CBA called Tyme on this digital investment too early when it retreated from risk taking

It’s the unicorn-sized investment Commonwealth Bank missed out on and likely rues. What does that say about the risk appetite of major Australian banks?

CBA’s money-laundering issues resulted in the bank divesting non-core investments, including Tyme. Picture: James Gourley

It’s the unicorn and growth investment that Commonwealth Bank missed out on. In its scramble to shed non-core assets after the Hayne royal commission, the nation’s largest lender missed the opportunity to stay invested in a company that was last month valued at US$1.5bn ($2.4bn).

Singapore-headquartered digital banking company Tyme Group in December ruled off a Series D capital raising, led by digital financial services firm Nubank which serves more than 110 million customers across Brazil, Mexico and Colombia.

The raising positions Tyme for growth in South East Asia. The company designs, builds, and operates digital banks, focusing particularly on emerging markets, and says it serves some 15 million customers. That is up from about seven million customers in 2023.

CBA, under the stewardship of former chief executive Ian Narev, acquired Tyme for about $40m about a decade ago, after it was spun out of consulting firm Deloitte. The mobile-based Take Your Money Everywhere company and its new owner in CBA had grand plans from the former’s then base in South Africa.

At the time Narev told investors the investment would aid the bank’s strategy in India, China and Vietnam, and provide capability around the emerging middle-class theme in markets where more people had mobile phones than bank accounts.

Former finance boss Rob Jesudason bought into Tyme after leaving CBA. The bank’s investment was made during the leadership of ex-CEO Ian Narev, right. Picture: James Croucher

But CBA’s money-laundering issues – which led to a $700m fine and then its savaging at the royal commission – resulted in the bank divesting a host of non-core investments, including Tyme.

It’s a route the big four all took to varying degrees, retreating from risk taking and businesses deemed peripheral, or associated with heightened reputational risk.

In 2019, CBA explained its divestment of Tyme to investors which occurred late in calendar 2018. The sale to minority shareholder African Rainbow Capital resulted in a post-tax loss of $113m that was narrowed to $22m net of transaction and separation costs.

While CBA was clearly grappling with regulatory issues and getting its house in order, the wholesale retreat from calculated digital banking bets and a potential growth option in Tyme, in this instance didn’t serve CBA well. As net interest margins on mortgages in Australia are continually squeezed, albeit they have stabilised somewhat in recent months, business banking is emerging as the next battleground for the major banks.

Drivers of growth have become elusive for incumbents, and CBA is using its app and promoting a digital ecosystem to ensure customers are stickier.

Challenger digital banks have all but come and gone in Australia, with Xinja and Volt shutting and 86 400 being acquired by National Australia Bank. Tyme’s targeted model, however, does appear to be gaining traction.

After TymeBank in South Africa, the firm launched digital bank GoTyme in the Philippines with the Gokongwei Group. Tyme also has a technology and product development hub in Vietnam.

Tyme’s co-founder and executive chairman, Coen Jonker, had a stint running CBA’s international financial services unit where the Tyme investment was housed. He decamped in late 2018 back to Tyme.

There were certainly some believers at CBA in Tyme’s model.

Former CBA finance chief Rob Jesudason, who also had a stint as head of international financial services, bought into Tyme when he set up investment firm Serendipity Capital some five years ago.

Pitchbook indicates Serendipity exited its Tyme holding about three years ago.

Despite CBA’s missed Tyme opportunity it still owns a stake in payments group Klarna, which has started the process for a US listing, that may value it at $US20bn.

CBA made an initial $300m investment in Klarna in 2019, before topping that up to $350m. In its most recent annual report CBA valued the stake at $574m, down from a fatter circa $3bn valuation during the buy now, pay later boom.

Using a potential $US20bn Klarna IPO valuation, MST Marquee’s Brian Johnson estimated if CBA sold into a Klarna float it could see as much as $1.8bn in capital released.

Originally published as CBA called Tyme on this digital investment too early when it retreated from risk taking