Old Mutual ticks off the next step on its journey to establish its own bank

Old Mutual said on Friday it had received approval to establish a bank, named OM Bank, subject to certain licence conditions.

The insurance and financial services group that once controlled Nedbank said in a statement that approval had followed a “stringent regulatory review” of its licence application. Old Mutual’s control of Nedbank was unbundled in October 2018 in a R43.2 billion distribution.

Old Mutual said the approval would allow it to proceed to the next critical stage in the process of establishing a bank. Old Mutual completed building the infrastructure and digital platform at the end of last year.

“The Group will now formally transition from ‘bank build mode’ and enter into a strict and rigorous industry testing phase with selected bank partners. Upon a successful error-free testing, the new OM Bank will fully integrate into the National Payments System,” the group said.

Old Mutual has so far played its hands close to its chest on what form the new bank will take, but it said on Friday the approval was a material catalyst in their strategic delivery journey.

However, it has been reported that the group will target the mass retail banking market. This market in South Africa is currently led by Capitec with more than 21 million customers. The country’s biggest bank by assets Standard Bank has over 18.8 million customers.

It has become an increasingly crowded banking market in recent years, with low cost online banks such as Bank Zero and Tyme Bank growing rapidly, in the past two years a resurgent African Bank has also been actively growing its stake in the mass retail market.

“It accelerates the fulfilment of our strategic choice to build an Integrated Financial Services business and further strengthens our victory condition to be our customers’ first choice to sustain, grow and protect their prosperity,” CEO Iain Williamson said in a statement.

Williamson said at the end of March, at the release of the group’s annual results, that it had spent R1.75 billion to complete the build phase of the bank on budget, and a further R800 million budget had been approved for the next “transition phase,” which was expected to complete before the end of this year.

Old Mutual’s share price gained 0.5% on Friday to R10.13, only slightly down from R11.37 on the same day a year before.

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