LONDON (Reuters) - Orange’s (ORAN.PA) online bank will produce an operating profit in France and Spain, the group’s two leading European markets, by 2023, the telecoms operator said on Friday as it sought to alleviate market concerns about the costs of the new service.
The diversification into digital banking is a key test for chief executive Stephane Richard, who is betting that the launch of a standalone lender will attract and retain customers in countries where competition in the telecoms business is tough.
The unit’s new set of targets was presented in London by Orange Bank CEO Paul de Leusse, the bank’s second leader since its launch a year ago.
Orange Bank, which has 200,000 clients in France and plans to reach 2 million within 10 years, expects to launch its service in Spain in the second-half of 2019.
The launch and development costs in the two countries are expected to cut between 500 and 600 million euros from the group’s core operating profit by 2023, it said.
Between 2020 and 2023, Orange also plans to expand its bank into Poland, Belgium and Slovakia, aiming to reach a total of 4 million clients and 500 million euros (445.66 million pounds) in net banking income on the continent within five years.
But the field is becoming increasingly crowded.
In France alone, the majority of online banks are owned by traditional lenders such as BNP Paribas (BNPP.PA), Societe Generale (SOGN.PA) and Credit Agricole (CAGR.PA), on top of other independent digital-only banks like Germany’s N26 and Britain’s Revolut.
All of them struggle to post profits, according to a report issued by France’s banking regulator ACPR last month.
Although half of them expect to break even in 2020, ACPR is challenging the assumption as their business model rests on high spending to win customers while charging almost no fees.
Orange also outlined ambitions for Orange Money in Africa, which offers deposit and money transfer services. It set a goal of over 800 million euros in revenue by 2023 for the service and is aiming to reach 30 million customers by then.
Reporting by Mathieu Rosemain; Editing by Sarah White and Kirsten Donovan