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The South African banking scene has long been overdue a shake-up.
That was evident from the moment Capitec first entered the scene with zero-fee accounts and grabbed a decent chunk of the market.
In fact, late last year Capitec overtook Standard Bank for the first time to become the country’s second-biggest bank by market value, just 20 years after it was founded.
In 2019, Discovery Bank entered the market and the figures involved are staggering. Consider this, via Moneyweb:
By the time it launched publicly in 2019, the group had invested more than R6 billion in getting to that point – on regulatory capital, build capex as well as a total of R3.28 billion it paid to FirstRand to exit its banking and card joint venture.
Then, add the cumulative R4 billion-plus in operating losses since 2018. In the year to June 2022, the bank reported an operating loss of R990 billion … the third billion-rand loss in a row.
Combine those two figures and you’re looking at R10 billion sunk so far. But no, Discovery can’t cover my R250 prescription meds from Clicks.
Businesses of this size and nature usually take a while to exit the red, so there’s no cause for alarm, but shareholders will start wanting to see a return on investment soon enough:
…Discovery has committed to getting its investment spend on these back down to its long-term guidance of operating profit.
This year it ‘spent’ almost 20% of core operating profit on these. In other words, were it not for these new businesses, operating profit would’ve been R11.5 billion – not the R9.4 billion reported.
Discovery Bank now boasts 470 000 clients, up 42% from last June, and just over a million accounts.
Every day, it’s adding 800 new-to-bank accounts. If it can raise that number to 1 000 a day, the milestone mark of one million clients will be reached by 2026.
Still, I can’t shake that R10 billion figure.
[source:moneyweb]