Discovery Bank sees 42% jump in customers – narrows loss to R339 million

 ·20 Mar 2024

Discovery Bank has seen a massive jump in its customer base, with the bank now making a smaller loss.

In the Discovery group’s interim financial results for the six months ended 31 December 2023 (H1 2024), Discovery Bank saw strong progress across all the group’s metrics, with the acquisition of quality clients accelerating and the bank reaching monthly operational break-even before acquisition costs over the period.

Discovery Bank’s operating loss, before new business acquisition costs, improved by 40%, while the overall loss of R339 million was an improvement from the prior year.

Growth remains high, with the bank’s customer base exceeding 825,000 clients in December 2023, while the total client base grew by 42% from the prior year.

“This momentum is indicative of Discovery Bank’s accelerated pace towards achieving its ambition of one million clients by 2026, which the Bank is well ahead of target to achieve,” the group said.

“In light of challenging macroeconomic conditions, Discovery Bank has remained focused on high-quality growth with the Bank’s shared-value behavioural banking model proving its efficacy.”

Deposits jumped by 31%, showing clients increasingly use Discovery Bank as their primary account.

Advances have also grown by 19% since the prior period, with Discovery saying that its credit loss ratio of 3.7% is far below the market for equivalent products.

Net interest income also grew by 37% to R366 million, while net non-interest revenue jumped by 29% to R438 million.

Discovery Bank is expanding its lending suite by launching a Revolving Credit Facility in December 2023, which will offer clients more flexibility.

The bank’s clients have R280 billion in existing home loan balances, which Discovery says will be accommodated.

Discovery Financial results

Across Discovery’s group operations, normalised operating profit grew 13% to R5.6 billion, with the UK composite up 13% and Vitality Global up 71%, both of which benefitted from the weaker rand.

New business annualised premium income (API) increased by 28% to R14.1 billion, with Discovery Health’s new business boosted by the take-on of the Sasolmed medical scheme.

Normalised headline earnings jumped 11% to R3.3 billion, while headline earnings are essentially unchanged at R3.2 billion.

“The difference is explained by the considerable prior period fair value gain from the UK interest rate swaption. The swaption was realised towards the end of the prior financial year. Consistent with prior reporting, headline earnings are normalised for this.”

The group said the South African composite’s normalised operating profit increased by 9% to R4.3 billion and new business by 29% to R11.1 billion.

Notably, earnings for the period are under the new IFRS 17 Insurance Contracts accounting standard, with earnings in the prior period restated.

The group said the transition from IFRS 4 to IFRS 17 would have no material effect on its underlying economic value, solvency levels, or cash flows but would affect its incidence of profit recognition.

The restated normalised profit from operations under IFRS 17 for H1 2023 was 16% lower than under the IFRS 4 standard.

Despite the impact on profits due to the new standard for accounting methods, the group still declared an interim dividend of 65 cents per share (H1 2023: 0)

The group’s key financials can be found below:

FinancialsH1 2023H1 2024 % Change
Net Income 14 60415 674+7%
Normalised headline earnings (Rm)3 0043 320+11%
Total income from non-insurance lines (Rm)2 5542 942+10%
New business annualised premium income (Rm)11 10614 197+28%
Headline earnings (Rm)3 2763 260
Basic earnings per share (cents)487.9492.9+1%
Basic headline earnings per share (cents)498.4493.8-1%
Interim Dividend (cents)65

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