National Australia Bank would bolster its returns and lower the risk of being hit by reputational damage by offloading its remaining wealth operations, analysts said.
Amid reports NAB was considering a potential float of its funds management, financial advice and superannuation businesses, bank-watchers said there could be a strategic case for further divestment by the bank in the wealth management sector.
While such a move would probably not have a major impact on its share price - as NAB has already quit the low-returning life insurance business - analysts said it could still be helpful for chief executive Andrew Thorburn.
NAB was the first big four bank to scale back its wealth division when it sold 80 per cent of its life insurance business to Nippon Life in 2015. Since then, however, rivals have gone further in exiting wealth management.
ANZ Bank last year said it would sell its superannuation and financial planning arms, as well as quit life insurance, while Commonwealth Bank of Australia is conducting a strategic review into the potential float of Colonial First State Asset Management this year.
Bell Potter analyst TS Lim said there could be a case for offloading the remaining NAB wealth businesses as the bank looks to bolster returns by focusing on its traditional strengths in retail and commercial banking.
"It's something they will have to consider," Mr Lim said. "At the end of the day, banks are are trying to focus on pure banking."BBY analyst Brett Le Mesurier said the sale would be "helpful" for the bank's capital position and would complete its moves to "tidy up" the bank, but would not have a major impact on its share price.
The Australian Financial Review on Monday said a NAB strategic review of its wealth business had investigated whether NAB's wealth businesses, which include MLC, Plum Super, and broker JBWere, could potentially be floated on the ASX. It is estimated this business would make about $300 million in profit a year.
NAB would not comment on market speculation, nor would it comment on the strategic review.
Portfolio manager at Regal Funds Management, Omkar Joshi, said there could well be a case for NAB selling its wealth assets, as the returns from the sector were lower than other parts of the bank, and came with added reputational risk.
However, he said there was no pressing need for the bank to sell down more of its wealth business, given its exit from the life insurance sector.
"They sorted out the bulk of the problems in wealth, which were in life insurance," Mr Joshi said. "The flipside is that it's not a big proportion of their earnings anyway, but it does lead to a lot of reputational damage when they have a planner who does the wrong thing."
Banks have been selling down in wealth amid weaker returns than forecast, and tougher regulation after a run of scandals in the industry.
Mr Lim estimated wealth management generated a return on equity of about 10 to 15 per cent, compared with 15 to 20 per cent returns from retail and business banking.
"It's a model that I believe is not working as well for the banks, so they have to consider exiting these legacy businesses."
Mr Thorburn has set about making the bank simpler and more profitable, and at its full-year results he said it aimed to have the highest return on equity of the big four.
