With a laundry list of Australian financial sector assets mooted to be up for sale, what is motivating the banks?
Deals rumoured or in the pipeline include:
- National Australia Bank (ASX: NAB) spinning off its fund management, superannuation and financial advice operations MLC, Plum Super, financial planning dealer groups and, potentially, broker JB Were, for a prospective $6 billion market value;
- Commonwealth Bank of Australia (ASX: CBA) selling its general insurance business for a potential $1 billion price tag;
- US wealth managers circling CBA’s Colonial First State Global Asset Management (CFSGAM), which could be listed for $5 billion; and
- Private equity giant Blackstone emerging as a suitor for ANZ’s UDC Finance
These potential deals are on top of CBA’s sale of its CommInsure insurance business last year.
The underlying factor in the banks shedding these businesses is likely the Royal Commission into misconduct in the banking, superannuation and financial services industry, announced by Prime Minister Malcolm Turnbull in November 2017. The Royal Commission began hearings on 12 February. The Big Four banks have already made submissions.
Slimming down areas of operation could be termed ‘political risk divesting’ for sprawling businesses which have already incurred bloody noses for bad practices and misconduct. CBA in particular was the subject of a Senate inquiry into its financial planning arm (which led to calls for a royal commission), while wrongdoing was uncovered at its CommInsure insurance business and at the other three big banks – NAB, Westpac and ANZ.
After two-plus years of trying to ride out a wave of angry public sentiment, negative press and the scrutiny of agencies and elected representatives, the Royal Commission promises to be a bumpy ride for the Australian banking sector. Some players mistakenly believed nothing would eventuate while the centre-right Coalition is in power, but the incumbent Coalition Prime Minister bowed to pressure from within his own ranks, as well as sustained attacks from the Labor Opposition and The Greens. Those left underprepared may find themselves exposed at the hearings.
This sector in Australia is a poignant example of regulatory issues triggering deal flow, particularly for foreign buyers interested in entering or expanding their footprint in the Australian financial sector. Understanding the connection between cause and effect at the nexus of the public and private sectors can provide investors with a distinct competitive advantage.
Statecraft is uniquely placed to deliver in this space. For a confidential discussion, contact Michael Priebe, Managing Partner on +61 2 8080 0060 or at michael.priebe@statecraft.com.au or Director, CT Johnson at ct.johnson@statecraft.com.au.
