Commonwealth Bank of Australia (CBA) is spinning off its wealth management arm Colonial First State, its mortgage broking businesses, and may also sell its insurance arm, as new chief Matt Comyn dramatically narrows its focus to traditional banking.
Amid heightened concern about banks owning advice and wealth businesses, CBA said it would hand existing shareholders shares in a new business to be called CFS Group, which would include a swag of businesses in wealth, advice and mortgage broking.
CFS Group had profits of about $500 million in 2017 and will be a separate ASX-listed company.
Mr Comyn on Monday also unveiled a new executive team to lead the bank, making six key appointments including announcing a new head of its vast retail banking arm, Angus Sullivan, and chief risk officer Nigel Williams.
CFS Group, which CBA expects to demerge in 2019, will include the superannuation business Colonial First State, funds manager Colonial First State Global Asset Management (CFSGAM), planning businesses Count Financial, Financial Wisdom and Aussie Home Loans.
The bank said both the remaining CBA businesses and CFS Group would be better served by the demerger because it would allow CFS to pursue its own growth strategy, while CBA could focus more on its core banking activities.
It also acknowledged that it was a response to concerns about the conflicts created in "vertical integration", where banks manufacture financial products, as well as distributing them through their advice and broking networks.
“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," Mr Comyn said.
"It also responds to continuing shifts in the external environment and community expectations, and addresses the concerns regarding banks owning wealth management businesses."
CBA said it would keep its salaried financial advice business, which would be part of its the retail banking division.
It said CBA shareholders would receive stock in the spun-off company in proportion to their existing stock in CBA, and CBA did not plan to have a shareholding in CFS Group. Former Suncorp chief John Mulcahy will chair CFS Group and a search has started for a chief executive.
The bank said it had also launched a strategic review of its CommInsure general insurance business, which would include considering a potential sale of the business and partnership with an insurance specialist, as it did with CommInsure's life business.
CBA in April flagged plans to float CFSGAM, in a deal analysts predicted could fetch $4 billion, but announcement has significantly broadened the scope of the spin-off.
Mr Comyn, who started as chief executive in April, also announced six new executive appointments.
CBA banker Angus Sullivan will fill the role previously performed by Mr Comyn as head of retail banking, CBA's biggest division, which is set to have an even larger impact on group profits once wealth has been spun off. Mr Sullivan has been acting in the role and has worked at CBA since 2012.
ANZ's previous chief risk officer, Nigel Williams, will be the next chief risk officer, replacing David Cohen, who has been moved to the position of deputy chief executive.
Pascal Boillat, who was previously the global chief information officer at Deutsche Bank, has been appointed CBA's next chief information officer.
CBA banker Andrew Hinchcliff will take on the role of group executive in charge of CBA's institutional banking and markets division.
In another internal appointment, Sian Lewis was appointed group executive in charge of human resources. Ms Lewis has worked at CBA since 2014 and previously worked at Westpac for nine years.
CBA shares were down $1.05, or 1.42 per cent, in early trading.
Re-disseminated by The Asian Banker from The Sydney Morning Herald