OM Bank is not playing around

OM Bank will cross the important milestone of one million clients before the end of September, just over one year since its public launch.

This growth rate is rapid and matches that of its chief competitor in the mass market space, Capitec, at 3,000 clients per day. 

The bank will have to maintain this growth rate over the next few years to break even in the 2028 financial year. In the first half of 2026, it reported a loss of R611 million. 

Old Mutual expects the bank to run losses of R1.1 billion to R1.3 billion until it breaks even in 2028, with the bank earmarking R2 billion to fund its expansion. 

Breaking even in three years is a tall order for a bank, considering it took Discovery Bank eight years to record its first annual profit. 

However, OM Bank has some key advantages in this regard, with it using a white-label product from 10x Banking rather than building its own from the ground up. 

Taking this option means the bank costs R2.8 billion to build, compared with Discovery’s in-house offering, which has required R15 billion in investment over its life. 

OM Bank can also leverage Old Mutual’s existing mass-market customer base, which numbers 14 million and has 7,245 tied financial advisers. 

The bank also has access to an established branch network of 357 branches across South Africa. 

Crucially, the bank is proving popular with people outside of the Old Mutual ecosystem, with half of its new transactional sign-ups being entirely new clients. 

OM Bank CEO Clarence Nethengwe said this had not surprised the bank, but has accelerated some parts of its strategy and forced some changes. 

In its interim results presentation, Old Mutual outlined plans to make the bank an ecosystem anchor where it becomes the primary growth engine for the group. 

“We will effectively leverage existing businesses for their distribution, their customers, and their flows to capture opportunities from that,” Nethengwe said. 

This will keep more of the customers’ financial activities within the Old Mutual ecosystem, providing valuable data and opportunities to grow earnings. 

The bank’s growth has surprised Old Mutual CEO Jurie Strydom, with the initial strategy focusing on ensuring the bank has the right to win against its competitors. 

“We are already moving from establishing that right to win to actually contesting the banking profit pool and turning the bank into a growth engine,” Strydom told Daily Investor. 

Strydom said the bank will hit one million clients before the end of September, putting it ahead of target to break even in 2028. 

Building the ecosystem 

With its client acquisition firmly on track, the next step for OM Bank is to make these individuals more active and profitable. 

This makes the rollout of new products and services crucial for increasing client activity, attracting primary customers, and generating lucrative non-interest revenue. 

“I tell people that OM Bank resembles a construction site. A site where you know the people are already staying there, but we are still building,” Nethengwe said. 

“There is a lot of stuff we are still building in terms of products and features that we are releasing on a regular basis to make the proposition appealing to customers.”

OM Bank was launched with a credit card offering and a full suite of value-added services, from airtime purchases to electricity and vouchers. 

It also has an extensive unsecured lending book, which was incorporated from Old Mutual Finance and has R16 billion in advances. 

The next step for the bank is to improve its secured lending proposition by launching home loans towards the end of 2026. 

“We need to grow the lending book to R27 billion by 2028, with at least R5 billion in secured lending from home loans and investment-backed lending,” Nethengwe said. 

This will leave the bank with a primarily unsecured lending book, which has a significantly higher credit loss ratio than other forms of lending. 

For context, typical credit loss ratios for secured lending range from 1% to 3%. For unsecured lending, OM Bank is tageting 6% to 8%. 

Nethengwe’s focus on client activity is revealing, as it shows OM Bank wants to emulate the success Capitec and Discovery Bank have had in generating significant income from non-interest revenue. 

This fee and commission income is highly profitable because it is extremely capital-light compared with lending activities. 

“Our model tells us that if we can get customer activity to between 36% and 38%, that should be enough for us to break even,” Nethengwe said. 

“In the next six months, the core banking rollout should be completed, and then we can look beyond that. But, we must get banking right first.”

Nethengwe is laser-focused on the bank’s 2028 breakeven target, saying that questions must be asked if losses do not begin to narrow in the second half of the 2026 financial year. 

He explained that it is key to show investors that the bank will be profitable and not let any doubt that it could miss its targets. 

Nethengwe also knows just how important the bank is to turning around the fortunes of Africa’s largest insurer by assets. 

“I wish I could just jump to 2028 because when you break even, that share price that has been long suffering will rise quickly. I am doing this for the shareholders,” Nethengwe said.