ANZ hesitant on pensions and investments business sale

ANZ and the trustee of its pensions and investments business are yet to schedule a vote on a sale of the unit to IOOF.

ANZ Bank and the trustee of its pensions and investments business are yet to schedule a vote on a sale of the unit to IOOF, as the bank displays hesitance over the deal despite the exit of the wealth group’s boss Chris Kelaher.

A funds transfer to separate ANZ’s life insurance business from the pensions arm will start on Friday, creating two stand-alone entities, sources say.

Following that process the $2.85 billion divestment of the life insurance unit to Swiss giant Zurich will be completed in May.

Peter Mullin, the managing ­director of ANZ’s superannuation and investments business, will continue to lead what ­remains of the wealth division ­reporting to deputy chief executive Alexis George.

Sources suggested ANZ’s primary concern over the IOOF transaction was limiting any reputational risk to the bank stemming from the pensions sale.

ANZ is closely watching the wealth group’s engagement with the banking regulator over a ­series of licence conditions, and is also mindful that court action against three executives that remain at IOOF starts in July.

The legal action’s next key date is a case management hearing on Thursday.

Some in the market believed the departure of Mr Kelaher from IOOF this week would clear the way for the transaction with ANZ to occur. But with former IOOF chairman George Venardos remaining on leave from the board and the other executives staying at IOOF while the allegations are defended, the situation remains precarious.

That is coupled with the appointment of acting chief executive Renato Mota not yet being made permanent while further succession planning takes place.

The Australian Prudential Regulation Authority started proceedings in the Federal Court in December, claiming the IOOF representatives were not fit and proper people to run a superannuation company.

An ANZ spokesman confirmed the bank would “continue working” with IOOF on the way forward, including updates on the progress of a management action plan the latter agreed to with APRA. “Until we have more information on these aspects, we cannot make further decisions on the transaction,” he said.

Analysts at UBS said the broader market was pricing in a 40 per cent probability of the ANZ pensions transaction proceeding with IOOF.

But the broking house is less upbeat, and does not expect the deal to go ahead.

“The outcome here hinges on sign off from trustees OnePath Custodians that the deal is in members’ best interests — a decision complicated by recent regulatory actions against IOOF,” the analysts said.

“While our earnings outlook adopts a more conservative ‘no deal’ view, we acknowledge EPS (earnings-per-share) upside of about 35 per cent should the deal proceed.

“Our current earnings outlook adopts the conservative view that the P&I (pensions and investments) deal does not complete, resulting in the $800 million bond with ANZ unwinding and a subsequent $450m buyback.”

Initially, ANZ and IOOF were targeting to have the pensions deal done by the end of March, after the wealth group snapped up ANZ’s financial planners and dealer groups last year.

Complicating the transaction is that ANZ and IOOF entered into an arrangement that saw an initial $800m go to the bank in a payment that signalled “substantial economic completion”. ANZ agreed to pay interest on a debt note in return until the superannuation business was separated from its life insurance division.