ANZ sells its OnePath Pensions and Investments to IOOF

Pedestrians walk past a sign stating the opening of a new ANZ Banking Group branch in central Sydney, Australia, April 27, 2016. Reuters/David Gray

ANZ is selling its OnePath Pensions and Investments to Independent Order of Odd Fellows (IOOF) for only under a billion dollars. The bank said the decision will not cause a material impact on its overall profitability.

Under the deal, the bank will receive $975 million, and the IOOF will enter a 20-year strategic partnership to distribute wealth management products. ANZ has become the latest bank to exit wealth management following Commonwealth Bank’s move to sell the life insurance division of CommInsure for $3.8 billion to Hong Kong-based AIA.

The bank said the latest annual profit for the businesses it was selling was $39 million, and it will take an accounting loss on the transaction of about $120 million. The deal will increase the bank's capital ratio by 15 basis points, which can help it meet tougher requirements from the bank regulator.

ANZ’s head of wealth, Alexis George, said they are able to come up with greater value for their shareholders by working with IOOF. They are also able to provide customers with access to quality wealth products “from a specialist provider with the right cultural fit, financial strength and digital capability.”

When it comes to the fate of its insurance business, it appears ANZ is still considering what to do. "The sale of our P&I and ADG businesses provides ANZ with greater flexibility to consider options for the life insurance business including strategic and capital markets solutions,” George added.

IOOF is now set to become the second largest financial advice business by adviser numbers. It said it will more than double its funds under advice through the deal.

Recently, the company posted a 41 percent fall in statutory net profit for the past financial year. But its underlying earnings were steady at $169 million and well ahead of expectations.

The business hopes to gain $65 million in savings through synergies, which is expected to come at a price with IOOF estimating it will incur about $130 million of "separation costs" over three years to integrate the businesses. According to ABC News, IOOF will pay for the deal through a $450 million share placement to institutional investors and a $100 million share purchase plan. The remaining will be through extra debt.

The company’s history originated in the mid-1800s as the Victorian branch of the international Odd Fellows friendly society. It demutualised in 2002 and was listed on the ASX in 2003.