The Commonwealth Bank has called off a stock market float of its funds management arm and will sell it to a big Japanese insurance group for $4.13 billion.
Investors thinking the $4.1 billion might result in some capital management from the CBA shouldn’t hold their breath – it wasn’t mentioned in yesterdays statement in which the bank talked about using the net proceeds to boost its top-tier capital.
But that’s not to say there might not be some move down the track once the sale of this business, plus its mortgage broking and wealth management operations are sold, and the sale of Comminsure gains full approval around the world.
But the shares jumped nearly 1.6% to $69.23 yesterday.
CBA said in yesterday’s statement “The Group reviews its capital management strategy on an ongoing basis and intends to update shareholders further following the completion of its announced divestments.”
So maybe CBA shareholders might get to follow the ANZ which is in the midst of a $3 billion buyback, with $1.9 billion worth of shares so far repurchased.
The bank said yesterday in a statement to the ASX that is selling its Colonial First State Global Asset Management (CFSGAM) business to a major Japanese group, Mitsubishi UFJ Trust and Banking Corporation (MUTB).
The bank will continue with plans to demerge its wealth management and mortgage broking businesses from CBA’s core banking operations and has hired a senior Westpac executive to oversee that process.
CBA said it had changed tack on Colonial First State because it believed a sale of the business was in the best interests of customers, shareholders, and staff.
CFSGAM is a high-quality business that has achieved strong growth under CBA’s ownership for over 18 years, “ CBA CEO Matt Comyn said in the statement.
He said the buyer was “one of the largest asset managers in Japan, with a long history and deep capabilities. We believe that CFSGAM’s clients and employees will benefit from MUTB’s supportive long-term ownership.”
CBA said that after its June announcement on the demerger of the funds management business “MUTB approached CBA in relation to CFSGAM and the CBA Board determined that it would be in the best interests of clients, employees and shareholders to explore a potential sale of CFSGAM.”
CBA said the total cash consideration implies a post-tax gain on sale of approximately $1.5 billion, which includes estimated post-tax separation and transaction costs of approximately $100 million.”
“As a result of the Transaction, CFSGAM will not be included in the previously announced demerger of CBA’s wealth management and mortgage broking businesses.
“Given the global nature of CFSGAM’s business and the licensed entities that it operates, the Transaction is subject to a number of regulatory approvals in various jurisdictions including in Australia, Japan, Hong Kong, Singapore, the United Kingdom and the United States. The Transaction is expected to complete in mid-calendar year 2019.
“Upon completion, the Transaction is expected to deliver an increase of approximately $2.9 billion of Common Equity Tier 1 (CET1) capital, resulting in a pro forma uplift to the Group’s FY18 CET1 ratio of approximately 60 basis points on an APRA basis as at 30 June 2018.
“The CET1 capital benefit is principally comprised of the post-tax gain on sale, plus a reduction in CET1 capital deductions from accounting goodwill and investment in net tangible assets,” the bank said.
