Financial services group Old Mutual says that it has received approval from the South African Reserve Bank’s Prudential Authority to apply for a banking licence, with plans to launch its own bank in 2024.<\/p>\n
In a voluntary business update on Tuesday (22 November), the group said that it had received Section 13 approval from the PA to proceed with the application for a banking license.<\/p>\n
“The establishment of an entity in the group with a banking licence is a natural progression of our core strategy, helping us to sustain our customers\u2019 prosperity through an enhanced transactional banking capability,” it said.<\/p>\n
The group already has existing lending and transactional solutions – an unsecured lending product and the Old Mutual Money Account – with the latter handled through a partnership with Bidvest Bank.<\/p>\n
“The current transactional solution is delivered through a commercial arrangement with a third-party bank. While this commercial arrangement has allowed us to gain experience in transactional
\nbanking services, a divergence of aspiration requires us to reassess our future arrangement to deliver on our customer needs,” it said.<\/p>\n
Old Mutual said that the unsecured lending solution, in particular, is already a strong contributor to group profitability.<\/p>\n
“The establishment of a bank within the group will allow us to hold the primary relationship with our customers, driving greater regular interaction with them and enhancing the cross-sell opportunity across the group. It will also enable the group to accept retail deposits, thereby providing a cheaper source of funding.”<\/p>\n
Old Mutual said that it is building transactional capability using the latest technology that will allow enhanced servicing and personalisation.<\/p>\n
“This, together with a cloud-based technology stack, will enable us to deliver cost-effective, flexible and scalable solutions to our customers.”<\/p>\n
In terms of financing the planned build, the group said that the approved expenditure to complete the build of the transactional capability is R1.75 billion.<\/p>\n
“In line with the business case, we have incurred costs of R830 million for the current period and approximately 10% of these costs were capitalised.”<\/p>\n
Once relevant Prudential Authority approvals are received, the launch is targeted for the second half of 2024.\u00a0 The entity is expected to break-even three years after the launch.<\/p>\n
“As the capability matures post-break-even, the return is expected to be significantly above the target return of 4% in excess of the cost of equity. We are currently working on our application under Section 16 of the Banks Act for the registration of the bank,” it said.<\/p>\n