The banking sector is heating up for all the wrong reasons, but an unlikely contender is entering the digital banking and lending space in SA, and it’s non-other than Old Mutual.
There is nothing “Old” about Old Mutual Limited (JSE: OMU), as its latest earnings release would suggest, with capital ratios in the group being the highest since 2018. The major insurance and investment group also announced that the group is looking to the future to enter the digital banking space by as early as 2024.
This digitally focused-banking initiative plans to take on Capitec bank in the mass market lending space. The insurer will leverage its current mass customer base to take on the fight for market share and invest heavily in its IT infrastructure while awaiting regulatory approval.
Technicals
Looking at the price action of Old Mutual, we can see an uptrend in price from October last year, which is finding support around the R11.50 a share level. If this support does not hold, we could expect bears to step in and lower the price to the uptrend trend line (black dotted).
If the bulls take control from current levels, we need to see the price close above the base level of around R11.93 a share to negate the current downward pressure. If positive momentum escalated, supported by the fundamentals, we could see the price push higher to the R13.00 a share resistance level.
Summary
It remains to be seen if the market considers the latest earnings and digital banking endeavours. Still, if seen as a long-term positive, the possibility of a long does exist above the R11.93 to the next resistance around R13.00. A short-term opportunity may potentially exist for the bears below the current R11.50 support level.
Sources: Old Mutual Limited, JSE SENS, BusinessDay, TradingView.
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