The Commonwealth Bank of Australia will look to sell its global funds management arm, Colonial First State Global Asset Management, through a float of the business following a strategic review.
In a deal that could be worth about $4 billion for CBA and will further dismantle its wealth business, CBA on Tuesday said it would create a new ASX-listed company to hold Colonial's assets, following the conclusion of a review it announced in September last year.
"While CFSGAM has achieved significant growth, scale and diversification under the current ownership structure, the strategic review determined that an independent ownership model would provide greater benefits," the bank said in a statement.
At the time the review was announced analysts predicted the split could fetch $4 billion, freeing up capital that would likely exceed regulatory demands, and leave CBA more narrowly focused on retail and business banking.
CBA has already sold its troubled life insurance arm CommInsure to AIA for $3.8 billion in a deal minted late last year.
Life insurance and CFSGAM accounted for almost 80 per cent of CBA's wealth management earnings last year.
At the time the review was announced the bank said there are no plans to sell its financial planning and superannuation platform businesses.
"In making our assessment, we examined long-term Commonwealth Bank shareholder value and also considered the ability of CFSGAM to serve the interests of its clients, attract and retain key personnel and better grow its business," the bank said in a statement.
The bank will aim to conclude the float by the end of 2018.
Commonwealth Bank said it had already secured agreement from several candidates to form a board of the new entity.
The proposed chairman is John Mulcahy, the chairman of Mirvac and a former chief executive of Suncorp. Other members of the board would be Susan Doyle, James Millar, Gail Pemberton and Richard Wastcoat.
Colonial's current chief executive Mark Lazberger would continue in the role and be appointed to the board.
CBA's move to sell off the funds manager comes as banks are cutting their exposure to the wealth management sector, as investors push banks to deploy their capital in the high-returning retail and commercial banking.
CFSGAM, manages about $219 billion on behalf of clients and has offices in the United States, Europe and Asia.
There is a view within banks that funds management businesses can have stronger growth prospects when they are independently owned, and the culture of funds management is different to that of retail and business banking.
Westpac has also been selling off its ownership of BT Investment Management in recent years, as it seeks to focus on distributing wealth products.
Clancy Yeates writes on business specialising in financial services. Clancy is based in our Sydney newsroom.
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