Discovery Bank’s launch delayed
Discovery plans to buy out FirstRand shares – which will make more sense, says Adrian Gore, as the two will be rivals
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...