CBA to spin off Aussie Home Loans, Colonial First State
LESS than a year after taking outright ownership of mortgage broker Aussie Home Loans, the Commonwealth Bank is offloading the business as part of a sweeping shake-up.
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THE Commonwealth Bank is selling out of the mortgage broking and wealth management businesses that were at the heart of its plans to become a broader financial services powerhouse.
Less than a year after taking outright ownership of Aussie Home Loans — the mortgage broker founded by “Aussie John” Symond — the CBA is cutting it loose as part of the shake-up.
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And CBA chief Matt Comyn, who took up the role in April, has also announced six changes to his senior executive team.
Mr Comyn today revealed the CBA would spin-off a group of businesses it regards as non-core, to focus on its “core banking business” — the biggest retail bank in Australia and New Zealand.
The spin-off will be floated as a stand-alone business on the Australian Securities Exchange, and be called CFS Group.
It will include Aussie, Colonial First State, Colonial First State Global Asset Management, Count Financial and Financial Wisdom.
The CBA bought Aussie — which is still led by Mr Symond, the executive chairman — in three stages over the past decade.
It is believed to have forked out about $400 million in all for the home loan broker.
The bank paid about $60 million for its first 33 per cent stake in the midst of the global financial crisis, during 2008.
In 2012, it lifted its holding to 80 per cent, for a price rumoured to be about $180 million.
Then it bought the remaining 20 per cent last August in a share deal worth more than $160 million.
The CBA also announced this morning that it would consider selling its general insurance business.
Its revelations come as the fourth round of the financial services royal commission kicks-off in Brisbane today, focusing on banking in regional and remote areas, with witnesses to include the Commonwealth Bank.
The commission has so far shone a light on scandals various aspects of the industry, including financial advice and mortgage broking, casting further doubt on the merits of the model for banks to have such a broad sweep of operations — dubbed “vertical integration”.
Announcing its spin-off plans, the CBA said today that the newly floated businesses would unlock value for shareholders through the creation of a “leading independent wealth management business”.
The bank will keep its financial advice business Commonwealth Financial Planning, which will be part of its consumer financial services business within its Retail Banking Services Division.
It has abandoned a planned stand-alone float of Colonial First State Global Asset Management, which will instead be housed in the bigger CFS spin-off.
Shareholders in the CBA will get a stake in the spin-off relative to their holding in the bank, which won’t hold a direct stake in the new organisation.
“(The group) will benefit from a separate listing and ability to pursue its own growth strategies,” it said in a statement.
The CBA said the spin-off would have a strong earnings base, with net profit of more than $500 million last financial year on a pro-forma basis — which accounts for costs of the demerger — and “a strong capacity to pay franked dividends”.
The CBA said it would also undertake a strategic review of the controversial CommInsure General Insurance that may culminate in a sale.
Colonial First State provides superannuation, investment and retirement planning and has more than $135 billion of funds under administration.
The bank’s “third party” distribution businesses include Aussie Home Loans, financial advisers Count Financial and Financial Wisdom, plus minority shareholdings in listed companies CountPlus and Mortgage Choice.
Colonial First State Global Asset Management handles over $207 billion of assets for clients
worldwide.
“The wealth management and mortgage broking businesses are each high-quality franchises.,” Mr Comyn said in a statement.
“With innovation and disruption in wealth management increasingly favouring specialist
companies, they will benefit from independence and the capacity to focus on new growth options without the constraints of being part of a large banking group.”
The CBA paid more than $9 billion for Colonial in 2000 in a takeover that, at the time, was Australia’s biggest.
The chairman of CFS will be John Mulcahy while a search for the chief executive has kicked off.
Announcing key appointments to his own senior executive team today, Mr Comyn revealed former retail banking executive general manager Angus Sullivan would take over the broader role of retail banking services group executive.
That promotion was tipped by the Herald Sun in February.
Former ANZ chief risk officer Nigel Williams will take the chief risk officer job at the CBA, with current CBA chief risk officer David Cohen becoming deputy chief executive officer.
Among other executive changes include, former Deutsche Bank global group chief information officer Pascal Boillat has been appointed group executive enterprise services and chief information office.
Former Westpac New South Wales retail head Sian Lewis has been appointed head of human resources.
CBA insider Andrew Hinchliff has been appointed head of institutional banking and markets.
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