JOHANNESBURG, April 19 (Reuters) - South African insurer Old Mutual Ltd said on Friday it had received approval from the Prudential Authority to establish a bank, moving a step closer to building an integrated financial services business.

The second largest life insurer in South Africa has said having a banking business would allow it to offer different financial services to its customers in addition to insurance and asset management, and generate new revenue streams for the group.

The regulator's approval allows Old Mutual to proceed to the next stage in the process, which will be a rigorous industry testing phase with selected bank partners, Old Mutual added.

The company said the regulator approved its application subject to certain licence conditions.

For the transition phase, Old Mutual has earmarked 800 million rand ($41.72 million) and expects to complete this phase before the end of 2024, Iain Williamson, the group Chief Executive Officer said last month.

Williamson said the approval "accelerates the fulfilment of our strategic choice to build an integrated financial services business."

In 2018, Old Mutual announced the unbundling of its majority shareholding of 52% in Nedbank to its shareholders. In March, it said its minority Nedbank stake was completely disinvested in August 2023.

The bank will compete with South Africa's Absa Bank , FirstRand's First National Bank, Standard Bank, Nedbank, Capitec Bank and digital banks such as Discovery Bank.

($1 = 19.1740 rand) (Reporting by Nqobile Dludla. Editing by Jane Merriman)