(Bloomberg) -- Old Mutual Ltd. has postponed the launch of South Africa’s newest bank to the first quarter of next year as it works to finalize the lender’s top management and meet regulatory conditions.
The Prudential Authority requires the bank to have a fully constituted board with the right balance of independent directors and a diverse skills mix, Chief Executive Officer Iain Williamson said. Additionally, the executive team must be fully appointed and approved by regulators before the lender can launch.
“The approval process can take 30 to 60 days from application to approval, and we’ve had some challenges around that aspect,” Williamson said in an interview. “We still anticipate making a return well in excess of our cost of capital and well in excess of our risk-adjusted view of what should be required.”
A new lender, dubbed OM Bank, will intensify competition in a nation where 85% of residents have accounts. Old Mutual, the continent’s largest insurer by assets, has already developed the bank’s core functions within a previously allocated budget of 1.75 billion rand ($99.5 million), and the board approved an additional 800 million rand to carry the project through to its official launch.
Old Mutual announced its revised timeline on Thursday, where it announced its first-half profit rose 20% to 5.24 billion rand.
The bank, will primarily target affluent customers. Competition is intensifying in the industry with the entry of digital lenders as well as the rapid growth of fintech units of telecom companies such as MTN Group Ltd., which provide mobile-banking services. Rival Discovery Ltd. started its bank in 2019 and has yet to turn profitable.
The insurer has also appointed Clarence Nethengwe as the CEO-designate of the bank, effective Nov. 1.
The value of new business fell 8.4%, while gross written premiums rose 9%. The insurer’s return on net asset value increased to 12.6% from 11.9% a year earlier, boosted by a 1.5 billion-rand share buyback in 2023. Old Mutual plans an additional 1 billion-rand buyback this year to deploy excess capital.
“We look very carefully at what the demands of our capital will be before we make decisions around things like a buyback, and we’ve done that,” Williamson said.
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Old Mutual has 1.4 billion rand of discretionary capital on its books even after the 2023 buyback, and excluding the planned 2024 offer. It’s also awaiting regulatory approval for a 2 billion-rand special dividend from its life-assurance division, which would increase the group’s excess capital by 1 billion rand, Williamson said.
Old Mutual declared a dividend of 0.34 rand per share. The stock was little changed after rising as much as 2.4% in Johannesburg.
The company is the worst performer in the FTSE/JSE Life Insurance Index, rising only 0.4% compared with an 18% increase in the overall gauge.
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(Updates with comment from CEO in second paragraph.)
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