Discovery Bank breaking its own targets

Digital bank Discovery Bank has narrowed its losses and seen revenues surge in the six months ended December 2024, breaking even on a monthly basis and hitting 1 million customers ahead of schedule.

The group’s results were captured in the Discovery Group’s interim results for HY25.

Discovery Bank’s revenue surged by 42% to R1.1 billion in the period, with net non-interest revenue accounting for R611 million of this—up 49% from R411 million in the prior period.

The group said revenue was driven by significant growth in clients and fee income per client, which it achieved through increased product take-up and engagement levels.

Discovery Bank’s total client base grew 32% to 1.09 million clients, with total accounts more than double at 2.6 million opened.

This is a key target the bank has beaten ahead of schedule, with the bank’s original plan to hit 1 million clients by 2026.

Deposits increased by 27% and advances by 37%, driven mainly by the launch of home loans, which ended the period at R802 million.

This delivered an operating profit of R69 million for the group (before acquisition costs), swinging from a loss in HY24 of R154 million.

The group’s overall loss was also significantly improved. After factoring in acquisition costs et al., Discovery Bank’s loss was R145 million for the period, narrowing from R339 million the year before.

The key takeaway, however, is that the bank achieved monthly break-even in December, ahead of plan, it said.

Boosting Discovery

Discovery said that its banking venture through Discovery Bank and its Vitality business has given the group a significant boost and set it on the path for a new phase.

It said that it emerged from a cycle of investment, which focused on creating new avenues for growth—such as Discovery Bank—and now it will enter a phase of scalability.

Its financials show that it will enter this phase on solid footing despite the challenging macroeconomic environment in South Africa and abroad.

Group insurance revenue for the period grew to R27.8 billion. Factoring in insurance costs and investment income, the net result was an income of R6.1 billion for the period.

Non-insurance revenue was recorded at R12.1 billion, giving a total income of R18.2 billion.

Headline earnings for the period were up 34% to R4.3 billion, up from R3.2 billion in the prior period.

Discovery said that both Discovery Bank and Vitality were key to this growth, with the latter demonstrating that it can be deployed and applied to various industries and markets.

It said it is moving to improve Vitality even further, by tapping into its wealth of data and technology assets to evolve the model through Vitality AI.

“This will allow greater and more precise understanding of individuals’ health risks and determine the exact actions to improve health outcomes, quantifying the impact on health and mortality,” it said.

“These will be delivered through engaging, hyper-personalised product experiences to encourage healthier behaviour.”

The Discovery Health business also saw decent growth, with profit from operations growing 8% to R2 billion.

The group said it was continuing “constructive engagements” over the National Health Insurance (NHI), which is a distinct threat to this business in South Africa.

Outlook and dividend

Looking ahead, Discovery said that its growth strategy is based on the repeatability and scalability of its business model. Given this, it said it is well-positioned to do so.

The group expects growth in profit from operations in 2025 to exceed the group’s medium-term ambition of 15% to 20%.

This will be driven in particular by a second-half recovery in the UK, compared with the second half of the prior year, it said.

The annual ordinary dividend is expected to be covered approximately five times by normalised headline earnings, with interim ordinary dividends expected to be paid in the range of 30% to 40% of the expected total annual ordinary dividend.

In line with this, the group declared its interim ordinary dividends for the period at 87 cents per share, consistent with the growth in normalised headline earnings.