The banking giant told investors that it would sell off 55 per cent of its wealth management business to global investment firm KKR. CFS is currently valued at $3.3 billion.
The transaction implied a total valuation for CFS on a 100 per cent basis of $3.3 billion, which will result in CBA receiving cash proceeds of approximately $1.7 billion, making for a post-tax gain of $1.5 billion. The post-tax gain figure included separation and transaction costs for the bank of around $180 million.
CBA reported the sale price represents a multiple of 15.5 times CFS’ pro forma net profit after tax of around $200 million.
CBA and KKR intend to undertake a significant investment program in CFS, aiming to strengthen its position in the Australian market as a retail super and investments business.
The bank said the sale is “expected to enhance the tools provided and the ease of doing business with CFS for advisers”.
The Commonwealth Bank also informed investors it has taken out an additional $1.5 billion in loan provisions as it prepares for the impact of COVID-19 on its bottom line.
The bank announced that its cash profits have fallen by 23 per cent to $1.3 billion, citing deteriorating economic conditions during the quarter.
In a statement to the ASX, CEO Matt Comyn told investors that while COVID-19 has created a challenging environment, the bank is in a good position to absorb the losses.
“Today’s announcement of an additional credit provision of $1.5 billion for the potential longer-term impacts of COVID-19 further reinforces our already strong provisioning and balance sheet settings,” Mr Comyn said.
“The strength and resilience of the bank remained evident through the March quarter. Our people have continued to serve our customers diligently and professionally under challenging circumstances.
“Given the challenges our people have faced, it was particularly pleasing to note a significant improvement in our recent survey of employee engagement (up 13 per cent on a year ago) which reflects the commitment and sense of pride our people have in supporting their customers and the broader community during these difficult times.”
The Commonwealth Bank was the last of the big four banks to make an announcement, which did not include whether or not they will pay a dividend to shareholders.
The National Australia Bank has announced that it will still pay a dividend after a capital raise, while ANZ and Westpac have deferred dividend payments during the pandemic.
