The Commonwealth Bank has announced a mass demerger of its wealth management and mortgage broking business arms – which will now be named CFS Group – amid a slew of changes to its executive team on Monday.
CBA chief Matt Comyn touted the changes would allow the separate companies to "focus on their core businesses" moving forward and unlock greater value for shareholders.
"With innovation and disruption in wealth management increasingly favouring specialist companies, they will benefit from independence and the capacity to focus on new growth options without the constraints of being part of a large banking group," he said in a statement to investors.
"We believe the plan will unlock value in both groups for our shareholders."
The new offshoot – which includes Colonial First State, its Global Asset Management division, Count Financial, Financial Wisdom, and Aussie Home Loans – is still subject to approval from the board and is expected to be completed by 2019.
Ex-Suncorp chief executive John Mulcahy will head up the new CFS group as chair as the search for a chief executive officer is underway.
The new plan has resulted in the canceling of the bank's initial decision to spin off and float Colonial First State Global Asset Management.
Morningstar’s David Ellis expects the demerger to cut CBA’s cash earnings by about $500 million per year, representing only 5 per cent of group profit.
The lender did not say how much capital would be released from the demerger, but Ellis is expecting a release of more than 100 basis points, paving the way for a share buy back in 2020.
On his analysis, CBA will be sitting on a common equity tier one capital ratio of around 11 per cent by December.
“We have seen plenty of examples of unwanted "ugly duckling" businesses demerged and subsequently rewarding shareholders handsomely,” Ellis said.
“It is obviously too early to reach conclusions concerning the likely outlook for CFS Group, but the business will be in control of its own destiny and growth strategies--we see this as key positive.”
Separately, Comyn made six key appointments including a new head of its retail banking arm, Angus Sullivan, and chief risk officer Nigel Williams.
David Cohen will move from his current role as head of risk to take up the position of deputy chief, effective 5 November 2018.
Comyn said the bank is still searching for a chief financial officer but expects to make a permanent appointment after the full year results in August.