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Discovery Bank charts path to break-even in FY24

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 26 Sept 2023
Discovery Bank signs up an average of 1 000 new clients a day.
Discovery Bank signs up an average of 1 000 new clients a day.

Discovery Bank’s operating loss for the year ended 30 June was 23% better than the prior year and the digital bank expects to break even in the 2024 financial year.

This is according to Discovery Group’s 2023 full-year financial results, released last week.

Owned by the financial services group − SA’s largest health insurer − Discovery Bank says despite recording a R767 million operating loss in the last year, its overall operating loss before new business acquisition costs was 39% better than in 2021, as it continues to expand its client base. The bank’s net income grew 67% to R1.2 billion during the year.

The total client base exceeded 700 000 by June, making significant progress toward breaking even within two years, it notes.

“Discovery Bank delivered on the medium-term target of averaging 1 000 new clients a day for January to June 2023, which was 50% higher than the equivalent prior year period.

“Total clients exceeded 700 000 by the end of June 2023, with progress towards the target of one million clients by 2026.Clients’ utilisation of Discovery Bank’s transaction capabilities grew, with total payments increasing 56%, by value, and total spend increasing by 48%,” says the bank.

In its half-year results released in February, the bank reported a narrowed loss of R398 million − 20% better than the previous period.

Discovery Bank was first announced in November 2018 and launched publicly in 2020.

Its competitor TymeBank launched in 2019 and now has over seven million customers.

Bank Zero, which launched in 2021, is not yet disclosing the number of customers it has on-boarded to date, but previously told ITWeb it has seen progress inthe business banking segment.

Discovery Bank says its credit strategy contributed to its accelerated client acquisition during the past financial year. Credit advances have grown steadily, given increased credit application volumes, growing 56% compared to the prior year, it notes.

“Discovery Bank’s share of new credit issued was 15.7% (by value) of credit card facilities in the second quarter of 2023, up from 10.9% the prior year. The credit strategy was evidenced by the credit loss ratio remaining within the long-term targets, despite the challenging macro-economic environment. Continuous operational enhancements have been implemented with a focus on improving collections, as macro-economic challenges are expected to continue,” it says.

Non-interest revenue grew strongly, with increasing interchange and fee income per client, and increased transactions, debit orders and salary deposits. Clients’ utilisation of the bank’s transaction capabilities grew, with total payments increasing 56%, by value, and total spend increasing by 48%, it adds.

Health insurance arm Discovery Health showed strong growth across all metrics, despite a tough operating environment – with prior investment in technology driving efficiencies and continued innovation.

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