In morning trade the Commonwealth Bank of Australia (ASX: CBA) share price has edged higher after announcing another divestment.
At the time of writing the banking giant’s shares are up 0.3% to $80.11.
What has CBA divested?
This morning CBA announced that it has entered into an agreement to sell the Count Financial business to Countplus Ltd (ASX: CUP) for $2.5 million.
Given its historical corporate relationship and equity holdings, CBA felt CountPlus was the logical owner of the financial advice business.
According to the release, CBA will continue to support and manage customer remediation matters arising from past issues at Count Financial, including after the completion of the transaction.
It has also agreed to provide an indemnity to CountPlus of $200 million and all claims under the indemnity must be notified to CBA within four years of completion.
This indemnity amount represents a potential contingent liability of $56 million in excess of the previously disclosed customer remediation provisions that the bank has made in relation to Count Financial of $144 million.
The transaction remains subject to a CountPlus shareholder vote to be held in August. If its shareholders approve the transaction, completion is expected to occur in October. After which, CBA intends to sell its shareholding in CountPlus in an orderly manner over time.
Whilst the transaction is not expected to have a material impact on CBA’s net profit after tax, shareholders are likely to be pleased to see the back of a business that is expected to be a drag on its bottom line this year. Management estimates that Count Financial will incur a post-tax loss of approximately $13 million in FY 2019.
This transaction will mean that CBA’s NewCo segment will be left with Colonial First State, Financial Wisdom, Aussie Home Loans, and its 16% stake in Mortgage Choice Limited (ASX: MOC).
CBA advised that it remains committed to exiting all these businesses over time, but that its current focus is on continuing to implement the recommendations from the Royal Commission and ensuring it puts things right by its customers.
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