AMP reports cash flow woes, loan book growth

AMP Ltd has released its financial results for the third quarter of 2019, which showed that while AMP Bank continues to perform relatively well in the quarter, the wealth management unit experienced significant cash flow problems.

AMP Bank’s loan portfolio grew by 0.47 per cent over the quarter to $20.3 billion, the second quarter of sustained growth, after a $200-million drop in loan commitments with the bank in 2H18 results.

The bank attributes its ongoing portfolio growth to the mortgage broker channel amid “subdued” housing market conditions.

Additionally, AMP Bank deposits increased by $600 million in Q319 to a total of $14.5 billion, driven by retail and wholesale deposits, which accounted for $484 million.

According to AMP, the results reflect the bank’s strategy to move to a more deposit-led funded bank.

While AMP Bank experienced quarterly growth, the results showed that the group’s Australian wealth management unit continues to be affected by cash flow problems.

The wealth management unit saw net cash outflows of $1.9 billion, driven largely by pension payments and new regulation around superannuation.

The combined effect of pension payments to AMP clients ($600 million) as well as the Protecting Your Super legislation ($200 million) – which reduced fees and costs, and forced institutions to transfer inactive account funds to the ATO – contributed to total cash outflows of $9 billion over the quarter.

Meanwhile, cash inflows totalled $7.1 billion in the quarter, $600 million more than in the same period last year.

While AMP noted that there were no material outflows from the loss of corporate super mandates during Q319, corporate super outflows of approximately $1.4 billion are expected during the next 12 months.

AMP chief executive Francesco De Ferrari said the Q319 results were “broadly as expected” across business units.

“AMP Capital continues to experience strong demand for its real assets investment capabilities, with especially strong infrastructure debt flows and commitments of US$6.2 billion received for its fourth infrastructure debt strategy.

“AMP Bank has again delivered exceptional value to clients, which is reflected in strong deposit growth and an increase in our loan book,” he said.

“Australian wealth management is taking significant steps to reinvent its business model, building a business around client needs. 

“We have achieved stronger inflows during Q3, reflecting our improved fee competitiveness, but also higher outflows as the new Protecting Your Super legislation was implemented in Australia.”

These results come just weeks after AMP Ltd announced the merger of its banking and wealth management businesses into one organisation, under the umbrella AMP Australia.

[Related: AMP Bank CEO resigns, organisational structure revamped]