ANZ Bank couldn't justify investing the sums needed to turn its wealth business into a potential market leader - a realisation that ultimately led to the lender offloading its life insurance arm for $2.85 billion to Swiss giant Zurich.
ANZ became the latest bank to retreat from wealth management on Tuesday, announcing the end of an asset sale process that will free up billions in capital, which analysts expect will be returned to shareholders through a share buyback.
After entering life insurance in 2002 and then expanding further in 2009, ANZ's focus is now on distributing the product rather than holding the risk. The deal includes a 20-year agreement to distribute Zurich policies via its retail network and advisers.
The sale means the bank is now on track to effectively quit wealth management, aside from its own financial adviser employees, after also selling its financial planning and superannuation businesses to IOOF in October.
ANZ's group executive for wealth in Australia, Alexis George, said the divestments reflected chief executive Shayne Elliott's strategy of focusing more sharply on competing where it was strongest.
The digital revolution is forcing banks to invest heavily in technology, and she said the bank would not have been able to invest the sums needed in wealth.
"The decision was made that we really need to be a simpler and more focused bank, and focused on those areas where we had the biggest advantages," Ms George told BusinessDay.
"We felt that from a wealth business perspective, we weren't number one in any area. We are good, I think the businesses are good businesses, but that wasn't going to get the investment or have the scale that was needed into the future."
The sale means Westpac is the last of the big four banks to remain wholly committed to holding the risk of life insurance policies on its balance sheet, after Commonwealth Bank and National Australia Bank also sold out of the sector to foreign companies.
Ms George said the move away from wealth management was a result of "tremendous" changes in the market, including the shift in customer behaviour and technology that few people predicted.
However, some analysts say the trend away from wealth management shows banks' foray into the sector had always been problematic.
Velocity Trade analyst Brett Le Mesurier said he thought ANZ had received a "fair price for an impaired asset", and the episode showed banks did not add value as owners of life insurance businesses.
"Banking and life insurance are two very different things. While both involve money, banking is about gathering deposits and taking credit risks. Life insurance involves the management of policy lapses and claims. One set of skills does not translate well to the other," Mr Le Mesurier said.
ANZ said it would make a $520 million accounting loss on the sale. The two deals with Zurich and IOOF are expected to cost the bank a total of $375 million in separation costs, and the process will take about a year to complete.
Macquarie analyst Victor German said the deal's price tag appeared "reasonable", and he estimated ANZ would have about $6.5 billion in surplus capital, which he expects will be returned via a share buyback. Mr Elliott said it would provide more details on capital management plans before its next half-year results.
Ms George said her main focus was on separating the wealth businesses, though "at some point in the future" she would think about her next career move.
ANZ will lose the annual profit contribution made by life insurance - $189 million last year - but it said there would be little impact on return on equity, a key measure of profitability.
For Zurich, the deal marks a significant expansion in the Australian market, where it said it would become the biggest provider in the market as measured by in-force premium.
