Orange takes 100% control of loss-making Orange Bank

Orange takes 100% control of loss-making Orange Bank

Stephane Richard Orange.jpg

Orange is to buy a further 21.7% stake in its loss-making Orange Bank from Groupama, the insurance company that has been its partner in the project since 2016.

The French telco said it is also increasing the capital of Orange Bank by a further €230 million to speed up growth prospects.

Orange set up Orange Bank five years ago by buying a 65% stake in Groupama Banque, until then operated as a bank by the Groupama insurance company.

Back in 2016 Orange saw the introduction of a bank to France and other European countries as a natural extension to its mobile banking services in African countries. However, Orange Bank has so far been launched in just France and Spain, and not in Belgium, which was explicitly mentioned in 2016, or elsewhere.

At the time group CEO Stéphane Richard (pictured) said he aimed to reach €400 million revenue in financial services by 2018. However, Orange has avoided giving detailed results for its bank, most recently in the 2020 annual results published in February 2021 and in subsequent announcements.

Paul de Leusse, CEO of Orange Bank, said on Friday: “We would like to thank Groupama for its commitment to Orange Bank’s success.”

Groupama CEO Thierry Martel: “We wish Orange Bank every success with its new strategic development plan. We appreciate the partnership we have built over the years with Orange Bank and are determined to continue to work together in the years to come.”

But the decision means Orange has failed in its desire to attract new investors in the bank. A few months ago French media were reporting that BNP Paribas and Société Générale were interested in buying a stake. Now, reports say those two banks’ “demands were too high”, and Orange has decided to increase its own stake to 100%.

Orange said that it now has 1.6 million bank customers in France and Spain, making Orange Bank “one of the top five neobanks in France”. A footnote to the data shows that it has 800,000 banking customers and 800,000 insurance customers, though it is not clear how customers who take both banking and insurance services are counted.

The telco said it is taking on “over 40,000 new customers every month” and added that it will have issued “over €1 billion in loans” by the end of 2021. Over 90% of new Orange Bank customers subscribe to a billed service, the company added – implying that getting on for 10% have free banking.  

De Leusse said: “We are now speeding up our industrial and geographic development strategy for a bank that is inherently designed to be accessible to everyone and used over the mobile phone.”

The bank is, however, still loss-making. Orange said that its banking arm “should significantly reduce its losses in 2021” thanks to an increase in net banking income, up 57% in the first half of 2021 compared with the same period of 2020, “and decreased management costs owing to investments in the bank’s processes over the past three years”.

Orange added: “This trajectory – which includes substantial investments to create a new, modern, digital bank in line with Orange customers’ expectations – was planned from the outset. The rate at which the bank is moving towards breakeven is comparable, or faster, than that of its peers in the neobanking industry.”

The company said that “in France, the average spending per customer who has also subscribed to an Orange Bank payment facility has doubled. In addition, thanks to the group’s distribution network, for every 100 sales linked to mobile telephony, 35 banking sales are made. In Spain, the attrition rate of Orange customers who have subscribed to the Orange Bank offer has halved.”





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