Commonwealth Bank is splitting with its wealth management and mortgage broking businesses as Australia’s largest lender slims down and sharpens up following a series of industry scandals.
CBA has cancelled the previously announced IPO of Colonial First State Global Asset Management and will instead bundle it with Colonial First State, Count Financial and Financial Wisdom – plus Aussie Home Loans – as CFS Group for demerger and a separate listing.
Chief executive Matt Comyn on Monday indicated the creation of a separate business – owned by CBA shareholders rather than the bank itself – was driven at least in part by a desire to cut exposure to areas that attracted criticism during the ongoing industry royal commission.
And general insurance looks likely to be next on the chopping block, with the CommInsure business subject to a strategic review.
“Today’s announcement is another step in our stated priority to become a simpler, better bank,” Mr Comyn said on Monday.
“It also responds to continuing shifts in the external environment and community expectations, and addresses the concerns regarding banks owning wealth management businesses.”
The new superannuation and investment business – which accounted for about $500 million in profits in 2017 – will be spun off some time in 2019.
The move reduces potential conflicts of interest posed by cross-selling within a vertically integrated business, with Treasury having asked the royal commission to consider the benefits of forcibly breaking up the big banks.
CBA’s most recent annual report said Colonial First State and Colonial First State Global Asset Management had more than $365 billion of funds under management between them at the end of the 2017 financial year.
“It is a clean and timely exit of all of these businesses,” said Mr Comyn, who also announced six executive appointments.
The move follows similar moves by rivals ANZ and National Australia Bank to cut their exposure to wealth management, although the Commonwealth Financial Planning unit – whose staff are salaried rather than paid according to sales – will be retained and incorporated into CBA’s retail banking unit.
CBA will update the market on CommInsure’s home and contents and motor insurance business when it releases its full-year results on August 8.
CBA said one option was a sale and partnership with a specialist insurer, along the lines of that between ANZ and IOOF Holdings following ANZ’s $975 million sale of its wealth business.
Mr Comyn, who replaced Ian Narev as chief executive in April, has also moved to fill out his executive team, including making Angus Sullivan his permanent successor as retail chief.
Former ANZ chief risk officer Nigel Williams will join CBA in the same role, with current CRO David Cohen shifting to deputy chief executive.
But CBA is still seeking a chief financial officer following Rob Jesudason’s surprise departure last month.
CBA shares dropped $1.70, or 2.3 per cent, to $72.16 on Monday, weighing on the broader Australian market.