Thread by @MaanoMadima

It is expected for a new bank to burn money. Discovery Bank and TymeBank are testament of this.

FY21, TymeBank Holdings had accumulated losses of ~R5bn and incurred a loss of R926m for the year.

Discovery Bank's operating loss for FY22 was R990m.

All things TymeBank.

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Background and Fun Facts:

Tyme Bank Holdings Limited is an investment holding entity incorporated in South Africa.

The company does not trade, and all of its activities are undertaken through its principal subsidiary, Tyme Bank Limited.

Tyme Bank provides digital banking services to customers in South Africa.

Bank soft-launched in Aug 2018 and marketed its transaction and savings accounts publicly on 25 February 2019.

To date, Bank has attracted 2 million customers and over R2.2 billion in retail deposits.

The group's holding company is African Rainbow Capital Financial Services Holdings Proprietary Limited. The group's ultimate holding company is Ubuntu-Botho Investments Proprietary Limited.

TymeDigital was 90% owned by the Commonwealth Bank of Australia with African Rainbow Capital (ARC) owning 10%.

2018, ARC acquired the 90% stake for an undisclosed consideration.

Transaction comprised TymeDigital in South Africa and the related intellectual property and patents

Sale agreement between Commonwealth Bank of Australia and ARC requires that if, at any time, within 5yrs after 31 Oct 2018, bank declares an audited statutory profit, after providing for an amount of R100m, R200m will be payable to the Commonwealth Bank of Australia over 12months

The factory for manufacturing facility for proprietary hardware innovations is in South Africa.

Headquarters of Tyme, business development, strategy, international partnerships and data analytics are in Singapore.

On 1 January 2019, a contract was concluded between Tyme Bank Limited and Tyme Limited.

The purpose of the contract is to provide right of use of intellectual property by Tyme Limited to Tyme Bank Limited.

2019, ARC got the necessary regulatory approvals from The Prudential Authority of the SARB after the purchased of the remaining 90% by ARC.

TymeDigital then changed its name to TymeBank. TymeBank South Africa was the first full greenfield digital bank deployment with ~200 staff.

Now who are some shareholders/equity partners that have joined in the last 2-3 years?

1. Ethos Private Equity.

2019, Ethos Artificial Intelligence Fund invested R200m which resulted in the Ethos (Fund) being an 8% shareholder in the bank.

Stake has ⬇️ to 4.36%.

2. Series B fund raising

December 2021 saw TymeBank South Africa and Tyme Global concluded their series B capital raising round which raised $70m and saw Tencent (yes Tencent) and CDC Group (UK’s development finance institution) being new shareholders in Tyme.

African Rainbow Capital introduced new shareholders in TymeBank SA and Tyme Global.

Combined capital raise amounts to R1.6billion, structured as two tranches;

Tranche 1 ~R1,163bn
Tranche 2 ~R436m.

This capital raise gave Tyme a value of R8bn.

The new investors in Tyme via tranche 1 are Apis Growth Fund II, a private equity fund managed by Apis Partners and JG Summit Holdings.

The 1st tranche of R1.2bn was concluded in April 2021.

Apis (14,9%) and JG Summit (5,13%) became minority shareholders in Tyme.

Why did Tyme raise $180m?

To enable Tyme to use its digital infrastructure to accelerate the rollout of financial services. The two investors’ capital and expertise will be used to strengthen Tyme’s ability to manage risk and support Tyme’s expansion into emerging markets.

TymeBank was launched to the public in February 2019 and reached one million customers in November 2019.

So, 9 months post-launch (>100,000 customer acquired per month).

TymeBank has also partnered with Hollard to provide affordable micro-insurance.

Early 2021, TymeBank announced that it has signed it 3-millionth customer.

2020, TymeBank entered into a partnership with the ZCC church, which will see TymeBank become the financial services partner of choice for the members of the church. ZCC's membership stands at ~12million

Of the 12m ZCC members, it was estimated that 6m were economically active in SA. Partnership will work as follows:

TymeBank debit card that doubles as the official ZCC membership card, and

Opportunity to assist with digitising cash-based donations insurance premium collections.

This is a very long thread. I just wanted to check if we are still together.

TymeBank’s high-tech high-touch model compares well with other digital banks despite it being in its early stages.

TymeBank is forecasting to breakeven in 2023 with a set of rapidly growing revenue streams and was expecting to reach monthly profitability before June 2022.

The Covid-19 outbreak was good to TymeBank. TymeBank acquired 1.4 million new customers, with increased active customer base from 50% to 60%.

TymeBank had 3.45m customers as at 30 Jun 2021.

Discovery Bank has 470 220 clients and 1 023 790 accounts.

Tyme is entering the Philippines next.

Tyme partnered with the JG Summit, which operates a diversified portfolio of businesses with 8 million loyalty members, to apply for a digital banking license and expand financial access to underbanked and under-served Filipinos.

Philippines has;

population of 108m,

adoption of digital financial services has ⬆️ in the Philippines,

GDP per capita growth 6.9%,

smartphone penetration: 52%,

underbanked or unbanked: 78%.

Tymbank has also made an application for a digital banking licence in Pakistan.

This is where the fun starts.

FY21, Tyme Bank Holdings impaired its investment in Tyme Bank Limited by R nil vs R1,274,129,787 in FY20.

The impairment was calculated with reference to the valuation of Tyme Bank Limited using the free cashflow equity method.

The valuation of the bank has incorporated a projected growth rate of 6%, a discount rate of 23% and a marketability discount of 15%.

The impact of COVID-19 pandemic has also been considered when determining the valuation for Tyme Bank Limited.

In addition Tyme Bank Holdings Limited also impaired its investment in Tyme Technical Solutions by R nil vs R195,696,882 in FY20 due to the fact that management has taken the decision to wind up the entity.

Big losses;

At 30 June 2021, the group had accumulated losses of R4,992,795,213 and incurred a loss of R926,441,278 for the year then ended.

Remember that sale agreement between Commonwealth Bank of Australia and ARC requires that if, at any time, within 5yrs after 31 Oct 2018

https://twitter.com/MaanoMadima/status/1567861324146778113

Tyme bank declares an audited statutory profit, after providing for an amount of R100m, R200m will be payable to the Commonwealth Bank of Australia over 12months?

In FY21, based on the bank's current performance of FY21, the payable has been valued at zero.

The ability of the group to continue as a going concern is dependent on ongoing procurement of capital and funding for the operations of the group.

In FY21, Ubuntu–Botho, as majority shareholder, + other shareholders, continued to provide adequate capital and funding to group.

In addition, the Ubuntu-Botho Investments continues to give assurance that the group will have access to continued capital and funding from them to be able to settle its debts as they fall due and is able to continue business as a going concern for the period ending 31 Oct 2022.

The ability of the group and the company to continue as a going concern beyond 31 Oct 2022 is dependent on a number of factors, such as;

ongoing support from shareholders,

sourcing of capital from potential new shareholders,

raising of working capital facilities as required,

the execution plans for the scaling of existing services and delivery of new products and features into the market, and

the impact of the COVID-19 pandemic on socio-economic conditions in the country.

Tyme has great support from its shareholders.

However,above conditions give rise to a material uncertainty beyond 31 Oct 2022,which may cast significant doubt on the group’s and company’s ability to continue as a going concern, and that it may be unable to settle its debts as they become due in the normal course of business.

I spoke about Ubuntu-Botho Investments Proprietary Limited Group and you might be wondering who they are?

Ubuntu-Botho has a 13.3% stake in Sanlam valued at R17bn.

It all started in 2003 when Sanlam established a black owned and controlled company.

The deal saw the Ubuntu-Botho consortium take an initial 8% stake in Sanlam. Shareholding was extended to include broad-based groups; trade union companies, religious organisations, women and youth groups,provincial companies from all the provinces, representing 700 shareholders.

By 31 December 2013, the 8% equity stake had grown to 14% through a combination of share buybacks and the reclassification of an additional 66.5 million deferred shares to ordinary shares.

At the beginning of 2014, the initial 10-year lock-up period and all of UBI’s contractual obligations towards Sanlam came to an end with the repayment of the original debt (initial investment of R1.3-billion (all debt and interest on debt was fully settled).

Ubuntu-Botho Investments used the returns on its 14% shareholding in Sanlam to establish African Rainbow Capital.

ARC Investments was registered and incorporated in Mauritius as a private company on 30 June 2017 and was converted to a public company on 2 August 2017.

4 Aug 2022, Apis Growth Fund I, a private equity fund managed by Apis Partners, entered into an agreement to sell the whole of its interest in leading South African SME Financing company Retail Capital Proprietary Holdings to TymeBank Holdings Ltd.

Retail Capital has provided more than 43 000 business owners in South Africa with over R5.5 billion in working capital over the last 10 years, making it the largest SME funder of its kind in the sector.

The acquisition of Retail Capital will give TymeBank a fighting chance in the SME banking space as the Bank's SME bank offering will target businesses earning less than R10m in annual turnover, a threshold that is often ignored by SA’s traditional big four lenders.

According Nobesuthu Ndlovu, a director of Old Mutual’s SME unit, there is an estimated R300bn-R500bn funding gap for SMEs in SA”. This means there is a market for more players in the space.

African Bank is doing that with the acquisition of Grindrod Bank.

https://twitter.com/maanomadima/status/1530144896430088193

Remember that Tyme Bank Holdings’ holding company is African Rainbow Capital Financial Services(ARCFS) after ARC bought 90% in 2018 from the Commonwealth Bank of Australia?

Through a series of capital raising rounds, ARCFS, stake has ⬇️ from 73.74% in 2020, to 59.96% in 2021.