Bank of Queensland has become yet another financial whose business has been disrupted by the impact of revelations from the Hayne Royal Commission.
The bank announced on Monday that it scrapped the $65 million sale of its St Andrew’s Insurance business to the beleaguered Freedom Insurance Group.
Bank of Queensland had announced the sale back in April, with settlement to occur later in the year after regulators had given it a tick.
After the revelations at the royal commission, there was no chance Freedom would have received any sort of approval for the deal. It is clear it doesn’t have the resources to do the purchase.
Bank of Queensland joins Freedom, ANZ, AMP and IOOF as the companies most immediately impacted by the disclosures at the commission – in some cases by other companies.
BoQ said on Monday the decision to terminate the deal was mutually agreed after it became clear “that the conditions of the transaction would not be satisfied within the time limits contained in the sale agreement”.
The bank had been looking at a post-tax gain of about $8 million from the sale, as well as an exclusive three-year distribution agreement with Freedom for the provision of life insurance products to its customers.
The real story is that Freedom can’t afford the deal after its shares collapsed in the wake of disclosures at the Royal Commission about its cold selling of insurance.
Freedom’s shares collapsed by more than 58% last week after it announced it may face a liquidity shortfall in 2019, with $4 million in customer remediations and no new business commissions following damaging revelations at the banking royal commission.
Freedom shares were trading at 2.6 cents yesterday, down from a historic high of 92 cents in July 2017 and unchanged from last Friday
BoQ said it would continue to assess its strategic options in relation to St Andrew’s.
“In the meantime, St Andrew’s continues to be a strongly capitalised business that remains focused on delivering for its customers and corporate partners,” the company said in a release.
BoQ shares were down 3.2% to $9.43 at the close. Freedom shares lost another 11.5% to end at 2.3 cents.
