HomeAfrican NewsOld Mutual plans to launch bank in 2024

Old Mutual plans to launch bank in 2024

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  • Old Mutual says it is considering a banking license and intends to launch transactional services in the second half of 2024.
  • The group already has credit and transactional products, but is looking for a license so that it does not have to depend on third parties.
  • The bank will provide cross-selling opportunities, while accepting retail deposits offers the prospect of a cheaper source of financing.
  • For more financial news, go to News24 Business Cover.

Financial services group Old Mutual has received approval from the SA Reserve Bank’s prudential authority to apply for a banking license.

This will help you broaden your relationship with some of your customers and secure cheaper sources of funding available by accepting retail deposits.

The firm plans to spend R1.75 billion developing the bank’s transactional capacity, with a view to launching in the second half of 2024. It expects this bank to break even three years after launch. It has already spent R830 million in the bank in the current year.

Old Mutual already has existing transactional and loan products, through its money account, as well as an unsecured loan product. This is primarily targeted at low to mid-income markets. Because you do not have a banking license, this requires a business relationship with a third party, and the business money account is associated with Bidvest Bank.

As of the end of June, the end of the group’s semester, loans and advances within that group stood at R14.78 billion, while net interest income exceeded R1 billion. In the company’s 2021 year, banking and credit results from operations, which include both SA and the rest of Africa, were R1.68 billion, compared to R4.38 billion for the group.

Old Mutual said on Tuesday that the establishment of a bank would allow it to maintain the core relationship with customers, “driving more regular interaction with them and improving the opportunity to cross-sell across the group. It will also allow the group to accept retail deposits, thus providing a cheaper source of finance.”

Old Mutual also provided a business update for its nine months through the end of September on Tuesday, saying its results of operations were above the prior period, driven mainly by gains in its life business, a result of lower excess of deaths from Covid-19.

“Despite market volatility, Old Mutual Investments delivered higher asset-based fees due to higher average asset-based levels which positively impacted earnings. This was partially offset by deteriorating persistence experience in Mass and Foundation Cluster and net catastrophic losses related to KwaZulu-Natal flooding, as well as an increase in attrition claims at Old Mutual so far this year,” it said. Persistence refers to the renewal of policies.

In Tuesday morning trading, Old Mutual shares were up 2.4% at R11.45, having lost around 13% so far in 2022.

Click here to view Old Mutual stock price data.

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