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Australia’s Commonwealth to spin off wealth, mortgage arms
SYDNEY, June 25, 2018 (AFP) – Commonwealth, Australia’s biggest bank,
announced plans Monday to spin off its wealth management and mortgage-broking
arms as it tries to streamline operations and focus on core businesses.
The troubled lender — the country’s largest company — is also
considering offloading 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 more than 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. But the market was not enthusiastic about the announcement, with the
stock ending 2.3 percent lower at Aus$72.16.
“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.”
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Other Australian banks have also been trying to cut their exposure to the
wealth management sector and redeploy their capital in the high-returning
retail and commercial banking operations.
Comyn, who also unveiled a new team of senior executives Monday, said that
as part of a strategic review the bank was also exploring the potential sale
of its CommInsure general insurance arms.
Australian banks — among the developed world’s wealthiest — are under
increasing scrutiny amid allegations of suspect financial advice, life
insurance and mortgage fraud and the rigging of benchmark interest rates.
The government launched a royal commission in February to investigate
misconduct in the sector.
Commonwealth has been under particular pressure. It agreed this month to
pay an Aus$700 million fine — the largest civil penalty in Australian
corporate history — to settle claims that it breached anti-money laundering
and counter-terrorism financing laws.
BSS/AFP/HR/1240