New bank could be a game changer for Old Mutual
Old Mutual is seen as a strong investment, with the group under new leadership and set to launch a new bank in the coming months.
Old Mutual is one of the largest financial service providers in South Africa, with insurance, asset management, short-term lending and, in the near future, banking products.
The group will launch its new bank, OM Bank, in Q4 2025 and is currently refining processes and enhancing the service experience.
The group currently has a market cap of R53 billion and a relatively low P/E ratio of roughly 7.
Speaking with Business Day TV, Mark du Toit from OysterCatcher Investments said there is value to be found in Old Mutual. He believes that new CEO Jurie Strydom will be able to unlock that value.
Du Toit said that there are several quick wins that Strydom can implement, such as changing the reporting lines (which the company has already done) and reducing central head office costs
He also believes that turning OM Bank from a loss-making entity into a profitable one will help the group’s growth.
The group previously noted that OM Bank will likely run an initial loss run rate of R1.1 billion to R1.3 billion, reducing over time as the bank is expected to break even in 2028.
The group plans to leverage its existing customer base, trusted brand, and expansive distribution network to grow the bank.
Its cloud-based service is also set to offer a scalable single-facility account with debit, credit, overdraft, and savings facilities at lower costs.
In the change to its reporting lines, Old Mutual Finance and Old Mutual Transaction Services are reporting to OM Bank CEO Clarence Nethengwe.
The digital bank will focus on the retail mass market and compete with Capitec, African, and Tyme Bank.
On the self-help theme for Old Mutual, Du Toit said that the group has also sold several loss-making African businesses.
When it comes to the broader market, Old Mutual is also geared to equity market performance. The group can benefit from the strong equity market that South Africa has seen.
The group has excess capital, which allows the group to return cash to shareholders via either share buybacks or a special dividend. The group’s cash by the end of 2024 stood at R38.4 billion.
When all these aspects are combined, Du Toit believes Old Mutual will offer a good return over the next three to four years, estimating 20% per year over the next couple of years.
2025 so far
Despite the value of the offer from Old Mutual, the latest financial information from the group was somewhat mixed.
In a trading statement for Q1 2025, the group said that its Life APE sales were marginally lower than the prior comparable period.
This comes off a decrease in guaranteed annuities sales in Personal Finance. This was in line with the overall market decline resulting from a yield drop.
The non-repetition of significant savings sales secured in the prior period in Old Mutual Corporate also further reduced the latest sales data.
“Large corporate sales are lumpy by nature with long and sometimes unpredictable lead times,” said the group.
“This was partially offset by good risk sales across all distribution channels in Mass and Foundation Cluster as well as strong corporate sales in Old Mutual Africa Regions, particularly in Namibia and Malawi.”
Despite gross flows increasing by 6% amid strong inflows in Wealth Management, net client cash outflow was adversely impacted by large outflows in Investments and Corporate.
Old Mutual Investments reported low-margin indexation outflows of R6.4 billion from the large offshore investor that continues to restructure its existing investment mandate.
The Higher outflows in Old Mutual Corporate were also attributed to terminations of R3.6 billion, which relates to the exit of an unprofitable business on an investment platform.
Nevertheless, the group’s gross written premiums also grew by 7%, which came off the back of fee increases Old Mutual Insure, particularly in the Speciality business.
Old Mutual Insure saw 12% in gross written premiums, with an underwriting margin well above the upper end of its 4% to 6% target range, coupled with strong investment performance.
| Key Performance Indicators (R million unless otherwise stated) | 31 March 2025 | 31 March 2024 | change |
| Life APE sales | 3 095 | 3 170 | (2%) |
| Gross flows (1) | 53 208 | 50 178 | 6% |
| Net client cash flow | (4 834) | 166 | (>100%) |
| Loans and advances (2) | 18 672 | 18 761 | (0%) |
| Gross written premiums | 7 448 | 6 936 | 7% |
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