National Australia Bank’s long touted MLC Wealth spinoff has again been delayed, with no indication given as to whether the institution has a public markets exit, trade sale or private equity buyout in mind.
The company declared on Wednesday that ongoing remediation and continued work on operational separation, as well as the challenging business environment for the wealth business had meant that a 2020 exit is now unlikely.
Pushing its WEXIT (wealth exit) beyond 2020 represents a delay of more than 12 months based on the bank’s original timeframe. When NAB first announced it planned to spin off its wealth business soon after the Hayne royal commission’s final report it projected completion within the 2019 calendar year.
The first indication that NAB’s Wexit plans would not play out as first hoped came this time last year when the bank told the market it would put on hold the public markets exit plan of MLC Wealth until at least the second half of the 2019 calendar year. Then on NAB’s earnings call in November, Phil Chronican – then NAB acting CEO – said the business would target a public markets exit in FY20.
NAB’s latest update regarding its MLC divestiture has pushed this twice extended timeline out further.
“NAB will take a disciplined approach to the exit of MLC Wealth and will execute a transaction at the appropriate time having regard for the interests of all stakeholders. Work on operational separation has progressed well but the business environment remains challenging. This may defer exit beyond FY20,” the bank said in a statement.
MLC Wealth includes the group’s advice, platform, retirement & investment solutions and asset management businesses. In March last year NAB announced its financial planning and asset management businesses would be rebranded to MLC Advice and MLC Asset Management, respectively.
Former Perpetual CEO Geoff Lloyd was appointed to lead MLC Wealth at the end of 2018 when the plan was to complete a spin off or sale of the business by the end of the 2019 calendar year. Professional Planner discussed Lloyd’s plans for the business in an interview mid last year.
In November, Chronican revealed to a House of Representatives Standing Economy Committee hearing that the bank’s leadership had underestimated the process of separating its wealth business from the bank. Chronican pointed to the same factors for the continued delay as he did back then, including the ongoing remediation process and the financial sustainability of the wealth operations.
NAB’s remediation bill to address non-compliant advice and fee-for-no-service misconduct uncovered during the Hayne royal commission hearings was bigger than any of the other so called ‘Big Six’ wealth institutions, ASIC’s latest update on compensation for financial advice related misconduct revealed.
NAB has so far paid or offered to pay $203.8 million in compensation to more than 588,000 customers, ASIC’s February disclosure revealed.
Elaborating on the factors that have slowed MLC divestment, Chronican explained during the bank’s last full year results at the end of last year that the bank needed to make sure it was sufficiently well advanced on its remediation “…so that we’re not handing on a legacy liability to the new shareholders.” He also added that the market environment has to be right for “whatever the sale mechanism is”.