Banks make money in a fairly simple way. You put your money in, the bank lends it out to somebody else, that borrower pays interest, and the bank keeps the difference. Old Mutual has now done the first part of that on a serious scale, and is still working on the second.
The deposits are in the door
OM Bank opened to the public in September last year, aimed at South Africans earning between R8,000 and R80,000 a month. Old Mutual's interim results, published on Tuesday, put it at 742,000 customers at the end of June, up from 284,000 a year earlier, holding R1.4 billion in retail deposits.
The more useful number is who those customers are. Half of the new transactional sign-ups are people who were not Old Mutual clients before, which means the bank is bringing in people from outside the group rather than only moving existing customers across. That distinction matters, because migrating your own policyholders into a bank account makes the customer chart look good without adding anybody new.
Deposits are worth having in their own right. Money sitting in customers' everyday accounts is the cheapest funding a bank can get, far cheaper than borrowing it from somewhere else, and it is what a lending book eventually gets built on top of.
The lending that has not started yet
That is where OM Bank still is. App-based lending was only soft-launched early this year, and Old Mutual says it will scale it during the second half, so the part of the business that actually earns the interest has been running for a matter of months. Until it does scale, the deposits sit there costing money rather than making it.
Old Mutual has never suggested otherwise. More than R4 billion has already gone into building the bank, with another R2 billion allocated through 2027. OM Bank lost R764 million in the first half of this year, inside a full-year forecast that runs from R1.1 billion to R1.3 billion.
The results told the market that leaning on the group's own distribution supports a pathway to profitability by the 2028 financial year, which is another two and a half years of spending before the bank is meant to pay for itself. Clarence Nethengwe has that long to get the second half of the machine running at the size the forecast assumes.
