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1 Mercantil Servicios Financieros
CONTENTS
Presentation 3
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 8
Statutory Auditors’ Report 20
Financial Statements 21
Economic Climate 25
Strategic Positioning 29
Management Discussion and Analisys 30
Performance of Subsidiaries 40
Corporate Governance 46
Awards and Acknowledgements 52
Corporate Contacts and Subsidiaries 55
AnnualREPORT
2016
Mercantil Servicios Financieros is the first and most comprehensive financial services provider
in Venezuela, operating in 10 countries in the Americas and Europe. It registered total assets
for Bs 1,484,732 million and Bs 75,404 million in equity with over 8,000 employees. Its shares
are listed on the Caracas Stock Exchange (MVZ.A and MVZ.B) and it holds a Level 1 American
Depositary Receipt (ADR) in the over-the-counter market (OTC) in the United States of
America (MSFZY and MSFJY).
Mercantil’s Mission is “to fulfill the needs of our customers by providing excellent financial
products and services, attain the aspirations of our employees, support the development of
communities where Mercantil has presence and add value for our shareholders through a
long term outlook.”
Mercantil plays an active role in the development of different markets where it operates in
the banking, insurance and wealth management business, through the following subsidiaries:
in Venezuela Mercantil Banco Universal, founded in 1925, with a national network of 239
offices, a branch in Curacao and representative offices in Bogotá, Lima, México and Sao Paulo,
as of December 31, 2016; Mercantil Seguros with 29 offices; Mercantil Merinvest, C.A. and
Mercantil Inversiones y Valores, holding of other support subsidiaries. Mercantil Bank, N.A.*
in the United States, with 15 offices in Florida and 7 in Houston, Texas. Mercantil Bank
(Schweiz) AG in Switzerland. Mercantil Bank (Panamá) with four offices; Mercantil Seguros
(Panamá) and Mercantil Capital Markets (Panamá) in Panama. Mercantil Bank (Curacao) N.V.
in Curacao, and Mercantil Bank and Trust, Ltd. (Cayman), in the Cayman Islands.
Likewise, it permanently undertakes an important social work in different community sectors,
both in Venezuela through Fundación Mercantil, and in Florida and Texas in the U.S., through
the Mercantil Bank, N.A.* subsidiary.
Over the years, Mercantil Servicios Financieros has developed a set of principles and values
that make up its Culture, which has remained unchanged and is a benchmark of their business
behavior and their workers.
3 Mercantil Servicios Financieros
(*) Previously Mercantil Commercebank, N.A.
4 Annual REPORT 2016
Mercantil’sStock Performance
Market Quote for Mercantil Class A and B Shares vs. Caracas Stock Exchange Index (CSEI)
Earnings per share (1)
Closing Price Class A shareClass B share
Market price/ Earnings per share (1)Class A shareClass B share
Book value per share (2)
Market price / book value (2)
Class A shareClass B share
Number of outstanding sharesClass A shareClass B share
Daily Average Traded Volume (Shares)Class A shareClass B share
Paid DividendsIn stock (new shares for each share held)In cash (Bs per share)
Cash dividends for the year / Market price (%)Class A shareClass B share
Caracas Stock Exchange: MVZ A & MVZ B
Level 1 ADR: MSFZY y MSFJY
Year Ended
178.07
12,600.0012,600.00
70.870.8
719.78
17.517.5
60,880,92943,880,032
3,6593,657
-18.75
0.10.1
December 31
2016bolivars
141.74
5,000.005,000.00
35.335.3
435.69
11.511.5
59,401,34342,813,618
2,5173,180
-16.50
0.30.3
December 31
2015bolivars
99.40
1,400.001,400.00
14.114.1
318.49
4.44.4
59,401,34342,813,618
33,66517,440
-11.00
0.80.8
December 31
2014bolivars
73.12
929.99910.00
12.712.4
241.23
3.93.8
59,401,34342,813,618
2,1422,354
-6.50
0.70.7
December 31
2013bolivars
41.97
140.00135.00
3.33.2
147.49
0.90.9
59,450,03542,828,767
12,9795,201
-4.00
2.93.0
December 31
2012bolivars
(1) Calculated based on weighted average shares issued minus repurchased shares adjusted by stock dividens.(2)Calculated based on outstanding shares issued minus repurchased shares adjusted by stock dividens.
apr-
12
jul-1
2
oct-
12
jan-
13
jul-1
3
jan-
14
jul-1
4
jan-
15
jul-1
5
jul-1
6
jan-
16
apr-
13
oct-
13
apr-
14
oct-
14
apr-
15
oct-
15
apr-
16
oct-
16
dec-
16
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
MVZ.AMVZ.BAdjusted CSEI
5 Mercantil Servicios Financieros
Financial Highligths
Balance SheetTotal AssetsLoan Portfolio (Net)DepositsShareholders’ Equity
Income StatementNet Interest IncomeCommissions and Other IncomeOperating ExpensesNet Income
Profitability Indicators (%)Net Interest Income / Average Financial Assets (NIM)Commissions and Other Income / Total IncomeNet Earnings for the Period / Average Equity (ROE)Net Earnings for the Period / Average Assets (ROA)
Capital Adequacy Indicators (%)Equity / Risk-Weighted Assets (regulatory minimum 8 %) (1)
Equity / Assets
Loan Portfolio Quality Indicators (%)Past-Due and Non-Performing Loans / Gross Loan PortfolioAllowances for Loan Losses / Past-Due + Non-Performing LoansAllowances for Loan Losses / Gross Loan Portfolio
Efficiency Indicators (%)Operating Expenses / Average Total AssetsOperating Expenses / Total Income
Liquidity Indicators (%)Cash and Due from Banks / DepositsCash and Due from Banks and Investment Portfolio / Deposits
Other Indicators (%)Gross Loans / DepositsFinancial Assets / Total Assets Financial Assets / Deposits
Number of EmployeesEmployees in VenezuelaEmployees Abroad
Banking Distribution NetworkBranches in Venezuela (2)
Branches AbroadRepresentative OfficesMercantil Aliado Network
Correspondent DeskCorrespondent Trading Points
Automatic Teller Machines (ATM)Point of Sale Terminals (POS) (3)
Consolidated Earnings(In thousands of Bs except percentages and Other Indicators)
Year Ended
1,484,731,617655,362,111
1,281,646,95675,404,391
76,684,58537,888,170
(96,784,298)18,035,740
14.535.829.22.0
10.15.1
0.4764.4
3.0
9.461.3
44.959.0
52.757.5
66.6
7,2811,089
26830
4
64237
1,15052,454
December 31
2016bolivars
634,324,610344,140,584534,903,16644,533,603
36,733,21515,424,013
(35,550,428)14,091,763
12.032.337.13.0
11.47.0
0.21,273.3
3.0
6.448.3
29.147.1
66.370.984.1
8,6961,161
29834
5
10972
1,33353,023
December 31
2015bolivars
355,520,544197,382,285
294,674,67032,553,965
18,081,1288,141,183
(18,740,590)9,854,389
9.333.236.3
3.4
15.29.2
0.31,186.9
3.1
5.349.1
26.149.5
69.276.592.3
8,8501,003
29930
5
125122
1,37950,903
December 31
2014bolivars
239,313,132121,818,576195,916,83524,657,506
11,483,8706,385,147
(11,732,159)7,250,427
8.836.736.5
3.8
18.410.3
0.5649.3
3.3
5.347.4
23.756.2
64.379.096.4
8,944938
29926
5
128188
1,43253,388
December 31
2013bolivars
142,642,20577,885,513
114,605,56615,076,192
7,484,2643,997,898
(7,523,368)4,162,607
8.537.432.9
3.5
18.810.6
0.9372.6
3.3
5.447.7
24.052.5
70.378.898.1
8,829880
30223
5
106186
1,39248,672
December 31
2012bolivars
(1) In accordance with the standards of the National Securities Superintendency(2) Excludes internal branch for employees, at Edificio Mercantil (Caracas)(3) Physical Points of Sale (POS)
6 Annual REPORT 2016
Board of Directors
Note: The Audit, Compesation and Risk Committees were created pursuantto provision in the By-laws and in accordance with a resolution by the Boardof directors. These commitees are made up of independent Directors and areattended by the Chairman and the CEO (ex-officio).
(1) Member of the Audit Committe(2) Member of the Compensation Committe(3) Member of the Risk Committe
Gustavo Vollmer A.Presidente
Alfredo Travieso P. 2
Luis A. Romero M. 2
Gustavo Galdo C. 3
Miguel A. Capriles L.2
Víctor J. Sierra A. 2
Federico Vollmer A.3
Roberto Vainrub A. 3
Millar WilsonGustavo Marturet Medina 1
Eduardo Mier y Terán 1
Luis A. Marturet M.2
Francisco Monaldi M.3
Claudio Dolman C.2
Carlos Zuloaga T. 3
Alejandro González Sosa 2
Miguel A. Capriles C. 1
Luis Pedro España N. 1
Alberto Sosa S. 3
Alexandra Mendoza Valdés 1
Rafael Sánchez B. 3
Nelson Pinto A.René Brillembourg C.1
Nerio Rosales R. 2
Fernando Eseverri I. 1
Oscar A. Machado K. 2
Francisco Torres P. 1
Gustavo A. Vollmer S. 3
Gustavo Machado C. 3
Carlos Acosta 1
Guillermo Ponce Trujillo
Rafael Stern S.
Francisco De LeónManuel Martínez Abreu
Umberto ChiricoGladis Gudiño
Luis Alberto Fernandes
Paolo Rigio C.
Principal Directors
Alternate Directors
Secretary
Alternate Secretary
Statutory Auditors
Alternate Statutory Auditor
Legal Counsel
Alternate Legal Counsel
Luis Calvo Blesa *Global Human Resources and Corporate Communications Manager
Luis Alberto Fernandes *Global Chief Legal Counsel
Vincenza Garofalo S. *Global Chief Risk Officer
Jorge Pereira *Global Operations and TechnologyManager
Isabel Pérez S. *Global Chief Financial Officer
Carlos Tejada G. *Global Commercial Banking Manager
Ignacio Vollmer Sosa *Global Personal Banking Manager
Guillermo Ponce TrujilloBoard of Directors Secretary
Rafael Stern S.Alternate Secretary
Anahy Espiga Corporate Strategic Planning Manager
Luis M. Urosa Z.Corporate Compliance
Maigualida Pereira C.Compliance Officer - Prevention ofMoney Laundering and TerroristFinancing
Gustavo Vollmer A. *Chairman & CEO
Millar Wilson *Executive Director of International Business
Alfonso Figueredo D. *Global Executive Vice Presidentof Operations and Administration
Fernando Figueredo M. *Global Executive Vice Presidentof Business
Nelson Pinto A. *Executive PresidentMercantil Banco Universal
María Silvia Rodríguez F. *Executive PresidentMercantil Seguross
Administration
(*) Member of the Committe Executive
7 Mercantil Servicios Financieros
Notice of OrdinaryGeneral Shareholder’s meeting MERCANTIL SERVICIOS FINANCIEROS, C.A. Authorized Capital Bs 1,361,892,493.00Subscribed and Paid-In Capital Bs 680,946,246.50 Caracas - Venezuela
The Board of Directors hereby convenes an Ordinary General Shareholders’ Meeting to be held at the Auditorium’s Edificio Mercantil,located at Avenida. Andrés Bello Nº 1, San Bernardino, Caracas, on March 24, 2017 at 9:30 in the morning, in order to:
1. Consider the report presented by the Board of Directors and the Company’s Audited Financial Statements as of December 31, 2016,in light of the Statutory Auditors’ Report.
2. Consider the report presented by the Board of Directors related to the Degree of Compliance with the Corporate GovernancePrinciples, contained in Resolution Nº 19-1-2005 dated February 2, 2005 by the National Securities Superintendency.
3. To appoint the Principal Members and their Alternates to the Board of Directors as established in the Bylaws and to set theremuneration of all members of said Board.
4. To appoint the Statutory Auditors and their Alternates and set their remuneration.
5. Consider the “Proposal for the Thirty-Fifth Phase of the Company’s Stock Repurchase Program; that the Board of Directors ofMercantil Servicios Financieros, C.A. submits for the consideration of the Ordinary General Shareholders’ Meeting to be held March24, 2017”.
6. Consider the “Proposal of Authorization for the Board of Directors for the Issuance and Placement of Bonds and/or CommercialPapers, that the Board of Directors submits for the consideration of the Ordinary General Shareholders’ Meeting to be held March24, 2017”.
7. Consider the “Proposal for the decree of dividends for the year 2017 of Mercantil Servicios Financieros, C.A.; that the Board ofDirectors submits for the consideration of the Ordinary General Shareholders’ Meeting to be held March 24, 2017”.
Note: The Shareholders are hereby informed that: 1) The Balance Sheet, Income Statement, Statement of Shareholders’ Equity andStatements of Cash Flow for the period ended December 31, 2016, duly examined by the external auditors “Pacheco, Apostólico yAsociados” (PricewaterhouseCoopers), the Statutory Auditors’ Reports, and the Board of Directors’ Report, 2) The Board ofDirectors’ Report related to the Degree of Compliance with the Corporate Governance Principles; 3) the “Proposal for the Thirty-Fifth Phase of the Company’s Stock Repurchase Program, that the Board of Directors of Mercantil Servicios Financieros, C.A. submitsfor the consideration of the Ordinary General Shareholders’ Meeting to be held March 24, 2017“ and, 4) the “Proposal ofAuthorization for the Board of Directors for the Issuance and Placement of Bonds and/or Commercial Papers, that the Board ofDirectors submits for the consideration of the Ordinary General Shareholders’ Meeting to be held March 24, 2017“, will be availableto them 15 days prior to the Shareholders’ Meeting, in the Company’s Headquarters located at Avenida Francisco de Miranda entresegunda y tercera Transversal de la Urbanización Los Palos Grandes, Centro Comercial El Parque, Segunda y Tercera Etapas, P03,Locales C-3-10, C-3-11, Municipio Chacao, Estado Miranda. The “Proposal for the decree of dividends for the year 2017 of MercantilServicios Financieros, C.A.; that the Board of Directors submits for the consideration of the Ordinary General Shareholders’ Meetingto be held March 24, 2017“ is already available in the mentioned Company’s Headquarters. In accordance with the provisions of theBylaws of the Company, the shareholders are hereby informed, that each group of Common “A” shares that represents at leasttwenty per cent (20 %) of the subscribed capital of said shares, has the right to propose and designate one Principal Director andits Alternated as it may correspond.
Caracas, February 16, 2017
On behalf of Mercantil Servicios Financieros, C.A.
Guillermo Ponce TrujilloSecretary of the Board of Directors
8 Annual REPORT 2016
Caracas, February 16, 2017
Dear Shareolders,
We are pleased to submit the consolidated results and main activities of Mercantil Servicios
Financieros for the second half of 2016, 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 Superintendency. They have been examined by the
Company’s external auditors, “Pacheco, Apostólico y Asociados (PricewaterhouseCoopers)”,
whose Reports is attached hereto.
Financial Results
Mercantil reported Bs 18,036 million in net income, of which Bs 6,762 million corresponds to
the first half of the year and Bs 11,274 million to the second one. These results compare
favorably to the Bs 14,092 million achieved in 2015.
It should be noted that in accordance with the provisions regulating activities both in
Venezuela and abroad, Mercantil’s subsidiaries have made contributions to various
government entities in Venezuela and abroad, which total Bs 21,198 million, representing
19.5 % of Mercantil’s expenses. These, combined with Corporate Income Tax of Bs 9,135 million,
amount to Bs 30,333 million and represents 27.9 % of its expenses.
Mercantil Servicios Financieros’ Total Assets grew 134 % to Bs 1,484,732 million compared to
December 2015. Shareholders’ Equity increased 69 % over the same period, closing at Bs 75,404
million.
The net loan portfolio grew 90 % to Bs 655,362 million compared to Bs 344,141 million at the
close of 2015. The quality of the loan portfolio continued at satisfactory levels. Therefore, the
ratio of past due and non-performing loans to total loans was 0.4 %, considering the overall
loan portfolios of Mercantil Servicios Financieros, which, consolidates the portfolios of
Mercantil C.A., Banco Universal, Mercantil Bank, N.A., Mercantil Bank (Schweiz) AG,
Mercantil Bank (Curaçao) N.V. and Mercantil Bank (Panama), S.A.
The efficiency ratio measured by calculating operating expenses as a percentage of average
assets was 9.4 % compared to 6.4 % at the close of 2015, while the efficiency ratio measured
by calculating operating expenses as a percentage of total income was 61.3 %, compared to
48.3 % in 2015.
Board of Directors’ Report
9 Mercantil Servicios Financieros
The equity/risk-weighted assets ratio was 10.1 % (regulatory minimum 8 %). This ratio was
11.4 % at the close of 2015 and is determined according to the guidelines of the National
Securities Superintendency, based on the standards of the Basel Committee on Banking
Supervision of the Bank for International Settlements.
In the Ordinary General Shareholders’ Meeting held on March 18, 2016 were approved the
decree of dividends proposed by the Board of Directors, of Bs 5.25 per share, to be paid in
two parts, the first one of Bs 2.25 on April 10, 2016 and the second of Bs 3.00 on October
10, 2016, and an extraordinary dividend of Bs 13.50 per share paid on May 27, 2016, for a total
of Bs 1,956,795,069.75.
On the other hand, the Extraordinary General Shareholders’ Meeting held on September
2016, approved the proposal submitted by the Board of Directors to enhance the social
capital in the amount of Bs 12,414,173,878.50 , through the capitalization of the “Share
Premium” account, increasing the shares’ nominal value from Bs 6.50 to Bs 125, with no
changes in the total number of shares, subject to the approval of the National Securities
Superintendency. As a result of this increase, the subscribed and paid capital of the
Company goes from Bs 680,946,246.50 to Bs 13,095,120,125.00, divided into one hundred
four million seven hundred sixty thousand nine hundred and sixty-one (104,760,961)
nominative shares, non-convertible to bearer, each one with a nominal value of Bs 125, of
which sixty million eight hundred eighty thousand nine hundred twenty nine (60,880,929)
are common “A” shares, and forty three million eight hundred eighty thousand and thirty two
(43,880,032) are common “B” shares. The authorization of the National Securities
Superintendency is pending to proceed with the registration of this increase in the
corresponding Mercantile Registry of the jurisdiction.
During the second half of 2016, Mercantil issued Series 6 of Commercial Papers Issue 2015-II
for Bs 340 million.
Outstanding Unsecured Bonds are Series 1 and 2 of Issue 2013-I for Bs 60 million, Series 1
and 2 of Issue 2014-I for Bs 40 million, Series 1 and 2 of Issue 2014-II for Bs 100 million, and
Series 1 and 2 of Issue 2015-I for Bs 100 million. Outstanding Commercial Papers are Series
2 and 5 of Issue 2015-II for Bs 160 million.
The Stock Repurchase Program, initiated in May 2000, is currently in its Thirty-Fourth
phase. It was approved at the Ordinary Shareholders’ Meeting held on September 16, 2016.
Given the stock market conditions, no shares were repurchased between July 1 and
December 31, 2016. Mercantil does not maintain any treasury stock at the end of the second
half of 2016.
10 Annual REPORT 2016
Credit Ratings Mercantil Servicios Financieros obtained “A1” and “A2” risk ratings for its commercial papers
and unsecured bonds issues, respectively, from Fitch Ratings and Clave Sociedad Calificadora
de Riesgos. These are among the highest possible ratings for a debt instrument in Venezuela.
Also, Fitch Ratings in its annual review issued in December 2016, ratified Mercantil Servicios
Financieros’ national rating in “F1+(ven)” for the short-term and “A+ (ven)” for the long-term.
Fitch Ratings also affirmed, in its assessment issued in December 2016, the international
ratings of the Mercantil Banco subsidiary at “CCC” for the long-term, “C” for the short-term,
and “ccc” for Viability. These ratings are largely dependent on the country risk. In addition,
Fitch Ratings adjusted Mercantil Banco Universal’s national ratings to “F1(ven)” for the short-
term, “A+(ven)” for the long-term, the best national ratings granted to a private financial
institution in Venezuela.
In December 2016, Fitch Ratings also affirmed the risk ratings of the Mercantil Holding Corp,
Mercantil Florida Bancorp and Mercantil Bank N.A. subsidiaries at “BB” for the long-term,
with an “Stable” outlook, “B” for the short-term, and “bb” for Viability. These ratings are also
limited by the sovereign risk rating of Venezuela.
Retirement and AppointmentsLast September 2016, the Global Operations and Technology Manager and Member of the
Executive Committee, Mr. Rodolfo Gasparri, retired after 31 years of service. During this time,
Mr. Gasparri held several management positions in the areas of Operations, Systems and
Information Technology. In addition, he lead many important strategic projects both in
technology and channel developments, allowing to place Mercantil in the forefront of
financial services in Venezuela.
The dedication, competence and professionalism of Mr. Gasparri are to be noted in the
performance of all duties and positions he held at Mercantil, which reflect the high level of
commitment he dedicated to the company.
The Board of Directors acknowledge Mr. Gasparri´s professional career and sound
performance, wishing him the best of success in the venture projects.
Mr. Jorge Pereira has been appointed as Global Operations and Technology Manager, who
had been serving as Global Personal Banking Manager, and is a Member of the Executive
Committee, effective as of October 1st, 2016. Mr. Pereira is an Agricultural Engineer graduated
from Universidad Centroccidental Lisandro Alvarado, with extensive training in management
development programs at the Instituto de Estudios Superiores de Administración (IESA). Mr.
Pereira has been with Mercantil for 27 years, during which time he has held several
management positions carried out with the utmost dedication, competence and
professionalism, a reflection of his high degree of commitment with the institution.
11 Mercantil Servicios Financieros
Mr. Ignacio Vollmer Sosa was also appointed as Global Personal Banking Manager and
Member of the Executive Committee, effective as of October 1st, 2016. Mr. Vollmer has a solid
preparation, with a degree in Finances from Tulane University, New Orleans, and an MBA
from the University of New York, and has been in Mercantil for 9 years, during which time he
has served in various areas.
Both executives have excelled in their competence and commitment to the principles and
values of the Mercantil Corporate Culture.
Mercantil Brand Unification
Ten years ago, Mercantil started the unification process of the Mercantil brand across all
subsidiaries in the organization, and now carries out a project for adjusting the names of the
Mercantil companies, mainly abroad, in order to guarantee a global image and a differentiated
brand platform that allows companies and businesses a better communications and presence.
To date, changes have taken place in the United States companies, and therefore, Mercantil
Commercebank is now Mercantil Bank, N.A. and its subsidiaries Mercantil Commercebank
Investment Services Inc. and Mercantil Commercebank Trust Company are now Mercantil
Investment Services Inc. and Mercantil Trust Company N.A. These new adjustments aim
exclusively to strengthening the Mercantil brand, with no impact on the managerial structure,
on the usual business and administration processes, on the model of attention to clients or
on the shareholders’ structure. All companies maintain its current graphic identity of the
Impulso Mercantil (Mercantil, empowering your world). The project will be gradually
implemented in stages, and as the regulatory authorities of the various countries approve
the changes and corresponding registries, the companies will modify their names.
Products and Services
The Mercantil Banco subsidiary continued to offer products and services to suit the needs of
its more than 4,956,000 clients at the close of the second half of 2016, of which 136,158 were
incorporated during the year.
The credit card product the bank has a market share of 15.25 %, for a total portfolio of Bs 83,307
million (including parallel lines of credit). During the first half of the year, the bank
implemented a strategy focused on selectively increasing credit limits to the best clients in
its portfolio, to promote loyalty and preference, which resulted in an additional exposure of
almost Bs 7,700 million. In addition, the credit limits of the parallel lines Préstame and
CrediPlan/CrediFácil instant loans products were increased to Bs 600,000, throughout
various promotional strategies for these modalities.
In the Majorities Banking Segment, the bank continued to implement its consolidation
process to include and support the unbanked sector of the population through the Mercantil
Aliado network, operating in 15 states and the Capital District, and through the offer of
Microenterprise Credits product. At the close of December 2016, the Microenterprise Credits
reached Bs 15,619 million, with 10,775 active borrowers, reflecting a 43.85 % growth from
December 2015. There are also over 337,154 Tarjetas Efectivo (Cash Cards), representing 16 %
more than at the close of 2015.
12 Annual REPORT 2016
Mercantil maintains the policy of digitalizing its operations and processes in order to
contribute more effectively to the development of the country's economic activities. The
Mercantil Banco subsidiary has developed this policy by establishing digital mechanisms that
facilitate clients operations.
Therefore, most of the clients’ transactions were carried out through Mercantil Business and
Personal Online Banking.
It is important to highlight the momentum achieved by the Mercantil Mobile app with more
than 14,300 active users in the business segments and more than 960,000 in the individual
segment, which together carried out over 139 million transactions. The Mercantil Mobile
channel registered 7 % of the business segment transactions. In July 2016, the menu of Mobile
Banking applications was launched, allowing customers to easily and orderly locate all
applications offered by the Bank.
Mercantil Banco became the first bank to grant loans to its customers through a mobile app,
keeping the security standards offered to them, which conduce to their loyalty.
The Pronto Crédito Empresarial (Online Fast Business Loans) app has been intensively used
by various operators.
The Portal de Pagos (Payment Portal) increased by 800 %, with a cumulative volume of
Bs 1,065 million for more than 300 affiliated companies from the small, medium and
corporate segments. The service is offered to a wide range of sectors, such as: electricity
(power), domestic gas, water, condominiums, transportation, storage, courier services, clubs
and social centers, schools, universities, telephone companies, cable TV and internet (with
the inclusion of Directv in October), and health.
In July, Mercantil Banco included in its Personal Online Banking a solution of scheduling
appointments to open accounts in a branch. In addition, the Bank incorporated in both
Personal and Business Online Banking a solution for employers to pay their legal contributions
to the National Housing and Habitat Bank (Banavih) and to the Venezuelan Social Security
Institute (IVSS). Mercantil Banco is the first bank in Venezuela to offer these services.
Mercantil Online Banking continues to garner preference among clients, reaching at the end
of the year more than 1,590,000 active users in Mercantil Personal Online Banking and more
than 88,000 active users in Mercantil Business Online Banking. Together Mercantil Online
Banking processed over 852 million transactions in 2016, representing 60 % of the
transactions carried out through all channels.
At the close of 2016, the Vía Rápida Mercantil (Mercantil Fast-track) self-service areas
processed over 6,300,000 transactions, representing 50.14 % of the total transactions
managed through branch offices.
The official Twitter account of the Bank, @MercantilBanco had more than 248,000 followers
by the end of the year, 11.7 % more than in 2015. The aim of this account is to provide
information and orientation on the various Bank services, products and activities. Since its
inception four years ago, it has attended over 44,000 requests, 31.7 % during 2016.
13 Mercantil Servicios Financieros
In the second half of 2016, the Mercantil Bank N.A. subsidiary adopted a new design for its
www.mercantilcb.com webpage, in line with Mercantil standards, with new features, such as:
navigation areas for domestic and international clients with a more friendly and sensitive
interface, which adapts to the client’s computer or mobile device screens. The new Personal
Online Banking app was also launched, with additional characteristics and functionalities
such as: loan payments, travel memory history, automatic enrollment for loans and automatic
clearing for wire transfers.
The Mercantil Bank (Panamá) subsidiary issued the new Debit MasterCard with chip
technology, allowing clients to manage their money in a comfortable, secure and trustworthy
way through ATMs and/or compatible points-of-sale anywhere in the world where MasterCard
is accepted, moreover offering facilities for internet purchases.
The Mercantil Seguros subsidiary continued to reinforce its Business Referral sales channel
for Individuals and Companies, mainly oriented to high yield products such as Línea Vital
(Personal Accidents Life, Funeral and Income Protection insurance) and Industry and
Commerce (SME), increasing the coverage granted, and improving and expanding the benefits
offered to its clients.
The range of insurance policy options was extended, with broad coverage and services
providing better safeguarding and protection of insured assets and individuals, minimizing
the effects of inflation. In this sense, a new plan for the Global Benefits Policy was promoted,
which offers, in addition to coverage for medical expenses, a complete travel assistance
services, thereby becoming an attractive option in term of Health Policies. Regarding,
Automobile Insurance the subscription policy was adjusted, allowing more vehicles brands
and models to be protected with special options and differentiated coverage, aimed at
guaranteeing that the contracted insured sum remains at reasonable levels, adjusted to the
market situation.
The use of the e-mail marketing campaigns of Relationship Marketing for renewing individual
Automobile and Health policies was consolidated, allowing clients to select the coverage that
better adapts to their requirements, with previous knowledge of the competitive benefits of
each one. The e-mail marketing campaign was also extended to the renewal of Automobile
Collective Policies, thus becoming a dynamic instrument of client contact and recruitment,
thereby promoting their loyalty maintenance.
In terms of communication, dissemination channels for internal and external information
were also consolidated, through weekly newsletters sent to employees and the sales force,
and institutional meetings to promote national business with focus on Property and Casual
products, which had the active participation of insurance advisors and company staff.
14 Annual REPORT 2016
The insurance activity in Panama, carried out through the Mercantil Seguros Panama
subsidiary, continued to expand with the offer of a wide range of differentiated products and
services; among which the Mercantil Global Benefits Health Policy. This policy includes four
plans with ample coverage for worldwide medical care, whenever and wherever needed,
adding the most comprehensive travel assistance service and a range of additional coverage
for supplementary protection.
In this sense, Mercantil Global Benefits Policy’s coverage was extended, during the second
half of 2016, to residents not only in Panama, Venezuela, Latin America and the Caribbean,
but also to those who live in Spain, Italy and Portugal, thereby strengthening its character as
an option for international health insurance.
In addition, during the second half of 2016, Mercantil Seguros Panama commercialized its
Global Benefits Travel product which expands care and coverage services to insured persons
when travelling, therefore becoming an attractive protection option, supplementing the
current Individual Insurance policies on offer.
Thanks to Mercantil Seguros' strong relationships with international reinsurers, agreements
were reached to significantly increased the available limits for automatic uptake of risks,
therefore making good use of the coverage needs in the international market.
In Venezuela, the Portafolio Mercantil Renta Fija, Fondo Mutual de Inversión de Capital
Abierto, C.A. (Mercantil Fixed Income Portfolio) mantained its leading position in the
investment services business reaching Bs 3,625 million in assets for a total of 196,930 clients,
with a volume increase of 15 % in the period. Within the Mercantil Fixed Income Fund, the
Plan Crecer Mercantil product, which is a systematic form of investment affordable to anyone,
continued its expansion to Bs 2,794 million in assets. Mercantil Fixed Income Portfolio
continues offering to its clients a routing savings mechanism to meet their commitments and
financial goals.
The Mercantil C.A., Banco Universal Trust Fund registered Bs 46,105 million in assets under
management at the close of 2016, 36 % increase from the first half of the year, mainly due to
Occupational Contingency Trust and Escrow Trust. During the second half of the year, the
focus on the optimization of quality of service was maintained.
In the United States, Mercantil Investment Services, Inc. (MIS), a subsidiary of Mercantil
Bank, N.A., offers Brokerage and Investment Advisory services. The volume of assets under
management grew by 8.4 % compared to 2015, mainly due to the stock markets performance.
In 2017, MIS keeps on working in continuous improvement to generate operational
efficiencies, expand product offerings and widen the client base.
In terms of trust, Mercantil Trust Company, N.A. registered 10 % increase in consolidated
assets under management compared to 2015, for the same reasons as mentioned above for
Mercantil Investment Services, Inc. Mercantil Trust Company, N.A. maintains its efforts
focused on a continued improvement of client services with protection needs in estate
protection and inheritance planning, as well as on identifying opportunities to increase
efficiency.
15 Mercantil Servicios Financieros
Prevention and Control of Money Laundering and Terrorism FinancingPrevention and control of money laundering and terrorism financing is a priority for Mercantil
and an integral part of our organizational culture. Therefore, the company has maintained
standards of internal control and supervision of its headquarters and subsidiaries' activities to
ensure early detection of suspicious transactions, and has stepped up staff training in this area.
To ensure compliance with anti-money laundering legislation, Mercantil implements a well-
structured “Comprehensive Money Laundering and Terrorism Financing Prevention and
Control System” at its Venezuelan and overseas subsidiaries, in addition to Operational and
Follow-Up Plans, and Monitoring and Oversight programs. The company's “Know your Client”
policy is the main guideline in this area.
Corporate Social Commitment
In 2016, Mercantil Servicios Financieros executed Bs 185.6 million in social investment both
directly and through its Mercantil Banco Universal, Mercantil Seguros, Mercantil Merinvest
and Mercantil Bank, N.A. subsidiaries, as well as Fundación Mercantil, sponsored by them.
These social investments was mainly directed to educational and various social development
programs and projects undertaken by well-known organizations in the communities in
Venezuela and the United States.
Mercantil earmarked 59.6 % of the contributions to educational institutions, mainly elementary
and higher level education, and particularly to infrastructure maintenance programs of schools
and college scholarships programs for low-income youngsters; and 40.4 % to organizations
dedicated to social development, comprehensive assistance, health, culture and environmental
protection programs.
Mercantil’s strategy and focus, in this matter, has oriented on supporting social institutions in
the different geographical areas where the companies operate with several initiatives that
have a direct impact on the communities and its citizens, as well as creating opportunities for
entrepreneurship and economic development.
During 2016, it is underlined, the strengthening of the agreement between Fundación
Mercantil and the Asociación Civil Fe y Alegría, which develops four action points: maintenance
of school facilities, promotion of entrepreneurship, training in youth leadership and citizenship.
In addition, it is important to highlight contributions granted to the Asociación Venezolana
de Escuelas de Educación Católica (AVEC), that benefits approximately 500,000 students.
Morever, highlights the contributions and support to programs and initiatives of several social,
health and cultural institutions, such as: Universidad Metropolitana, Universidad Nacional
Experimental del Táchira, Universidad Santa Rosa, UNICEF, Venezuelan Anti-Cancer Society,
Hogar Bambi, Fundación Santo Domingo, Fundación Comunidad Madre Emilia A.C., Centro al
Servicio de la Acción Popular (CESAP), Fundación para Niños con Parálisis Cerebral, Asociación
Venezolana de Servicios de Salud de Orientación Cristiana (AVESSOC) and Fundación
Camerata de Caracas.
16 Annual REPORT 2016
As part of Mercantil’s Social Commitment a new program was promoted by Fundación
Mercantil, together with the Social Alliance of the Venezuelan-American Chamber of
Commerce and Industry (VenAmCham) and Red Venezolana de Organizaciones para el
Desarrollo Social, named “Institutional Strengthening of Social Development Organizations”.
The purpose of the program is to provide tools and methodologies to new or smaller social
development institutions; in order to serve as a trainee program to help them manage and
organize their activities in a more efficient way, promoting their long-term sustainability. More
than 100 representatives of 22 organizations in the country were part of this program.
The university award “Promoting Socially Responsible Leaders” also known as “El Reto U”
(The U Challenge) deserves special attention, having been established in 2004 by the Social
Alliance of the Venezuelan-American Chamber of Commerce and Industry (VenAmCham),
together with Rotary Club and Fundación Mercantil, to promote social projects developed
by university students for the benefits of various communities in the country. In 2016,
among over 500 companies worldwide, Rotary International selected the Mercantil Banco
subsidiary, as one of the two companies chosen globally and the only Latin American
company, to receive the “Socially Responsible Enterprises” award during the
commemoration of Rotary Day at the United Nations Organization Headquarters.
In the United States, as part of its Corporate Social Commiment, several programs developed
by educational, social and health organizations in South Florida and Houston were supported,
among which stand out: Centro Mater Foundation, Florida Community Loan Fund, Habitat for
Humanity of Greater Miami, Lincoln Center for the Performing Arts, Florida National
University, FIU Foundation, Houston Museum of Fine Arts, Miami Symphony Orchestra and
the American Cancer Society. Also, an alliance was established with the Zoological Society of
Florida and the Miami Zoo for a new edition of an educational program for middle school
students.
Mercantil workers and their families have volunteered in several programs in Venezuela, for
the benefit of institutions such as: Fe y Alegría, the Hospital Ortopédico Infantil, the Diviendo
Voluntario para la Comunidad, Sociedad Anticancerosa de Venezuela, Comedores Madre
Teresa de Calcuta (Comatec), Hospital J.M. de los Ríos and Universidad Simón Bolívar (Tree-
planting Day).
In the United States, Mercantil volunteers carried out several activities in conjunction with
various organizations: Miami-Dade College Foundation, Women’s Breast and Heart Initiative,
American Cancer Society, Centro Mater, Habitat for Humanity, March of Dimes, Autism Speaks
and Liga Contra el Cancer.
AcknowledgmentsThe prestigious financial publication, The Banker, included Mercantil among the World’s Top
500 Banking Brands in February. Mercantil ranks 273, 61 positions up from the 2015, and is the
leading Venezuelan institutions included in the ranking. Similarly, in June, Mercantil Servicios
Financieros was included in the Top 1000 World's Financial Institutions. Mercantil Servicios
Financieros rose 32 positions to rank 178. It also ranks 7 among the Top 25 Latin American
financial institutions. In March, the Mercantil Bank (Panamá) subsidiary was included among
the Top 100 Central America Banks, for the fourth consecutive year, ranking 76, and was also
included among Panama’s banks in the 34 position.
17 Mercantil Servicios Financieros
In May, Mercantil Servicios Financieros was again included in the Global 2000 Most Valuable
Companies in the World, published by the specialized magazine Forbes. Mercantil ranks 793
and is the first of four Venezuelan companies included in this year’s list. The Global 2000 ranking
considers income, revenues, assets and market share.
In November, the Venezuelan-American Chamber of Industry and Commerce (VenAmCham)
presented its “Top 100 Companies” ranking, including both Mercantil Servicios Financieros and
the Mercantil Seguros subsidiary in places 6 and 9, respectively. The list includes the most
successful companies in the country, with national or foreign capital, ranked by their total
income at the close of 2015.
The Global Finance magazine, in its January 2016 edition has selected the Mercantil Banco
Universal subsidiary, for the 11th consecutive year, as the “Venezuela’s Best Trade Finance
Provider in 2016”. The magazine selection process took into consideration the volume of
transactions, geographical coverage, customer services, price competitiveness, new business
development and technological innovations.
In November, the LatinFinance magazine, specialized in Latin American and Caribbean finance
topics, acknowledged the Mercantil Banco subsidiary as the Best Bank in Venezuela in 2016.
The magazine chose the institution for its long-term strategy, development of digital technology
and efficient cost management in a changing environment.
In June, Aon Hewitt international consulting firm granted to the Mercantil Banco Universal and
Mercantil Bank N.A. subsidiaries the 2016 Best Employer award. The assessment took into
consideration the opinion of workers on aspects related to Banks’ commitment, leadership,
culture and brand, compiled in the Organizational Climate and Commitment 2015 research.
In November, the Mercantil Banco subsidiary received the first edition of the Award for “Socially
Responsible Enterprises”. The award acknowledged the university program Training Socially
Responsible Leaders, also known as “El Reto U’ (The U Challenge), which has been promoted
for the last 12 years by the Social Alliance of the Venezuelan-American Chamber of Commerce
and Industry (VenAmCham) and Districts 4370 and 4380 of Rotary International. The award
was presented at the United Nations Headquarters during the celebration of the Rotary
International Day.
Finally, the AICA 2015 Award of the International Association of Art Critics, Venezuelan Chapter,
should be mentioned, which acknowledged, in November, the 1955-2008 Venezuelan Ceramics
exhibition of the Mercantil Collection as Best Collective Exhibition category. The decision was
taken because the exhibition “strengthens the artistic scope developed by modern and
contemporary Venezuelan ceramics, with specific examples in research and experimentation
with techniques”.
18 Annual REPORT 2016
Development and Work Environment
During the second half of the year, Mercantil in Venezuela continued to apply significant
compensatory measures in order to improve the wellbeing and quality of life of its workers.
These measures complement those applied in the first half of the year, among which a special
bonus in July, equivalent to a month and a half of the monthly salary; a 30 % wage increase,
effective as of August 1, and an additional 30 % increase effective as of October 1 2016. To
these benefits are added those applied during the first half of 2016, of a 20 % wage increase
in January, the application of the annual of wage increase policy based on performance,
which established an average wage increase of 35 %; as well as the new Educational
Scholarship Aid for the amount of Bs 6,000 per month. In addition, during the year, the food
benefits also increased, according to current regulations. In sum, the average wage increase
for workers during 2016 was 175 %.
The Mercantil Banco and Mercantil Seguros subsidiaries also applied the benefits established
in the new 2016-2018 Collective Labor Agreements, approved during the second half of 2016
by the Ministry for Labor and Social Security. These Collective Labor Agreements will benefit
over 7,000 workers, including improvements in the economic and social conditions of
workers, and are the result of the cordial relationships and traditional harmony,
understanding and cooperation with the labor union representatives, which produce a
permanent beneficial effect on all parties.
These aspects are complemented with the development of permanent staff retention,
education and training programs, allowing the improvement of staff professional training
and the maintenance of a continuous knowledge process. Similarly, highlights the
development of several activities that encourage areas of closeness and recreation with
workers, on which their family groups actively participate throughout the country.
These actions reinforce Mercantil’s leadership among Venezuela’s financial services
institutions, underlining its commitment with the nation, in line with its long-term vision,
which has characterized the Mercantil Banco subsidiary’s performance since its inception
in 1925.
It is relevant to highlight the result obtained in the Organizational Climate and Commitment
study, with a significant 85 % workers commitment with Mercantil. The study was
undertaken with the advisory of the specialized firm Aon Hewitt, and 83 % of voluntary
participation of the invited collaborators.
19 Mercantil Servicios Financieros
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 to their work.
Pursuant to the National Superintendency Securities (formerly National Securities
Commission) resolution, please note that form CNV-FG-010 reflects Bs 46,967,264.66 in
remunerations paid to Company Directors and Executives in the second half of 2016.
During this time, a number of Alternate Directors attended Board meetings, either standing
in for Principal Directors in their absence, or as invitees. On the occasion of the Chairman
of the Board's temporary absences, some of his CEO functions were delegated to members
of the Executive Committee.
Sincerely ,
Gustavo Vollmer A.
Alfredo Travieso P.
Luis A. Romero M.
Gustavo Galdo C.
Víctor J. Sierra A.
Miguel A. Capriles L.
Roberto Vainrub A.
Federico Vollmer A.
Gustavo Marturet M.
Millar Wilson
20 Annual REPORT 2016
Statutory Auditors’ Report
Financial Statements(In accordance with the standards of the National Securities Superintendency)
Balance SheetUnconsolidated(in thousands of Bs)
Year ended
AssetsCash and Due from BanksInvestment PortfolioOther AssetsTotal Assets
Liabilities and Shareholders’ EquityUnsecured Bonds and Commercial PaperOther LiabilitiesTotal Liabilities
Shareholders’ Equity
Total Liabilities and Shareholder’s Equity
808,20580,105,620
535,20981,449,034
800,0005,244,6436,044,643
75,404,391
81,449,034
December 31
2016bolivars
491,26549,424,889
(20,944)49,895,210
995,0004,366,6075,361,607
44,533,603
49,895,210
December 31
2015bolivars
44,75034,778,210
(33,835)34,789,125
750,0001,485,1602,235,160
32,553,965
34,789,125
December 31
2014bolivars
Income StatementUnconsolidated(in thousands of Bs)
Year ended
IncomeFinancial IncomeEquity Investments in subsidiariesand affiliates and othersTotal Income
ExpensesOperatingFinancialDeferred Corporate Income TaxTotal Expenses
Net Income
287,954
20,544,33720,832,291
(1,317,242)(200,309)
(1,279,000)(2,796,551)
18,035,740
December 31
2016bolivars
35,420
14,455,65114,491,071
(334,619)(64,689)
0(399,308)
14,091,763
December 31
2015bolivars
15,597
9,701,9549,717,551
(144,386)(35,776)317,000136,838
9,854,389
December 31
2014bolivars
21 Mercantil Servicios Financieros
Gustavo Vollmer A.Chairman and CEO
Alfonso Figueredo DavisGlobal Executive Vice President of
Operations and Administration
Aury OliverosAdministration Manager
Isabel Pérez SanchisGlobal Chief Financial Officer
22 Annual REPORT 2016
Consolidated Balance Sheet(In thousands of Bs)
Year ended
Assets
Cash and Due from BanksCash and Due from BanksCentral Bank of VenezuelaVenezuelan Banks and other Financial InstitutionsForeing Banks and Other Financial InstitutionsPending Cash Items
Invesments Portfolio Invesments in Trading SecuritiesInvesments in Securities Available-for-SaleInvesments in Securities Held-to-MaturityShare Trading PortfolioInvesments in Time Deposits and PlacementsRestricted Investments and Repos
Loan PortfolioCurrentRestructuredPast-DueIn Litigation
(Allowance for losses on Loan Portfolio)
Interest and Commissions ReceivableLong-Term InvestmentsAssets Available for SaleProperty and EquipmentOther Assets
Total Assets
24,816,727523,287,181
4,647,9782,684,915
19,953,194
575,389,995
552,12276,664,63172,043,579
1,013,39326,749,129
3,187,552
180,210,406
672,166,5331,034,0172,581,779
103,252
675,885,581(20,523,470)655,362,111
8,464,5014,841,6751,979,8688,481,814
50,001,247
1,484,731,617
December 31
2016bolivars
8,541,437137,641,397
287,8611,663,8557,525,966
155,660,516
6,55438,773,837
47,804,801386,732
7,396,8301,651,470
96,020,224
353,346,672510,653777,49550,640
354,685,460(10,544,876)
344,140,584
5,053,0511,613,928
377,8275,348,577
26,109,903
634,324,610
December 31
2015bolivars
4,363,47366,235,157
921,2861,641,0223,740,214
76,901,152
11,51936,684,481
26,404,305307,313
4,813,424646,892
68,867,934
202,742,735500,986530,681
8,618
203,783,020(6,400,735)197,382,285
2,481,114338,801
28,1162,044,6817,476,461
355,520,544
December 31
2014bolivars
3,809,87137,599,293
919,4711,580,6882,461,748
46,371,071
70,99934,967,91416,798,928
236,07811,137,596
435,473
63,646,988
124,758,531545,128539,97094,446
125,938,075(4,119,499)
121,818,576
1,681,142242,007
78,0981,116,611
4,358,639
239,313,132
December 31
2013bolivars
2,456,74522,414,239
76,026887,925
1,722,425
27,557,360
88,43020,191,962
7,364,45520,189
3,837,0521,119,752
32,621,840
79,336,932492,243552,222160,798
80,542,195(2,656,682)77,885,513
895,041185,12449,096
832,3472,615,884
142,642,205
December 31
2012bolivars
Gustavo Vollmer A.Chairman and CEO
Alfonso Figueredo DavisGlobal Executive Vice President of
Operations and Administration
Aury OliverosAdministration Manager
Isabel Pérez SanchisGlobal Chief Financial Officer
23 Mercantil Servicios Financieros
Consolidated Balance Sheet(In thousands of Bs) Year ended
Liabilities and Shareholders’ Equity
LiabilitiesDepositsNon-Interest Bearing Checking AccountsInterest Bearing Cheking AccountsSaving DepositsTime Deposits
Debt Authorized by theNational Securities SuperintendencyPublicly OfferedDebt Securities
Financial LiabilitiesObligations with Banks and Savings and Loan Institutions
In Venezuela up to one yearAbroad up to one yearAbroad for more than one year
Liabilities Under Repurchase AgreementsOther Liabilities up to one year
Interest and Commissions PayableOther LiabilitiesSubordinated Debt
Total Liabilities
Intereses minoritarios en filiales consolidadas
Shareholders’ EquityCapital Maintenance of Paid-In CapitalPremium for Issuing StockCapital ReservesAdjustment for Conversion of Net Assets by SubsidiariesAbroadRetained EarningsShares Repurchased and Held by SubsidiariesPension plan remeasurementUnrealized Gain from Adjustment at Market Value ofInvestments
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
765,770,652190,561,241303,597,483
21,717,580
1,281,646,956
701,037
701,037
4,439,1004,538,6254,748,100
498,75014,951
14,239,526
114,903111,461,809
1,127,215
1,409,291,446
35,780
680,946191,709
12,713,451166,715
6,377,02656,038,556
(615,633)0
(1,877,630)
1,729,251
75,404,391
1,484,731,617
December 31
2016bolivars
190,706,706177,429,396155,482,82111,284,243
534,903,166
887,621
887,621
3,357,5002,490,114
2,048,649439,89442,042
8,378,199
154,26844,737,862
706,169
589,767,285
23,722
664,397191,709
0166,715
2,983,24439,914,413(234,638)
0(504,556)
1,352,319
44,533,603
634,324,610
December 31
2015bolivars
94,244,958101,175,77391,069,3378,184,602
294,674,670
619,507
619,507
300,1272,620,5111,805,136439,894127,739
5,293,407
93,50421,573,322
696,338
322,950,748
15,831
664,397191,709
0166,715
2,982,24127,054,686
(91,626)0
(93,223)
1,679,066
32,553,965
355,520,544
December 31
2014bolivars
58,309,77968,533,11362,315,5966,758,347
195,916,835
198,080
198,080
430,127974,051
1,528,632628,420
19,9273,581,157
54,23614,198,060
696,144
214,644,512
11,114
153,322191,709
203,546166,715
3,005,73018,505,241
(10,850)(48,608)
0
2,490,701
24,657,506
239,313,132
December 31
2013bolivars
35,309,37734,308,37339,013,606
5,974,210
114,605,566
176,149
176,149
4211,115,218846,064
707,73513,963
2,683,401
23,3059,591,762
478,591
127,558,774
7,239
153,418191,709
203,546166,715
1,550,16811,902,480
(6,678)(48,608)
0
963,442
15,076,192
142,642,205
December 31
2012bolivars
Gustavo Vollmer A.Chairman and CEO
Alfonso Figueredo DavisGlobal Executive Vice President of
Operations and Administration
Aury OliverosAdministration Manager
Isabel Pérez SanchisGlobal Chief Financial Officer
24 Annual REPORT 2016
Consolidated Income Statement(In thousand of Bs)
Year ended
Interest IncomeIncome from Cash and Due from BanksIncome from Investment PortfolioIncome from Loan Portfolio
Total Interest Income
Interest ExpensesInterest on Demand and Savings DepositsInterest on Time DepositsInterest on Securities issued by the institutionInterest on Financial Liabilities
Total Interest Expenses
Net Interest Income
Provision for Losses on Loan Portfolio
Net Financial Margin
Commissions and Other IncomeTrust Fund OperationsForeing Currency TransactionsCommissions for account TransactionsCommissions on Letters of Credit and Guarantees GrantedEquity in Long-Term InvestmentExchange GainsIncome on Sale of Investments SecuritiesOther income
Total Commissions and Other Income
Insurance Premiums. Net of ClaimsPremiumsClaims
Total Insurance Premiums. Net of Claims
Operating Income
Operating ExpensesSalaries and Employee BenefitsDepreciation, Property and Equipment Expenses, Amortization of Intangibles and OtherFees Paid to Regulatory AgenciesOther Operating Expenses
Total Operating Expenses
Net before Income taxes, Extraordinary itemsand Minority Interest
TaxesCurrentDeferred
Total Taxes
Net Income before Minority Interest
Minority Interest
Net Income for the Year
1,371,9218,891,293
108,102,085
118,365,299
(27,362,124)(259,689)(119,838)
(1,268,027)
(29,009,678)
89,355,621
(12,671,036)
76,684,585
514,30599,332
10,702,20722,358
616,262112,137
632,68325,188,886
37,888,170
63,344,695(51,316,251)
12,028,444
126,601,199
(24,691,335)
(13,895,142)(11,417,688)
(46,780,133)
(96,784,298)
29,816,901
(9,135,398)(2,634,841)
(11,770,239)
18,046,662
(10,922)
18,035,740
December 31
2016bolivars
463,7125,417,729
52,962,731
58,844,172
(16,453,734)(145,524)(54,939)
(532,248)
(17,186,445)
41,657,727
(4,924,512)
36,733,215
251,03630,594
3,347,45224,309
329,040270,899916,886
10,253,797
15,424,013
27,856,851(23,368,580)
4,488,271
56,645,499
(10,052,560)
(4,715,174)(5,842,759)
(14,939,935)
(35,550,428)
21,095,071
(7,437,214)441,521
(6,995,693)
14,099,378
(7,615)
14,091,763
December 31
2015bolivars
215,6644,676,951
25,247,483
30,140,098
(8,858,292)(111,123)(30,513)
(185,461)
(9,185,389)
20,954,709
(2,873,581)
18,081,128
167,40836,051
1,419,09830,216
238,62590,089
460,3305,699,366
8,141,183
13,377,429(11,216,351)
2,161,078
28,383,389
(6,274,223)
(1,713,468)(3,334,025)(7,418,874)
(18,740,590)
9,642,799
(96,592)314,149
217,557
9,860,356
(5,967)
9,854,389
December 31
2014bolivars
24,5243,786,234
14,642,794
18,453,552
(4,904,321)(119,849)
(13,111)(148,163)
(5,185,444)
13,268,108
(1,784,238)
11,483,870
104,2743,495
858,94525,872
159,506914,781799,961
3,518,313
6,385,147
8,548,931(7,225,263)
1,323,668
19,192,685
(4,314,387)
(1,015,980)(1,779,089)
(4,622,703)
(11,732,159)
7,460,526
(63,303)(142,568)
(205,871)
7,254,655
(4,228)
7,250,427
December 31
2013bolivars
8,5951,979,4399,815,722
11,803,756
(3,179,620)(105,916)
(6,603)(109,681)
(3,401,820)
8,401,936
(917,672)
7,484,264
70,8834,685
525,54323,141
102,563198,319877,446
2,195,318
3,997,898
6,055,320(5,033,730)
1,021,590
12,503,752
(2,996,641)
(644,642)(1,127,533)
(2,754,552)
(7,523,368)
4,980,384
(612,535)(202,787)
(815,322)
4,165,062
(2,455)
4,162,607
December 31
2012bolivars
Gustavo Vollmer A.Chairman and CEO
Alfonso Figueredo DavisGlobal Executive Vice President of
Operations and Administration
Aury OliverosAdministration Manager
Isabel Pérez SanchisGlobal Chief Financial Officer
25 Mercantil Servicios Financieros
Global During 2016, the economy grew slowly, at an estimated 2.2 % rate (2.5 % in 2015), the lowest
expansion since the financial crisis of 2008-2009. The level of economic activity in developed
countries slightly increased 1.5 % (2.1 % in 2015) and the growth of emerging economies
slowed to 3.6 % (3.8 % in 2015). With few exceptions, most of the large developed economies
showed this deceleration. The United States ended by increasing a mere 1.6 % (2.6 % in 2015),
after a first half of low growth. The Euro Zone’s GDP also increased by 1.6 % (vs. 2 % the
previous year). Japan remains with very moderate variations at 0.5 % (0.6 % in 2015).
As in previous years, emerging economies remained as the largest growing areas, although
with significant asymmetries. China, for the sixth consecutive year, reduced its growth to
6.6 % (6.9 % in 2015), while India remains the emerging economy with the largest growth
at 7.5 % (7.2 % in 2015). In contrast, other large emerging economies, such as Brazil and
Russia, continued to decrease its growth in 2016 with variations of -3.4 % (-3.9 % in 2015)
and -0.5 % (-3.7 %), respectively.
This inactivity resulted in a new deceleration of world trade volumes (1.7 % vs. 2.3 % in 2015),
within the framework of a weak global aggregate demand, low fixed investments, contraction
of large emerging economies, such as Russia and Brazil, and the new lower growth shown by
China.
However, some favorable features could be seen during 2016, which could anticipate a more
robust economic growth in 2017. Following the initial tension associated with the decision of
the British electorate to separate from the European Union (Brexit), an instructed exit and
with reduced immediate collateral effects has contributed to reduce financial volatility.
Capital flows towards emerging countries have resumed, the perception of high risk due to
the dysfunctional Chinese economy and, in particular, of its capital market has dissipated,
and the considerable reduction of prices of commodities has been moderated (-6 % vs. -29 %
in 2015), which alleviates external restrictions on many developing economies. Similarly, the
monetary policy of most central banks has continued to give priority to strengthening
demand with very low interest rates.
Global inflation rose from 2.6 % to 3.9 % due to the observed acceleration in both developed
(0.4 % to 1.3 %) and emerging (5.9 % to 7.8 %) economies, basically due to the pressure on
prices in Latin America, Africa and the Middle East.
Economic Climate
26 Annual REPORT 2016
United StatesThe U.S. economy showed a weakened growth in 2016 closing the year with 1.6 % expansion
of its Gross Domestic Product, below the 2.6 % of 2016, and the lowest increase since 2011,
mostly due to the low rates of the first two quarters of the year, at slighly 0.8 % and 1.4 %.
This performance of the GDP was not an obstacle to the high dynamism in the labor market,
which generated, on average, almost 180,000 new jobs per month throughout the year
(although still below the 229,000 new jobs in 2015) to a total of 2.16 million new joBs The
unemployment rate closed at 4.7 %, below the 5 % considered full employment.
The boost of economic activity on the side of aggregate demand this year was mainly based
on the 2.7 % increase in personal consumption expenses (3.2 % in 2015), public expenditure at
0.9 % (vs. 1.8 %), weaker federal spending (+0.6 %) than at the state and local levels (+1.0 %)
and net exports at 0.4 % (0.1 %); these factors more than compensated the decline of private
investments, which fell by 1.5 % (in contrast with the 5 % expansion of 2015), which in turn
centered on infrastructure (-3.1 %) and equipment (-2.8 %).
Although at a slower rate than in the previous triennium (3.8 % in 2016 vs. 12.8 % in 2015),
the value of the U.S. currency continued to strengthen compared to the main currencies of
its commercial partners, particularly in Europe, going from its recent historical maximum
record of 1.37 €/US$ in December 2013 to 1.05 €/US$ at the end of 2016. This variation brings
the cumulative appreciation to over 30 %, which has negatively affected domestic growth
and net results of its external sector. With the reduction of exports competitiveness, the
deficit in the balance of goods and services has surpassed US$ 490 billion since 2014, with a
decreasing value of exports for the third consecutive year, against imports that also, and in
decline too, dropped less than external sales (-2.4 % vs. -2.7 %). Industrial production, which
also been adversely affected by the exchange appreciation, is experiencing profound
technological and location changes, which explain the 1 % decline in 2016, compared to a
modest 0.3 % expansion of 2015 (+2.9 % in 2014).
Following the monetary exceptionality imposed to combat the financial crisis, the Federal
Reserve (FED), at the December meeting of the Federal Open Market Committee (FOCM)
and for the second time in over a decade (after the first adjustment of December 2015), made
a new adjustment of 25 basis points in interest rates to bring them to a range between 0.50 %
and 0.75 %, acknowledging that economic growth is following a solid trajectory, that the labor
market has significantly reduced its under-utilization margin of resources, and that inflation
remains below the 2 % mid-term margin, still gaining from the moderate prices of energy and
imports.
27 Mercantil Servicios Financieros
Latin AmericaThe region, as the rest of emerging economies, has suffered from the decline of the global
economic growth, particularly via foreign trade, which became the main source of expansion
of Latin America prior to the 2008-2009 global crisis. The regional GDP in 2016 contracted
by 1.1 % (-0.5 % in 2015), the worse decline since 2009, with several regional economies in the
region, including Venezuela (according to the Economic Commission for Latin America), in
recession: Brazil (-3.6 %), Argentina (-2 %) and Ecuador (-2 %), and the rest of the larger
countries with less dynamism in their production activity.
This performance of the real sector was reflected in the negative results of the labor market,
with a rise in the unemployment rate to 9.0 % (from 7.4 % in 2015); which in turn has
deteriorated the quality of new jobs, concentrating on self-employment, and contributed to
reduce the growth of real wages to 1 %, 100 basic points, less than in 2015.
Inflation rate, excluding Venezuela, closed at 8.4 % from 7.9 %, mainly due to the recovery of
energy and food prices in the commodities markets, but also as a result of adjustment in
public utilities, exchange rate devaluations, and in some cases, monetary financing of the
imbalances of the public sector.
For the fifth consecutive year, the region trade terms have declined, although merely 0.7 %
(-9.5 % in 2015). Although the flow of international funds towards Latin America declined in
2016, the contraction of imports may have been sufficient to more than compensate the
deficit in its current account (US$ -95 billion in 2016 vs. US$ -175 billion in 2015) and to
accumulate external assets up to US$ 812 billion (+2.1 % variation).
The fiscal situation of the region continued to show a deficit (-2.7 %) in spite of the efforts to
reduce public spending (from 15.1 % of GDP in 2015 to 14.9 % in 2016), a reduction that has
concentrated on the capital expenditure component. The cyclical movement of fiscal revenues
(a reduction from 17.8 % of GDP in 2015 to 17.6 % in 2016), given the prevailing recession,
explains that public debt continues to grow, although at moderate rates (50.8 GDP points in
2016 vs. 50.7 points in 2015).
VenezuelaThe value of the Venezuelan oil basket declined for the fourth consecutive year, which worsened,
during 2016, the decline of external revenue and the availability of international reserves, with
unfavorable effects on the growth capacity of the domestic economic activity, maintaining
moderate inflation rates.
Venezuelan oil prices averaged US$/b 35.5 during 2016, 20.6 % below the US$/b 44.7 of 2015,
and equivalent to a third of the highest historical price of US$/b 103.4 in 2012. The trajectory of
oil prices throughout 2016, nonetheless, showed a progressive improvement from a minimum
of US$/b 24.3 in the first two months to an average of US$ 41.9 in the fourth quarter of 2016.
On the other hand, oil production declined 10.4 % on average, from a daily volume of 2.667
million barrels in 2015 to 2.390 million barrels in 2016, the lowest production since 2011.
This mix of lower prices and lower production volumes, and consequently of exports, largely
explains the reduction of external assets in the hands of the Venezuelan Central Bank, which
ended in US$ 10,974 million from US$ 16,367 million at the close of 2015 (-33 %).
Fiscal spending, measured in terms of primary spending (not including the service of the
national public debt) executed by the National Treasury, grew 121 % in nominal terms in
2016 (vs. a 100 % growth in 2015). Domestic fiscal revenue (taxes and duties in the hands
of Seniat) showed a nominal expansion of 285.6 %, even above the high increase registered
in 2015 (245.8 %). VAT, as the main domestic tax ( accounting for 56 % of total collections)
rose by 270.3 % (254.6 % in 2015), and the remaining revenues, except for Customs Income,
grew at even higher rates (310 % for Corporate Income Tax, 357 % for Liquors and 284 % for
Tobacco, among the main sources of income). In contrast, all taxes and duties associated
with imports activities, such as VAT on Importers and Customs Income, although increased,
were at much lower rates (119 % and 126 %, respectively).
During 2016, monetary liquidity, which includes all means of payment in the hands of the public,
continued the expanding trend started in 2011, increasing by 159 % (101 % in 2015), with a
significantly high expansion during the second half of the year, even above the typical seasonal
expansion, making the liquidity surpluses of the financial system to increase from July to
December in 673 %.
The growth of the nominal magnitudes was even higher in the case of high-powered money or
monetary base, with a 236 % variation (108 % in 2015). In this creation of primary money by the
Central Bank, the components of the base which contributed the most to its expansion were
the international reserves measured in bolivars, as a result of higher average exchange rate used
to express those assets (+110 %), and mostly, the financing to PDVSA (+389 %).
Commercial and full-service bank lending rates in 2016 averaged 21.5 % in 2016 (20.3 % in 2015).
On the other hand, deposit rates for savings and term deposits were 12.7 % and 15.1 %,
respectively, slightly different from the 13 % and 15.0 % rates of the previous year for the same
deposit instruments.
28 Annual REPORT 2016
Source: Central Bank of Venezuela and in-house calculations.
Summary of Economic Performance 2015 2016
Variation of Gross Domestic Product %Total -3.1 nd Oil Sector -0.4 nd Non Oil Sector -3.3 nd
Exchange Rate Bs/US$ End of Period 12.7 56.9 Average 12.2 34.1
Exchange Rate Variation %End of Period -24.2 % 349.5 %Average -14.4 % 180.4 %
Inflation (Caracas) %Cumulative Variation 47.3 nd Annualized Variation 187.3 nd
Interest Rate - End of PeriodAverage Leading Rates (6 main Banks) 19.2 20.8 90 day Time Deposits (6 main Banks) 14.6 14.7
29 Mercantil Servicios Financieros
StrategicPositioning
Our Culture
Soundness: “Strength and Soundness above all else”.
Long-term thinking and vision: “The strategy is based on a long-term outlook, with tactical
decisions and permanently striving to achieve the desired results”.
Respect and Care for Employees: “The well-being, motivation, recognition and individual
development of our employees are permanent goals for the organization”.
Mercantil brand is the focal point: “The brand image is the organization. The public presence
is of the organization as a whole and not of its individual members. The corporate profile is
guided by the strategy”.
Compliance: “Strict and timely adherence to all applicable laws, regulations, rules and policies”.
Ethical Behavior: “Zero tolerance for unethical behavior and transparency in all
communications and information”.
Multinational: “We are an international organization with Venezuelan roots”.
Resilience: “We continuously adapt to changing environments and circumstances with dignity
and integrity”.
Good citizenship: “Our behavior reflects the solidarity and commitment to the community”.
Corporate Governance: “Respect for the organization’s corporate governance structure”.
Our Commitment
• To be the best financial services provider as measured by the degree to which customers’
needs and expectations are met, through products and services considered by them as the
best in the market.
• To be a leading and innovative institution that anticipates the needs of the customers and
competitors actions.
• To be recognized for its quality and excellence.
• To have the best and most capable human resources that are committed to working as a team.
• To maintain a prudent risk management combined with an excellent asset and liability
management.
• To maintain a continuous focus on increasing operational efficiency across the organization,
leveraging on technology as a competitive advantage.
Mission
To fulfill the needs of our customers
by providing excellent financial
products and services, attain the
aspirations of our employees, support
the development of the communities
where Mercantil has presence and add
value for our shareholders through
a long term outlook.
Vision
To be an independent financial
services organization of reference**
in the areas of banking, wealth
management and insurance, in the
markets we serve.
(*) Independent:
• Mercantil is the brand. Mercantil Servicios Financieros isthe organization.
• Mercantil Servicios Financieros isthe parent company and is notdependent on any other company.
(**) Reference:
To be recognized and respectedfor our strength, ethical behavior,dynamism, innovation, quality ofservice and for being the bestplace to work.
Balance Sheet
A summary balance sheet at the close of December 2016 is shown below and the main
variations by comparison to December 2015 and 2014 are commented on.
The audited financial statements and their notes are attached to this Report. The accounting
standards used are summarized at the end of this chapter.
Total Assets
Total assets were Bs 1,484,732 million, representing 134.1 % annual growth. This growth is due
to a combined behavior of cash and due from banks, investments portfolio and loan portfolio,
which increased by 269.6 %, 87.7 % and 90.4 %, respectively. Financial assets reached 58.4 %
of total assets, Bs 409,894 million (89.7 %) up from the previous year. Among cash and due
from bank, demand deposits (non-bearing interests) at the BCV are related to internal limits
of liquidity risks. As of December 31, 2016, this includes the effect of the recent high levels of
liquidity of the Venezuelan financial system.
The variations for this item during 2016, taken individually by subsidiary, are as follows:
30 Annual REPORT 2016
ManagementDiscussion and Analysis
Summary of ConsolidatedBalance SheetYear ended(In thousands of Bs except percentages)
Total Assets
Investment Portfolio
Loan Portfolio, Net
Deposits
Shareholders’ Equity
Trust Fund Assets
1,484,731,617
180,210,406
655,362,111
1,281,646,956
75,404,391
49,594,274
December 31
2016bolivars
634,324,610
96,020,224
344,140,584
534,903,166
44,533,603
32,117,678
December 31
2015bolivars
355,520,544
68,867,934
197,382,285
294,674,670
32,553,965
24,874,057
December 31
2014bolivars
850,407,007
84,190,182
311,221,527
746,743,790
30,870,788
17,476,595
134.1
87.7
90.4
139.6
69.3
54.4
317.6
161.7
232.0
334.9
131.6
99.4
Dec. 2016 Vs. Dec. 2015Increase/
(Decrease)bolivars %
Dec. 2016 Vs. Dec. 2014Increase/
(Decrease)bolivars %
1,129,211,073
111,342,472
457,979,826
986,972,286
42,850,426
24,720,217
(In thousands of Bs except percentages)
563,052,568
31,838,781
8,130,082
802,808,641
28,056,409
267,512
142.6 %
88.1 %
3.3 %
December 31
20151,365,861,209
59,895,190
8,397,594
December 31
2016Mercantil Banco Universal Bs
Mercantil Seguros Bs
Mercantil Bank Holding Corporation Us$
Dec. 2016 Vs. Dec. 2015Increase/
(Decrease)
bolivars %
31 Mercantil Servicios Financieros
Investment Portfolio
At December 31, 2016, investments totaled Bs 180,210 million, reflecting Bs 84,190 million
(87.7 %) year-on-year growth from Bs 96,020 million in December 2015. This increase is mainly
observed in investments issued by the Bolivarian Republic of Venezuela and placements in the
BCV.
The most significant variations of this item during the year, taken individually by subsidiary, are
as follows:
Government bonds issued by the Venezuelan State account for 0.44 times Mercantil’s equity
and 2.2 % of its assets (0.57 and 4.0 % in December 2015, respectively). At Mercantil Banco
Universal, these securities represent 0.24 times its equity and 1.7 % its assets (0.39 and 3.5 %
in December 2015, respectively).
At December 31, 2016, the Mercantil C.A., Banco Universal subsidiary, in line with regulations
issued by the National Executive Branch, has purchased Bs 92,570 million in Mortgage
Securities, Certificates of Participation, Agriculture Bonds and Stocks, representing 70.3 %
of the investment portfolio and 1.5 times its equity (Bs 47,243 million, representing 68.2 % of
its investment portfolio and 1.3 times its equity at December 31, 2015).
Investments in Securitiesby IssuerBs 180,211 million December 2016
Venezuelan Central Bank
Venezuelan State and Goverment Entities
Goverment and US Goverment-sponsored Bodies
Others
Dec-2016 Dec-2015 Dec-2014
Dec. 2016 Vs. Dec. 2015Increase/
(Decrease)
bolivars %(In thousands of Bs except percentages)
81,541,577
11,694,491
2,198,375
81,471,329
11,392,627
132,849
99.9 %
97.4 %
6.0 %
December 31
2015163,012,906
23,087,118
2,331,224
December 31
2016
8.9 %
69.8 %
10.5 %
10.8 %
2.2 %
75.4 %
10.6 %
11.8 %
1.7 %
70.0 %
15.9 %
12.4 %
Mercantil Banco Universal Bs
Mercantil Seguros Bs
Mercantil Bank Holding Corporation Us$
Net Loan Portfolio
At December 31, 2016, net loans totaled Bs 655,362 million, up Bs 311,222 million (90.4 %) from
Bs 344,141 million in December 2015.
The most significant variations for this item, taken individually by subsidiary, are as follows:
The ratio of past due and non-performing loans to gross loans is 0.4 % (0.2 % at December 2015).
The ratio by subsidiary is as follows:
• Mercantil Banco Universal 0.3 %, the same as for the Venezuelan financial system (0.2 %
compared to 0.3 % of the Venezuelan financial system in December 2015).
• Mercantil Bank, N.A. 0.8 % (0.3 % 0.3 % at the close of December 2015). Non-accrual loans
at the close of December 2016 and 2015 amounted to 1.2 % of total loans.
99.4 % of Mercantil’s loan portfolio is outstanding at December 31, 2016. The allowance for
losses on loan portfolio covers 764.4 % of past due and non-performing loans (1,273.3 % at
December 31, 2015). At Mercantil Banco Universal, this ratio is 959.4 % (1,466.9 % at December
31, 2015) and 170.2 % at Mercantil Bank N.A. (480 % at the close of December 2015).
32 Annual REPORT 2016
Investments by Maturity and Yield(Stated in millions of Bs, except percentages)
Years
Less than 1 From 1 to 5 Over 5
Trading
Bs 1
1 192 359
552
Available for Sale
Held toMaturity Shares
Bs 1
--
1,013
1,013
TOTAL
67,07919,75993,373
180,211
Time Depositsand Placements
Trust Funds andRestricted
Investments
Bs 1
35,407 8,296
32,962
76,665
% 3
4.2 7.4 8.5
Bs 2
1,814 11,260 58,970
72,044
% 3
5.3 5.2 6.4
Bs 1
26,749--
26,749
% 4.8
--
Bs 1
3,10811
69
3,188
% 3
5.518.115.6
(1) Market value.(2) Amortized cost.(3) Yield is based on the amortized cost at year end. This is obtained by dividing income from securities (including
amortization of premiums or discounts) by the amortized cost or market value.
Investments, by maturity and yield at December 31, 2016, are broken down as follows:
(In thousands of Bs except percentages)
307,416,423
5,558,623
287,905,383
120,243
93.7 %
2.2 %
December 31
2015Mercantil Banco Universal Bs
Mercantil Bank Holding Corporation Us$
595,321,806
5,678,866
December 31
2016Net Loan Portfolio byBusiness SegmentBs 655.362 million December 2016
Large Corporations 15 %
Small and Medium Enterprise 45 %
Individuals 40 %
15 %E
40 %
15 %E
40 %
Dec. 2016 Vs. Dec. 2015Increase/
(Decrease)
bolivars %
33 Mercantil Servicios Financieros
(1) Includes Bs 626 million in Agricultural Bonds issued by the Venezuelan State and Government Entities valid for thecompulsory agricultural portfolio; and Bs 207 million in Class "B" shares of the company guaranteeing the loans oftourism SMEs "Sociedad de Garantías Recíprocas para la Pequeña y Mediana empresa " applicable for compliancewith the tourism portfolio.
(2) Includes Bolivarian Mortgage Securities 2015-II.
December 2016
SectorPercentages
of Compliance %reached
%required
December 2016Interest rates in force
Agriculture
Mortgage
Microcredits
Tourism
Manufacturing
42.04 1
3.53 2
3.88
5.42 1
10.15
26.0
20
3.0
5.25
10
Calculated on the average of balances shown asnet loan portfolio at December 31, 2015 and 2014,compliance is monthly. Maximum per client: 5 %of the current net agriculture portfolio. A mini-mum of 10 % annual of new loan takers, and theportfolio must be quarterly distributed amongstrategic items (75 %), non-strategic (5 %), agroin-dustrial investments (14 %) and commercialization(5 %) according to regulations from the Ministryof Agriculture and Lands. A minimum 20 % of theportfolio must be dedicated to mid- and long-termloans.
Calculated on the gross loan portfolio at 12/31/2015,distributed as follows: 7.6 % for home purchase,0.4 % for self-construction, improvements andexpansion, and 12 % for self-construction of maindwellings, from the latter 9.0 % should be allocatedfor the purchase of bonds and 3 % for construction.Annual Compliance, only applies for new credits atDecember.
3 % calculated on the gross loan portfolio at06/30/2016. Monthly Compliance.
Calculated on the average gross loans at 12/31/2015and 12/31/2014. The Tourism Ministry set in 5.25 %the percentage that full service banks have toearmark to the tourism sector in 2016. Compliancemust be achieved at 12/31/2016.
10 % calculated on the net loan portfolio byDecember 31, 2015. The percentage of compliancemust be directed to strategic development sectors(60 %) and 40 % to financing small and mediumenterprises, as well as joint community ventures,and state companies. Compliance is annual.
Set weekly by the Venezuelan CentralBank. At 12/31/2016 the maximum is 13 %.
Set by the Housing and Habitat Ministry.Set in accordance with family income ofdebtors, ranging between 4.66 % and10.66 %.
Within minimum and maximum ratesestablished by the Venezuelan CentralBank. At 12/31/2016 the rate cannot behigher than 24 %.
The Venezuelan Central Bank establishesa preferential rate for the sector on amonthly basis. As of 12/31/2016, themaximum rate is 11.62 % and, in somecases, could be decreased in 3 bps(minimum 8.62 %) in accordance withthe Law for Tourism Loans.
Set by the Venezuelan Central Bank at 18%. For SME, state-owned industries,community industries and jointventures, the applicable interest ratemay not exceed 90 % of the rate set bythe Venezuelan Central Bank. At12/31/2016 this is equivalent to 16.2 %.
Compulsory Percentage of Mercantil Banco UniversalLoan Portfolio by economic sector and interest rates
Loan Portfolio, grossClassified by StatusYear Ended(In thousands of Bs except percentages)
353,346,672510,653777,49550,640
354,685,460
December 31
2015bolivars
202,742,735500,986530,681
8,618203,783,020
December 31
2014bolivars
99.50.20.30.0
100.0
%
99.70.10.20.0
100.0
%
CurrentRestructuredPast DueIn Litigation
672,166,5331,034,0172,581,779
103,252675,885,581
December 31
2016bolivars
99.40.20.40.0
100.0
%
Deposits
At December 31, 2016, deposits totaled Bs 1,281,647 million, representing 139.6 % increase
compared to Bs 534,903 million in December 2015. Demand deposits were the main components
of total deposits, which reached Bs 956,332 million, 159.8 % up from December 2015 and 74.6 %
of total deposits. Savings and time deposits increased by Bs 148,115 million (95.3 %) and Bs 10,433
million (92.5 %) over the same period, respectively.
The most significant variations for this item, taken individually by subsidiary, are as follows:
Shareholders’ Equity
At December 31, 2016, shareholders’ equity totaled Bs 75,404 million, 69.3 % up from Bs 44,534
million in December 2015. This variation mainly includes Bs 18,036 million in net income for
the year, Bs 12,730 million for social capital increase approved in the General Shareholders’
Meeting held on September 2015, Bs 3,394 million increase from the conversion of net assets
of subsidiaries abroad, Bs 1,912 million decline corresponding to dividends declared net of
cash dividends and Bs 1,373 million reduction of remeasurement for personnel benefits.
Capital Ratios
Mercantil’s equity-to-assets ratio at December 31, 2016 is 5.1 %, and its equity to risk-weighted
assets ratio is 10.1 %, based on the standards of the National Securities Superintendency
(7.0 % and 11.4 % as of December 31, 2015, respectively).
• Mercantil Banco Universal, in accordance with the requirements of the Superintendency
of Banking Sector Institutions in Venezuela, has an equity-to-assets ratio of 11.2 % and an
equity to risk-weighted ratio of 13.1 % (10.0 % and 12.7 % at December 31, 2015, respectively).
• Mercantil Bank, N.A., based on the standards of the Office of the Comptroller of the
Currency (OCC) has an equity-to-assets ratio of 9.2 % at December 31, 2016, and an equity
to risk-weighted assets ratio of 12.4 % (9.4 % and 12.3 % at December 31, 2015, respectively).
The equity ratios of Mercantil and its subsidiaries exceed the regulatory minimums.
34 Annual REPORT 2016
Deposits byBusiness SegmentBs 1,281,647 millionDecember 2016
Large Corporations 21 %
Small and Medium Enterprise 31 %
Individuals 48 %
492,825,991
6,507,626
721,095,466
55,330
146.3 %
0.9 %
December 31
20151,213,921,457
6,562,956
December 31
2016(In thousands of Bs except percentages)Mercantil Banco Universal Bs
Mercantil Bank Holding Corporation Us$
Dec. 2016 Vs. Dec. 2015Increase/
(Decrease)
bolivars %
Evolution of Net Interest Income
35 Mercantil Servicios Financieros
Income StatementThe main variations between figures for December 2016 and December 2015 are summarized
below:
Net Interest Income
Net interest income in 2016 was Bs 89,356 million, 114.5 % up from Bs 41,658 million in 2015,
mainly due to the growth of financial assets and liabilities. Interest income totaled Bs 118,365
million, recording 101.2 % year-on-year increase, reflected in the growth of the loan portfolio
income by 104.1 %. Interest expenses were Bs 29,010 million, 68.8 % more than in 2015. The
financial intermediation ratio (loans-to-deposits) was 52.7 % at the close of December 2016
and 66.3 % in December 2015.
• Mercantil Banco Universal reached Bs 85,128 million, 132.5 % year-on-year growth from
Bs 36,618 million, mainly due to the increase of financial assets and liabilities. The
financial intermediation ratio was 50.1 % in December 2016 and 63.8 % in December 2015.
• Mercantil Bank, N.A. reached US$ 193 million1 (Bs 1,805 million), 11.5 % up from US$ 173
million1 (Bs 1,085 million) in 2015. The Bank continues to hold a significant portion of its
assets, US$ 2,290 million (more than 27 %), in short-term investments and securities
issued by the U.S. government or U.S. government-sponsored agencies. This high level
of liquidity has continued to allow the Bank ample flexibility to increase its credit
operations.
Mercantil’s net interest income to average financial assets ratio at December 31, 2016 was 14.5
%, compared to 12.0 % in the previous year.
Interest Income
Interest Expense
Net Interest IncomeProvision for losses on Loan PortfolioandCommissions Receivable
Net Financial Margin
118,365,299
(29,009,678)
89,355,621
(12,671,036)
76,684,585
58,844,172
(17,186,445)
41,657,727
(4,924,512)
36,733,215
30,140,098
(9,185,389)
20,954,709
(2,873,581)
18,081,128
59,521,127
11,823,233
47,697,894
7,746,524
39,951,370
101.2
68.8
114.5
157.3
108.8
292.7
215.8
326.4
340.9
324.1
88,225,201
19,824,289
68,400,912
9,797,455
58,603,457
Net Financial MarginYear Ended(In thousands of Bs except percentages)
December 31
2016bolivars
December 31
2015bolivars
December 31
2014bolivars
Dic . 2016 Vs. Dec. 2015Increase/
(Decrease)bolivars %
Dic . 2016 Vs. Dec. 2014Increase/
(Decrease)bolivars %
5.5 %
7.5 %
9.5 %
11.5 %
13.5 %
15.5 %
8,402 13,267 20,955 41,658 89,356
2012 2013 2014 2015 2016
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
8.5 % 8.6 %
9.3 %
12.0 %
14.5 %
13,267 20,955 41,658 89,356
2
8
Net Interest IncomeNet Interest Income / Average Financial Assets
(1) Dollar figures are given for reference only; balance sheet figures are converted at the period-end exchange rate of Bs 9.975/US$ 1 and income statement figures at the averageexchange rate for the period of Bs 9.3599/US$ 1. Exchange control has been in place in Venezuela since February 2003.
(in m
illio
ns o
f Bs)
36 Annual REPORT 2016
Loan Portfolio Provision
During 2016, loan loss provision were Bs 12,671 million, up 157.3 % from Bs 4,925 million in
2015, bringing the accumulated provision to Bs 20,523 million at the close of December 2016.
This represents 3.0 % of Mercantil’s gross loans (3.0 % at December 31, 2015) and 764.4 %
coverage of past due and non-performing loans (1,273.3 % at December 31, 2015).
• Mercantil Banco Universal registered Bs 12,474 million in loan loss provision in 2016
(Bs 4,804 million in 2015) mainly aimed at provisions in the construction, commercial,
industrial and service sectors, resulting from loan portfolio growth during the period.
At December 31, 2016, the accumulated loan portfolio provision was Bs 19,552 million,
which represents 959.4 % of past due and non-performing loans (1,466.9 % at December
31, 2015). The ratio of past due and non-performing loans to gross loans reached 0.3 %
in December 2016, which compares to 0.2 % in December 2015.
• Mercantil Bank, N.A. registered US$ 22 million1 (Bs 207 million) in loan loss provision
during the 2016. At December 31, 2016, the accumulated provision for the loan portfolio
was US$ 82 million1 (Bs 815 million) and covers 170.0 % of past due and non-performing
loans (480 % at the close of December 2015).
0
0.0 %
1.6 %
2.0 %
0.4 %
0.8 %
1.2 %
2.4 %
2.8 %
3.2 %
3.6 %
4.0 %
4.4 %
2012 2013 2014 2015 2016
3.3 % 3.3 % 3.1 % 3.0 % 3.0 %
50,000100,000150,000
200,000250,000300,000350,000
400,000450,000500,000550,000600,000650,000700,000
0.9 %
0.5 % 0.4 % 0.3 % 0.2 %
C
Loan Portfolio Evolution
(in m
illio
ns o
f Bs)
Loan Portfolio
Past due and non-performing loans
Past due and non-performing Loan / Gross Loan Portfolio
Loan Portfolio Provision / Gross Loan Portfolio
(1) Dollar figures are given for reference only; balance sheet figures are converted at the period-end exchange rate of Bs 9.975/US$ 1 and income statement figures at the averageexchange rate for the period of Bs 9.3599/US$ 1. Exchange control has been in place in Venezuela since February 2003.
37 Mercantil Servicios Financieros
Commissions, Other Income and Insurance Premiums, Net of Claims
Commissions and Other Income during 2016 totaled Bs 37,888 million, reflecting Bs 22,464
million (145.6 %) year-on-year increase from Bs 15,424 million. This increase is mainly due to:
• Bs 22,620 million (162.7 %) growth in earnings from commissions on the use of debit and
credit cards, income from financing insurance policies, as well as other commissions on
customer operations, among others.
• Bs 253 million (27.6 %) decrease in earnings from securities trading activities.
Insurance premiums, net of commissions, reinsurance and claims totaled Bs 12,028 million in
2016, reflecting 168.0 % increase compared with Bs 4,488 million in 2015. Net collected premiums
in 2016 totaled Bs 84,759 million, which represents a year-on-year increase of Bs 45,742 million
or 117.2 %. This growth was mainly from net collected premiums in both the collective business
lines, which increased by 139 % compared to 2015 from Bs 12,476 million to Bs 29,940 million and
the individuals business lines, which rose by 95.7 % from Bs 24,100 million in 2015 to Bs 47,180
million in 2016, mainly in the automobile business. This segment represents an important amount
in Mercantil Seguros’ portfolio with 50.1 % of participation.
Mercantil Seguros is the second insurance company in the country in terms of net collected
premiums, with a 9.7 % market share at December 31, 2016. Claims and administrative expenses
totaled Bs 51,316 million, up Bs 27,948 million (119.6 %) from 2015. The claims ratio was 62 % in
2016 (64.0 % at December 31, 2015). During 2016, the Mercantil Seguros Panamá registered
US$ 16,308 thousand collected premiums in Venezuela.
Commissions, Other Income andInsurance Premiums, Net of ClaimsYear Ended(In thousands of Bs except percentages)
Net Financial MarginCommissions and Other Income
Insurance Premiums, Net of Claims
Operating Income
76,684,585
37,888,170
12,028,444
126,601,199
December 31
2016bolivars
36,733,215
15,424,013
4,488,271
56,645,499
December 31
2015bolivars
18,081,128
8,141,183
2,161,078
28,383,389
December 31
2014bolivars
39,951,370
22,464,157
7,540,173
69,955,700
108.8
145.6
168.0
123.5
324.1
365.4
456.6
346.0
Dec. 2016 Vs. Dec. 2015Increase/
(Decrease)bolivars %
Dic . 2016 Vs. Dec. 2014Increase/
(Decrease)bolivars %
58,603,457
29,746,987
9,867,366
98,217,810
Net IncomeYear Ended(In thousands of Bs except percentages)
Earnings from Financial OperationOperating Expenses
Personal Expenses
Taxes (Current and Deferred)
Minority Interest
Net Income for the Period
126,601,199
(72,092,963)
(24,691,335)
(11,770,239)
(10,922)
18,035,740
December 31
2016bolivars
56,645,499
(25,497,868)
(10,052,560)
(6,995,693)
(7,615)
14,091,763
December 31
2015bolivars
28,383,389
(12,466,367)
(6,274,223)
217,557
(5,967)
9,854,389
December 31
2014bolivars
69,955,700
46,595,095
14,638,775
4,774,546
3,307
3,943,977
123.5
182.7
145.6
68.2
43.4
28.0
346.0
478.3
293.5
(5.510.2)
83.0
83.0
Dec. 2016 Vs. Dec. 2015Increase/
(Decrease)bolivars %
Dec. 2016 Vs. Dec. 2014Increase/
(Decrease)bolivars %
98,217,810
59,626,596
18,417,112
11,987,796
4,955
8,181,351
38 Annual REPORT 2016
Operating ExpensesDuring 2016, Operating and Personnel Expenses registered 172.2 % (Bs 61,234 million) year-on-
year increase , which has been affected by the inflationary environment. This growth is mainly
due to:
• Bs 14,639 million increase in personnel expenses, reflecting 145.6 % year-on-year rise. This
increase in expenses is mainly due to the application of compensation and benefits policies
consistent with the market. Assets per employee at Mercantil Banco Universal rose from
Bs 76.2 million in 2015 to Bs 215.4 million in 2016. At Mercantil Seguros, net earned
premiums per employee rose from Bs 10.7 million in 2015 to Bs 28.1 million in 2016. In the
case of the overseas business, assets per employee ratio rose from US$ 8.0 million in 2015
to US$ 8.9 million in 2016.
• Bs 27,341 million (210.1 %) increase in expenses from commissions on the use of the point-
of-sale and ATM network, among others.
• Bs 5,575 million (95.4 %) increase in expenses for contributions to regulatory agencies.
• Bs 9,180 million (194.7 %) rise in depreciation, property and equipment expenses,
amortization of intangibles and others.
• Bs 4,500 million (233.3 %) increase in expenses for taxes and contributions.
Expenses for corporate income tax increased Bs 4,775 million (68.2 %), compared to 2015, mainly
due to the exclusion of financial and insurance activities from the system of adjustment for
inflation, as a result of regulatory changes in Venezuela. Also, the applicable fee for these
activities increased from 34 % to 40 %.
The efficiency ratio measured by calculating operating expenses as a percentage of average
assets was 9.4 % in December 2016, and 6.4 % in December 2015. The ratio of operating expenses
to total revenue was 613 % in December 2016 (48.3 % in December 2015).
Taxes and ContributionsFor the year ended December 31, 2016, Mercantil and its subsidiaries reported significant
expenses for various types of taxes and contributions.
Operations in Venezuela generated the following expenses: Bs 8,968 million in payable
corporate income tax, Bs 742 million in deferred corporate income tax; Bs 6,055 million in
value added tax; Bs 6,416 million in municipal taxes; Bs 8,199 million in contributions to the
Deposit Guarantee Fund; Bs 974 million in contributions to the Superintendency of Banking
Sector Institutions; Bs 2,180 million in contributions to the Superintendency of Insurance
Activity; and Bs 1,396 million in contributions to the National Community Council Fund.
Operations abroad registered the following expenses: Bs 167 million in expenses for payable
corporate income tax, Bs 1,450 million in deferred corporate income tax, Bs 23 million in
municipal taxes and other contributions, and Bs 64 million for contributions to regulatory
agencies of the banking activity.
Mercantil Servicios Financieros and its subsidiaries also complied with other compulsory
contributions provided for under the applicable legislation.
Total contributions to the various official entities both in Venezuela and abroad account for
19.5 % of Mercantil's expenses which, combined with corporate income tax, make up 27.9 %
of those expenses (22.8 % and 40.3 % as of December 31, 2015, respectively).
39 Mercantil Servicios Financieros
Financial statements are presented in accordance with the
accounting standards of the SNV, in bolivars. A summary
of some of the main accounting principles applied is given
below:
Investment Portfolio Securities Held for Trading - Unrealized gains or losses
resulting from differences in market value due to market
fluctuations are included in the results for the period.
Available-for-Sale Securities – Recorded at their market
value. Unrealized gains or losses resulting from differences
in market value and exchange rate fluctuations are included
in shareholders’ equity. Held-to-Maturity Securities –
Recorded at their acquisition cost, adjusted for amortization
of premiums or discounts. For all portfolio investments,
permanent losses in market value are recorded as a charge
to income in the period in which they occur. Permanent
investments – are investments that represent 20 % to 50 %
stock ownership. Those greater than 50 % are recorded as an
equity interest and consolidated, except when control is
likely to be temporary.
Loan Portfolio Loans are classified as overdue 30 days after their maturity.
Allowances for loan portfolio losses are determined through a
collectability assessment that quantifies the amount that must
be set aside for each loan. These assessments take into account
such aspects as economic conditions, credit risk by customer,
credit history and the collateral received. When assessing loans
for small amounts of the same nature, these are grouped
together to determine the provisions required.
Recognition of income and expendituresIncome, costs and expenses are recorded as they are earned or
incurred. Interest earned on past-due loan portfolios is
recorded as income when collected. Fluctuations in the market
value of derivatives are recognized as income in the period in
which they occur. Insurance premiums are recorded as income
when earned.
Consolidation The consolidated financial statements include the accounts of
Mercantil and its more than 50 %-owned subsidiaries and other
institutions in which Mercantil has a controlling interest.
Inflation AdjustmentAccording to SNV standards, Mercantil’s financial
statements, as of December 31, 1999 must be presented in
historic figures. Since then Mercantil has ceased to adjust for
inflation in its primary financial statements. As a result, fixed
and other assets are shown at their inflation-adjusted value
up to December 31, 1999. The market value determined by
independent assessments is higher than the inflation cost
adjusted for inflation indicated above. New additions are
being recorded at their acquisition value.
Assets and Liability in Foreign currency Transactions and balances in foreign currency are translated
according to the best estimate of the expectations of the future
flows of bolivars obtained, making use of mechanisms legally
established.
Main differences between the accounting standards of
SNV and the accounting standards of other subsidiariesThe main accounting differences for the reconciliation of items
under SNV and Sudeban for Mercantil Servicios Financieros are:
• Amortization of premiums or discounts of securities carried
out on a straight-line basis under Sudeban standards and
in accordance with the constant amortization rate under
SNV standards.
• Foreign exchange rate fluctuations are recorded in the
results, with the exception of those that Sudeban indicates
to be included in equity and are subsequently recorded in
the results when Sudeban authorized.
The main accounting differences for Mercantil Servicios
Financieros between the SNV standards and the USGAAP are:
• Deferred Income Tax: USGAAP allows deferred tax to be
recognized for the total amount of loan portfolio loss
allowances, while SNV standards only allow recognition of
allowances for loans classified as high risk and unrecoverable.
• Provision for assets received in lieu of payment: SNV
standards stipulate that 100 % allowance for real estate
property received in lieu of payment after one year from the
date of incorporation; under IFRS no amortization deadlines
are established Superintendency.
Summary of the Accounting Principlesused to prepare the Financial Statements
40 Annual REPORT 2016
Performance of Subsidiaries
Mercantil’s global business includes the company’s operations in Venezuela and abroad. Its
results are explained in the Management and Discussion Analysis chapter.
A summary of Mercantil’s operations carried out through each subsidiary at December 31,
2016, prepared in accordance with the accounting standards of the National Securities
Superintendency is presented below.
(1) In accordance with the standards of the National Securities Superintendency. Figures net of elimination resulting from the consolidation process.
Equity
Main Activity
Main Subsidiaries
Mercantil, C.A.Banco Universal
Bs 91,905,044
Venezuelan
Universal
Bank
MercantilFlorida BanCorp
Bs 6,701,682
Commercial Bank,Brokerage and
TrustServices in the US
Mercantil Bank N.A.
Mercantil Investment
Services (MIS)
Mercantil Trust Company
(MTC)
OtherBanks Overseas
Bs 1,152,335
InternationalBank
Mercantil Bank (Schweiz), AG.
Mercantil Bankand Trust Limited
(Cayman)
Mercantil Bank(Curaçao) NV
Mercantil Bank(Panamá) S.A.
Mercantil Seguros, C.A.
Bs 9,922,649
Insurance inVenezuela
MercantilSeguros
Panamá, S.A.
MercantilMerinvest, C.A.
Bs 582,226
Investment Banking, MutualFunds, Trading &
Brokerage
Mercantil MerinvestCasa de Bolsa, C.A.
MercantilServicios de
Inversión, C.A.
MercantilSociedad
Administradora de Entidadesde Inversión
Colectiva, C.A.
Mercantil CapitalMarkets
(Panamá)
Other NonFinancial
Businesses
Total
1,334,458,407
131,854,117
595,301,690
1,211,637,887
18,697,431
6,196
83,711,299
23,489,514
56,646,691
64,716,020
179,467
944
8,111,070
3,168,657
3,413,730
5,293,049
(541,782)
123
56,204,778
21,116,863
-
-
1,734,648
1,035
2,010,942
218,057
-
-
(2,185,316)
34
1,484,731,617
180,210,406
655,362,111
1,281,646,956
18,035,740
8,370
235,124
363,198
-
-
151,292
38
Mercantil Servicios Financieros (1)(In thousands of Bs)
as of December 31, 2016 Shareholders’ Equity Bs 75,404,391
(In thousands of Bs)1
Total Assets
Investment
Loan Portfolio, Net
Deposits
Net Income
for the year
Number of Employees
Others Bs 761,066
41 Mercantil Servicios Financieros
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. This explains
why they differ from the consolidated information presented according to the accounting
standards of the National Securities Superintendency. Mercantil C.A., Banco Universal
consolidated with foreign subsidiaries is presented in accordance with the standards of the
Superintendency of Banking Sector Institutions; Mercantil Florida Bancorp in accordance with
USGAAP; Mercantil Seguros, C.A., according to the Superintendency of Insurance Activity;
and Mercantil Merinvest, C.A., in accordance with the standards of National Securities
Superintendency.
Mercantil Banco UniversalDuring 2016, Mercantil Banco Universal's total assets grew Bs 783,538 million (142.2 %), net
loan portfolio increased Bs 287,890 million (93.6 %) and total deposits grew Bs 729,201 million
(146.7 %). Loan portfolio quality remains favorable, with a ratio of past due and non-
performing loans to gross loans of 0.3 %, the same as for the Venezuelan financial system as
a whole. The loan portfolio provision covers 959.4 % of past due and non-performing loans
(1,466.9 % at December 31, 2015).
At December 31, 2016, the Mercantil Banco Universal subsidiary ranks fourth in the
Venezuelan private financial system in terms of total assets with 10.2 % of the market. The
leading institution has a 19.7 % share, and Venezuela’s four main banks account for 58.7 % of
the total for the financial system. Mercantil Banco Universal is the leading bank in Venezuela's
private financial system in terms of savings deposits and loans to the agriculture with a market
share of 20.2 % and 14.4 %, respectively. Additionally, it is the third bank in the private sector
in terms of loans to the tourism, manufacturing, mortgages and microcredits sectors, with
market shares of 8.5 %, 7.7 %, 6.2 % and 7.1 %, respectively.
At December 31, 2016 investments in securities totaled Bs 131,671 million, reflecting Bs 62,423
million (90.1 %) growth compared to December 2015. At December 31, 2016 investments in
securities are made up of 87.2 % in securities issued or guaranteed by the Venezuelan State
and Government Entities; 12.1 % in certificates of deposit issued by the Venezuelan Central
Bank (BCV) with maturities between January and September 2017; and 0.7 % in securities
issued by the Venezuelan and international private sectors, and others.
Shareholders’ equity grew Bs 24,010 million (64.3 %) compared to December 2015 reaching
Bs 61,349 million at the close of December 2016. This increase mainly includes Bs 18,602
million in net income for 2016; Bs 5,998 million increase from capital contributions not
capitalized and Bs 581 million reduction from adjusting available-for-sale investments to their
market value.
The equity/assets ratio as of December 31, 2016 is 11.2 %1 (minimum requirement 9 %) and the
equity/risk-weighted assets ratio is 13.1 % (minimum requirement 12 %), according to the
standards of the Superintendency of Banking Sector Institutions.
Net income in 2016 was Bs 18,602 million, reflecting Bs 6,441 million (53.0 %) year-on-year
increase. This variation is mainly due to:
(1) Obtained by dividing equity plus generic provisionand anticyclical for the loan portfolio and microcreditsby total assets minus investments and cash and duefrom banks at the BCV, as well as bonds and securitiesissued by the BCV and Petróleos de Venezuela, S.A.(PDVSA).
42 Annual REPORT 2016
Bs 45,670 million (115.6 %) increase in net interest income, attributed mainly to a higher
volume of financial assets and liabilities. Mercantil's net interest margin (net interest
income/average financial assets) at December 31, 2016 was 16.1 % compared to 13.8 % in the
previous year.
Bs 7,747 million (160.2 %) growth of expenses for non-performing
loans, Bs 10,549 million (163.7 %) increase in earnings from
commissions on debit and credit cards, other commissions on client
transactions, net of commissions for the use of the point-of-sale and
ATM network, generated by a higher volume of transactions during
the year, Bs 236 million (34.6 %) increase in net earnings from the sale
of investments in securities as a result of trading in securities, issued
by the Venezuelan government, an activity that produced Bs 915
million in net earnings in 2016, Bs 126 million (57.,6 %) increase in
income from commissions on investments in trust funds, and Bs 113
million (5.8 %) increase in expenses from available-for-sale assets,
from provision for other assets and operating expenses, among other.
Operating expenses rose Bs 39,864 million (180.9 %) compared to
2015, mainly due to Bs 13,251 million (184.4 %) increase in personnel expenses as a result of
the application of compensation and benefits policies according to the market; Bs 4,369
million (90.9 %) increase in contributions to regulatory agencies; and Bs 22,244 million
(221.4 %) increase in general and administrative expenses. This increase is primarily due to
Bs 7,880 million (231.2 %) in expenses to outsource services such as securities transportation
and surveillance, among others, Bs 9,337 million (197.6 %) in expenses for depreciation of
property and equipment, amortization of intangibles and others, Bs 2,499 million (220.2 %)
in taxes and contributions, and Bs 2,529 million (325.1 %) in other general administrative
expenses.
Historic figures presented in accordance with the Superintendency of Banking Sector Institutions.
Mercantil C.A., Banco Universal. Consolidated with Foreign SubsidiariesYear Ended(In thousand of Bs)
Total Assets
Investments in Securities
Loan Portfolio, Net
Deposits
Equity
Net Earnings for the Period
1,334,641,402
131,670,733
595,301,690
1,226,342,085
61,349,302
18,602,428
December 31
2016bolivars
551,102,948
69,247,833
307,411,935
497,141,013
37,339,031
12,161,578
December 31
2015bolivars
287,893,368
44,287,993
162,619,332
258,084,541
24,255,805
9,430,659
December 31
2014bolivars
0.0 %
3.0 %
6.0 %
9.0 %
12.0 %
15.0 %
18.0 %
M
2012 2013 2014 2015 20160
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
4.1 % 3.5 % 3.3 %
4.4 %
6.5 %
11.1 % 10.8 % 10.9 %
12.0 %
16.1 %
7,352 11,646 19,134 39,528 85,194
Evolution of Net Interest Income
Net Interest MarginOperating Expenses / Average Total Assets
Net Interest Margin(in
mill
ions
of B
s)
(1) Obtained by dividing equity plus generic provision and anticyclical for the loan portfolio and microcredits by total assets minus investments and cash and due from banks at theBCV, as well as bonds and securities issued by the BCV and Petróleos de Venezuela, S.A. (PDVSA).
43 Mercantil Servicios Financieros
Mercantil Florida BancorpAt December 31, 2016 Mercantil Florida Bancorp registered US$ 8,433 million in total assets,
reflecting 3.3 % increase compared to December
2015. The investment portfolio increased by 3.6 %
from the close of December 2015 to US$ 2,183
million. The net loan portfolio reached US$ 5,683
million, 2.5 % up from the previous year. Total
deposits ended at US$ 6,579 million, 0.9 % up from
US$ 6,522 million registered at the close of
December 2015.
At the close of the year, shareholders' equity totaled
US$ 702 million, representing 3.3 % year-on-year
growth from US$ 679 million. This variation is mainly
due to US$ 23 million in net income for the period,
among others.
Mercantil Florida Bancorp registered US$ 24 million
in net income by December 31, 2016, 55.4 % up from
the net income registered in 2015. The net income
of its main subsidiary, Mercantil Bank, N.A., was US$ 31
million in 2016, registering 50.4 % year-on-year
growth from US$ 21 million. This variation is mainly
due to US$ 20 million increase in net interest
income, US$ 9 million increase in loan loss provision
requirement, and US$ 7 million increase in operating
and personnel expenses.
The ratio of non-accrual loans to total loans was 1.2 %
in December 2016, the same as at the close of 2015.
Mercantil Bank N.A.’s main capital adequacy ratios
are 9.2 % for equity/assets ratio, and 12.4 % for
equity/risk-weighted assets ratio, in accordance with
the standards of the Office of the Comptroller of the
Currency.
0 %
5.0 %
10.0 %
15.0 %
20.0 %
25.0 %
0.0 %
4.0 %
2.0 %
6.0 %
8.0 %
2012 2013 2014 2015 2016
1.9 % 1.2 %
0.8 % 1.2 % 1.2 %
18.7 %
2.9 % 9.3 %
1.1 % 1.7 %
2.2 %
0.7 %
7.7 %
13.5 % 14.9 %
Assets Quality Ratios
Non Accrual / Gross LoansTotal Class Loans / Gross LoansTotal Class Loans + Oreo / Tier 1 + Allowance for loan losses
Year Ended(In thousands of Bs and millions of US$)
Total Assets
Investments in Securities
Loan Portfolio, Net
Deposits
Equity
Net Earnings for the Period
8,433
2,183
5,683
6,579
702
24
December 31
2016US$(1)
84,120,472
21,772,802
56,688,025
65,629,216
7,000,206
224,806
December 31
2016bolivars
51,289,824
13,234,619
34,914,456
40,983,780
4,269,498
97,129
December 31
2015bolivars
49,722,111
14,010,461
32,884,873
39,446,822
4,255,497
141,602
December 31
2014bolivars
Figures in accordance with Generally Accepted Accounting Principles (US GAAP).
(1) Dollar figures are given for reference only; balance sheet figures are converted at the period-end exchange rate of Bs 9,975/US$ 1 and income statement figures at the averageexchange rate of Bs 9,3599 / US$ 1 (Bs 6,2842 / US$ 1 for 2015). Exchange control have been in place in Venezuela since February 2003.
Mercantil Florida BanCorp, IncConsolidated
44 Annual REPORT 2016
Mercantil SegurosIn 2016, collected premiums registered 117,2 % year-on-year growth to Bs 84,759 million,
reflecting an outstanding achievement of the company’s sales force. At December 31, 2016,
Mercantil Seguros was the country’s second insurance company in terms of net collected
premiums, with 9.7 % of the insurance market.
Total assets at December 31, 2016 were Bs 101,565 million, 122.3 % more than at December 31,
2015. Shareholders’ equity was Bs 52,373 million at December 31, 2016, 127.3 % up from the close
of December 2015, which means the company’s solvency margin complies the regulations in
force.
The figures presented include all the mandatory and voluntary reserves required to guarantee
the company’s operations, including outstanding claims reserves and end-of-period payments.
Guarantees and reserves totaled Bs 37,488 million and reflect 84.7 % growth compared to the
close of December 2015.
At the close of December 31, 2016 the company’s investment portfolio
totaled Bs 86,616 million, 144.9 % more than at the close of December
2015. Total investments representing technical reserves were Bs 64,522
million, 124.8 % up from December 31, 2015. Liquidity levels remained
sufficient to meet commitments with policyholders, insurance advisers
and reinsurers diligently.
Net collected premiums for the Individual Business Lines grew 95.7 %
from Bs 24,100 million in 2015 to Bs 47,180 million at December 31, 2015,
mainly due to the automobile business growth.
Net collected premiums for the Collective Business Lines rose 139 %
from Bs 12,476 million at December 31, 2015 to Bs 29,940 million at
December 31, 2016. During 2016, the Mercantil Seguros Panamá
subsidiary registered US$ 16,308 thousand collected premiums in
Venezuela.
The technical result1 at December 31, 2016 was Bs 1,593 million, with
a combined operating ratio2 of 97.5 %. Net income for 2016 registered
Bs 7,035 million, 219.7 % up from 2015.
Mercantil Seguros, C.A.Year Ended((In thousands of Bs)
Total Assets
Investments in Securities
Equity
Net Earnings for the Period
Net Premiums
101,564,863
86,616,261
52,373,092
7,035,314
84,759,000
December 31
2016bolivars
45,697,902
35,374,297
23,045,766
2,200,370
39,016,800
December 31
2015bolivars
16,233,747
13,364,999
5,451,630
1,613,693
17,504,400
December 31
2014bolivars
Historic figures presented in accordance with the standars of the Superintendency of Insurance Activity.(1) Technical result = Earned Premiums - Incurred claims - Commissions - Administrative Expenses.(2) Combined Operating Ratio (COR) = Claims + Commissions + Administrative Expenses + Contributions / Earned Premiums.
97.5 %
2012 2013 2014 2015 201680 %
85 %
90 %
95 %
100 %
7,166 10,379 17,504 39,017 84,759
89.8 %
95.7 % 95.6 % 97.4 %
Net Collected PremiumsCombined Operating Ratio
Evolution of Net Collected Premiums and Combined Operating Ratio1
45 Mercantil Servicios Financieros
(1) Dollar figures are given for reference only; balance sheet figures are converted at the period-end exchange rate of Bs9,975/US$ 1 and income statement figures at the average exchange rate of Bs 9,3599 / US$ 1 (Bs 6,2842 / US$ 1 to 2015).Exchange control have been in place in Venezuela since February 2003.
Other Subsidiaries of Mercantil Servicios FinancierosThe subsidiaries of Mercantil Servicios Financieros include a brokerage company, a mutual
fund and investment portfolio management company which are consolidated with
Mercantil Merinvest, C.A., as well as other overseas banks, and other non-financial
subsidiaries in Venezuela, as listed below:
• Mercantil Merinvest Casa de Bolsa, C.A. reached Bs 368 million in total assets at
December 31, 2016, reflecting 172.5 % growth compared to December 31, 2015. This
variation is reflected in cash and due from banks, which grew 521 % compared to
December 2015 to Bs 161 million at the close of 2016. Investments in securities totaled
Bs 186 million, 84.7 % up from December 2015. Annual net income was Bs 99 million, up
Bs 66 million from last year. This variation was mainly due to Bs 224 million growth of
net earnings from securities trading operations issued by private companies,
commissions on portfolio management; Bs 83 million in expenses from information
services, taxes and contributions to regulatory agencies, among others; and Bs 63 million
in corporate income tax expenses.
• Mercantil Bank (Schweiz) AG, reached US$ 168 million in total assets at December 31, 2016
and an annual net income of US$ 1.4 million.
• Mercantil Bank (Panamá) S.A., reported US$ 321 million in total assets at December 31, 2016,
0.3 % up from the close of December 2015. The net loan portfolio totaled US$ 186 million,
reflecting US$ 53 million (39.7 %) increase compared to US$ 133 million for the previous
year. Deposits reached US$ 278 million, 24.9 % year-on-year rise from US$ 222 million at
the close of December 2015. Net income in 2016 totaled US$ 2.6 million, US$ 10.8 million
more than the US$ 8.3 million loss registered during the previous year. This variation was
mainly due to the increase in earnings from trading securities operations of US$ 2.4 million
during 2016 compared to US$ 1 million in 2015, and lower loan portfolio provision
requirements of US$ 11 million in 2016.
• Mercantil Inversiones y Valores comprises Mercantil Servicios Financieros’ non-financial
companies, such as Servibien, Almacenadora Mercantil and others with various
investments in securities. At December 31, 2016, Mercantil Inversiones y Valores C.A.
registered Bs 563 million and Bs 685 million in consolidated assets and equity,
respectively.
46 Annual REPORT 2016
Corporate GovernanceMercantil Servicios Financieros (Mercantil) is registered in Venezuela and its shares are listed
on the Caracas Stock Exchange. It also has a program of Level 1 ADR which are traded over
the counter in the U.S. Mercantil’s corporate governance structure is based on its bylaws, the
Capital Markets Law, the Code of Commerce and the resolutions issued by the National
Securities Superintendency, (formerly the National Securities Commission) on the subject.
The Board of Directors and Mercantil's management keep up with the changing regulations
through ongoing analysis and study of this area so the Corporation is able to adapt its
Corporate Governance structure to current best practices in order to guarantee the
appropriate transparency and efficiency demanded of it, based on the highest professional
and ethical principles that characterize its permanent and close relationship with its
shareholders, customers, creditors and employees.
According with the aforementioned, Mercantil has a Unit in charge of Compliance, which is
responsible for independently detecting and managing the risk of compliance with regulatory
obligations through adequate policies, methodologies and procedures, to strengthen the
business model, eliminating or reducing exposure to associated risks. During 2016 progress
was made with the execution of this unit's Strategic Agenda.
It is important to point out that there has been a Compliance Unit at Mercantil Bank, N.A.
subsidiary for many years now.
Another very significant aspect of Corporate Governance is the dividend policy which gives
shareholders greater assurance that dividends will be declared and paid. In line with this
policy, all proposals to declare dividends must be formulated in accordance with the
corresponding legislation and bylaws. They must adhere to the provisions on compliance with
the regulatory relevant equity ratios and meet the company’s investment and development
plans. A Board of Directors meeting is normally held each February. It reviews the dividend
proposal that will be submitted for consideration by the first General Shareholders’ Meeting
held in the first quarter of the year, and after it is approved by the Board, a press release is
published. Notwithstanding, the Board of Directors may at any time consider any dividend
proposal it deems to be in order. In 2016, an ordinary cash dividend was declared and paid in
two portions and an extraordinary cash dividend was paid in a single instalment.
Among the elements of the Mercantil Corporate Culture, which comprise a series of principles
and values that guide Mercantil performance in its decision making and activities, is its Ethical
Behavior, expressed as “Zero tolerance for unethical behavior and transparency in all
communications and information”. Part of the implementation of this principle is the Code
of Ethics in place for Mercantil, which gather a set of ethical principles and values that lead
its decision-making and execution of activities. This Code of Ethics cover fundamental duties
47 Mercantil Servicios Financieros
such as probity, loyalty, efficiency, co-fraternity, honesty, sincerity, dignity and law abidance.
It also establishes rules designed to regulate treatment in the event of conflicts of interest
and complement the provisions of the relevant bylaws. The bylaws 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. Directors are required to remain outside the meeting room until the final decision
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 Chairman and CEO (both positions currently held by the same person), the
Internal Auditor and the Compliance Officer.
Board of DirectorsIt is essential for the Board of Directors to be efficient so that it can act in the interests of the
company, which are ultimately those of the community at large and its shareholders, creditors,
client and employees in particular.
The Board has responsibility for defining corporate strategies, determining business policies
and establishing and controlling the strategic direction of the institution. It also supervises
the management of the organization’s different business and support areas. It evaluates
results by comparing them against previously approved plans and strategies, performance in
previous years and the general banking environment.
In line with best Corporate Governance practices, the majority of Mercantil Servicios
Financieros' Board members are independent from management. The presence of directors
who are independent from management is further proof of Mercantil’s commitment to
international management standards and in line with best Corporate Governance practices.
The Directors are highly qualified and well-versed in business and finance, thereby ensuring
optimum performance of their functions.
The Board of Directors is made up of ten directors and twenty alternate directors. The Board
appoints the Chairman and CEO, who must be Directors, from among its members, and these
appointments may be held by the same person. The Board meets once a month and whenever
else its Chairman deems necessary.
To ensure more transparency and better control over management procedures, from the
outset Mercantil’s bylaws have provided for the activity of a Compensation, Audit and Risk
Committees, whose functions are regulated by those bylaws. Members of these Committees
are comprised mainly of Directors, who are independent from management.
Consistent with the Company’s tradition of adhering to best corporate governance practices,
the Audit Committee is subject to bylaws governing its functions. This document details the
purpose of the Committee, as well as its functions and its responsibilities. There members
should undertake an annual compliance evaluation with them. It also states that its members
must be independent from Management, adding that at least one of them must have
considerable accountancy or financial management experience.
48 Annual REPORT 2016
The committee must review and discuss accounting and management policies, the opinions and
reports of the organization’s internal and external auditors, establish reserves, reviewing the Financial
Statements and their Notes and formulate recommendations on matters incumbent upon it to the
Board. It also approves the engagement and remuneration of the external auditors. In 2016 the Audit
Committee met eight times. The main topics reviewed were: Consideration of the financial statements
of Mercantil and its subsidiaries in Venezuela, opinions of the external auditors on the financial
statements and their corresponding notes, which included a review of the new disclosures contained
in the notes; observations of internal control presented by the external auditors; review and follow-
up of internal audit activities of Mercantil and its subsidiaries; report of activities related to the
Prevention and Control of Money Laundering and Terrorism Financing; external auditing activities
schedule for 2017; consideration of fiscal aspects; evaluation of the investment portfolio in foreign
currency; VEN-FRS financial statements; consideration and approval of the remuneration of the
External Auditors, appointment of the new corporate internal auditor; Credit Risk reports of Mercantil
and its subsidiaries.
Approves Mercantil’s risk profile, policies and limits. It also optimizes the use of capital to support
the approved risk profile. In 2016 the Risk Committee met seven times. The main topics reviewed
were: Credit, Market and Operational Risk Reports for Mercantil and its subsidiaries; consideration
and establishment of cross-border risk limits; follow-up of the limits set for the Republic of Venezuela;
consideration, adjustment and measures related to the credit risk policy, review of limits for individual
borrowers, economic groups, boards of directors, Loan and Capital Commitment Committee and
Global Corporate Committee; adjustment of credit / integration faculties of the various Committees;
adjustment of Risk Manuals; analysis of particular loan sectors; budget for treasury activities and
limits of market risk; summary of security trading activities; projected losses for Mercantil and its
subsidiaries operational risk; security of information reports; analysis of Commercial Real Estate
Retail (Mercantil Bank, N.A.) reports; consideration of PDVSA Sovereign Risk exposure; follow-up of
the Risk Committee of the Board of Directors of Mercantil Bank, N.A.
Board of Directors’ Auditor Committee
Board of Directors’ Risk Committee The Committee is made up
as follows:
Gustavo Galdo C. (Coordinator)
Roberto Vainrub A.
Francisco Monaldi M.
Federico Vollmer A.
Carlos Zuloaga T.
Rafael Sánchez B.
Alberto Sosa S.
Gustavo Vollmer S.
Gustavo Machado C.
Gustavo Vollmer A. (Ex officio)
The Committee is made up as follows:
Gustavo Marturet Medina (Coordinator)
Eduardo Mier y Terán
Luis Pedro España
Alexandra Mendoza de Martínez
Miguel Ángel Capriles C.
René Brillembourg C.
Fernando Eseverri I.
Francisco Torres Pantin
Carlos Acosta
Gustavo Vollmer A. (Ex officio)
49 Mercantil Servicios Financieros
Board of Directors’ Compensation Committee
Executive Committee
The committee is responsible for setting the organization’s policy on pay and benefits, approving
the remuneration of the Chairman and senior management and informing the Board of Directors
accordingly. In 2016, the Compensation Committee met eight times. The main topics reviewed were:
program for variable compensation, short-term incentives, procedures for performance evaluation,
strategic goals; initiative for organizational efficiency, implementation and results; wage policy
actions for Mercantil and its subsidiaries’ workers; 2017 personnel expenses budget; actuarial
assumptions for calculating retroactive welfare benefits and retirement pensions; analysis of staff
turnover semi-annually and annually; Mercantil’s plan for retention of talented individuals; Labor
immobility decree; impact of modifications of national minimum wage; Food Law; payment of
pensions; Special Mortgage Plan; voluntary retirement savings plan; homologation of 2016-2018
Collective Agreements for the Mercantil Banco and Mercantil Seguros subsidiaries; considerations
on per diems of Board Directors, Audit, Risk and Compensation Committees; reports to be presented
to the National Securities Superintendency.
Mercantil has an Executive Committee comprising a Chairman and twelve senior managers from the
organization’s Business and Supporting areas, which guarantees the timely implementation of
Mercantil’s decisions and strategies. The committee meets weekly and holds extraordinary meetings
as required. It is responsible for evaluating options and making recommendations on policy,
objectives, strategies and organization and submitting to the Board of Directors for consideration,
as well as guiding management in its effort to implement the policies adopted. It is also responsible
for evaluating the outcome of their implementation.
The Committee is made up as follows:
Gustavo Vollmer A.Chairman & CEO
Millar Wilson Executive Director of International Business
Alfonso Figueredo D.Global Executive Vice President
of Operations and Administration
Fernando Figueredo M.Global Executive Vice President of Business
Nelson Pinto AlvesExecutive President Mercantil Banco Universal
María Silvia RodríguezExecutive President Mercantil Seguros
Luis Calvo Blesa
Luis Alberto Fernandes
Vincenza Garofalo
Jorge Pereira
Isabel Pérez S.
Carlos Tejada G.
Ignacio Vollmer S.
The Committee is made up as follows:
AlfredoTravieso P. (Coordinator)
Víctor Sierra A.
Miguel Ángel Capriles L.
Luis A. Romero M.
Claudio Dolman
Luis A. Marturet M.
Alejandro González S.
Oscar Machado K.
Nerio Rosales R.
Gustavo Vollmer A. (Ex officio)
50 Annual REPORT 2016
Chairman of the Board of DirectorsThe Chairman of the Board of Directors is the President of the Company. The positions of
Chairman of the Board of Directors and CEO are currently held by the same person. The
corresponding statutory provisions provide that the same person exercising both positions,
if deemed appropriate by the Board of Directors.
This officer, as Chairman of the Board, shall be responsible for directing the Company's
activities and business, chairing Shareholders meetings, Board meetings and meetings of the
Executive Committee, and providing them with guidance on setting the policies, goals and
strategies to be followed when taking important decisions. He, or she, also represents the
Company before political and administrative authorities and public and private entities. The
CEO 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 on
the company’s financial condition and the results of their operations. Further responsibilities
include designing, establishing and developing the company’s organizational structure and
appointing and removing general managers, consultants and advisors as necessary.
The two Global Executive Vice Presidents, of Business and of Operations and Administration,
together with the Executive Director of International Business, the Executive Presidents of
Mercantil Banco Universal, Mercantil Seguros and Mercantil Bank, N.A. subsidiaries, the
Global Chief Risk Officer, and the Corporate Compliance Manager, report directly to the
Chairman and to the CEO of Mercantil. The Audit Unit, the Board of Directors Secretary, and
the Compliance Officer of Prevention of Money Laundering and Terrorist Financing, report
directly to the Board of Directors, and depends on administrative matters of the Chairman.
Internal AuditorIn 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 audited.
The results of the internal audits are reviewed and discussed periodically by the Audit
Committee and the Board of Directors so that any corrective action may be taken.
51 Mercantil Servicios Financieros
Compliance Officer for the Prevention of MoneyLaundering and Terrorism Financing In accordance with regulations on the matter, Mercantil has a Compliance Officer on the
Prevention of Money Laundering and Terrorist Financing who is responsible for designing the
Annual Operating Plan on the Prevention and Control of Money Laundering and Terrorist
Financing, by coordinating and supervising training activities and training Mercantil staff on
prevention and control of money laundering and terrorist financing, and maintaining
institutional relations with the regulatory bodies on the matter. The Compliance Officer also
advises the Audit Committee and Board of Directors on compliance with their anti-money
laundering and antiterrorism financing obligations under the legislation in force.
Disclosure of Information Mercantil prepares and publishes the company’s financial statements on a semi-annual
basis in compliance with the rules of the regulatory bodies. The company also prepares a
quarterly report containing detailed information and accurate economic and financial data,
as well as other relevant data for the market, which is disclosed to the general public, the
National Securities Superintendency and the Caracas Stock Exchange through nationwide
distribution methods, and by e-mail to analysts and participants in the local and
international markets. In addition, information is distributed periodically to the Securities
and Exchange Commission in accordance with its obligation to maintain Mercantil’s Level1
ADR program in the United States of America. Financial information on the company is also
available on Mercantil's website www.msf.com and on that of its principal subsidiary
Mercantil Banco at www.mercantilbanco.com. Thus Mercantil fulfills the regulations on
immediate dissemination of any information that may materially affect the price of its
shares.
Last but not least, Mercantil has an Investor Relations business Unit, whose functions include
the timely disclosure of information to investors by different means, including events and
presentations.
52 Annual REPORT 2016
In 2016, Mercantil Servicios Financieros and its subsidiaries received various acknowledgments
from prestigious publications and institutions.
Mercantil Servicios Financieros• In February, the prestigious financial publication The Banker, included Mercantil among
the World’s Top 500 Banking Brands. Mercantil ranks 273, 61 positions up from the 2015,
and is the leading Venezuelan institutions included in the ranking.
• In May, Mercantil Servicios Financieros was again included in the Global 2000 Most
Valuable Companies in the World, published by the specialized magazine Forbes. Mercantil
ranks 793 and is the first of four Venezuelan companies included in this year’s list. The
Global 2000 ranking considers income, revenues, assets and market share.
• In June, The Banker magazine included Mercantil Servicios Financieros in its Top 1000
World's Financial Institutions. Mercantil Servicios Financieros rose 32 positions to rank 178.
It also ranks 7 among the Top 25 Latin American financial institutions.
• In November, the Venezuelan-American Chamber of Commerce and Industry (VenAmCham)
granted the Entrepreneur award of the year 2016 to Gustavo Vollmer A., Chairman of
Mercantil in recognition of his entrepreneurial qualities, among which are the preeminence
he gives to the practice of values and ethical principles, modeled by his example, sobriety
and discretion in his social commitment; a tireless and disciplined worker, who with his
conciliatory temperament and his ability to create and promote work teams has allowed
him to accumulate ample experiences to run enterprises that he has always put at the
service of the nation’s interests.
• In November, the Venezuelan-American Chamber of Industry and Commerce (VenAmCham)
presented its “Top 100 Companies” ranking where Mercantil Servicios Financieros ranked 6.
The list includes the most successful companies in the country, with national or foreign
capital, ranked by their total income at the close of 2015.
Awards and Acknowledgements
53 Mercantil Servicios Financieros
Mercantil Banco Universal• In January, the Global Finance magazine selected Mercantil Banco Universal, for the 11th
consecutive year, as the “Venezuela’s Best Trade Finance Provider in 2016”. The magazine
selection process took into consideration the volume of transactions, geographical
coverage, customer services, price competitiveness, new business development and
technological innovations.
• In June, Aon Hewitt international consulting firm granted to Mercantil Banco Universal the
2016 Best Employer award. Among the criteria considered for this assessment are workers’
opinion on Banks’ commitment, leadership, culture and brand, compiled in the
Organizational Climate and Commitment research.
• In November, Mercantil Banco Universal was recognized as the Best Venezuelan Bank in
2016 by the LatinFinance, a magazine specialized in Latin America and the Caribbean
financial topics. The magazine chose Mercantil Banco Universal for three aspects: long-
term strategy, development of digital technology, and efficient cost management in a
changing environment.
• In November, Mercantil Banco received the first edition of the Award for “Socially
Responsible Enterprises”. The award acknowledged the university program Training Socially
Responsible Leaders, also known as “El Reto U’ (The U Challenge), which has been promoted
for the last 12 years by the Social Alliance of the Venezuelan-American Chamber of
Commerce and Industry (VenAmCham) and Districts 4370 and 4380 of Rotary International.
The award was presented at the United Nations Headquarters during the celebration of
the Rotary International Day.
Mercantil Bank, N.A.• In June, Mercantil Bank, N.A. received the 2016 Best Employer Award from Aon Hewitt
International consulting firm. Workers opinion on the Banks’ commitment, leadership,
culture and brand were taken into account in the Organizational Climate and Commitment
research compilation.
• In September, the Office of the Comptroller of the Currency (OCC) granted to Mercantil
Bank, N.A. the “Outstanding” rating in the evaluation of its Community Reinvestment Act
(CRA) performance. The highest rating granted to a financial institution in the United
States. The Bank has consistently received this rating since 2000.
54 Annual REPORT 2016
Mercantil Bank (Panama)• In March, for fourth consecutive year, Mercantil Bank (Panamá) has been included among
the Top 100 Central American Banks, according to the prestigious financial publication
The Banker. Mercantil Bank (Panamá) ranks 76, and was also included among Panama’s
banks in the 34 position.
Mercantil Seguros• In November, the Venezuelan-American Chamber of Commerce and Industry (VenAmCham)
presented its “Top 100 Companies” raking, where Mercantil Seguros ranked ninth. The list
includes the most successful companies in the country, with national or foreign capital,
ranked by their total income at the close of 2015.
Mercantil Arte y Cultura• In November, the 1955-2008 Venezuelan Ceramics exhibition of the Mercantil Collection,
received the 2015 AICA Award of the International Association of Art Critics, Venezuelan
Chapter, as Best Collective Exhibition. The decision was taken because the exhibition
“strengthens the artistic scope developed by modern and contemporary Venezuelan
ceramics, with specific examples in research and experimentation with techniques”.
55 Mercantil Servicios Financieros
Mercantil Servicios FinancierosAv. Francisco de Miranda, between Segunda and TerceraTransversal, Urb. Los Palos Grandes, Centro ComercialEl Parque, Segunda y Tercera Etapa, P03, suites C-3-10y C-3-11, Chacao, Caracas, Venezuela.Phone : (58-212) 287.8200www.msf.com
INVESTOR RELATIONSAv. Andrés Bello, N° 1, Edificio Mercantil 25th floor, Caracas 1050, Venezuela Phone : (58-212) 503.1335 [email protected]
CORPORATE COMMUNICATIONSAv. Andrés Bello N° 1, Edificio Mercantil 14th floor, Caracas 1050, VenezuelaPhone: (58-212) [email protected]
SubsidiariesMERCANTIL, C.A. BANCO UNIVERSALAv. Andrés Bello N° 1, Edificio Mercantil Caracas 1050, VenezuelaPhone: (58-212) 503.1111Telex 27002/27003 [email protected]@MercantilBancoCall Center: Phone: 0-500-600 2424/ 0-500-503 2424(58-212) 600.2424 -(58-212) 503 2424
MERCANTIL, C.A. BANCO UNIVERSALSUCURSAL CURAÇAOAbraham de Veerstraat #1 Willemstad, CurazaoPhone: (5999) 432 [email protected]
REPRESENTATIVE OFFICES
BOGOTACarrera 13, Nº 119-95, Office 105Bogota, ColombiaPhone: (57-1) 635 [email protected]
LIMAAv. Canaval and Moreyra Nº 452, 15th and 17th floorSan Isidro, Lima 27, PerúPhone: (511) 442 [email protected]
MÉXICOEugenio Sue N° 58,Colonia Polanco Chapultepec,Delegación Miguel HidalgoC.P.11560, México, D.F.Phone: (52-55) 5282 2300/[email protected]
SAO PAULOAv. Paulista, N° 1765, Conjunto 131 -13° andarBela Vista- São Paulo- BrasilCep: 01311-020Phone: (55-11) [email protected] [email protected]
MERCANTIL BANK N.A.*220 Alhambra Circle, Coral Gables, Fl. 33134, U.S.A. Phone: (1-305) 460.8701www.mercantilcb.com@MercantilCB (english)@MercantilCBesp (spanish)
MERCANTIL TRUST COMPANY, N.A.*220 Alhambra Circle, 11th floor, Coral Gables,Fl. 33134, U.S.A.Phone: (1-305) 441.5555www.mercantilctc.com
MERCANTIL INVESTMENT SERVICES, Inc.*220 Alhambra Circle, Penthouse, Coral Gables,Fl. 33134, U.S.A.Phone: (1-305) 460.8599www. mercantilcis.com
MERCANTIL BANK (SCHWEIZ) AGKasernenstrasse 18004 Zurich,SuizaPhone: (41) - 433 444 555 [email protected]
MERCANTIL MERINVEST, C.A.Avenida Andrés Bello, N° 1 Edificio Mercantil24th floor .Caracas 1050, VenezuelaPhone: (58-212) 503.2700www.mercantilmerinvest.com@MMerinvest
MERCANTIL CAPITAL MARKETS (PANAMÁ), S.A.Torres de Las Américas, Torre A, 14th floor. Punta PacificaPanama City, PanamaPhone: (507) 282 5800contactenos@mercantilcmp.comwww.mercantilcapitalmarketspanama.com
MERCANTIL SEGUROS, C.A.Av. Libertador con calle Isaías “Látigo” Chávez,Edificio Mercantil Seguros, Chacao. Caracas1060, VenezuelaPhone: (58-212) 276.2000www.mercantilseguros.com@MercantilSeg
MERCANTIL SEGUROS PANAMÁ, S.A.Torres de las Américas,Torre A, piso 14. Punta PacíficaPanama City, PanamaPhone: (507) 304 [email protected] www.mercantilseguros.com.pa
MERCANTIL BANK (PANAMÁ), S.A.Torres de las Américas, Torre A, 14th. Punta PacíficaPanama City, PanamaPhone: (507) 282.5000mercan24@mercantilbankpanama.comwww.mercantilbankpanama.com
MERCANTIL BANK & TRUST, LIMITED (CAYMAN)Harbour Place, 4th floor 103 South Church StreetP.O. Box 1034 Grand Cayman, KY1-1102 Cayman IslandsPhone: (1-345) 949-8455
MERCANTIL BANK (CURAÇAO) N.V.Abraham Mendez Chumaceiro Boulevar 1 Willemstad, CurazaoPhone: (5999) 432 [email protected]
Corporate Contactsand Subsidiaries
(*) Formerly known as Mercantil Commercebank, N.A,Mercantil Commercebank Trust Company, N.A. andMercantil Commercebank Investment Services, Inc.
56 Annual REPORT 2016
General Production: Corporate Communications Management Graphic Design: Arte Impreso H.M., C.A.Caracas, Venezuela, May 2017.