The Commonwealth is spinning off its wealth management business

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  • The Commonwealth Bank says the demerger of its wealth management and mortgage broking business will unlock value for shareholders.
  • The new ASX-listed company, CFS Group, will include Colonial First State, Colonial First State Global Asset Management, Count Financial, Financial Wisdom and Aussie Home Loans.
  • The bank is also doing a strategic review of CommInsure General Insurance, including a potential sale.

The Commonwealth Bank is demerging its wealth management and mortgage broking businesses into a separate ASX-listed company.

And it is looking at the potential sale of its general insurance business.

“We have made a decision that the best thing for CBA shareholders is for us to focus on our core banking business and seeking to become a simpler and better bank,” says CEO Matt Comyn.

The ASX-listed business, to be called CFS Group, will include Colonial First State, Colonial First State Global Asset Management, Count Financial, Financial Wisdom and Aussie Home Loans businesses.

The new group would have combined net profit after tax of of more than $500 million.

The major banks have been ditching their wealth management businesses following a series of scandals involving financial planners now being investigated by the financial services Royal Commission.

All three of the businesses CBA is either spinning off or selling have been under the spotlight.

CBA shareholders will get shares in CFS Group proportional to their existing shareholding. The bank won’t be keeping a shareholding.

“I think there is good reasons for why banks should own wealth management businesses,” says Comyn. “I think there are equally good reasons why banks shouldn’t own wealth management businesses.

“The context has changed quite markedly over the last ten years. Ultimately for us, we have formed the view that the best decision (for) the Commonwealth Bank’s shareholders, is to demerge the wealth management businesses, enabling our core banking business to become a simpler and better bank.

“I think a demerger offers a couple of important benefits. Firstly, it is a clean and timely exit of all of these businesses. I think each of them are good businesses in their own right.”

As part of a strategic review, the Commonwealth is looking at a potential sale and partnership with a specialist insurance provider for CommInsure General Insurance.

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