Hilary Joffe Columnist
Peter Moyo. Picture: MARTIN RHODES
Peter Moyo. Picture: MARTIN RHODES

Soon-to-be-listed African financial services group Old Mutual Ltd is expanding its banking and funeral businesses as it seeks to grow its Mass Foundation cluster, which already has a leading position in SA’s low-income financial services market.

The group, which held an investor day at its new Sandton head office on Thursday ahead of its June 26 listing on the JSE, is opening more than 30,000 bank accounts a month and has opened more than 400,000 accounts since it ventured into transactional banking, of which 145,000 are active accounts.

That prompted one analyst to wonder on Thursday whether Old Mutual was planning to go up against Capitec in the low-income market, though Capitec, which also targets insurance products, is opening as many as 100,000 accounts a month.

Old Mutual Ltd CEO Peter Moyo said the group was not as yet thinking about having a banking licence. The group uses subsidiary Bidvest’s banking licence and though it intends to unbundle much of its 52% stake in Nedbank before the end of 2018, it will retain a 19.9% strategic stake.

The group’s Mass Foundation business, which contributed just over R3bn of Old Mutual Ltd’s R10.9bn adjusted operating profit in the year to December, is also expanding into the funeral market, taking advantage of its lead in funeral insurance to provide "an end-to-end tailored funeral solution", Moyo said.

It has linked up with different providers, including funeral parlours in townships and rural areas, to do this, but Moyo said his team was looking at whether Old Mutual itself should participate in the full value chain.

The Mass Foundation and Personal Finance business, which serves middle-income earners, together made up almost 60% of the group’s adjusted operating profit in financial 2017, with the rest of Africa, mainly Southern African Development Community countries, contributing 9%. Zimbabwe, where Old Mutual also has a strong banking presence, accounts for almost 12% of total shareholder funds, but the dire shortage of liquidity in Zimbabwe means the group cannot get its money out.

Old Mutual Ltd’s JSE listing, along with the London listing on June 25 of Old Mutual’s UK wealth management business, Quilter, bring to fruition the "managed separation" of London-listed Old Mutual plc.

What remains of Old Mutual plc after the breakup will become a subsidiary of Old Mutual Ltd, holding the remaining debt of £461m covered by cash and assets of more than £900m.

Analysts expect the Old Mutual Ltd share price to rerate to narrow the gap with rival Sanlam after the listing. Avior Capital analyst Warwick Bam estimates it is valued by the market at a forward price:earnings ratio of just 7 to 9, where the Sanlam share is trading on a forward p:e ratio of 13-15.

Moyo said: "We are putting this business in the hands of its natural shareholders and we expect more emerging market fund managers will want to hold the stock."

Though developed-market fund managers who held the Old Mutual plc share because it was in the FTSE 100 index will sell the Old Mutual Ltd shares they receive out of the break-up, this is expected to be more than countered by the emerging market funds that buy in now that the share is a focused Africa play, with operations in 13 African countries including SA.