Big boost for Discovery's bank launch

By Sandile Mchunu Time of article published Sep 5, 2018

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DURBAN - Discovery's plans to launch its bank received much-needed boost when FirstRand agreed to sell its 25.01 percent stake in a financial joint venture for R1.8 billion. 

Discovery Bank was granted a banking licence last year and will enter a South African retail banking market dominated by Standard Bank, Absa, FirstRand’s FNB, Nedbank and Capitec.

FirstRand yesterday also confirmed that is has agreed to dispose of its 25.01 percent interest in Discovery Card and Discovery Bank.

FirstRand said this transaction, when combined with the payment of R1.3bn in 2016 when Discovery increased its participation in the FNB/Discovery Card joint venture (JV) from 20 percent to 74.99 percent has unlocked R3bn of value for FirstRand shareholders. 

FirstRand chief executive Alan Pullinger said: “FirstRand shareholders have been well rewarded through the economic value created by the FNB/Discovery Card JV and the subsequent sale of our interest in the JV and Discovery Bank.”

FirstRand held its interest in Discovery Bank through its wholly owned subsidiary FirstRand Investment Holdings and its interest in the FNB/Discovery Card JV through its subsidiary FirstRand Bank Limited. 

DISCOVERY says the bank build is progressing well and remains within budget. The launch is expected before the end of 2018. Reuters

Discovery chief executive Adrian Gore said the development of Discovery Bank was another key focus area for the group and the excellent performance of Discovery Card during the year to end June boded well for the bank.

In the year ended June, profits for the Discovery Card and FNB joint venture grew by 17 percent to R414 million and revenue increased by 6percent to R1bn. Discovery Bank has licence approval subject to the condition that FirstRand Bank’s shareholding reduces over time.

Discovery, which has a number of business divisions, including Discovery Health, Discovery Life and Discovery Insure, said it supported the government’s National Health Insurance (NHI) bill and continues to work closely with the national department of health and other stakeholders to ensure optimal outcomes.

NHI is an attempt by the government to create a single fund in which all citizens contribute to before they pay for their medical aid premiums.

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