National Australia Bank on Wednesday announced the sale of an 80 percent stake in its insurance business to Japan's Nippon Life for US$1.7 billion and outlined plans to divest troubled British asset Clydesdale Bank.
The lender tabled the moves in posting a 19.7 percent lift in annual net profit to Aus$6.34 billion (US$4.56 billion) for the year to August 31 as it looks to bolster its balance sheet and provide a buffer to meet tougher regulatory requirements.
Cash profit, the industry's preferred measure which strips out volatile items, rose 15.5 percent to Aus$5.84 billion, below expectations, with six-monthly dividends remaining at 99 cents. NAB shares were trading 1.60 percent lower at Aus$31.90 in morning trade.
The bank -- in a trading halt since Tuesday with speculation rife that Nippon was taking a large stake in the life insurance business -- confirmed the transaction for Aus$2.4 billion.
"Our wealth business has delivered significantly improved results since 2013, which has enabled us to secure the long term partnership we are announcing today," chief executive Andrew Thorburn said.
"This partnership will enable us to continue to deliver insurance solutions to our customers while improving wealth returns for shareholders."
OptionsXpress analyst Ben Le Brun said shareholders should be happy with the outcome.
"In terms of the price tag, I think the market will be quite comfortable with that, even quite pleased," he said.
NAB also announced a timetable for a demerger and initial public offering for its poorly-performing British business Clydesdale Bank, which was acquired in 1987, as it looks to focus on core Australian and New Zealand arms.
Thorburn said NAB planned to spin off 75 percent of the asset to NAB shareholders while the remaining 25 percent would be sold through an IPO to institutional investors in February next year.
"Significant progress has been made on the proposed transaction, including advanced engagement with key regulators and listing authorities in both jurisdictions," he said.
"(Once completed) we will have exited all our low returning offshore businesses, allowing us to fully focus on serving our priority customer segments and leveraging the investments we have made in Australia and New Zealand."
The primary listing for Clydesdale will be on the London Stock Exchange.
- Delivering on strategy -
Earlier this year, NAB successfully completed a huge rights issue to raise Aus$5.5 billion, partly to meet new regulatory rules demanding higher reserve capital requirements to shield banks from any housing downturn.
But the capital raising, the nation's biggest ever which was strongly supported, was also to help NAB exit its British operations.
Before it can do that, British regulators had told NAB it needed to shore up Clydesdale's balance sheet to protect against potential losses linked to past problems, including misconduct issues.
Analysts said the bank was moving in the right direction.
"NAB is delivering on its strategy of divesting underperforming assets," said CMC Markets' chief analyst Ric Spooner.
"However, market attention will now focus increasingly on its core Australian business.
"One key issue will be whether the investment of increased overheads aimed at improving market share and revenue in its Australian business lending and other priority segments will turn out to be justified."
ANZ Bank reports its annual results on Thursday with Westpac following suit on Monday.
Australia's biggest bank, the Commonwealth, works to a July-June financial year and reported a five percent rise in full-year net profit to a record Aus$9.06 billion in August.