Old Mutual Advances in Establishing a New R1 Billion Digital-First Bank in South Africa

Old Mutual, a financial group with a strong presence in South Africa, has announced significant progress in its efforts to establish a new bank in the country. The company has allocated a substantial amount of capital – R1 billion – towards this project, with the aim of constructing robust transactional capacity within the group. Reporting its full-year results for the period ending December 2022, Old Mutual stated that the plans for the new bank are progressing well, with a planned launch date of the second half of 2024.

The new bank, which will be a digital-first offering, is being developed with the assistance of “some of the leading global technology providers”. According to the company, the bank’s establishment is a natural progression of its core strategy to hold the primary relationship with its clients. This move will allow Old Mutual to improve cross-selling opportunities with its other businesses within the group. Additionally, the bank’s launch will enable the company to accept retail deposits, providing a more efficient source of funding for the company.

Old Mutual has already made significant strides towards establishing itself as a key player in the South African financial services industry. The company currently offers a range of lending and transactional solutions, including an unsecured lending product and the Old Mutual Money Account, which is handled through a partnership with Bidvest Bank. However, the establishment of its own bank within the group will allow Old Mutual to provide its customers with a more comprehensive suite of financial services, further cementing its position as a leader in the industry.

To complete the build of the new bank, Old Mutual has approved an expenditure of R1.75 billion. So far, the company has incurred costs of R1 billion related to this project, and approximately 20% of these costs have been capitalised. The group has received Section 13 approval from the Prudential Authority to proceed with its application for a banking license, and it is currently working on its application under Section 16 of the Banks Act for the registration of the bank.

The new bank is expected to break even three years after its launch, and Old Mutual anticipates that the return on investment will be significantly above the target return of 4% in excess of the cost of equity. While these growth initiatives currently represent a small part of Old Mutual’s business, the company’s investments in these areas are critical to ensuring sustainable growth over the long term. With the establishment of a new bank within the group, Old Mutual is well-positioned to offer its customers a comprehensive range of financial products and services, while also generating strong returns for its investors.