South Africa’s big banking changes

South Africa’s banking space is set for some massive changes, with a significant player being put up for sale and a new entrant expected by the end of 2024.

Bidvest announced its plans to put Bidvest Bank and FinGlobal up for sale in early July 2024 as part of a “strategic restructuring”.

Speaking to 702, Denker Capital director and portfolio manager Kokkie Kooyman said Bidvest’s plan to dispose of Bidvest Bank and FinGlobal shows how competitive South Africa’s banking market is.

“They want to focus on what they call more profitable businesses. I think that reflects how competitive the banking industry has become in South Africa,” said Kooyman.

“Banking is very capital intensive and very regulatory-driven. It’s a higher-risk business in terms of potential bad debts, and it’s volatile.”

He said he believes the Bidvest group tried to get into banking to see if it could cross-sell those products to clients of its other businesses.

“I don’t think it worked well enough, and now they’re trying to see if there is potentially a buyer in that business,” said Kooyman.

He said Bidvest would be aware that the sale will take six to nine months, so it may have just put its notice out to gauge interest.

To that end, Kooyman believes there will be little interest as few organisations are looking to buy a bank.

“No… not many,” he responded to a question about whether there are people or organisations interested in acquiring a bank.

He added that he believes there are still too many risks in South Africa to draw interest from an international bank.

Furthermore, he believes it would be far too small of a transaction for prominent banks like Absa, Standard Bank, and FirstRand.

In its announcement, Bidvest chief executive Mpumi Madisa said restructuring Bidvest Financial Services will allow the group to gear up for the “next phase of sustainable expansion”.

The Bidvest Group board of directors said it believes Bidvest Financial Services requires dedicated ownership for its continued sustainability.

“Shareholders are therefore advised that the Bidvest Group Board has approved a process to dispose of Bidvest Bank and its related entity, FinGlobal,” the board said.

Bidvest’s short-term insurance businesses in the Financial Services division will be transferred to the automotive division, considering they primarily focus on vehicle insurance and related value-added products.

“This aligns with this division’s strategy of diversifying into allied automotive services,” the board added.

Old Mutual’s OM Bank hopes to be a new entrant in the South African banking space by the end of 2024, and it will target a market similar to Capitec and TymeBank.

This includes upper mass market and lower affluent customers earning between R5,000 and R80,000 monthly.

Old Mutual filed its section 17 application earlier this year and received approval from the Prudential Authority to launch its bank in April 2024.

The news came roughly two years after the company received its banking licence from the Prudential Authority.

In March 2024, Old Mutual CEO Iain Williamson said the submission for its section 17 application required its banking systems and processes to be independently tested.

He said that the approval means that Old Mutual can begin an industry testing phase with selected bank partners.

Once it has passed the tests, OM Bank will fully integrate into the National Payments System.

Built using 10x Banking’s cloud technology, Old Mutual says it can offer personalised, affordable, and flexible services to South African customers.

The company said building a bank is an essential part of its plan to build a fully integrated financial services ecosystem. It will also act as its clients’ primary point of contact.

It added that having a bank to accept retail deposits would provide a cheaper source of funding.

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