MELBOURNE, Australia--Australia & New Zealand Banking Group Ltd. (ANZ.AU) has struck an almost US$750 million deal to sell a large chunk of its wealth-management operations in Australia and continues to look at options for the remaining life-insurance business as it tightens its focus on core banking businesses.
The sale further consolidates ANZ's portfolio of operations after a string of recent dealmaking, and continues a trend among Australia's biggest banks to exit lower returning business and switch to simply distributing rather than producing their own investment products.
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ANZ said it had agreed to sell its pensions and financial planning business to Australia's IOOF Holdings Ltd. (IFL.AU) for 975 million Australian dollars (US$746.2 million) in cash, and would also enter a 20-year partnership that would see it sell the financial services firm's investment products through its network of bank branches.
The disposal is expected to lead to an accounting loss of about A$120 million but will offer a modest increase to ANZ's capital position at a time when regulators are pushing lenders to lift their buffers against the risk of future crises. ANZ said the earnings and return-on-equity impacts from the sale wouldn't be material.
Since taking over from long-serving Chief Executive Mike Smith more than a year ago, Shayne Elliott has sought to address investors' worries about the lower returns and higher costs of ANZ's Asian businesses. The bank flagged an exit from manufacturing its own life and investment products late last year and formally kicked off the auction of its wealth businesses in April, just days after agreeing to sell retail and wealth-management businesses in five Asian countries. It has since agreed to sell its asset-finance business in New Zealand, and in April it agreed to sell its retail banking operations in Vietnam to focus instead on institutional banking in the country.
The original plan was to seek a buyer for the entire wealth business, but ANZ Wealth executive Alexis George the company elected to first sell the pensions and investments operations to be able to offer a cleaner insurance business with more options. She said the bank continued to look at alternatives for the remaining operation, a process that was likely to take some time.
The businesses being sold to IOOF include the OnePath pensions and investments unit, which has about A$48 billion in funds under management, and a network of aligned dealers under brands including RI Advice and Elders Financial Planning. The remaining rump of the wealth division includes the OnePath Life Insurance business, with in force premiums worth A$1.6 billion, general and lenders-mortgage insurance business and licensed advisors.
For IOOF, the agreement sharply increases its scale in Australia and the company said it expected strong earnings growth and cost savings. It plans to fund the acquisition, which is set to close in about 12 months, through an about A$450 million institutional share offer, a share purchase plan and new debt arrangement.
The sale of ANZ's wealth operations comes weeks after Commonwealth Bank of Australia (CBA.AU) said it was selling its life-insurance businesses in Australia and New Zealand to pan-Asian insurer AIA Group Ltd. (1299.HK) for A$3.8 billion and was considering spinning off its global asset-management unit. Last year, National Australia Bank Ltd. (NAB.AU) agreed to a A$2.4 billion deal to sell control of its life-insurance business and Macquarie Group Ltd. (MQG.AU) sold its life business for an undisclosed price.
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(END) Dow Jones Newswires
October 16, 2017 20:02 ET (00:02 GMT)