Discovery Ltd. is on track to start a South African bank by the end of this year after agreeing to buy FirstRand Ltd.’s stake in a credit-card venture, a transaction which had delayed the lender’s launch.
Johannesburg-based Discovery is joining a rush into South African retail banking by a range of new entrants spanning from insurer Old Mutual Ltd. to local banking-veteran Michael Jordaan, who is looking to start a digital-only offering. The country’s largest medical-insurance administrator is adding to its businesses in life, property and casualty cover, and a loyalty program that rewards customers who keep healthy through partnerships around the world.
The insurer will pay ZAR 1.8 billion ($120 million) for FirstRand’s 25 per cent stake in Discovery Card, which it started with the country’s second-largest banking group in 2004, Discovery said in a statement on Tuesday. The deal will be implemented as “as soon as practically possible,” to meet one of the conditions imposed by the South African central bank when the regulator granted Discovery its banking license, the company said.
The transaction will be funded through issuing of stock and is still subject to regulatory approval, Discovery said. Discovery Bank will hold all rights to the credit-card book once the transaction is finalised and the assets will be migrated over time, it said.
"Although these developments have delayed the process slightly, the bank-build is progressing well and remains within budget, and the launch is expected before the end of 2018,” Discovery said. Profit at the Discovery Card venture increased by 17 per cent to 414 million rand in the 12 months through June, while revenue rose six per cent to ZAR 1 billion.