SYDNEY (Oct 17): Australian No. 4 lender Australia and New Zealand Banking Group Ltd sold its pension unit to financial services company IOOF Holdings for A$975 million ($766 million), continuing the rush of banks quitting non-core divisions.

The deal fell short of a total exit of ANZ's wealth management operations which the bank had flagged a year earlier, and which had been expected to fetch the bank about A$4 billion.

A month earlier, larger Commonwealth Bank of Australia sold its life insurance unit to Hong Kong's AIA Group for $3.1 billion while saying it may spin off its wealth management unit in an initial public offering.

The divestments are part of a trend of asset sales across Australia's banking sector as the country's lenders seek to cut exposure to fierce competition and satisfy tough new rules about how much cash they must keep on hand.

"As we've gone through this process it's become clear that it's actually better for the customers and for the shareholder that we separate the superannuation and insurance businesses and look for alternative outcomes for both of those," said ANZ Wealth Group Executive Alexis George in comments published by the Australian Securities Exchange.

"Separating the super business from the insurance business will take some time but once that happens it means we've got a clear life insurance business and that gives us much more opportunities than we've got today," George added.

ANZ announced the deal before the start of share trading on Tuesday. ANZ and IOOF both put their shares in a trading halt.

For IOOF, the deal makes it Australia's second-largest pension management business.

"It presents a unique opportunity for IOOF to significantly increase scale, create value from cost synergies, and partner with an iconic Australian institution," said IOOF managing director Christopher Kelaher in a statement.

IOOF said it would fund the deal with a A$450 million institutional share placement.