Old Mutual's gamble

BANKING: INSURER BETS BIG ON PROFITABILITY BY 2028, BUT FACES RIVALS >>> It must add millions of clients while absorbing billions in losses.

- Hilton Tarrant

Old Mutual Bank, which launched to the public in September, has grand ambitions. It aims to be profitable by 2028 - and to do so, it will need between 2.5 million and three million customers, of which around 500 000 will be dormant.

The decision to enter the banking space as a standalone insurer (it previously owned a majority stake in Nedbank before the managed separation of the plc entity into four units a decade ago) has been a bold one. But will it be the correct one?

To date, it has spent R2.8 billion actually building the bank with nearly R2 billion of this dedicated to the core technology build-out.

It sees the loss run rate at between R1.1 billion and R1.3 billion a year, which will reduce towards its planned break-even. Plus, it has allocated R1.6 billion in capital to the bank for next year.

Including losses and capital, this means an investment of closer to R8 billion (perhaps as much as R10 billion) by the time it turns profitable.

'Gap' in the market?

Old Mutual is not exactly entering an uncrowded market:

► The “big four” are, well, the big four;

► Investec has sewn up the (true) private banking market;

► Tyme Bank has acquired over 11 million customers, although many of these are not necessarily active;

► Discovery Bank has turned profitable and continues to add customers across the income spectrum;

► African Bank continues to focus on its retail ambitions, albeit from a modest base;

► Lesaka Technologies has ambitions of its own and acquired Bank Zero for R1 billion in the middle of 2025; and

► Then there's the 24.4 million client gorilla in the room, Capitec Bank, which is steadily growing its personal banking client base year after year.