Old Mutual on track to launch new bank in South Africa
Old Mutual says it is on track to launch a new bank in South Africa in 2024, with the plan to soft-launch for “friends and family” before taking the almost R2 billion build live with the wider public.
In March, the group said it planned to launch the new bank in the second half of 2024.
“Our bank build in South Africa is a core component of our integrated financial services ecosystem. A transactional banking capability enhances our ability to have regular interactions with our customers and partner with them earlier on in their life journeys,” it said.
“The bank platform build is progressing at a pleasing pace. To date, we have spent R1.2 billion of the R1.75 billion expenditure approved for the build. We recently submitted our Section 16 application to the Prudential Authority and are now awaiting feedback.”
“The next steps following the granting of section 17 by the regulator are to connect to the payments system and to conduct integration testing followed by a ‘friends and family’ launch of the bank.”
The progress being made on the bank comes despite the group operating in a very challenging environment. The build is on track and in-budget, it said.
Performance
In its interim results for the six months ended 30 June 2023, the group said it performed well across most of its key performance indicators, with sales growing by 14% following improved productivity levels.
The improved results come amid a rebound in the South African economy in the first half of the year after a decline in Q4 2022.
“Despite the dual impact of electricity shortages and a confidence crisis, more efficient production processes combined with significant private sector energy generation supported economic activity,” the group said.
“Strong growth in private sector investment in energy generation projects and ongoing rebuilding of inventories also added to growth.”
However, the rand did reach a record low against the dollar following tensions between South Africa and the USA over the Lady R fiasco.
Inflation also averaged 7% in Q1 2023 due to high food prices, while elevated unemployment continued impacting real income growth.
“Our customers’ disposable income remains under pressure, which led to increased disinvestments on savings and investments as customers seek to fund their liquidity requirements,” it said
Financials
During the period under review, the group’s basic earnings per share dropped by 9% from 106.8 cents in H1 2022 to 96.7 cents in H1 2023.
Headline earnings per share were also down 8% from 104.9 cents in H1 2022 to 96.9 cents in H1 2023 in South Africa.
Despite this, the group upped its interim dividend per share by 28% from 25 cents in H1 2022 to 32 cents in H1 2023.
South African Outlook
The group said that economic growth in South Africa is still very weak but has proven resilient.
Inflation is returning to the South African Reserve Bank’s midpoint, with the central bank then keeping rates unchanged in its July and September meetings.
However, load shedding will continue to impact the economic outlook, which could dampen the economic outlook.
Growth is thus expected to drop from 1.9% in 2022 to 1% in 2023.
“According to the Energy Council of South Africa, load shedding may cease by the end of 2024, but this will require a collaborative effort by both Eskom and the private sector,” the group said
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