Financial services group Old Mutual has outlined plans to launch a new bank in 2024 after getting the necessary approvals from authorities.
In a voluntary market update, Old Mutual said it plans to launch a full transactional account in the second half of 2024, noting that it is building its transactional capability using the latest technology.
The group further said the establishment of a bank within the group will allow it to hold the primary relationship with customers, driving greater regular interaction with them and enhancing the cross-sell opportunities.
“The establishment of an entity in the group with a banking licence is a natural progression of our core strategy, helping us to sustain our customers’ prosperity through an enhanced transactional banking capability,” Old Mutual said.
“The group has existing lending and transactional solutions which, in South Africa, consist of our money account and an unsecured lending product.
“These solutions are offered mainly to our mass and foundation cluster customer base and the unsecured lending solution is already a strong contributor to group profitability. The current transactional solution is delivered through a commercial arrangement with a third-party bank.
“While this commercial arrangement has allowed us to gain experience in transactional banking services, a divergence of aspiration requires us to reassess our future arrangement to deliver on our customer needs.”
Old Mutual is no stranger to the banking sector having previously held a significant stake in Nedbank. This was before 2018 when the insurance giant announced plans to unbundle its then 52% interest in Nedbank.
The group, through its wholly owned subsidiary Old Mutual Life Assurance Company, has about 5% of the issued ordinary share capital of Nedbank.
Old Mutual, which has a market capitalisation of about R53-billion on the JSE, said it had set aside R1.7-billion to complete the building of the transactional capability.
“In line with the business case, we have incurred costs of R830-million for the current period and approximately 10% of these costs were capitalised. Once relevant Prudential Authority approvals are received, the launch is targeted for the second half of 2024. The entity is expected to break even three years after the launch.”
South Africa’s banking sector has welcomed several new entrants in the past few years ranging from Patrice Motsepe’s TymeBank, Discovery to Bank Zero.
African Bank has also gathered steam in recent years and recently concluded the takeover of Ubank. Capitec also continues to win the hearts and minds of millions of customers every year and currently sits with about 19-millions customers.
Meanwhile, Old Mutual said its Bula Tsela share offer has exceeded expectations.
The scheme attracted thousands of black people, small businesses, and groups such as trusts and stokvels, making Old Mutual the first insurer to offer shares directly to the black South African public in a retail scheme.
“To include as many people as possible in this transaction, some applicants [especially those who applied for a large number of shares] will unfortunately not get everything they applied for,” Old Mutual CEO Iain Williamson said.
“We have, however, managed to allocate 100% of what applicants asked for to around 75% of individuals who applied to the scheme.”
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