The $945 million sale of ANZ's wealth management assets to IOOF is a mutually beneficial move for both companies in achieving their respective long-term strategies, according to an analyst’s note issued by the research house yesterday.
IOOF, whose “major focus” on mergers and acquisitions had been a “defining tactic” of its growth strategy, has enjoyed a “stellar M&A track record”, the note said.
“We like the deal and see multiple benefits for IOOF’s business,” it said.
“We are confident IOOF can leverage the additional business scale, 20-year distribution agreement with ANZ bank and materially boost IOOF’s market position to realise substantial long-term earnings growth.
“IOOF has taken advantage of ANZ Bank’s wealth management business rethink,” the note said, with the acquisition “highly complementary” to IOOF’s existing channels.
Meanwhile, the transaction is another sign of ANZ pulling back from its “involvement in Australia’s challenging financial advisory sector” as it “evolve[s] into a simpler, cleaner and leaner bank focusing on retail and business banking”.
“For many years, ANZ Bank has struggled to leverage its wealth management operations, which are the smallest of major bank peers,” Morningstar wrote.
“The sale of selected wealth management assets to IOOF Holdings continues the bank’s 18-month long group-wide business repositioning strategy.”
Despite the “minor loss of future earnings”, the sale would not change ANZ’s wide economic moat rating and would still see ANZ’s “core banking businesses deliver steady earnings growth”.
“Providing wealth management products and services to ANZ Bank’s retail and business banking customers remains a core proposition, but ANZ Bank is better placed to increase shareholder value by distributing wealth products from a specialist provider like IOOF,” the note said.