Australia's CBA suspends $4b wealth management spin-off
The Commonwealth Bank has indefinitely put on hold a plan to float its scandal prone A$4bn wealth management business as it deals with the fallout from the banking royal commission.
In a statement to the ASX before the market opened, Australia's biggest bank by assets said it was still committed to the demerger but, after a review, it needed to focus on addressing the commission's recommendations first.
"CBA is prioritising the implementation of these recommendations, refunding customers and remediating past issues," the bank said in the statement. "Accordingly, CBA has suspended preparations for the demerger in order to support the focus on these priorities.
CBA is prioritising the implementation of these recommendations, refunding customers and remediating past issues"
Last week, Australia's largest lender had said there was still a lot of work to be done under its remedial plan to address the 76 recommendations made by a powerful inquiry into the financial sector, which had revealed widespread instances of misconduct.
CBA is spending A$1.46bn on refunding customers and remediating issues linked to misconduct, with A$1.2bn of this related to its wealth businesses.
Banks have been quitting the wealth management sector, which has failed to deliver the big returns they hoped for in the early 2000s, while also suffering from a string of scandals.
The suspension comes after National Australia Bank also said last month that its plan to demerge MLC would be delayed until 2020. ANZ Bank is also aiming to sell its superannuation business to IOOF, though this has been delayed by regulatory action, while Westpac remains the most committed to remaining in the sector.
CBA has already offloaded its Colonial First State Global Asset Management business, which it sold to Japanese giant Mitsubishi UFJ Trust and Banking Corporation for A$4.1bn in October. Its remaining wealth and mortgage broking arm could be worth A$4bn.
