Internal and external factors pose risks to the “earnings guidance” provided by ANZ ahead of IOOF’s purchase of its wealth subsidiaries, says an analyst.
In a note to investors seen by InvestorDaily, Bell Potter equities analyst Lafitani Sotiriou warned that IOOF's intended purchase of ANZ Wealth subsidiaries faces a number of fresh challenges.
Having analysed monthly ASIC data, Mr Sotiriou noted that a number of ANZ-aligned financial advisers have already left the network since the announcement of the IOOF deal, a trend he says may be worrying for the IOOF boardroom.
“The parts of ANZ Wealth that [IOOF] is purchasing lost a further 11 advisers to bring the total below 700 (now 699),” Mr Sotiriou explained.
“When [IOOF] announced the deal, ANZ Wealth had around 720 advisers. If [ANZ] continues to lose advisers at this rate, IOOF will end up with around 130 [fewer] advisers by the time they actually get the asset, [which is] a significant risk to the earnings guidance provided by the company.”
Furthermore, in a separate note to investors, Mr Sotiriou argued that the reported price tag of $975 million offered by IOOF is "too high" given the trend in the market away from the institutionally-owned sector and "structural shift" towards more independent business models.
“[IOOF] has taken on significant risk with this purchase,” he wrote. “Not only will they have to wait a year to get the asset (I am unaware of any other acquisition where they had to wait a year to extract the business – [which] gives you an indication of where the technology is at), the price [IOOF] paid was too high, and now the fully-integrated model which it pursues is under risk.”
The analyst said IOOF competitor AMP faces similar risks in coming cycles.
“Make no mistake, if there is an issue for banks owning advice, so too will there be an issue for [IOOF] and AMP the other two fully-integrated wealth models in the market,” he wrote, referencing the royal commission into banking, superannuation and financial services.