Old Mutual says it is making headway in building a new bank in South Africa, having invested R1 billion in the initiative so far.
In its full-year results for the fiscal year ending December 20, 2022, the firm stated that its preparations to establish “transactional capacity” within the company are advancing, with the new bank’s debut still scheduled for the second half of 2024.
It stated that the bank will be a digital-first service, with Old Mutual collaborating with “some of the leading global technology providers” to carry out its objective.
“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 Prudential Authority granted the group Section 13 authorisation to proceed with the application for a banking licence in November 2022.
Old Mutual already has lending and transactional solutions in place, including an unsecured loan product and the Old Mutual Money Account, which is managed through a relationship with Bidvest Bank.
It did say, however, that having its own bank inside the group is a “natural progression” of its basic approach of maintaining the primary contact with its clients.
This will allow it to increase cross-selling opportunities with its other group companies.
“It will also enable the group to accept retail deposits, thereby providing a more efficient source of funding,” it said.
Old Mutual announced an R1.75 billion investment to finish the bank’s construction. Thus far, the group has spent R1 billion in expenditures as a result of this, with around 20% of these costs capitalised.
“Once relevant Prudential Authority approvals are received, the launch is targeted for the second half of 2024,” the group said.
Three years after its launch, the organisation is scheduled to break even.
“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.
