dated
February 2, 2005, published in Official Gazette
of the Bolivarian Republic of Venezuela N°
38,129 of February 17, 2005, the Board of Directors of Mercantil Servicios Financieros submits to
the Ordinary General Shareholders’ Assembly of this report on the degree of compliance with the
Principles of Corporate Governance adopted by the National Securities Commission as provided
for in said Resolution.
Independent Directors of the Board of Directors
At its March 12, 2008 meeting, the Board of Directors examined the independence of each
director and determined that, according to the criteria on the independence of Directors,
contained in the above-mentioned resolution, at least one fifth of the members of the Board of
Mercantil Servicios Financieros are independent directors. Thus Mercantil Servicios Financieros
complies with the provisions set out on this matter in the Resolution issued by the National
Securities Commission on the Principles of Corporate Governance whereby at least one fifth of
the Board of Directors must be comprised by independent directors.
In order to meet the level of transparency and disclosure required on this matter, the report
distributed to the shareholders contains a brief resume on each Director.
Audit Committee
All the members who vote on the Audit Committee of Mercantil Servicios Financieros are
independent directors, according to the criteria on the independence of directors contained
in said Resolution. Dr. Gustavo A. Marturet, in his capacity as President of the company,
assisted this Committee as an ex officio member. The Audit Committee has responsibilities
and exercises them in matters regarding the Principles of Corporate Governance. The
Committee also deals with other matters. The chapter of the report that refers to Corporate
Governance states the matters dealt with by this Committee in 2006. A resume of each
member is included in this report.
All the members who vote on the Audit Committee of Mercantil Servicios Financieros are
independent directors, according to the criteria on the independence of directors contained in
said Resolution. Dr. Gustavo A. Marturet, in his capacity as President of the company, and
Alejandro González Sosa, in his capacity as Executive President, assisted this Committee as ex
officio members. The Audit Committee has responsibilities and exercises them on matters
connected with the Principles of Corporate Governance. The Committee deals with other issues
as well. The matters dealt with by this Committee in 2007 are indicated in the Corporate
Governance chapter of this report. A resume of each member is also included in the report.
In view of the above, Mercantil Servicios Financieros fulfills the Principles of Corporate
Governance adopted by the National Securities Commission (CNV).
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Awards and
Acknowledgements
During 2007, Mercantil Servicios Financieros and its subsidiaries in Venezuela were
acknowledged by prestigious specialized national and international publications and risk
rating companies. Mercantil Banco Universal was granted Quality Certificates for eight of its
lines of service.
These recognitions reaffirm the commitment of Mercantil Servicios Financieros to the
wellbeing of its clients, through a consistent effort driven by the highest ethical principles
and its determination to provide a first class service.
• Mercantil Servicios Financieros was included on the list of the Top 2000 Corporations in the
World published by Forbes magazine in its March 2007 edition. This means that Mercantil
climbed 179 places to number 1,617 and it is the only Venezuelan financial institution and
the first of the two Venezuelan companies to be included in that select ranking.
• In the July 2007 editions of the U.S. magazine American Banker, Mercantil Servicios
Financieros was seventeenth on the list of Foreign Companies Ranked by deposits of U.S.
Banks.
• Fitch Venezuela assigned an A1 risk rating to the issue of Mercantil Servicios Financieros
C.A., 2007-II commercial paper for a maximum of Bs.100 billion at terms of between 15 and
360 days, thereby ratifying that rating for all its outstanding short-term issues. It also
assigned an A2 rating to Mercantil Servicios Financieros C.A. 2007-II Unsecured Bonds up
to a maximum of Bs.180,000 million and maturing at between 12 and 60 months. It rated
long-term issues outstanding to date as A2.
• In its September 2007 issue, Global Finance magazine named Mercantil Bank Universal as
one of the financial institutions with the best Internet Banking practices.
• Moody’s raised its financial strength indicator rating for Mercantil Banco Universal to Dafter applying a new analysis strategy to review the ratings of Latin American banks.
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• For the third year running an employee survey conducted by the Great Place to Work
Institute confirmed that Mercantil Banco Universal is the country’s leading financial
institution and the eighth best firm to work for in Venezuela and showing that it is one of
the organizations that provides its employees in Venezuela with the most benefits.
• In November the Venezuelan Standardization and Quality Certification Institute,
Fondonorma approved the ISO 9001:2000 Quality Management System certification for
Mercantil’s banking transactions carried out through 93 Mercantil Banco Universal type
“A’ offices nationwide.
Fondonorma certified Mercantil Banco Universal’s following lines: Mercantil Call Center,
online banking, printing and distribution of credit cards and home delivery of check books;
corporate client services for settlement, custody and payment in the secondary fixed-income
securities market; processing of operations for the settlement, collection, extension and
renewal of promissory notes and registration of performance bonds and guarantees required
by Middle Market and Business Banking; handling and processing of customer transactions
at regional head offices; and processing of transactions through the ATM network. Mercantil
Banco Universal has obtained quality certifications for its services since 2001.
• Mercantil Commercebank, N.A. was rated “Outstanding” by the Office of the Comptroller
of the Currency (OCC) in its evaluation of the Bank’s performance under the Reinvestment
in the Community Act (CRA). This is the highest rating given by the OCC to any banking
institution.
• The purpose of the Reinvestment in the Community Act passed in 1977 Law is to encourage
banks and savings institutions to respond to the credit needs of all the segments of their
communities, including the low and moderate-income areas. Each year the regulations
evaluate the degree of compliance by the entire financial system with its provisions and
since 1998 Mercantil Commercebank’s performance in that respect has been classified as
outstanding
• The Greater Miami Chamber of Commerce awarded Mercantil Commercebank its “Good to
Great” award in 2007.
• The regional prizes program honors companies in southern Florida that demonstrate
management leadership capacity and have a stable workforce.
• In July American Banker magazine ranked Mercantil Commercebank Holding 121st on the
list of Bank Holding Companies with the Largest U.S. Business Loan Portfolios.
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Sin título (4/30) • 1991 • Serigraph on paper • 64 x 45,4 cm
New Brand
Strategy for 2007
Mercantil Servicios Financieros has an outstanding track record and serves the needs
of clients and communities by providing
high-quality banking, insurance and asset
management products which it customizes by market segment.
In 2007 the strategic brand project was concluded. Its objective is to highlight the value of
the Mercantil brand as a financial services corporation with national and international presence which consolidates a series of financial businesses and activities that had hitherto
been available under different trading names, graphic brand designs and legal structures.
The proposal to align the identity of all the subsidiaries of Mercantil Servicios Financieros
All Mercantil Servicios
Financieros subsidiaries aligned
their trading names:
under the Mercantil brand name was approved.
Along with these changes the company adopted a modern new symbology and logo to use
a more contemporary approach to express its commitment to the clients of its subsidiaries
at home and abroad, and to reinforce its competitive edge as a solid, dynamic and forward-
Mercantil, C.A. Banco Universal
thinking organization.
The new strategy established the promise of the Mercantil brand as an organization “Com-
Mercantil Seguros, C.A.
Mercantil Merinvest, C.A.
Mercantil Merinvest,
Casa de Bolsa, C.A.
mitted to your wellbeing” which that reflects the commitment of all the staff of Mercantil
and its subsidiaries to provide follow-up for its customers in order to meet their needs
quickly and efficiently through an innovative, proactive attitude, anticipating market requirements. This promise also included the brand’s advertising signature under the slogan
“Impulsa tu mundo” in Venezuela and “Empowering your world“ abroad.
The new corporate identify ratifies Mercantil’s commitment to guarantee the wellbeing of
Mercantil Servicios
de Inversión, C.A.
its clients, adding value for its shareholders, maintaining the best human resources and
working with and involving the communities in which they do business.
Mercantil Commercebank, N.A.
Investment Services
Trust Company
Mercantil Bank (Schweiz) AG
Mercantil Bank Curaçao N.V.
Mercantil Bank (Panamá)
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S e r v i c i o s
New Graphic Identity for the Mercantil Brand
The new graphic identify of the Mercantil brand replaces the one used in all the corporation’s activities for over 25 years. The changes were implemented through an extensive informational
program targeted at Mercantil’s different stakeholders: its workers, clients, shareholders, regulatory agencies and the communities in which it operates. The new design projects the image of
a sound, dynamic, innovative organization, the blue logo reflects experience and the orange its
quality and cordiality. The style of the new logo is modern and attractive.
As of November 6, 2007, Mercantil’s graphic identity has gradually been incorporated in all the
customer service, products and services channels of its different subsidiaries in Venezuela and
the United States. It is estimated that at the close of the semester of 2008 the new brand identity had been concluded and in use.
Right from the outset Mercantil involved its staff in this change in image by structuring a faceto-face communication program to disseminate the new logo and trading names, which involved
9,000 employees in informational events.
According to the results of a survey conducted by Consultores 21 between November 8 and
19 in Caracas, Mercantil’s customers expressed positive opinions about the changeover to
the new image.
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Management
Board of Directors
Directors
Gustavo Antonio Marturet Machado
Luis A. Romero M.
Electrical Engineer
President
President and member of the Boards of Directors of Mercantil Servicios Financieros and Mercantil Banco Universal. Chairman of the Boards of Directors of Mercantil Commercebank Holding, Mercantil Commercebank N.A. and Mercantil
Merinvest. President of Todo1 Services and Fundación Mercantil. Member of the
Board of Directors of Mercantil Seguros and Mercantil Bank (Schweiz) AG. Member of the Board of Directors of the Institute of International Finance, In. (IIF).
Vice President of Venezuelan American Chamber of Commerce and Industry (VenAmCham). Member of the Chairman’s Advisory Council of the Council of the
Americas. President John Paul II Foundation for Ecclesiastical Education (FESE).
Former Executive President of Mercantil Servicios Financieros and Mercantil
Banco Universal, President of the Venezuelan Bankers Association (ABV), National Banking Council (CBN), Council of Venezuelan American Entrepreneurs
(CEVEU), Colombian Venezuelan Economic Integration Chamber (CAVECOL).
Former Member of the Advisory Council of the Central Bank of Venezuela (BCV),
Member of the Board of Directors of the Andean Development Corporation (CAF)
and Member of the Board of Directors of various associations connected with the
financial and production sector. Civil Engineer, graduate of Universidad Central de
Venezuela (1962).
Gustavo J. Vollmer H.
Former Chairman of the Board of Mercantil Banco Universal
Civil Engineer graduated from Cornell University (USA), with a Doctorate
from Universidad Central de Venezuela (UCV). Director of the Board of Mercantil Servicios Financieros, C.A. and Mercantil Banco Universal. Member of
the Board of Directors of S.C. Johnson & Son de Venezuela, C.A., IBM de Venezuela and IBM World Trade, Americas Far East. Former Chairman of the
Board of Directors of Mercantil Banco Universal and Consorcio Inversionista
Mercantil Cima and President and/or Director of several sugar, metalworking,
cement, finance, construction, alcoholic beverage companies and international corporations. Former President and Director of several business organizations and national and foreign organizations and foundations.
Alfredo Travieso Passios
Senior Partner Tinoco, Travieso, Planchart & Núñez,
Attorneys at Law
Graduate and postgraduate degrees in law from Universidad Católica Andrés
Bello (UCAB), postgraduate degree from the University of Michigan, USA. Senior Partner of Tinoco, Travieso, Planchart & Núñez, Attorneys at Law, President of Hamburg Süd de Venezuela, C.A., Grupo Emboca, C.A. and Tapas
Corona, S.A., Director of the Boards of Mercantil Servicios Financieros, C.A.
and Mercantil Banco Universal, Mercantil Commercebank Holding Corporation, Manufactura de Papel MANPA, C.A., Corporación Industrial de Energía,
C.A., Ars Publicidad C.A., C. Hellmund & Cia. Toyo Club Valancia, C.A., Envases Venezolanos, C.A. and Desarrollos Judibana, C.A.; President of the Venezuelan Association of Financial Law (AVDF), Member of the Venezuelan
Association of Tax Law (AVDT), the International Bar Association and the International Academy State & Trust.
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Graduate of Universidad Metropolitana, MBA from Babson College, PMD and
CEP from Harvard University. Director of the Boards of Director of Mercantil
Servicios Financieros C.A., Mercantil Banco Universal, Mercantil Commercebank Holding Corporation and Mercantil Commercebank N.A. Member of the
Consultative Council of the Venezuelan American Business Council (CEVEU).
Director of Sociedad de Amigos del Árbol “SADARBOL”. Director of International Briquettes Holding (IBH), Director of Caurimare, S.A. and Desarrollos e Inversiones, S.A. Former Corporate Director of Strategic Planning of Siderúrgica
Venezolana, SIVENSA, S.A.
Víctor J. Sierra A.
Director of Valores and Desarrollos VADESA S.A.
Attorney graduated from Universidad Central de Venezuela (UCV). Director
of Valores and Desarrollos VADESA, S.A., Vice President of Inversiones Capriles and Legal Representative of Cadena Capriles. President of Publicaciones Capriles, C.A. member of the Boards of Directors of Mercantil Servicios
Financieros, C.A. and Mercantil Banco Universal. Former Legal Advisor, Legal
Representative and President of Cadena de Publicaciones Capriles publishing
group and the Capriles group of companies. Director of Valinvenca, Inversiones Finalven, Sociedad Financiera Finalven, Servicios Finalven, Banco República, Inversiones Diversas, C.A. (INVERDICA) and C.A.La Electricidad de
Caracas. Former Director of C.A. Venezolana de Guías (CAVEGUÍAS).
Gustavo Vollmer Acedo
President of Grupo Palmar
Degree in Economics from Duke University. Postgraduate in Economic Development at Cambridge University, UK; PED in Business Administration from
IMEDE, Switzerland. Chairman and CEO of Corporación Palmar, C. A., the Palmar Group and its subsidiaries, President of the Board of Directors of Instituto
de Estudios Superiores de Administración (IESA). Member of the Board of Directors of Venezuela Competitiva. Member of the Advisory Committee of Conindustria. Former President, Founder, and Member of the Board of Directors
of CEVEU (US-VENEZUELA Business Council). Member of the Development
Council of Universidad Católica Andrés Bello. Member of the Board of Directors
of Mercantil Servicios Financieros, Mercantil Banco Universal. Mercantil Commercebank Holding Corporation, S.A. Siderúrgica Venezolana (SIVENSA). Former President International of Young Presidents' Organization (YPO), and of
Alianza para una Venezuela sin Drogas.
S e r v i c i o s
Jonathan Coles
Alternate Directors
Assistant Professor of IESA and Consultant
Luis A. Sanabria U.
Graduated from Yale University, with an MBA from Venezuela’s Institute of
Advanced Studies in Administration (IESA). Director of the Boards of Mercantil Servicios Financieros and Mercantil Banco Universal. Director of Mercantil Commercebank N.A. and Mercantil Commercebank Holding Corp. Was
President of AES; President of IESA; General Manager, Executive President
and Chairman of the Board of Directors of Mavesa, S.A., Minister of Agriculture and Director of the Central Bank of Venezuela (BCV); has lectured extensively at national and international institutions. Voted “Businessman of
the Year” in 1989 by the magazine “América Economía.” Publications: “Reforming Agriculture”. Lessons of the Venezuelan Experience. Woodrow Wilson
International Center for Scholars and Johns Hopkins University (1995). “Inequality -Reducing Growth in Agriculture: A Market-Friendly Policy Agenda.”.
Beyond tradeoffs, Market Reform and Equitable Growth in Latin America.
Inter-American Development Bank (IDB) and Brookings Institution. (1998). J.
Coles and C. Machado, “Trayectoria de las políticas agrícolas venezolanas:
“Aprendizajes y exigencias para el futuro”, in Agronegocios en Venezuela. Ediciones IESA (2002).
Roberto Vainrub
Director, Holding Activalores., Vice President IESA
PhD Engineering (UCAB-1999 Summa Cum Laude), Master’s Degree (Stanford University-1981), Industrial Engineer (UCAB-1978). He is currently Vice
President of IESA (Instituto de Estudios Superiores de Administración) and
since 1997 adjunct professor of entrepreneurship. Vainrub was the founder of
IESA’s Center for Entrepreneurship and its first coordinator. He is a full tenured professor at Universidad Católica Andres Bello where he taught at the Engineering School from 1982 to 2003 – Gold Medal, UCAB. The managerial
career of Vainrub started at Procter and Gamble’s Marketing Department.
Former executive vice president and partner of Grupo Frigilux. Was Director
of Prosperar Entidad de Ahorro y Prestamo (1998-2002). Executive director
and shareholder of Holding Activalores. Currently Member of the Board of
Directors of Mercantil Servicios Financieros and Mercantil Banco Universal.
He is also director of other companies such as Tucarro.com and Actibienes.
Vainrub has a long list of publications, and participated in national and international conferences. Director of Educrédito, a member of consultative council of Conciencia Activa. Former president of the National Association of
Manufacturers of Refrigeration Equipment, director of CAFADAE and member
of the Venezuelan Jewish community arbitration committee in Caracas.
Executive President and Chief Finance Officer of Mercantil
Servicios Financieros
Graduated in Chemical Engineering at Universidad Metropolitana, Caracas, Venezuela. MBA Babson College, Massachusetts USA. With twenty-six years of
service at Mercantil. Is the Executive President and Chief Financial Officer of
Mercantil Servicios Financieros. Member of the Executive Committee of Mercantil Servicios Financieros, Mercantil Banco Universal, Mercantil Commercebank Holding Corporation and Mercantil Commercebank N.A. Member of the
Board of Directors of Mercantil Servicios Financieros, Mercantil Banco Universal, Mercantil Commercebank Holding Corporation, Mercantil Commercebank
N.A., Mercantil Seguros, Mercantil Bank Panamá, Mercantil Bank N.V. Curaçao,
Mercantil Merinvest C.A., Mercantil Casa de Bolsa C.A., Fundación Mercantil,
Venezuelan National Banking Council (CBN), Swiss-Venezuelan Chamber of
Commerce and Industry and Educrédito C.A. Former Director of the Venezuelan Banking Association (ABV); Venezuelan Council for Investment Promotion
(CONAPRI), Executive President of Mercantil Banco Universal and former President of Interbank, C.A., Banco Universal and Mercantil Merinvest, C.A.
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R e p o r t
Legal Adviser to Corporación Palmar
Law degree from Universidad Católica Andrés Bello (UCAB) and studied at Georgetown University, Washington. Currently Director for Inversiones AEFEVE,
C.A., C.A. Ron Santa Teresa, Constructora Alvo. Alternate Director on the Boards of Mercantil Servicios Financieros and Mercantil Banco Universal.
Oscar A. Machado K.
President of Siderurgica Venezolana SIVENSA, S. A.
Industrial Engineer, Universidad Catolica Andres Bello (1974). First Vice President
of the Iron and Steel Latin American Institute (ILAFA). Director of the Venezuelan
Industrialists Confederation (Conindustria) and Aeropuerto Caracas, S.A.; the Development Council of Universidad Catolica Andrés Bello, Board of Directors of Venezuelan American Chamber of Commerce and Industry (VenAmCham), Deputy
Member of the Board of Directors of Mercantil Servicios Financieros and Mercantil Banco Universal; former President and Director of Venezuela Competitiva and
of the Venezuelan Institute of Iron and Steel (IVES); former President and Counsellor of the Venezuelan Association of Executives (AVE), Member of the Board of
Directors of IESA.
Eduardo A. Mier y Terán
President of Desarrollos e Inversiones, S.A
Civil Engineer graduated from Universidad Católica Andrés Bello, MSc from
Stanford University. Currently Chairman of the Boards of Agregados Livianos,
C.A., Caurimare, S.A. and Desarrollos e Inversiones, S.A. Director of Moore de
Venezuela, S.A., H.L. Boulton & Co., S.A. and Fundación John Boulton, Alternate
Director of the Boards of Mercantil Servicios Financieros and Mercantil Banco
Universal. Former General Manager of Inversiones Tacoa, C.A. and President
of Educrédito.
Luis Esteban Palacios W.
Founding Partner of law firm Palacios, Ortega y Asociados
Law degree from Universidad Central de Venezuela (UCV) and postgraduate
degree from New York University, MCJ 1958. Founding partner of law firm Palacios, Ortega y Asociados. Member of the Advisory Board of Investments of
Superintendencia de Inversiones Extranjeras (Superintendency of Foreign Investments – SIEX). Director of Fundación Scout; Alternate Director of Mercantil Banco Universal and Mercantil Servicios Financieros; Vice President of the
Venezuelan Arbitration Committee. Advisor on corporate law, banking law and
capital markets. Has participated in a number of financing transactions
through bank syndicates and project financing. Was Assistant Secretary of the
Board of Directors of the Bar Association of the Federal District, and Former
President of Montepío de Abogados (the Venezuelan Attorney’s Fund). Formerly Professor of Law in Labor Law at Universidad Central de Venezuela. Former Director of Compañía Anónima Nacional Teléfonos de Venezuela (CANTV)
and assistant to the President of Banco Central de Venezuela (BCV).
Gustavo Galdo C.
CEO Inversora Parnaso S.A.
Civil Engineer graduated from Universidad Católica Andrés Bello (UCAB), MSc
in Civil Engineering Management and MSc in Industrial Engineering Economic
Systems Planning and Honorary Alumni of the Department of Management
Science and Engineering of Stanford University, USA. Director of Fe y Alegría,
Alternate Member of the Board of Mercantil Servicios Financieros, and Mercantil Banco Universal. Former Director General of Public Finance of the Ministry
of Finance and member of the Advisory Commission on External Public Debt
Negotiation, in the public sector; and CEO Inversiones Finalven, S.A., Sociedad
Financiera Finalven, S.A. and Sociedad Financiera Valinvenca, S.A. in the private sector.
2 0 0 7
Miguel A. Capriles L.
Gustavo Machado Capriles
President of Grupo de Empresas Capriles
Vice President and Editorial Advisor to Cadena Capriles
Degree in Administrative Sciences from Universidad Metropolitana. President of Cadena Capriles, Deputy Member of the Board of Directors of Mercantil Servicios Financieros and Mercantil Banco Universal; Director of
Mercantil Commercebank Holding Corp.; Chairman of the Board of Directors
Mantex C.A., Director of H. L. Boulton, S. A.; Member of the Board of Directors of Instituto de Estudios Superiores de Administracion (IESA); Former Director of C. A. La Electricidad de Caracas and Cerámicas Carabobo, C. A.
Graduated in Economics at Universidad Central de Venezuela (UCV). Specialized studies in Journalism and Media Management at Universidad de Navarra
, Pamplona, Spain and in International Banking at Manufacturers Hanover
Trust in New York. Has worked in the tourism construction industry and international trade sectors and held management positions in the field of Strategic
Planning with the Confinanzas Consortium. Currently Vice President and Editorial Advisor to Cadena Capriles and Alternate Director of the Board of Mercantil Servicios Financieros and Mercantil Banco Universal.
Gonzalo A. Mendoza M.
Francisco J. Monaldi M.
Chairman of the Board of Negroven, S.A.
Civil Engineer graduated from Universidad Santa María with an MS in Civil
Engineering Management from Stanford University. Chairman and Director of
the Board of NEGROVEN, S.A., TRIPOLIVEN, C.A. and Kamequín C.A., Director of Valores Químicos (VALQUIMICA), C.A.. Alternate Director of the Board
of Directors of Mercantil Servicios Financieros and Mercantil Banco Universal. Former President of the Venezuelan Association of the Chemical and Petrochemical Industry (ASOQUIM) and of the Venezuelan Ecuadorian Chamber
of Commerce (CAVENEC).
Germán E. Sánchez Myles
Chief Dentist at the Center of Restorative Dentistry
Graduated in Dentistry at Universidad Central de Venezuela with specializations in Buccal Surgery, Prostheses and Administrative Management of
Dental Clinics. Formerly Assistant in the Surgical Area of the Puerto Ayacucho Central Hospital and of the Eudoro González Hospital and the Restorative Dentistry Center. Currently Chief Restorative Dentist at the Center for
Restorative Dentistry, in charge of the surgical area. Alternate Director of
the Boards of Directors of Mercantil Servicios Financieros and Mercantil,
Banco Universal.
Luis A. Marturet M.
Computer Engineer
Graduated in Computer Engineering from Universidad Simón Bolívar (USB),
with a postgraduate in business management from the same university. Intensified his management skills at Wharton, the University of Pennsylvania Business School and in various advanced technology programs. Developed and
managed the Information Technology Planning area of C.A. La Electricidad de
Caracas, where he held several positions. Member of the Board of C.A. Ed. Marturet & Co. Scrs., and Alternate Director of Mercantil Servicios Financieros and
Mercantil Banco Universal. Director of an international mailbox, shipping and
messaging franchise and is currently developing new business in the field of
production of audiovisual content for the media and entertainment industries
and storage of structured information in digital format.
Carlos Hellmund Blohm
Coordinator of the International Center for Energy and
Environmental Studies of IESA
Economist graduated Cum Laude from Universidad Católica Andrés Bello
(UCAB), with a Master’s in Economics from Yale University and a PhD in Political Economy from Stanford University. Academic Coordinator and Professor at
the International Center for Energy and Environmental Studies of Instituto de
Estudios Superiores de Administración (IESA). Professor and Research Fellow at
UCAB. Consultant to the Inter-American Development Bank (IADB), the Andean Development Corporation (CAF) and the International Center for Development of Harvard University. Alternate Member of the Boards of Directors of
Mercantil Servicios Financieros, Mercantil Banco Universal and Siderúrgica Venezolana, S.A. (SIVENSA).
Federico Vollmer Acedo
Vice President of Industrias Palmar S.A.
BSc in Agribusiness from Middle Tennessee State University, master’s degree in
Agricultural Economics from Cornell University (MPS/Agriculture). Has held
technical and management positions at various firms within the Palmar Group
of companies. Director General of the Palmar Group and President of Comercializadora Central, S.A.; member of the Executive Committee of Inversiones
AEFEVE; Director of FUNDACAÑA; Director of Inversiones Porcinas, C.A., Director of the Venezuelan Food Industry Chamber (CAVIDEA) and Vice President of
VENAZUCAR. Alternate Director of the Boards of Mercantil Servicios Financieros and Mercantil Banco Universal.
Guillermo Sosa
Director of Administration and Finance, Servicios
de Corrugados Maracay
Graduate of Capital University with a BA in Finance and Economics (Accounting and Computer Science). Currently Administration and Finance Director
and also Director of Servicios de Corrugados Maracay. Alternate Director of
the Boards of Mercantil Servicios Financieros and Mercantil Banco Universal.
Was Finance Manager of Seguros Canaima (Organización Orinoco) and Finance Director and Alternate Director of Seguros La Seguridad, Alternate Director of Inverdica, Director of La Seguridad Casa de Bolsa and Finance
Manager of C.A. Ron Santa Teresa.
Vice President of Casa Hellmund
Industrial Engineer graduated from Northeastern University, USA, with a Master’s in Business Administration (MBA/SLOAN Fellowship) from the London
Business School, England. President of Laboratorios Rapid Fot, C.A. Director of
Casa Hellmund, Director of the Venezuelan Japanese Chamber (CAVEJA) and of
the Venezuelan Chamber of Photography (CAVIFOT) Alternate Director of the
Boards of Mercantil Servicios Financieros and Mercantil Banco Universal and
member of the Board of Trustees of the Latin American Region of the London
Business School. Member of the Marketing Committee of VenAmCham.
M e r c a n t i l
117
Claudio Dolman
Director of Holding Activalores
Industrial Engineer, Universidad Catolica Andrés Bello.
President and Director of ActiBienes. Director of Holding ActiValores. Director
and Vice President of Rattan Group. Alternate Director of the Boards of Mercantil Servicios Financieros and Mercantil Banco Universal. President and Director
of Promotora Itaca 2000, C.A. Was Director of Seguros PanAmerican. Director
of Corimon and General Manager of the Osiris Group.
S e r v i c i o s
Carlos Zuloaga Travieso
Executive Committee
Partner of law firm Tinoco, Travieso, Planchart & Núnez
Graduated in law at Universidad Católica Andrés Bello (UCAB). Master’s in International Commercial Law, American University, Washington DC. Formerly
foreign associate for the Department of Foreign Investment of Holland &
Knight LLP in Miami. Alternate director of the Board of Mercantil Servicios Financieros Director of Janus Capital Inc. and former director of Transportes
Marítimos del Caribe (Crowley Group). Member of the International Bar Association (IBA) and the American Bar Association (ABA).
Gustavo Antonio Marturet Machado
President
See CV (Board of Directors Section).
Executive President and Chief Finance Officer
of Mercantil Servicios Financieros
Nerio Rosales Rengifo
Executive President of Mercantil Banco Universal
Economist graduated at Universidad Católica Andrés Bello. Executive President
of Mercantil Banco Universal, Global Manager Commercial and Personal Banking, member of the Executive Committee of Mercantil Banco Universal and
Mercantil Servicios Financieros. Director of Mercantil Banco Universal, Director of Mercantil Commercebank Holding Corporation, Director of Mercantil Seguros. Director of Mastercard International Latin American Region. Director of
Mercantil Bank Curaçao N.V. and Banco del Centro, S.A (Panama). Alternate Director of Mercantil Servicios Financieros.
Nerio Rosales Rengifo
Executive President of Mercantil Banco Universal
Global Manager of Commecial and Personal Banking
of Mercantil Servicios Financieros and
Armando Leirós R.
Global Operations and Technology Manager of Mercantil
Servicios Financieros and Mercantil Banco Universall
Economist graduated from Universidad Católica Andrés Bello. Has been with
Mercantil for 30 years and is currently Global Operations and Technology Manager, Member of the Executive Committee of Mercantil Banco Universal and
Mercantil Servicios Financieros, Director of Todo1 Services, Director of Mercantil Commercebank N.A. and Alternate Director of Mercantil Servicios Financieros. Positions held at Mercantil Servicios Financieros, include: Manager
of Corporate Banking, Manager of Corporate and Institutional Banking, Executive President of Arrendadora Mercantil, C.A. and Banco de Inversión Mercantil, C.A., Director of Fondo Mercantil and Banco Hipotecario Mercantil.
Philip R. Henríquez S.
Manager of Global Corporate and Investment Banking
of Mercantil Servicios Financieros and
Executive President of Mercantil Merinvest
Economist graduated at Universidad Católica Andrés Bello (1986) with an
MBA from Columbia University, New York (1991). Member since 2004 of the
Executive Committee of Mercantil Servicios Financieros, Mercantil Banco Universal (Venezuela) and Mercantil Commercebank (USA). Former President of
Citibank N.A. and Citigroup Country Officer in Venezuela (2000-2004); Executive Vice President of Banca Mayorista Global; Member of the Board of Directors of Banco Venezuela – Grupo Santander and President of Valores
Santander Casa de Bolsa (1997-2000), responsible for the Treasury, Fixed Income, Derivatives, Corporate Finance, Analysis, Capital Market, Trust Fund
and Custody business. Joined Citibank N.A. – Venezuela in 1991 in the Treasury
and Derivative Products area. Appointed Vice President of Teasury in Venezuela in 1993. Member of the Board of Directors of Venezuelan Council for Investment Promotion - CONAPRI, the Association of Venezuelan Executives
(AVE), Venezuelan Institute of Finance Executives (IVEF) and the Venezuelan
Diabetic Foundation. Former Member of the Board of Directors of VenAmCham (2001-2004), National Banking Council (2001-2004), Caracas Stock Exchange (1998-2000) and the National Art Gallery (2001-2003). He continues
to play an active role in the cultural and philanthropic community.
Rosa M. de Costantino
Manager Global Private Banking and Asset Management,
Mercantil Servicios Financieros and Mercantil Banco Universal
Economist graduated from Universidad Central de Venezuela. Has been with
the institution for 28 years where she has held several positions in the Finance
and Commercial Banking areas. Manager of Private Banking and Asset Management and Member of the Executive Committee of Mercantil Banco Universal. Mercantil Commercebank Holding Corporation and Mercantil
Servicios Financieros, Member of the Board of Directors of Mercantil Commercebank Trust Company, Director and member of the Executive Committee of Mercantil Commercebank Investment Services with a Broker-Dealer
license in USA. Chairwoman of the Board of Directors of Mercantil Sociedad
Administradora de Entidades de Inversión Colectiva and Portafolio Mercantil de Inversión, Director of Mercantil Seguros, Mercantil Bank Curaçao N.V.
and and Banco del Centro (Panama).
A n n u a l
118
R e p o r t
2 0 0 7
Alberto Benshimol M.
Luis Alberto Fernandes
Manager of Insurance and New Business of Mercantil
Banco Universal and Mercantil Servicios Financieros
President of Mercantil Seguros
General Counsel for Mercantil Banco Universal and Mercantil
Servicios Financieros
Civil Engineer graduated from Universidad Católica Andrés Bello, MSc in Civil
Engineering from the University of Illinois. Graduated from the SEP at Stanford
University. Has been with the institution for 15 years. Manager of Insurance and
New Business of Mercantil Servicios Financieros C.A., Member of the Executive Committee of Mercantil Servicios Financieros, C.A., and President of Mercantil Seguros, C.A. Formerly General Manager of Inversiones Polar, C.A.,
President of Bodegas Pomar C.A. and.Director of a number of industrial and
real estate companies.
Armando Leirós R.
Global Operations and Technology Manager of Mercantil Banco
Universal and Mercantil Servicios Financieros
Guillermo Villar
Graduated in Law from Universidad Católica Andrés Bello. Postgraduate degree in Corporate and Commercial Law, London University. Currently General Counsel for Mercantil Servicios Financieros and Mercantil Banco
Universal. Formerly Legal Manager for Financial and Corporate Affairs of Mercantil Banco Universal. Director of Mercantil Seguros and Mercantil Merinvest Bank Curaçao N.V. and Director of Banco del Centro (Panama). Before
joining Mercantil he held various positions at the Central Bank of Venezuela
(BCV), including Alternate General Counsel, Legal Manager on Financial Affairs and Legal Advisor on Monetary and Financial Affairs. Former Advisor to
the Financial Emergency Board. Was Professor of Banking Law and National
and International Regulation of Financial Services, Financial Contracts and
Oversight of Financial Institutions at postgraduate level at Universidad Católica Andrés Bello (UCAB) and Universidad Central de Venezuela (UCV). Participated as a negotiator and advisor for Venezuela on financial services within
the framework of the World Trade Organization and the Andean Community
of Nations. Participant and speaker at national and international seminars
and events. Studies in arbitration and negotiation.
Luis Calvo Blesa
Global International Operations Manager of Mercantil Banco
Universal and Mercantil Servicios Financieros and Executive
President of Mercantil Commercebank N.A.
Graduated in Business and Administration, master’s degree in Economics
from Vanderbilt University, USA. Began his banking career at the Chase Manhattan Bank in 1967 and joined Mercantil in 1974 where he has held several
management positions. His current responsibilities include supervision of all
Mercantil’s international subsidiaries as Chief Executive Officer of Mercantil
Commercebank N.A. and Chairman of the Boards of Directors of Mercantil
Commercebank Trust Co. and Mercantil Commercebank Investment Services,
which provide trust fund and investment advisory services respectively, in
Miami, Florida. Also Executive Director of Mercantil Bank Curaçao N.V., Banco
del Centro (Panama) and BMC Bank & Trust (Cayman), and member of the
Boards of Directors of Mercantil Bank (Schweiz) AG Mercantil Seguros and
Mercantil Merinvest (Venezuela). Member of the Executive Committee of
Mercantil Banco Universal, Mercantil Servicios Financieros and Mercantil
Commercebank (Miami).
Manager Office of the President of Mercantil Banco Universal and
B.A. in Media Studies from Universidad Católica Andrés Bello in 1976.
Twenty-eight years of service at MERCANTIL. Manager of the Office of the
President of Mercantil Banco Universal and Mercantil Servicios Financieros,
General Manager and Director of Fundación Mercantil and Fundación BMA.
Member of the Executive Committee of Mercantil Servicios Financieros and
Member of the Board of Directors of Mercantil Seguros. Member of the Committee of the Social Alliance of VenAmCham and the Dividendo Voluntario
para la Comunidad. Former Chairman of the Venezuelan Bankers Association’s Human Resources Committee and Member of the Latin American Human
Resources Development Committee of the Latin American Banking Federation Committee - FELABAN.
Millar Wilson
Global Chief Risk Officer of Mercantil Banco Universal and Mercantil Servicios Financieros
Graduated of Bradford University England, in Business and Administrative
Studies (1973). Has been with Mercantil for 30 years and is currently Global
Risk Manager of Mercantil Servicios Financieros. Former President and Chief
Operating Officer of Mercantil Commercebank Holding Corporation and Mercantil Commercebank. Deputy Country Manager of Banco,del Centro, S.A.
and Chairman of the Supervisory Board of Mercantil Bank Curaçao, N.V. Member of the Executive Committees of Mercantil Servicios Financieros and Mercantil Banco Universal; member of the Board of Directors and Executive
Committee of Mercantil Commercebank N.A.; of the Board of Directors of
Mercantil Commercebank Investment Services and Mercantil Commercebank
Trust Services. Member of the Board of Directors of Mercantil Merinvest C.A.
and Mercantil Sociedad Administradora de Entidades de Inversión Colectiva.
Graduate of the Management Development Program of Harvard Business
School (1992). Former chairman of the Board of Greater Miami and Keys Chapter of the American Red Cross (2001-2002). Director and Treasurer of the
Miami Dade College Foundation (1999-2004).
M e r c a n t i l
119
S e r v i c i o s
Subsidiaries
MERCANTIL, C.A. BANCO UNIVERSAL
Avenida Andrés Bello, N° 1
Edificio Mercantil
Caracas 1050, Venezuela
Phone: (58-212) 503.1111
Telex 27002/27003 BMERVC
P.O. Box 789, Caracas 1010-A
Venezuela.
Mercan24@bancomercantil.com
www.bancomercantil.com
Call Center:
Phone 0-500-600 2424/ 0-500-503 2424
(58-212) 600.2424 -(58-212) 503 2424
MERCANTIL BANK (PANAMA)
Via España N° 120, 3er Piso, Ofc. N° 305
P.O. Box 0819-05811 Panamá, República de Panamá
Phone: (507) 223 5062 Telefax: (507) 269 2055
tdeboyd@bancodelcentro.com
MERCANTIL COMMERCEBANK N.A.
220 Alhambra Circle, Coral Gables,
Fl. 33134, U.S.A.
Phone: (1-305) 460.4000
Fax: (1-305) 629.1400
www.mercantilcb.com
MERCANTIL BANK CURAÇAO N.V.
Abraham Mendez Chumaceiro Boulevar 1
Willemstad, Curaçao,
Netherlands Antilles
Phone: (5999) 461.1566 / 1669
Fax: (5999) 461.1974
fgirigori@bancomercantilcu.com
BMC BANK & TRUST, LIMITED
CIBC Financial Centre, 11 Dr. Roys Drive
P.O. Box 694 GT
Grand Cayman, Cayman Islands
British West Indies
Phone: (1-345) 949.8666
Fax: (1-345) 949.0626
MERCANTIL COMMERCEBANK TRUST COMPANY, N.A.
Fl. 33134, U.S.A.
Phone: (1-305) 441.5555
Fax: (1-305) 441.5560
www.mercantilctc.com
MERCANTIL COMMERCEBANK
INVESTMENT SERVICES, Inc.
Fl. 33134, U.S.A.
Phone: (1-305) 460.8599
Fax: (1-305) 460.8598
www.mercantilcis.com
LONDON
Oficina de Representación en Europa
Blackwell House, Guildhall Yard
London EC2V 5AE
United Kingdom
Phone: (44-020) 7830.9615
Fax: (44-020) 7830.9616
psolares@bancomercantil.co.uk
NEW YORK
11 East 51st. Street, New York
NY, 10022-5903, U.S.A.
Phone: (1-212) 891.7400
Fax: (1-212) 891.7419
ljordan@bancomercantilny.com
MIAMI AGENCY
220 Alhambra Circle, Coral Gables
Fl.33134, U.S.A.
Phone: (1-305) 460.8500
Fax: (1-305) 460.8595
Telex: 681278 BMER UW
asala@mercantilcb.com
Corporate Contacts
Edificio Mercantil
Phone: (58-212) 503.1111
Telex 27002/27003 BMERVC
Venezuela
Mercan24@bancomercantil.com
www.bancomercantil.com
Call Center:
Phone 0-500-600 2424/ 0-500-503 2424
(58-212) 600.2424 -(58-212) 503 2424
MERCANTIL, C.A. BANCO UNIVERSAL.
CURAÇAO BRANCH
Abraham Mendez Chumaceiro Boulevar 1
Willemstad, Curaçao,
Netherlands Antilles
Phone: (5999) 461.8241 / 1706
Fax: (5999) 461.1974
fgirigori@bancomercantilcu.com
MERCANTIL BANK (SCHWEIZ) AG
Talackerstrasse 42CH-8001 Zurich, Switzerland
P.O. Box 9758CH-8036 Zurich, Switzerland
Phone: (41 - 433) 444 555 master
Telefax: (41 - 433) 444 550
www.mercantilsuiza.com
Representative Offices
MERCANTIL MERINVEST, C.A.
Edificio Mercantil, Piso 24
Phone: (58-212) 503.2700
Fax: (58-212) 503.2757
INVESTOR RELATIONS
Caracas
Av. Andrés Bello, N° 1, Edificio Mercantil
Piso 25, Caracas, 1050, Venezuela
Phone: (58-212) 503.1335
Fax: (58-212) 503.1075
inversionista@bancomercantil.com
BOGOTA
Av. 82, Nº 12-18, Piso 8, Ofc. 805
Santafé de Bogotá. Colombia
Phone: (57-1) 623.7515
Fax: (57-1) 623.7701
mmezo@bancomercantil.com.co
MERCANTIL SEGUROS, C.A.
Av. Libertador con calle
Isaías “Látigo” Chávez,
Edificio Mercantil Seguros, Chacao.
Caracas, Venezuela
Phone: (58-212) 276.2000
Fax: (58-212) 276.2001
www.segurosmercantil.com
New York
11 East 51 st. Street, New York
NY, 10022-5903, U.S.A.
Phone: (1-212) 891.7405
Fax (1-212) 891.7419
LIMA
Av. Canaval y Moreyra N° 452
Edificio Standard Chartered, Piso 15
San Isidro, Lima 27, Perú
Phone: (51 1) 442 5100 Anexo 232
Fax: (51 1) 442 5100 Anexo 237
rafael.alcazar@rebaza-alcazar.com
MERCANTIL INVERSIONES Y VALORES
Edificio Mercantil, Piso 20
Phone: (58-212) 503.3361 / 3644 / 1353
Fax: (58-212) 503.7086
csuarez@bancomercantil.com
SAO PAULO
Av. Paulista, N° 1842, 3° andar, CJ. 37,
Edf. Cetenco Plaza, Torre Norte-Cep 01310-200
Sao Paulo, SP Brasil
Phone: (55-11) 3285.4647 - 3284.0206
Fax: (55-11) 3289-5854
mercansp@uol.com.br
Office of the Presindency
Piso 35, Caracas 1050, Venezuela
P.O. Box 789, Caracas, 1010-A
Phone: (58-212) 503.0782 / 0783
Fax: (58.212) 503.0709
presidencia@bancomercantil.com
MEXICO
Eugenio Sue N° 58, Colonia Polanco
Chapultepec, Delegación Miguel Hidalgo
C.P. 11560, México, D.F.
Phone: (52-55) 5282.2300
Fax: (52-55) 5280.9418
mercvenmex@prodigy.net.mx
Corporate Communications
Piso 14, Caracas 1050, Venezuela
Phone: (58-212) 503.1670
gcomunicacionesc@bancomercantil.com
General Production: Corporate Communications • Graphic Supervision and Coordination: Alba Fuenmayor • Photography: Mercantil’s Collection / Víctor Turco
Artist’s Photography: Carlos Germán Rojas / G. Romero. Fundación Museos Nacionales / Galería de Arte Nacional – CINAP
Graphic Design: Arte Impreso H.M. , C.A. • Printing: La Galaxia • Caracas, Venezuela, March 2008.
A n n u a l
120
R e p o r t
2 0 0 7
GEGO
Hamburgo, 1912 - Caracas, 1994
Gertrud Goldschmidt, formada y nacida en
Alemania en 1912, es una artista que trabajó en
Venezuela desde 1939 hasta su muerte en 1994.
Su obra, en principio ligada a las tendencias del
neoplasticismo europeo y del constructivismo, se
despliega en una inquietante investigación plástica,
gráfica y arquitectónica, que la llevó a concretar múltiples propuestas en las que las retículas, las
estructuras colgantes, el dibujo, las esculturas, los grabados y las tejeduras, la convirtieron en una
artista inclasificable, una artista cuya obra traspasó las vanguardias para instaurarse como una de las
más importantes referencias de la contemporaneidad.
Para Mercantil, es un orgullo presentar en este documento las obras de Gego que forman
parte de nuestra Colección. La producción plástica de esta artista es una muestra de la tenacidad y
el empeño, la disciplina y la constancia que significa el asumir el arte como una labor de vida.
Preocupada por las problemáticas y metáforas del individuo, el ser y su entorno, su trabajo se
convirtió en visionario; desde los dibujos y acuarelas de los años cincuenta, donde pueden apreciarse
colores y líneas que serán parte de las temáticas del futuro, hasta los orgánicos proyectos civiles, las
estructuras y las inserciones en el espacio de los años setenta y ochenta.
Además de trabajar como docente en la Facultad de Arquitectura de la UCV, obtuvo el
Premio Nacional de Artes Plásticas en el año 1979. Su obra ha sido presentada en museos y galerías
internacionales, exhibiendo sus propuestas en ciudades como Nueva York, Bogotá, Caracas, Munich
y San Francisco. Entre las exposiciones póstumas más importantes destaca la gran restrospectiva de
su obra titulada: GEGO 1955-1990 presentada durante el año 2001 en el Museo de Bellas Artes de
Caracas, y la exhibición internacional Cuestionando la línea: Gego, una selección, la cual recorrió
entre el año 2002 y 2003, el Museo de Bellas Artes de Houston, el Museo de Arte Contemporáneo
de Monterrey y el Museo Rufino Tamayo en la ciudad de México.
GERTRUD GOLDSCHMIDT (GEGO)
at the Mercantil Collection
1.-
Esfera 2
1976
Stainless steel wire
103 x 103 x 103 cm.
2.-
Tejedura (89/22)
1989
Paper strips and crayon
23,9 x 20,5 cm.
3.-
Sin título
1968
Ink on paper
38,9 x 33,5 cm.
4.- GERTRUD GOLDSCHMIDT (GEGO)
Nexus
1991
Serigraph on paper
76,8 x 57,7 cm.
5.-
Chorro reticulárea
1988
Stainless steel wire
200 x 100 x 70 cm.
6.-
Sin título
1966
Lithograph on paper
56 x 56 cm.
7.-
Sin título
1968
Ink on paper
71 x 101 cm.
8.-
Sin título
1981
Chine-collé on paper
46,2 x 41,4 cm
9.-
TAM-1856
1966
Lithograph on paper
28 x 27,9 cm.
Tejedura (88/18)
1988
Paper strips
12,8 x 11 cm
Dibujo sin papel # 6
1976
Stainless steel wire and metallic cord
50,5 x 49,5 x 18 cm.
TAM-1857
1966
Lithograph on paper
28 x 28 cm.
Dibujos sin papel 83/13 y 85/21
1983 y 1985
Stainless steel wire, copper, aluminum
and iron
128 x 78 x 8 cm.
Sin título
Sin fecha
Lithograph on paper
56,8 x 56,4 cm.
Sin título
1963
Lithograph on paper
45,5 x 38 cm.
Sin título
Sin fecha
Watercolor on paper
53 x 42 cm.
Sin título
1966
Lithograph on paper
56,5 x 56,8 cm.
Cubo en esfera
1966
Iron and paint
57, 4 x 50,5 x 45 cm.
TAM-1855
1966
Lithograph on paper
28 x 28 cm.
Sin título (4/30)
1991
Serigraph on paper
64 x 45,4 cm.
TAM-1854
1966
Lithograph on paper
28 x 28 cm.
Sin título
1966
Lithograph on paper
56,5 x 56,2 cm.
Dibujo con papel
1963
Ink on paper
28,5 x 34,8 cm.
Sin título
Sin fecha
Lithograph on paper
56 x 56,5 cm.
Sin título (Prueba de artista)
1965
Etching on paper
21 x 21 cm.
TAM-1896
1966
Lithograph on paper
27,9 x 27,9 cm.
Sin título
1966
Lithograph on paper
51 x 51 cm.

Board of Directors` Report - Mercantil Capital Markets (Panamá)

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