Discovery Bank going from zero to R3 billion in five years

Discovery Bank is tracking ahead of expectations on its path to reaching R3 billion in profit in the 2029 financial year, with it recently having posted its first interim profit. 

Apart from enabling it to reach the ambitious target set by Discovery as part of its “scaled organic growth” phase, which began at the start of the 2025 financial year, it also gives the bank immense optionality. 

Discovery Bank CEO Hylton Kallner told Daily Investor that the growth of the bank has presented the management team with opportunities it never even dreamt of. 

This includes a shift in focus towards building what Discovery calls a “super bank”, with all of the group’s products and functionality set to be housed on the Discovery Bank app. 

The creation of the super bank will enable the group to cross-sell its products across its client base on a single platform, creating the holy grail for an integrated financial services provider. 

However, this is only possible because of the bank’s financial success, with its ability to scale and reach profitability freeing up time and resources to execute on the next phase. 

Discovery Bank posted a R75 million profit for the six months to 31 December 2025, excluding new business acquisition cost this profit jumps to R318.9 million. 

Kallner revealed to Daily Investor that the bank is currently generating a profit of R60 million to R70 million per month, excluding new business acquisition costs. Inclusive of these costs, the monthly profit is around R20 million to R30 million. 

Discovery Bank still has significant new business acquisition costs as it continues to scale significantly, with growth re-accelerating to 1,500 new clients signing up on a daily basis. 

Currently, the bank has 1.5 million active customers, with it ahead of its target to surpass two million by 2029. 

This scale is vital for the bank as it gives it operating leverage, where the cost to serve a client declines as the base grows. Discovery Bank’s expenses per client have plummeted from R336 in 2022 to R144 at the end of 2025. 

The bank’s operating leverage comes from much of the costs associated with building its offering being fixed in the form of historic investment in technology and capability. 

This investment was significant, with Discovery pumping over R15 billion into building its bank. Now that the bank has a full-service offering on its digital platform, it can add new clients without increasing its operating costs significantly. 

“Being able to serve all our clients digitally, without compromising on quality, gives us a very scalable platform to be able to grow without increasing expenses at the same rate,” Kallner explained. 

The operating leverage of Discovery Bank’s model can be seen in the graphs below, with it growing its client base and revenue, while expenses per client decline. 

The maths behind R3 billion in profit

Discovery Bank has a crucial role to play in Discovery’s stated target to effectively double the size of its business by the end of the 2029 financial year. 

It is on track to do this, thanks to several of its business units, including the bank, tracking ahead of their targets. 

During this scaled organic growth phase, Discovery Bank is expected to grow its operating profit to R3 billion and reach over two million clients. 

This is a tough ask, with the bank’s run rate indicating it will hit an annual profit of around R840 million at the end of the current financial year. This excludes new business acquisition costs. With those included, the bank should post a profit of around R360 million. 

“Reaching the R3 billion target reflects how the model plays out and how the new business we attract stacks up over time,” Kallner explained. 

“This reflects a few different factors, chief among them is continued client growth. The acquisition rate of new clients is very strong. We are ahead of plan.” 

Kallner said the bank is targeting over two million clients by the end of 2029. With it currently having over 1.5 million and growing at 1,500 a day, it should surpass this target comfortably. 

The real secret sauce is in how quickly Discovery Bank can make these clients profitable, increase their engagement over time, and maintain its high-quality client base. 

“The nature of the model and platform is that new clients generate profit or contribute to overall profitability very, very quickly. That is the nature of a digital bank,” Kallner said. 

“Over time, these clients tend to engage with our offering more and more and take up more products. Even with the existing base, we see more of their banking activity occurring at Discovery Bank.” 

This is supported by Discovery Bank’s ability to attract high-quality clients, and, through its Vitality Money model, it naturally has a lower credit-loss ratio and impairment charges. 

“What is really interesting here is that it tends to be income agnostic. We are overindexed to the affluent segment, but we also attract aspirational clients who want to manage their money better,” Kallner said. 

“Whether these are already private banking clients elsewhere or graduates just coming out of university, we are overindexed towards high-quality clients.”

“To us that is valuable. You may not be borrowing millions or investing millions now, but you are an incredibly good quality client for life.” 

Kallner explained that this is coupled with an asset-light operating model, with Discovery Bank having no branch infrastructure. This minimises its cost to serve clients. 

“So, if you get all of that right, what pops out at the end is a market-leading cost-to-income ratio of about 40% to 50%. When you multiply the revenue, you see an operating profit of R3 billion on a client base of 2 to 2.5 million.”

“We have to execute to achieve that. That is the challenge.”