South African financial services group Discovery has revealed plans to take control of its credit card joint venture (JV) through the acquisition of FirstRand stake for R1.8bn ($120m).

The move is intended to meet one of the regulatory requirements for the launch of new Discovery Bank.

FirstRand stake: step towards Discovery Bank launch

The launch of the bank is subject to reduction of FirstRand’s shareholding over time in the joint venture, which is presently focused on credit cards, reported Reuters.

A statement from Discovery said: “Although these developments have delayed the process slightly, the Bank build is progressing well and remains within budget and on track to launch within 2018.”

Discovery Card is a combined business started by Discovery (74.99% stake) and FirstRand  (25.01%) in 2004.

Under the acquisition deal, the financial services group will take control of all economic interests and rights of the card business. The transaction is set to be funded by issuing stock and is still subject to regulatory approval.

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Profits for the card JV are reported to have increased by 17% to R414m ($27.3m) and revenue grew 6% to R1bn ($65.9m) in the 12 months through 30 June 2018.

Discovery was quoted by the news agency as saying: “Discovery’s credit card base is less sensitive to negative market conditions due to a substantially better risk profile.

“Both its percentage of non-performing loans and cost to income ratio were significantly below the average of other South African banks.”