Discovery to close FNB JV

Discovery intends to integrate its credit card business, currently operated through a joint venture (JV) with FNB, into its soon-to-belaunched banking offering.

Discovery holds a 74.99% interest in the Discovery Card business with FNB parent company FirstRand holding the remaining 25.01%. The business will be transferred into its bank on the same effective ratio, said a Discovery spokesperson.

Discovery Card has around 300 000 active clients. Its credit loss ratio for the six months ended December 31, 2017 stood at 1.5% compared with a market average of 6% for tier one credit providers. Profit and revenue increased by 16% and 7% to R207 million and R500 million respectively.

Despite the quality of Discovery Card’s clients, a close of the JV wouldn’t have a material impact on FirstRand, as only 25.01% of its net profit is reflected in group numbers, Sam Moss at FirstRand said.

The JV dates back some 15 years. At the time, the insurer was still part of the FirstRand stable and made use of FNB’s platforms and systems to launch a credit card under its own brand.

The proposed purchase of the Discovery-branded FirstRand-issued credit card business and book is subject to approval by the Competition Commission. The insurance group’s banking licence is also subject to conditions related to the shareholding of Discovery Bank. According to the spokesperson, shareholders of the bank are currently discussing how best to manage the conditions, such discussions may potentially impact Competition Commission approval.

To date, Discovery has spent R1.2 billion on the bank, which is currently functional and being tested by some staff. Total spend is expected to reach R1.5 billion by the launch, expected in the third quarter of the calendar year.

For the six months to December 31, 2017, it reported a 19% increase in normalised operating profit to R4.06 billion. Normalised headline earnings rose 30% to R2.83 billion.

Bloomberg

It appears the banking bug runs too deep in Michael Jordaan, former CEO of FNB. Having moved to his wine farm Bartinney full time in 2014 after 10 years at the helm of FNB, Jordaan is now readying Bank Zero, a digital bank that may offer some services for free. With its start date slated for the end of this year, Bank Zero is likely to be much like Jordaan: innovative, consumer focused and kinda cool.

“It’s a project that’s close to my heart,” he said recently. “It’s now five years since I left FNB and at some stage you have to follow the

Profit and revenue increased by 16% and 7% to R207 million and R500 million respectively.