It was supposed to be the time for balloons, hot dogs, clowns and cannon fire. Discovery had planned to launch its new bank this quarter. But the Reserve Bank was a party pooper. It never made sense for FirstRand to be a sleeping partner in the new Discovery Bank. And much as SA’s most successful bank would have been happy to hold 25% of the newcomer, the regulator gave the businesses up to five years to unwind the shareholding. "But as we will be competing it makes much more sense to make a clean break and to buy FirstRand out," says Discovery CEO Adrian Gore. It will raise R1.8bn in equity capital, R700m for the remaining share in the credit-card operation and R1.1bn for its share in Discovery Bank. "We could just about manage to cover this through internal resources but we would then be touching our self-imposed gearing limit." The Discovery card has a cost-to-income ratio of 40% — well below the average of SA banks, which is closer to 56%.

But Gore says that this is its ra...

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