ASB recorded funds management revenue of some $80 million in the final half of last year, up about 4 per cent on the first six months of 2021 despite axing KiwiSaver administration fees at the end of September.
But the NZ institution stands as the sole remaining source of continuing funds management revenue in the Commonwealth Bank of Australia (CBA) family, which has retreated at pace from the sector over the previous few years.
CBA reported a residual A$10 million funds management income during the December quarter from its now-closed in-house financial planning business and smattering of ‘aligned’ advisers but only the NZ subsidiary still has a hand in the game.
According to the December half-year report, the $22.2 billion of ASB funds (including $14.5 billion in KiwiSaver) represent the entire CBA book of assets under management.
As recently as June 2019, the Australian bank earned annual revenue of about A$2 billion from funds management where it was one of the largest firms in the sector through ownership of Colonial First State Global Asset Management (CFSGAM).
CBA completed a A$4.1 billion sale of CFSGAM to Mitsubishi UFJ Trust and Banking Corporation (which later rebranded the manager as First Sentier Investors) in 2019 as part of massive clean-out of wealth management assets.
Excluding CFSGAM, the latest CBA report lists seven completed deals over the last couple of years covering such items as the sale of its life insurance arm and offloading 55 per cent of the superannuation and platform business, Colonial First State, to US private equity firm KKR in December 2021.
CBA is also in line to finalise the sale of its general insurance division to Holland Insurance in the first half of this year.
“The Group continues to deliver on its strategic priority to create simpler, better foundations through divestments of wealth management and other non-core businesses,” the half-year report says.
While the CBA wealth exit began prior to the release of the final report by the Australian Royal Commission into financial services (RC) early in 2019, the consequent regulatory attention highlights may have hastened the process.
A CBA investor presentation shows the bank will complete a pay out of over A$2 billion in client compensation by the first half of this year – mostly due to RC-related events. All up the CBA ‘remediation’ program will set the bank back more than A$3.3 billion including almost A$1.3 billion of internal costs.
Wealth management (either in-house or via aligned adviser groups) account for about three-quarters of the A$2 billion CBA customer refunds, the presentation shows.
The report lists about 20 regulatory or court actions pending or completed against CBA entities over the last couple of years.
For ASB the funds management half-year revenue of $80 million equates to just 5.3 per cent of the NZ group’s banking income for the period of close to $1.5 billion. ASB reported $742 million in net profit after tax for the six months to December 31.
ASB was fired as a default KiwiSaver scheme in May along with four others for reallocation among the six newly approved providers: an estimated 200,000 plus members and $2.3 billion was expected to change hands during the default reshuffle.
The scheme also cut some member fees following the ‘value for money’ guidance issued by the Financial Markets Authority last year.
In a statement, Vittoria Shortt, ASB chief, said the decision to axe all KiwiSaver fixed admin fees from October saw an extra $3.9 million invested across member accounts by December 31.
“… we expect that benefit to be almost $12 million by the end of [the 2022 financial year],” Shortt said.
The Australian parent withdrawal from wealth management has seen the NZ bank outsource some funds services that were previously taken care of by CBA-associated entities or partners.
For instance, last year ASB appointed BlackRock to oversee large parts of the investment management process including asset allocation. It is understood, ASB will also look to appoint a third-party custodian this year, ending the associated nominee company structure currently in place.