Commonwealth Bank of Australia (CBA) today announced it will demerge its wealth management and mortgage broking businesses.
As part of the move it will also undertake a strategic review of its general insurance business, including a potential sale.
In a statement, CBA said it hopes these initiatives will result enable CBA to enhance its focus on its core banking businesses in Australia and New Zealand and create a simpler, better bank.
The demerged business, CFS Group, will include CBA’s Colonial First State, Colonial First State Global Asset Management (CFSGAM), Count Financial, Financial Wisdom and Aussie Home Loans businesses.
CBA Chief Executive Officer Matt Comyn said: “The wealth management and mortgage broking businesses are each high-quality franchises. 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.”
As an independent business, CFS Group can enable CFSGAM to realise its full potential for its customers and staff and, as a result, the previously announced Initial Public Offering of CFSGAM will no longer proceed.
The demerger of CFS Group will provide investors with a direct investment in the independent wealth management company, including Aussie Home Loans and CBA’s minority shareholdings in ASX-listed companies CountPlus and Mortgage Choice.
The chairman of CFS Group will be John Mulcahy. A search for the chief executive officer of CFS Group is underway.
Comyn added, “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.
"It also responds to continuing shifts in the external environment and community expectations, and addresses the concerns regarding banks owning wealth management businesses.
"By allowing CBA and CFS Group to focus on their core businesses and market leading positions, we believe the plan will unlock value in both groups for our shareholders."
CBA’s salaried financial advice business, Commonwealth Financial Planning, will be retained by CBA and will form part of its consumer financial services business within its Retail Banking Services Division.
“The ability to provide high-quality banking services and in-house financial advice to CBA customers will remain fundamental to CBA’s focus on customers’ financial wellbeing and we will deliver that through a new model for advice that is safe, simple and scalable,” Comyn said.
The demerger does not impact the 20-year strategic distribution partnership with AIA in relation to bank customers. The partnership will also extend to the CFS Group. CFS Group's customers will be able to benefit from AIA’s innovation in life insurance including a focus on digital engagement, together with the benefits and synergies of global scale and specialisation.
CBA will provide further details on its strategy as part of its 2018 Annual Results announcement on 8 August