Discovery Limited · JSE:DSY
Discovery — 2024 JP Morgan Conference
36 slides from Discovery's conference presentation, April 2024
Slide 1: The Future of Banking
The Future of Banking. Discovery Hylton Kallner | April 2024 Discovery Bank Limited. Registration number 2015/408745/06. An authorised financial services and registered credit provider. FSP number 48657. NCR registration number NCRCP9997. VAT registration number 4590272730. Limits, terms and conditi
Slide 2: Discovery Group Operating Performance
Discovery Group Operating Performance Discovery Health Discovery Insure Discovery Invest Discovery Bank Discovery Life Vitality Health Vitality Life USA Normalised New business Headline Normalised operating profit earnings headline earnings +13% +28% +0% +11% to R5 622m to R14 197m to R3 260m to R3
Slide 3: Discovery Bank as a contributor to the success of the Discovery Group
Discovery Bank as a to the success of the Discovery Group Vitality UK Vitality Global Discovery Hypotheses for the South Africa success of the Bank Digital Banking platform Discovery Health Discovery Insure Discovery Invest Discovery Bank Discovery Life Vitality Health Vitality Life Risk Health USA
Slide 4: Discovery Bank
Discovery Bank Clients Deposits Advances NII + NIR Operating result to 825k to R16.67bn to R5.75bn to R933m to to (R339m) (R154m) Before NBAC H1 H1 H1 H1 H1 2020 2021 2022 2023 2024 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 H1 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 2020 202
Slide 5: Evolution of Discovery Bank
Evolution of Discovery Bank | ACCOUNTS BUILD MIGRATION GROWTH Revolving Credit Facility ACCOUNTS Vitality Active Rewards 3.0 ACCOUNTS Discovery Card Vitality migration from FNB Travel Banking Demand, tax-free, licence granted notice & fixed-deposit Discovery Miles accounts Public launch: Account Reg
Slide 6: Pillars of the Bank
of the Bank Shared-value Digital Unique Data Full-service Behavioural Banking Assets and Ecosystems Digital Bank Banking Model Platform AI Capabilities Clients DB Discovery Group Travel VALUE CHAIN Society Bank Travel Home Health Fitness Borrow More Health Fitness
Slide 7: Comprehensive banking product suite
Comprehensive Access to a credit card and a superior transaction account A full banking experience with access to exclusive benefits, TRANSACT lifestyle rewards and more Wide-range of savings accounts from demand deposits, notice SAVE AND INVEST deposits and fixed deposits with market-leading and pe
Slide 8: Discovery Bank Home Loan
Discovery Bank Home Loan | Up to 100% home financing with a seamless digital application process and personalised rates Up to 50% off initiation fees Comprehensive building and contents cover, and home loan protection in the event of death or defined medical conditions A market-first interest rate d
Slide 9: Full-service digital banking model
digital banking model Full-service offering High-touch service Exceptional service levels Full-service app & Live Assist website with all Mobile app ratings functionalities of a (iStore and Google bank branch 4.9 CBR score Play Store) Personalisation with Unique digital smart notifications banking f
Slide 10: Pillars of the Bank
of the Bank Shared-value Digital Unique Data Full-service Behavioural Banking Assets and Ecosystems Digital Bank Banking Model Platform AI Capabilities Clients DB Discovery Group Travel VALUE CHAIN Society Bank Travel Home Health Fitness Borrow More Health Fitness
Slide 11: Behavioural correlations: customer and business value
correlations Customer Value Business Value Vitality money interest rate Value received per client Correlations in healthy behaviours Credit loss ratio Lifetime value per client boosts and discounts In interest rate higher value lower credit Higher LTV boosts and discounts received loss ratios 6 Depo
Slide 12: Universal Shared-Value Rewards Currency
Universal Shared-Value Rewards Currency Best in category How to earn rewards How to spend rewards Personal Baby General Groceries Fuel Retail Travel Prepaid Cash out Transfer care essentials card spend Yes, up to Yes, up to Up to 75% Up to 50% Up to 50% Up to 20% Up to 0.67% Yes Yes Yes 30% off 15%
Slide 13: Pillars of the Bank
of the Bank Shared-value Digital Unique Data Full-service Behavioural Banking Assets and Ecosystems Digital Bank Banking Model Platform AI Capabilities Clients DB Discovery Group Travel VALUE CHAIN Society Bank Travel Home Health Fitness Borrow More Health Fitness
Slide 14: Seamless onboarding
Seamless onboarding in Register your name, Take a selfie for Drop a pin on your address Select the most suitable ID number and ID verification through for address verification product and card colour cell phone number the Department of using geolocation for the client’s need Home Affairs
Slide 15: Digital Banking and full service offering
Digital Banking and Peer to Peer Unlimited virtual cards Vitality Pay EasyEquities Health Pay Invest Endowment Plans Guaranteed backed Plans Flexible Secure storage Investments credit Smart search Full service 24/7 offering
Slide 16: Pillars of the Bank
of the Bank Shared-value Digital Unique Data Full-service Behavioural Banking Assets and Ecosystems Digital Bank Banking Model Platform AI Capabilities Clients DB Discovery Group Travel VALUE CHAIN Society Bank Travel Home Health Fitness Borrow More Health Fitness
Slide 17: Unique dataset allows sophisticated understanding of behaviour
dataset allows for a sophisticated understanding of behaviour Diagnoses & Risk predictions Health records Enriched transaction data medication Pathology & radiology Episodes of Types and categories care Spend types (ATM, debit orders, transfers, payments, ...) Categories, sub-categories and brands I
Slide 18: Hyper-personalisation: short-term strategy and applications
short-term strategy and applications ACTIONS AND QUANTILE REGRESSION PROMPT INDICES AND SIMILARITY SEARCH PERSONALISATION Document store HYPER Next best Enablers actions Clients Generating Behavioral Theory Vector personalised search messaging through optimal channels Applications and timing FRAUD A
Slide 19: Discovery Bank client servicing
Discovery Bank client servicing Discovery Bank’s AI Client context and data used to provide Context retention and personalised accurate and verifiable responses messaging based on client preferences call centre co-pilot Unique client insights available at the click of a button Supported by a sophist
Slide 20: Pillars of the Bank
of the Bank Shared-value Digital Unique Data Full-service Behavioural Banking Assets and Ecosystems Digital Bank Banking Model Platform AI Capabilities Clients DB Discovery Group Travel VALUE CHAIN Society Bank Travel Home Health Fitness Borrow More Health Fitness
Slide 21: Ecosystems accessible through the Bank app
Ecosystems accessible through the Bank app ecosystems Health Invest Life Insure PURCHASE. PROTECT. POWER. LIVE. COMING SOON BOOK View View Class Confirm CONFIRM YOUR Make Discover DISCOVER VIEW FACILITY PROFILE VIEW CLASS SCHEDULES BOOKING MAKE PAYMENT Discounted local & international flights Access
Slide 22: Significant engagement with Vitality Travel
Significant engagement with Seamlessly at a discounted rate from our wide partner network Flights booked Lounge visits Cumulative flights since the Cumulative lounge visits since launch of Vitality Travel the launch of the lounge VITALITY FITNESS J-22 J-23 D-22 D-23 A-22 A-23 A-23 F-23 O-22 O-23 J-2
Slide 23: Discovery Bank: growth across all segments
Discovery Bank | Growth across all High Sustainable funding Excellent Discovery SA segments and high engagement levels model, scalability quality of risk operating system client satisfaction and resultant revenue and profitability Client and Value generated by Client engagement Integration Cost acco
Slide 24: High-quality new business
High-quality Average New Business Source of Clients and Accounts (’000) Daily Sales Product Mix New Business New business by number of 1 200 Discovery products Accounts Clients Savings only Trans PAYT Trans Bundled Credit & Suite July 2023 – December 2023 2 500 1 000 100% 90% 2 000 800 80% 70% 1 500
Slide 25: Product suite relevant across channels, ages and incomes
The product suite is relevant across Distribution Channel Client Age Personal Income Discovery Bank growth in monthly sales has been Discovery Bank appeals to all age groups Discovery Banking products and features are sustained across all channels while slightly skewed towards younger clients releva
Slide 26: Discovery Bank: high engagement
Discovery Bank | Growth across all High Sustainable funding Excellent Discovery SA segments and high engagement levels model, scalability quality of risk operating system client satisfaction and resultant revenue and profitability Client and Value generated by Client engagement Integration Cost acco
Slide 27: Risk profile attracted by leveraging integration
risk profile attracted by leveraging integration and New Business Shared-Value risk Value of integration Credit quality Risk Profile stratification Risk distribution by Credit loss ratio by DSY vs non-DSY clients Vitality Money status 51% Q4 FY23 Q4 FY21 Q2 FY21 Q3 FY21 Q4 FY22 Q2 FY22 Q3 FY22 Q2 FY
Slide 28: Shared-value model has driven increasing net interest margin
has driven increasing net interest margin Growing Increasing but below Cost of funds managed Growing net interest margin advances yield market arrears rates below the repo rate and income Net interest margin 25% 10% 10% 13% 8% 9% 6% 20% 8% 4% 10% 2% 7% 0% A-22 J-21 A-23 J-22 J-22 J-23 J-23 O-21 O-22
Slide 29: Discovery Bank: sustainable funding model and scalability
Discovery Bank | Growth across all High Sustainable funding Excellent Discovery SA segments and high engagement levels model, scalability quality of risk operating system client satisfaction and resultant revenue and profitability Client and Value generated by Client engagement Integration Cost acco
Slide 30: NIR growth driven by client engagement
NIR growth driven by NIR per client for Discovery NIR per client by duration NIR composition Total NIR growth vs other banks Core NIR per client (excl. cli ent acquisition costs, rewards, treasury and corporate NIR) 100% Big four average 250% 3-year CAGR 90% Fee income 200% 80% (Monthly, ad hoc and
Slide 31: Discovery Bank: cost to serve
Discovery Bank | Growth across all High Sustainable funding Excellent Discovery SA segments and high engagement levels model, scalability quality of risk operating system client satisfaction and resultant revenue and profitability Client and Value generated by Client engagement Integration Cost acco
Slide 32: Value of the Bank as the operating system for the Group
Value of the Bank as the operating system for the Integration opportunity New distribution channels for Enriched indices for pricing remains high Group Products Discovery Insure case study Proportion of clients with more than one Discovery product Geolocation § Geolocation cluster § Work and after-h
Slide 33: Discovery Bank: operating system and profitability
Discovery Bank | Growth across all High Sustainable funding Excellent Discovery SA segments and high engagement levels model, scalability quality of risk operating system client satisfaction and resultant revenue and profitability Client and Value generated by Client engagement Integration Cost acco
Slide 34: High-quality deposit profile and strong funding position
The Bank is for the launch of new lending products High growth in deposit High-quality deposit profile Strong funding position and advances Deposits Advances to deposits ratio Bubble size = proportion of total deposits 3-year CAGR 70% 60% % of fixed and notice deposits 50% J-22 J-22 N-22 A-23 S-23 D
Slide 35: Bringing the Bank to profitability
Bringing the Bank to New business Operating income − Expenses − acquisition costs = Profit / (loss) before tax Operating result (Rm) NBAC per new client (R) Forecast 180 1800 2% CAGR 1% CAGR 160 1600 Jul'23 projected profit (loss) before NBAC 140 1400 Actual profit (loss) before NBAC 120 1200 Jul'23
Slide 36: Discovery Bank
Discovery Bank | Shared-Value Discovery SA Growth behavioural banking Digital banking platform Data and AI assets operating system model Unique data assets and AI Ecosystems and platforms solidify Full-service Shared-Value behavioural Digital banking platform creates capabilities enable hyper- the B