8 days before the scheduled release of its half-year financial report, ANZ Banking Group Ltd disclosed an $A632 million hit to its bottom line following sale of Wealth Australia & OnePath businesses.
The bank also disclosed an $A16 million first-half hit for legal & other costs related to the Australian royal commission into banking, and an anticipated $A50 million commission cost in the second half.
With an $A80 million addition of restructuring charges, the total comes to $A778 million ($NZ827 million).
The bank is scheduled to announce its half-year financial results next Tuesday, 1 May, but issued an advance package of information yesterday “to assist market participants preparing to analyse the group’s financial performance”.
ANZ created OnePath when it bought various ING businesses in Australia & New Zealand in 2010. It ran into immediate outrage in New Zealand when it tried to lift the price on management contracts on 2 NZX-listed former ING entities, the ING Property Trust & ING Medical Properties Trust, which became the Argosy Property Trust (now Argosy Property Ltd) and the Vital Healthcare Property Trust.
Argosy became internally managed and Vital’s management contract is held by a subsidiary of the Northwest Healthcare group headed by Paul Dalla Lana of Toronto, Canada.
ANZ’s disclosure of losses now arises from its reclassification, as discontinued operations, of Wealth Australia businesses it’s sold. The bank announced 2 separate Wealth Australia sales last year:
- Sale of the OnePath pensions & investments (OnePath P&I) and aligned dealer groups (ADG) business to IOOF Holdings Ltd on 17 October, and
- Sale of the life insurance business to Zurich Financial Services Australia on 12 December.
As discontinued operations, their assets & liabilities have been reclassified as at 31 March as held for sale and measured at the lower of their carrying value & fair value less costs to sell.
Consequently, the bank said, “an $A632 million loss has been recognised, comprising an $A277 million net loss on measuring the assets & liabilities at fair value (including a treasury shares adjustment of $A396 million) and future separation & transaction costs to complete both transactions of $A355 million”.
Wealth Australia businesses the bank retains are ANZ Lenders Mortgage Insurance, ANZ Share Investing, distribution of general insurance products and ANZ Financial Planning. The bank said the profit for these retained businesses in the 2017 financial year was $A95 million before group elimination adjustments.
The bank said the ANZ group had incurred about $A80 million in restructuring charges within cash profit in the 2018 first half, compared to charges of $A26 million & $A36 million in the second & first halves of 2017. “In large part, the 2018 first-half charges relate to the implementation of agile ways of working in the Australia division,” the bank said.
In other accounting details, ANZ said its total net gain on sale from divestments in the 2018 first half was $A138 million, comprising:
- an $A85 million net gain on sale for the Asia Retail & Wealth businesses, including a gain on sale for Vietnam retail
- an $A86 million loss on sale of Shanghai Rural Commercial Bank, which includes the offset to $A58 million of equity-accounted earnings (recognised in cash profit in the 2017 first half and identified as a large/notable item), which increased the carrying value. Allowing for this, the total net loss is $A28 million, reflecting additional hedging & tax costs associated with the extended completion
- an $A121 million net gain on sale for the first tranche of multi-currency conversion. The sale of the second tranche is subject to a put option exercisable in the fourth quarter of the 2018 financial year.
- an $A18 million cost recovery related to UDC. The derivative valuation adjustment charge for the Institutional Markets business is not material in 1H18. The charges for 1H17 and 2H17 are shown in the large/notable items template.
ANZ announced the $660 million sale of its subsidiary UDC Finance Ltd to the Chinese HNA Group in January 2017, but the Overseas Investment Office declined the application in December, saying it was dissatisfied by HNA’s opaque ownership trail.
21 March 2018: ANZ says listing among UDC options
18 October 2017: ANZ sells pensions & investments businesses to IOOF
12 January 2017: ANZ sells UDC Finance to Chinese HNA Group
2 November 2016: ANZ sells Asian retail & wealth business to DBS
29 July 2011: OnePath management sell-off totally unstuck
9 June 2011: 3 institutions fight $32.5 million Argosy management buyout, demand manager be sacked
20 April 2011: ANZ proposes internal management for 2 NZ property trusts
25 March 2010: ING to get its own brand under ANZ Bank ownership
Attribution: Bank release.