In April, Discovery may launch its home loan business, and the company’s group CEO, Adrian Gore said that it thinks it will be a very compelling product.
The home loan offering is set to be launched in April, Discovery hopes. The product is being alpha tested, and according to Gore, they hope to roll it out in the next four weeks.
The company is determined to get a bit of the R1.4 trillion mortgage market.
According to Gore, Discovery has an embedded client base within the bank that already has R280 billion worth of home loans.
According to Moneyweb, analysis based on these figures, this means Discovery has access to around 20% of the South African mortgage market in its existing client base.
These clients may have home loans at the other four major banks. Therefore, it would seem to reason that the company hopes to tempt clients to move their mortgages over to the online bank.
Further incentives
In September, Discovery noted also that through its banking model, Discovery Bank will give clients up to 1.5% off their home loan interest rate for engaging and managing their money through various offerings by Discovery.
What does this mean? Borrowers with home loans valued at R2 million for instance, could save up to R400,000 in interest over a 20-year term, should clients make use of Discovery Bank’s other financial services products like the lender’s Home Loan Protector and Home Insurance products.
The product essentially incentivises clients to conduct most, if not all, of their business with Discovery Bank. Other incentives to entice clients away from their current financial institutions include alternative power solutions and access to credit.
Discovery thinks that 60% of its existing clients could receive a lower interest rate on their home loan.
In their results presentation published last week, Discovery said that clients could either apply for new home loans, or they could switch or refinance their existing home loans.
Not all great news for Discovery
Last week Monday, Discovery share price took a 7% hit as the market reacted to its voluntary trading statement.
The share price for the company at the close of business on Monday (March 18) was R123,97. When you compared to a week earlier (March 11), the share price was around R134,65.
The share price was trading at around R124,72 on Tuesday (March 25) at 1pm. It has therefore recovered somewhat.
Headline earnings
Discovery said that its update for the six months ended December 31, 2023, noted that its expected headline earnings per share (Heps) would be either slightly lower or minimally higher of the interim period.
According to the statement, headline earnings (HE) is expected to be between 3% lower and 2% higher.
The financial services company revealed that it expects EPS to be between R478,10 and R502,50, as compared with revised 487.90c recorded in the previous year.
Discovery expects heps to be between R483,40 and R508,40, as compared with revised 498.40c recorded in the previous year.
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