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August 31, 2020

NAB agrees to divest MLC Wealth unit to IOOF for $1.4bn

National Australia Bank (NAB) has agreed to divest 100% of its MLC Wealth business to IOOF Holdings for approximately $1.4bn.

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  • The affluent population grew by 5.3% in 2021 and is expected to grow at an AAGR of 4.8% between 2022 and 2026.
  • The value of liquid assets held by the affluent segment surged by 8.4% in 2021, backed by economic recovery. HNW individuals’ financial wealth grew by 12%, while mass affluent individuals’ wealth grew by 6.0%.
  • The report provides an analysis of factors driving liquid asset growth. It is also split into asset classes - equities, mutual funds, deposits, and bonds.
  • The affluent population are more risk-tolerant and invest a significant proportion of their investments in risky assets such as equities, compared to emerging affluent and mass market individuals.
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The MLC Wealth Management unit includes financial advice, platforms, superannuation & investments and asset management businesses.

Other advice entities assets and related employees of the advice business will also be transferred to IOOF.

NAB will maintain legal ownership of MLC’s advice entities in order to complete advice-related remediation programmes. The company will provide targeted wealth management products and services via JBWere and nabtrade.

NAB and IOOF will also form a strategic alliance on various products and services. The companies will sign a referral agreement, under which NAB customers can access financial advice.

NAB strategic decision

This deal comes after the strategic decision by NAB in 2018 to sell MLC. Also, the agreement is part of the company’s strategy to focus on its core banking business.

The transaction will involve $1.2bn in cash proceeds from IOOF. In addition, NAB will receive $200m as a five-year structured subordinated note in IOOF.

NAB can use the structured subordinated note to be part of the potential value created by combining MLC and IOOF over the medium term.

Further, NAB is eligible for around $220m in surplus cash from MLC in the form of a pre-completion dividend.

NAB Group expects its Core Equity Tier 1 (CET1) capital to rise by approximately 30bps, on a pro forma 30 June 2020 basis.

The transaction will not require additional separation costs and strategic investment in MLC business by NAB. It is estimated to involve a post-tax loss on sale of about $400m.

NAB Group CEO Ross McEwan said: “We have explored a range of transaction options and are confident this sale provides the best outcome for NAB shareholders and for MLC stakeholders.

“We recognise the specialised nature of wealth management and the opportunity for the MLC business as part of IOOF.”

With the acquisition, IOOF expects to become a leading retail wealth manager with $510bn in funds under management and administration (FUMA).

Besides, IOOF will have 1,884 advisers and $173bn in funds under administration.

The transaction, which is subject to certain conditions, is set to close next year.

Free Report
img

Analyze opportunies within the wealth management market in APAC

GlobalData’s ‘Asia-Pacific Wealth Management: Market Sizing and Opportunities to 2026’ report provides a comprehensive overview of the Asia-Pacific (APAC) wealth management market.
  • The report analyzes the APAC wealth and retail savings and investments markets. This includes affluent market size, both by number of individuals and the value of their liquid assets.
  • The affluent population grew by 5.3% in 2021 and is expected to grow at an AAGR of 4.8% between 2022 and 2026.
  • The value of liquid assets held by the affluent segment surged by 8.4% in 2021, backed by economic recovery. HNW individuals’ financial wealth grew by 12%, while mass affluent individuals’ wealth grew by 6.0%.
  • The report provides an analysis of factors driving liquid asset growth. It is also split into asset classes - equities, mutual funds, deposits, and bonds.
  • The affluent population are more risk-tolerant and invest a significant proportion of their investments in risky assets such as equities, compared to emerging affluent and mass market individuals.
The report also provides data and insights on the size of offshore holding of HNW investors in the APAC region.
by GlobalData
Enter your details here to receive your free Report.

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