The bank said it will continue to offer targeted wealth management products via two outlets. The spin-off of the MLC business is part of steps the bank is taking to streamline its business, recovering from serious compliance failings in parts of its operations several years ago.

National Australia Bank has agreed to sell all of its MLC Wealth business to Australian financial services group IOOF Holdings for A$1.44 billion ($1.07 billion), following the bank’s decision in 2018 to spin off the unit.

NAB said it will continue to offer targeted wealth management products and services through JBWere and nabtrade. NAB and IOOF will also enter into a strategic partnership that will cover a range of products and services. This will include a referral agreement through which NAB customers will have access to financial advice.

The purchase price represents a multiple of 17.3x MLC’s cash earnings of approximately $83 million. The price is made up of A$1.24 billion in cash proceeds from IOOF and A$200 million in a five-year structured subordinated note in IOOF. This gives NAB the chance to participate in the potential value created by melding MLC and IOOF over the medium term, NAB said in a statement.

“We have a clear plan and we are getting on with it. The sale of MLC will enable NAB to prioritise investment and focus on executing our refreshed strategy of delivering simpler, more streamlined products and processes for our customers and colleagues,” NAB Group CEO, Ross McEwan said.

“NAB has taken a disciplined approach over the past two years to transform the business and prepare it for exit. Significant work has been done by MLC CEO Geoff Lloyd and his executive team to modernise and strengthen the MLC business and remediate customers."

Once the transaction is completed, NAB’s Core Equity Tier capital ratio is expected to rise, on a pro-forma basis to about 11.9 per cent. The deal will also modestly raise NAB’s return on equity.

By entering into a transaction with IOOF, NAB will not incur additional separation costs and strategic investment which would have been required for a standalone MLC business, NAB said.

The transaction includes MLC’s advice, platforms, superannuation and investments, and asset management businesses.

NAB will retain legal ownership of MLC’s advice entities, for the purpose of completing advice-related remediation programmes. Other assets of the advice entities and related employees of the advice business will be transferred to IOOF as part of the transaction. MLC’s aligned advisors will be provided with an opportunity to transfer to IOOF’s licenses at completion of the transaction.

Completion of the transaction is subject to certain conditions, including regulatory approvals from APRA and ACCC. Subject to the timing of regulatory approvals, completion is expected to occur before the middle of calendar year 2021.

Recovery from troubled times
NAB, along with a number of other domestic banks and financial firms, has been working to rebuild its fortunes after a series of mis-selling and compliance breaches. 

In February 2019 the chairman and chief executive of NAB, which was singled out for criticism by the Royal Commission probing widespread failings in the country’s financial services sector, resigned 

A public inquiry has heard that NAB's wealth management arm had charged hundreds of thousands of retirees for financial advice they never received. Around 300 NAB staff were fired or left the company as a result of internal investigations into wrongdoing.