AMP Ltd has released its first half results for the 2020 financial year (1H20), reporting a 30 per cent slide in its banking division’s (AMP Bank) operating earnings, from $71 million in 1H19 to $50 million.
The bank’s earnings were impacted by a credit loss provision of $24 million, in anticipation of a COVID-induced deterioration in credit quality across its mortgage portfolio.
In 1H20, approximately 4,700 AMP Bank customers deferred repayments on their home loans, representing approximately 11 per cent of the bank’s portfolio.
Over 90-day arrears underlying its mortgage portfolio increased by 15 bps, from 0.63 per cent to 0.78 per cent.
“Supporting clients through the unprecedented COVID-19 pandemic has been our priority and true to our purpose,” AMP Group CEO Francesco De Ferrari said.
“While the pandemic has created challenges, it has not distracted us from executing against our 2020 commitments to transform AMP.”
The COVID impact was offset by an improvement in AMP Bank’s operating performance.
The bank’s mortgage book grew 4 per cent, from $19.7 billion in 1H19 to $20.5 billion, while deposits increased 22.5 per cent, from $13.8 billion to $17 billion.
Group profit down 42 per cent
AMP Bank’s earnings hit contributed to a 40.2 per cent decline in AMP Ltd’s underlying profit, from $256 million to $149 million.
AMP’s Australian wealth business was hit hardest over 1H20, with its operating earnings down 43 per cent, from $103 million to $59 million.
AMP Capital’s earnings fell 40 per cent, from $120 million to $72 million, while the group’s New Zealand wealth business posted operating earnings of $18 million, down 18.2 per cent from $22 million.
AMP Ltd also announced that it will be repurchasing Mitsubishi UFJ Trust and Banking Corporation’s (MUTB) 15 per cent stake in AMP Capital for $460 million.
According to Mr De Ferrari, the decision to repurchase the shareholding, which is set to be completed in 3Q20, forms part of the group’s new strategy.
“The purchase of MUTB’s 15 per cent stake in AMP Capital provides strategic flexibility for AMP to position the business for its next phase of growth under new leadership,” he said.
“We have an opportunity to build the best global private markets platforms in the world, underpinned by our strength in real assets.”
Reflecting on the road ahead, Mr De Ferrari acknowledged the continued uncertainty surrounding the COVID-19 crisis but said market conditions would present AMP Ltd with new opportunities.
“With the second wave of COVID-19 impacting the economy here and overseas, we expect conditions to remain challenging,” he said.
“However, we also see opportunities emerging over the longer term as we transform AMP to be a simpler, client-led and growth-oriented business.”
Charbel Kadib is the news editor on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.