South Africa will have a new bank before the end of this year

Old Mutual is on track to launch its new bank before the end of 2024, with the insurer submitting its systems and processes for regulatory approval from the Prudential Authority at the beginning of this year. 

This was revealed in the company’s annual results for its 2023 financial year, where it posted strong growth. 

The company’s insurance revenue grew by 7.84% to R68.26 billion, while non-insurance revenue grew by 12.1% to R15.71 billion.

The company’s massive profit growth was largely driven by its impressive investment return, which increased from R20.41 billion to R135.9 billion – a 565.79% increase.

This resulted in profit after-tax growing from R5.65 billion to R7.63 billion.

In a media briefing following the release of the company’s results, Old Mutual CEO Iain Williamson provided an update on the company’s plans to launch a bank. 

The company received approval from the South African Reserve Bank’s Prudential Authority to apply for a banking licence in November 2022. 

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.

Old Mutual said that the unsecured lending solution, in particular, is already a strong contributor to group profitability.

“The establishment of a bank within the group will allow us to maintain a primary relationship with our customers, driving greater regular interaction with them and enhancing cross-sell opportunities across the group,” the insurer said. 

“It will also enable the group to accept retail deposits, thereby providing a cheaper source of funding.”

Williamson said Old Mutual’s bank completed its section 16 submission to the Prudential Authority at the beginning of 2024 and is now awaiting approval. 

As part of the section 16 submission, the company is required to have the banking systems and processes independently verified in a working end-to-end scenario. 

Williamson said the bank build was completed within its initial budget of R1.75 billion at the end of last year. Old Mutual also had an independent audit firm that analysed its systems and processes before seeking regulatory approval. 

The next step for Old Mutual is the section 17 submission, which allows them to notify the industry via the Payments Association of South Africa that we intend to test the National Payments system in the latter half of 2024. 

Williamson said this is a regulated activity and follows a predetermined process of testing with partner banks in the industry. 

This integration will take around three months once approval is given. Only after this integration can the bank be tested end-to-end. 

“It is a long process, but we are on track to deliver an operational bank by the end of the year,” Williamson said.