Discovery Bank narrows loss to R398m

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 24 Feb 2023
Hylton Kallner, CEO of Discovery Bank.
Hylton Kallner, CEO of Discovery Bank.

Discovery Bank narrowed its loss in the six months to December, as the financial institution gets closer to delivering on its medium-term average daily new-to-bank sales target rate of 1 000 clients per day.

The half-year losses narrowed to R398 million − 20% better than the previous period.

Discovery Bank expanded its client base, with 581 500 primary clients (385 200 clients in December 2021) and 1 313 000 accounts (793 200 accounts in December 2021).

Discovery Group, SA’s largest health insurer, owns the bank, and yesterday released its half-year performance, “notwithstanding a 46% increase in new business acquisition costs, which represented approximately 30% of the operating loss for the period as growth continues to exceed expectations”.

It added: “Discovery Bank is close to delivering on its recently established medium-term average daily new-to-bank sales target rate of 1 000 clients per day and showing significant progress towards the target of one million clients by 2026.

“Retail deposits at 31 December grew by 33% to R12.7 billion versus the prior period, with growth in advances of 19% to R4.8 billion, over the same period. Discovery Bank’s share of new credit issued was at 15% (by value) of credit card advances in the third quarter of 2022, up from 5% in the third quarter of 2021, yet customer quality remains excellent, with high average levels of non-interest revenue per client.”

According to Discovery, the quality-focused credit strategy was also evidenced by the low credit loss ratio of 1.8%.

“The benefits of the business model continue to manifest in high levels of client engagement, resulting in net income growth of 71% to R706 million and improving operating leverage, with operating costs remaining constant in real terms, notwithstanding the significant customer growth and expanded product offering.”

Dubbed the “world’s first behavioural bank”, Discovery Bank has been pushing growth in a highly-competitive space, recently launching new products, including a Discovery Account – available to clients of the Discovery Group, with zero monthly fees.

Other products are Discovery Pay, a digital payments service for real-time payments, and the Vitality Travel booking platform, which allows clients to book all domestic and regional flights.

Hylton Kallner, CEO of Discovery Bank, commented at the launch of the products: “The bank has scaled quickly and built a uniquely powerful digital banking and technology capability.

“This is now being deployed as the de facto operating system for the Discovery Group in South Africa. Discovery Bank’s digital payments technology, advanced security features and shared value rewards capabilities represent a unique opportunity to deliver new products and digital services to all of our clients.”