New bank launching in South Africa in 2024
Financial group Old Mutual says it is making progress in establishing a new bank in South Africa, having spent R1 billion on capitalising the project so far.
Reporting its full-year results for the period ending December 2022, the group noted that its plans to build “transactional capacity” within the company are progressing, with a planned launch for the new bank still pencilled in for the second half of 2024.
It said the bank will be a digital-first offering, with Old Mutual partnering with “some of the leading global technology providers” to deliver its vision.
“We are making good progress across our portfolio of new growth engines. While these currently represent a small part of our business, our investments in these initiatives are critical to ensuring sustainable growth over the long term.
“Most notably, we received regulatory approval to proceed with our application for a banking licence in South Africa. This represents a natural extension of our victory condition by enhancing our transactional capability to better sustain our customers’ financial prosperity,” it said.
The group received Section 13 approval from the Prudential Authority to proceed with the application for a banking license in November 2022.
Old Mutual already has existing lending and transactional solutions – an unsecured lending product and the Old Mutual Money Account – with the latter handled through a partnership with Bidvest Bank.
However, it said that establishing its own bank within the group is a “natural progression” of its core strategy to hold the primary relationship with its clients.
This will enable it to enhance cross-selling opportunities with its other businesses within the group.
“It will also enable the group to accept retail deposits, thereby providing a more efficient source of funding,” it said.
Old Mutual said that it has approved an expenditure of R1.75 billion to complete the build of the bank. So far, the group has incurred costs of R1 billion related to this, and approximately 20% of these costs were capitalised.
“Once relevant Prudential Authority approvals are received, the launch is targeted for the second half of 2024,” the group said.
The entity is expected to break-even three years after the launch.
“As the capability matures post-break-even, the return is expected to be significantly above the target return of 4% in excess of the cost of equity. We are currently working on our application under Section 16 of the Banks Act for the registration of the bank,” it said.
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