The news that KKR will buy a majority stake in the Commonwealth Bank of Australia’s (CBA) wealth management business is striking from both sides of the fence.
On the Australian side, the seller, it shows that the banking industry’s commitment to get out of wealth management is intact, despite fears that the big four banks might renege on that idea.
Commissioner Kenneth Hayne had suggested that banks having wealth and advisory arms was a breeding ground for conflict of the kind his Royal Commission bluntly exposed. However, he never made an order that banks should divest them.
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Matt Comyn, |
When CBA’s CEO Matt Comyn said in March 2019 that he was suspending a previously announced plan to shift Colonial First State, the wealth business, it appeared that the bank was just wriggling off the hook.
Now, encouragingly, we know better: Commonwealth has found a buyer, one that will pay A$1.7 billion at a time when capital is very handy indeed.
And perhaps it’s this latter point – the need for capital to deal with the damage wrought by Covid-19 – that will prompt a bit more urgency at Westpac and National Australia Bank (NAB) in selling their wealth management arms.