Discovery Bank says it already has more than 22 000 clients since its inception
JOHANNESBURG – Discovery, the JSE-listed financial services group, on Wednesday reported that its new banking offering has more than 22 000 clients, with more than 50 000 accounts as the group spent 21 percent of earnings on new ventures, including the bank.
The Johannesburg headquartered company said it had delayed the Discovery Bank’s public rollout to June to fine-tune certain elements and it was now gaining momentum.
“The bank has gained traction since the public roll out, making considerable progress in a period of two months with more than 22 000 clients on board, and deposits and total credit limits approved exceeding R190 million and R900m, respectively,” Discovery said. Discovery Bank along with Thyme Bank and Bank Zero are the new kids on the banking block, aiming to steal market share from South Africa’s four big banks.
Discovery reported that for the financial year ended June 30, 2019, it had spent 114 percent more on new business to R1.31 billion. About 21 percent of group earnings was spent on new businesses, including Discovery Bank, VitalityInvest, Vitality1, Umbrella Funds and Discovery for Business.
Group normalised profit from operations had declined by 3 percent to R7.74bn. Headline earnings decreased by 11 percent to R5.14bn, and normalised headline earnings decreased by 7 percent to R5.03bn.
The company said high-value mortality claims volatility in the first half of the year had hurt its life insurance business. Discovery Life normalised operating profit fell by 9 percent for the full year to R3.23bn, due to the spike in mortality claims.
Discovery Health’s normalised operating profit increased by 10 percent to R3.04bn. Lives under management exceeded 3.5 million, the company said.
Lester Davids, a trading analyst at Unum Capital, said Discovery earnings were lower than the prior period, reflecting the group’s capital expenditure into new ventures such as the Discovery Bank as well as the unexpected spike in mortality claims within Discovery Life.
“For the period, 21 percent of earnings was spent on investing in new initiatives which management believe will set the group up as a leader in the global financial services space. In addition, impacting results were a challenging South African economic backdrop as well as subdued equity markets which often assist life assurers’ profitability,” said Davids.
Asief Mohamed, the chief investment officer at Aeon Investment Management, said Discovery Bank was expected to take market share from competitors, including Investec.
“Investec Bank is going to have to offer much more value to retain clients. I foresee the Investec Bank’s clients moving to Discovery Bank, because of the benefits the bank offers,” Mohamed said.
Mohamed also said that Discovery’s financial results had beaten market expectations.
“Discovery has a good management team, they have good businesses both in South Africa and offshore, with the offshore business offering excellent growth prospects,” he said.
Discovery, whose share price took a knock last month after the government announced it plans to introduce the National Health Insurance Bill, said it was supportive of the plan.
“The bill is not expected to have a material long-term impact on the Discovery Health business and may, in fact, present new opportunities for growth and product innovation,” the company said.
Discovery shares closed 0.48 percent lower at R114.45 on the JSE on Wednesday.