BCN-10 Australia’s Commonwealth to spin off wealth, mortgage arms

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BCN-10

AUSTRALIA-BANKING-COMMONWEALTH

Australia’s Commonwealth to spin off wealth, mortgage arms

SYDNEY, June 25, 2018 (BSS/AFP) – Commonwealth, Australia’s biggest bank,
announced plans Monday to spin off its wealth management and mortgage-broking
arms as it looks to streamline operations and focus on core businesses.

The troubled lender — the country’s largest company — is also considering
selling its general insurance business.

Chief executive Matt Comyn said it would unlock value for shareholders.

“Today’s announcement is another step in our stated priority to become a
simpler, better bank and has followed a thorough review of the group’s
businesses and its optimal organisational structure to drive growth and
shareholder value for all businesses,” he said.

“It also responds to continuing shifts in the external environment and
community expectations, and addresses the concerns regarding banks owning
wealth management businesses.”

The demerged business, CFS Group, will include Commonwealth’s Colonial
First State, Colonial First State Global Asset Management (CFSGAM), Count
Financial, Financial Wisdom and Aussie Home Loans businesses.

Investment and retirement fund Colonial First State has over Aus$135
billion (US$100 billion) under administration while CFSGAM, a global
investment management business, looks after Aus$207 billion of assets for
clients worldwide.

The new entity will list on the Australian stock exchange some time next
year.

“The wealth management and mortgage broking businesses are each high-
quality franchises,” said Comyn.

“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.”

Other Australian banks have also been seeking to cut their exposure to the
wealth management sector and redeploy their capital in the high-returning
retail and commercial banking operations.

Comyn said that as part of a strategic review the bank was also exploring
the potential sale of its CommInsure general insurance arms.

The move comes with Australian banks — among the developed world’s
wealthiest — under increasing scrutiny amid allegations of dodgy financial
advice, life insurance and mortgage fraud, and rigging benchmark interest
rates.

The government launched a royal commission in February to investigate
misconduct in the sector.

Commonwealth has been under particular pressure, agreeing this month to pay
an Aus$700 million fine — the largest civil penalty in Australian corporate
history — to settle claims it breached anti-money laundering and counter-
terrorism financing laws.

BSS/AFP/HR/0955