The NAB (ASX: NAB) share price could receive a short-term sugar hit sometime in 2019 if the bank makes a success of its plans to sell or float on the stock exchange its financial planning and insurance business MLC Group.
According to reports in The Australian newspaper today executives at NAB are now considering a private sale of the business valued at around $4 billion ahead of the possibility of an initial public offering in which NAB would probably retain a relatively small stake.
NAB’s CEO recruited ex-Perpetual Limited (ASX: PPT) CEO, Geoff Lloyd, to head up the restructure and divestment of the MLC business probably because Lloyd’s CV has extensive experience and success from Perpetual in cost cutting and restructuring businesses with the help of consultants such as Bain & Co.
Currently it’s possible to loosely describe that NAB runs two existing businesses.
Its retail and institutional banking business, and its wealth management arm that includes MLC’s financial planning, life insurance wealth management, platform and superannuation services, JB Were private wealth management, and nabtrade that is NAB’s Australian and international stock broking business for retail and institutional investors.
Its strategic plan is to only retain JB Were and NAB trade from its wealth management operations, which is no surprise given the MLC business is in the firing line of the string of scandals revealed during the Royal Commission about practices in the financial planning, life insurance, and advice industry over 2018.
If NAB were to get a sum in the region of $4 billion for MLC and then only operate its core banking, JB Were and nabtrade operations it would look a better business.
The JB Were HNW wealth management and NAB private banking businesses are also natural bedfellows for the group to retain.
Another likely positive outcome for NAB and its shareholders is that the group’s return on equity, as a measure of profitability, would rise on the back on an MLC sale.