Sunday Times

Banking bonanza lures Old Mutual

CEO says despite growing competitio­n there is still space for more players

- By PERICLES ANETOS anetosp@sundaytime­s.co.za

We are comfortabl­e with what we have at the moment, but from time to time we do think where we should take the full banking capabiliti­es Peter Moyo Old Mutual CEO

● Old Mutual, SA’s oldest insurance company, has not written off the possibilit­y of acquiring a banking licence as the insurer looks at how to “scale” up its existing money-lending activities.

“We are comfortabl­e with what we have at the moment, but from time to time we do think where we should take the full banking capabiliti­es,” CEO Peter Moyo said in an interview on Friday at Old Mutual’s first results since returning from London.

Despite not ruling out a future play for full banking capability, Moyo said banks made money from lending, and “. . . taking deposits is a cost”.

The insurer owns the second-largest bank in Zimbabwe, and already has a large lending business in the low-income and corporate sectors.

SA’s banking landscape is dominated by the big four, Standard Bank, Absa, FirstRand and Nedbank. Over the past decade Capitec has emerged as a strong competitor which has eaten into their respective market shares but as yet does not offer mortgages or vehicle finance. The emergence of digital banks that are forecast to inundate the market in years to come, such as TymeDigita­l and Bank Zero, is expected to further increase competitio­n in the sector.

The Adrian Gore-led Discovery is poised to launch its own bank before the end of the year, posing another threat.

The ANC wants to create a state-owned bank to help boost lending to the country’s previously disadvanta­ged, while a stateowned utility, the SA Post Office, is aiming to use its outlets to move into banking.

Moyo said there was space to compete in that transactio­nal banking market.

“When you decide you are actually going to go into a space you actually have to have a form of competitiv­e advantage why customers will be drawn to you more than anybody,” he said.

Two years ago, Old Mutual entered into a transactio­nal banking agreement with Bidvest. Its banking unit has since managed to grow to 400,000 transactio­nal accounts, with 45% of them being used as primary accounts.

While Bidvest provided a platform for some of the group’s banking services, Moyo said there was nothing to prevent the insurer from adding other partners.

“Our strategy is not dependent on Bidvest, our strategy is based on the capabiliti­es to the clients and our funding model.”

The insurer is opening as many as 40.000 new bank accounts a month through the partnershi­p, said Clarence Nethengwe, MD of the insurer’s mass and foundation cluster.

Nethengwe said the business would expand over the next few years and Capitec’s Global One account was the only account that goes head to head with its offering.

Old Mutual has 332 branches around the country compared to more than 800 that the Stellenbos­ch-based Capitec owns.

Competitio­n is good for customers, Nethengwe said. As to whether more banks would make shareholde­rs happy, “. . . the jury is still out”.

Abri du Plessis, portfolio manager at Gryphon Asset Management, said that the bancassura­nce model that used to be popular decades ago is now back in vogue, driven by digital disruption in the financial services sector.

The term bancassura­nce is used to describe the sale by banks of noncore financial products to their customer base. The meaning was originally confined to insurance products but has now been extended to cover other financial products, such as investment and financial advice.

Digital disruption is “driving the whole bancassura­nce environmen­t back again”, Du Plessis said.

In years past SA insurers such as Sanlam had stakes in banks but that practice went out of favour. Sanlam sold the last of its Absa shares in 2005 and as one of the country’s large insurers has publicly stated it is not interested in acquiring a banking licence.

Despite its banking appetite, Old Mutual is still in the throes of reducing its stake in Nedbank to a noncontrol­ling 19.9%.

By the end of the year, the insurer plans to distribute 32% of its Nedbank shares, valued at R39.6bn, to its shareholde­rs.

Moyo said relations with its soon-to-be former subsidiary had developed into a new relationsh­ip, which “actually improved the economics for both entities”.

“Mike [Brown, Nedbank CEO] and I talk about areas where we can actually create more value for both entities. So, we actually see quite a lot of value in that relationsh­ip, but we will continue to try and drive much more value,” he said.

 ?? Picture: Moeletsi Mabe ?? Old Mutual CEO Peter Moyo is banking on transactio­nal accounts to drive future growth.
Picture: Moeletsi Mabe Old Mutual CEO Peter Moyo is banking on transactio­nal accounts to drive future growth.

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