AMP Ltd has released its half-year results for the 2019 financial year (1H19), reporting a 9 per cent decline in AMP Bank’s underlying profit, from $78 million in 1H18 to $71 million.
According to AMP, the decline in the bank’s underlying profit was driven by “higher regulatory and compliance project costs”, partly offset by growth in its mortgage book and an increase in deposits.
The bank’s home loan portfolio increased slightly over the first half, rising from $19.64 billion to $19.69 billion, but was relatively flat when compared to the previous corresponding period ($19.68 billion). AMP Bank’s total loan book grew to $20.2 billion.
The bank’s deposits increased from $13.3 billion to $13.7 billion over 1H19, and from $12.7 billion when compared to 1H18.
AMP group CEO Francesco De Ferrari was pleased with the bank’s performance, given the “slow housing market”.
Mr De Ferrari said AMP is embarking on a strategy to increase its presence in the banking sector by better integrating its banking and wealth businesses.
“We’re building on already strong momentum by better integrating banking solutions with our wealth business to increase client engagement and to increase our share of the $70-billion revenue pool in the sector,” he said.
“Our objective is double-digit earnings growth over the medium term and increased market penetration of the broker, adviser and direct channels.”
Overall group performance
Overall, AMP Ltd reported a decline in its underlying profit of $186 million (37.6 per cent), from $495 million in 1H18 to $309 million.
The group’s profit slide was driven by a halving of the underlying profit of its Australian wealth management business, which fell from $204 million in 1H18 to $103 million.
However, a $2.35-billion impairment charge has been reported, which AMP said was written down to “address legacy issues and position AMP for the future”.
As a result, AMP has recorded a $2.3-billion net loss attributable to shareholders.
New group strategy
As well as embarking on a new strategy for AMP Bank, the financial services group has announced that it would commence a three-year plan to “create a simpler, client-focused business”.
The strategy includes plans to:
- Divest majority ownership in AMP Life to release capital and further localise New Zealand wealth management, exploring options to divest.
- Reinvent wealth management in Australia.
- Grow AMP Capital through differentiated capabilities such as real assets and public markets, pursue international growth opportunities.
- Transform AMP culture to be client-led, entrepreneurial and accountable, with effective management of financial and non-financial risk.
According to AMP, the strategy will be supported by a focused and disciplined $1 billion-$1.3 billion program to “invest in transformation”, which includes:
- Investing in growth ($350–$450 million)
- Realising cost improvement ($350–$450 million)
- Tackling legacy issues by de-risking the business ($300–$400 million)
To fund the new strategy, AMP has announced it is raising $650 million via a fully underwritten placement to institutional investors combined with a separate non-underwritten “share purchase plan” (SPP) for eligible shareholders in Australia and New Zealand.
The group claimed that proceeds are expected to provide AMP with the balance sheet strength to complete the separation of AMP Life, commence the implementation of the new strategy immediately, and “continue to grow its core businesses” prior to the completion of the AMP Life sale.
The strategic initiatives are also expected to be funded by the net proceeds from the sale of AMP Life, which are expected to total $3 billion under a newly revised arrangement.
CFO steps down
Moreover, AMP has announced that its CFO-designate John Patrick Moorhead has resigned from his role to “pursue other opportunities”.
James Georgeson, currently AMP deputy CFO, has been appointed to the role of acting CFO and will immediately commence handover with retiring CFO Gordon Lefevre.
Mr Georgeson will formally transition into the role by 1 October 2019.
[Related: Mortgage growth offsets CBA's profit slide]