Discovery Bank records R1bn loss in year-end results

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Hylton Kallner, CEO of Discovery Bank.
Hylton Kallner, CEO of Discovery Bank.

Discovery Bank today posted an operating loss of R1.094 billion for the year ended June 2021.

The digital bank says this was 7% lower than the previous reporting period. Nonetheless, it says it continued to gain traction, with 362 000 clients (versus 274 000 clients in July 2020) and 649 000 accounts (versus 505 000 accounts in July 2020).

In the period, it says, it expanded its existing Discovery and non-Discovery client base, achieving 500 average daily new-to-bank sales, in line with the bank’s medium-term forecast.

“There was a steady improvement in product mix over the year, with transaction accounts and credit cards making up over 80% of new business. Retail deposits grew by 167% to R8.18 billion. A deliberate decision to pursue a prudent credit strategy resulted in moderate advances growth of 5% to R3.83 billion at 30 June 2021. The quality-focused credit strategy was evidenced by the low credit loss ratio of 4.6%, which includes a COVID-19 overlay, and high average client non-interest revenue (NIR) levels.”

The digital-only bank, owned by Discovery Health, says in the year, it continued to focus on product innovation and building a “differentiated and sophisticated” digital platform.

This, it says, included the rollout of payment platforms like Apple Pay and Discovery Pay, as well as “an enhanced account origination journey with unique features, such as virtual cards; a more valuable Discovery Miles currency; enhancements to travel benefits; and more differentiated products in the pipeline”.

According to Discovery, there was a strong improvement in utilisation over the period. It says, compared with July 2020, clients depositing their salary, initiating debit orders and making digital payments grew substantially, driving strong NIR levels.

“The shared-value fundamentals also emerged as expected, with clients on Gold and Diamond Vitality Money status exhibiting superior banking dynamics: 94% lower arrears rate compared with clients on Blue Vitality Money status; four times higher spend compared with clients on Blue status; and nine times higher average deposits compared to the average client,” it says.

Discovery Bank was first announced in November 2018 and launched in March 2019, when it touted the new offering as the “world’s first behavioural bank” and a fully digital bank that can be joined by anyone with a smartphone.

Despite the loss in the current reporting period, Discovery Bank has been positioning itself as a competitive alternative financial institution, appointing key experienced individuals to drive the bank’s vision.

At the beginning of this year, the bank appointed Hylton Kallner as its new CEO, replacing Barry Hore.

In April, the bank appointed Dr Reuel J Khoza as chairperson, replacing Adrian Gore, who remains a director.

At the time, Gore said: “Reuel brings a wealth of experience and will add tremendous value in the governance of Discovery Bank. The bank is performing excellently and we believe he will play a significant role as we continue to build a world-class bank.”

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