CBA will spin off its giant funds management arm

Photo: Torsten Blackwood/AFP/Getty Images

The Commonwealth Bank plans to float its investment management business Colonial First State Global Asset Management (CFSGAM) on the ASX.

The wealth arm has $219 billion under management. In the 2017 financial year, CFSGAM earned $837 million in funds management income.

Some reports put the value of a float at more than $4 billion.

The IPO decision comes at a time when the diverse divisions of Australia’s major banks are under intense scrutiny, including through the Royal Commission into Financial Services.

Critics have argued that the ownership of huge financial planning and investment management arms by retail banks, whose main business is in lending, distorts behaviour and encourages the banks to “funnel” funds and clients towards different products which may not always be in the customer’s best interests.

The ANZ Bank also has formally started looking at ways to get its wealth management business off its books.

The Commonwealth in September last year announced a review of CFSGAM. The review recommended a listing on the ASX, expected by the end of the calendar year,l depending on market conditions.

“The strategic review determined that an independent ownership model would provide greater benefits,” the banks said today.

The Commonwealth has approached several potential independent non-executive directors for CFSGAM ahead of an IPO.

These include John Mulcahy, who would be appointed as Chairman, Susan Doyle, James Millar, Gail Pemberton and Richard Wastcoat.

Mark Lazberger will continue in as Chief Executive Officer of CFSGAM and would be appointed as an executive director of the board.

The statement from CBA:

    Commonwealth Bank of Australia has concluded the strategic review of its global investment management business, Colonial First State Global Asset Management (CFSGAM).

    The review, announced in September 2017, considered a range of options.

    In making our assessment, we examined long-term Commonwealth Bank shareholder value and also considered the ability of CFSGAM to serve the interests of its clients, attract and retain key personnel and better grow its business.

    While CFSGAM has achieved significant growth, scale and diversification under the current ownership structure, the strategic review determined that an independent ownership model would provide greater benefits.

    Accordingly, Commonwealth Bank intends to pursue an initial public offering of CFSGAM on the Australian Securities Exchange (“ASX”) by the end of calendar year 2018, subject to market conditions and necessary approvals.

    In preparation for the potential listing, Commonwealth Bank and CFSGAM have approached several candidates who have agreed to join the board of CFSGAM as independent non-executive directors pursuant to the potential IPO.

    The candidate directors include John Mulcahy (who would be appointed as Chairman), Susan Doyle, James Millar, Gail Pemberton and Richard Wastcoat.

    Additional directors may be approached to join the board ahead of the potential IPO. Mark Lazberger will continue in his role as Chief Executive Officer of CFSGAM and would be appointed as an executive director of the board.

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