ANZ’s sale of OnePath to Zurich for $2.85 billion, combined with the sale of its pensions and investments business to IOOF for $975 million, will be “broadly neutral” to earnings per share and return on equity, says Morningstar.
In a research note on ANZ, Morningstar analyst David Ellis said the bank will retain its ‘wide moat’ rating following the sale of its wealth management franchise to IOOF and Zurich.
“The Australian wealth sales follow a year-long reassessment of the bank’s involvement in Australia’s challenging financial advisory sector,” Mr Ellis said.
The loss of earnings impact from the combined Australian wealth sales is approximately 3 per cent, which Mr Ellis said was a “meaningful adjustment to future earnings”.
However, Morningstar is retaining its fair value estimate of $30 for ANZ’s share price despite the loss of earnings, on the assumption that the bank will conduct up to $4 billion in on-market share buybacks during the next two fiscal years.
The boost to ANZ’s balance sheet will be a “substantial release” of approximately 80 basis points of capital, increasing ANZ’s common equity tier 1 capital ratio to around the 12 per cent mark, Mr Ellis said.
On the product distribution side, ANZ will enter into a 20-year distribution agreement with the local arm of Zurich as part of the sale announced on Tuesday.
“Despite the loss of future earnings, the sale does not detract from our wide economic moat rating,” Mr Ellis said.
“Providing wealth management products and services to ANZ’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 specialist providers like Zurich and IOOF.”
