The banking giant is selling the wealth management businesses to IOOF Holdings, it said on Tuesday, in a move that will narrow its focus onto traditional retail, business and institutional banking.

However, some in the market were disappointed that after a lengthy review of its entire wealth operations, ANZ is not yet selling its life insurance business, as National Australia Bank did last year, and Commonwealth Bank is doing.

Instead, ANZ will spend millions of dollars separating the life insurance arm from the planning and super businesses it is selling to IOOF, and consider other options for offloading insurance in the future.

The deal is a reversal of moves in the early 2000s to bulk up in wealth, by buying into ING Australia's wealth management business, which it then purchased in full in 2009 under former chief executive Mike Smith.

ANZ will make a $120 million loss on the sale, because of hefty costs from separating insurance from the other businesses, a write-down in its carrying value, and a loss on treasury shares.

ANZ wealth group executive Alexis George said separating life insurance from the other parts of the wealth division would give the bank a "cleaner look" at how to scale back its role as a manufacturer of life insurance policies.

"ANZ is still committed to the strategy of not manufacturing insurance. So we need to look for alternatives for insurance. It may take some time. I just want to be clear about that," Ms George told the bank's in-house news service, BlueNotes.

Banking groups have been selling off the parts of their businesses that hold life insurance risk, amid weak returns and tougher capital requirements. Yet banks also remain keen to distribute products to retail customers, and ANZ's sale to IOOF includes a 20-year deal to make IOOF super and investment products available to its retail customers.

The deal leaves ANZ with OnePath life insurance and general insurance, group and individual insurance, ANZ Financial Planning and lenders' mortgage insurance.

Velocity Trade analyst Brett Le Mesurier described the sale as a "miserable outcome" for the bank, and predicted it could take about a year for ANZ to also sell its life insurance business, because of the complex separation process.

"ANZ did not understand the ING business it acquired in 2001 and has maintained an unrealistic view of its value. Therefore, they achieved only a partial sale after a year of trying. This is a miserable outcome," said Mr Le Mesurier, who has a "sell" rating on ANZ.

UBS analyst Jonathan Mott, who has a "neutral" rating on the stock, said he was "slightly disappointed" ANZ had not sold a larger proportion of its wealth arm by now. Mr Mott said the businesses being sold only contributed 0.5 per cent of ANZ's profit in the last financial year.

Bell Potter analyst TS Lim, who has a "hold" rating, said it appeared ANZ's original plan to sell its entire wealth division had been complicated by Commonwealth Bank's "first mover advantage," after CBA found a buyer for its life insurance operation last month.

IOOF will hold a $450 million fully underwritten institutional placement, a share purchase plan and a engage new debt facilities to help fund an acquisition that is expected to complete within 12 months.

It said it would become Australia's second-largest advice business by adviser numbers.

Ms George said the bank had increased its options around exiting life insurance manufacturing but that picking the right one would take some time.

"By partnering with IOOF, we are able to create greater value for our shareholders while also providing our customers with access to quality wealth products," Ms George said.

Analysts previously estimated the value of ANZ's entire wealth business at about $4 billion.

The sale comes before ANZ will report its full-year results next Thursday, to be followed in the coming weeks by NAB and Westpac.

With AAP