Ann: IOOF update on acquisition of ANZ P&I, page-7

Credit Suisse cautions on post-Hayne risks for IOOF

Credit Suisse has cautioned about the ongoing risks in financial advice for IOOF (IFL)."Further headwinds for IFL's Financial Advice division come from the increased compliance and complexity of advice post the Royal Commission," the bank's analysts wrote."It is likely that the cost to provide advice will go up, almost immediately. The ability for IFL, and the broader industry, to pass this directly on to clients will determine the degree to which profit margins can be maintained."However, Credit Suisse noted the boost that will be provided by the recently approved acquisition of ANZ's wealth arm, which the analysts noted could deliver an uplift of over 30 per cent to earnings.The ANZ Wealth Pension and Investments business is expected to deliver IOOF one of the cheapest platforms in the market, Smart Choice, the analysis said."Arguably, the inclusion of the ANZ P&I business and the full achievement of synergies could on face value increase IFL's [underlying net profit after tax] by almost 50 per cent," the analysts said."However, we highlight that the ANZ business will be impacted by regulatory change (PYS) and additional costs that will offset some of the synergies. Further, some of the gross synergies have already been achieved while within ANZ."We, therefore, expect the benefit of the ANZ acquisition to be close to 30 per cent on current earnings."Credit Suisse maintained its "outperform" rating for IOOF with a target price of $8.45.Shares in IOOF are currently trading at $7.64, up 0.64 per cent in trade today and 72 per cent higher over the last 12 months.