Capital Return Covers Over Messy AMP Result

By Glenn Dyer | More Articles by Glenn Dyer

Woohoo, investors loved the AMP’s loss-strewn June half-year report yesterday.

The reason? The decision to return of capital to shareholders by way of a special dividend from the sale of AMP Life and a $200 million share buyback (subject to stability in the market).

That return came despite a weak operating profit and a massive loss after write-downs. The shares bounced more than 10% to $1.53 in what looked like a relief rally but were really the greed gene kicking in.

AMP will pay shareholders a fully franked special dividend of 10 cents a share. But the dividend is a one-off for 2020 with no more payouts forecast for shareholders this year.

AMP also confirmed its underlying profit had more than halved to $149 million, compared to $309 million reported in the same period last year, thanks to the volatility brought on by the coronavirus crisis and foregone profit from the sale of AMP Life.

There were no more shocks or bad news in the document – no more surprise exits of senior executives, rumours or ‘scandals.’

The weak results were not a surprise – they had been telegraphed recently in a trading update in the wage of the sale of AMP Life.

The exit of the senior executive in AMP Australia though remains unexplained by the company, and there was nothing yesterday except an acknowledgment from CEO Francesco De Ferrari that the company had a deep-rooted culture problem systemic throughout the organisation.

“We’ve made progress in strengthening accountability and execution but know we have more to do,” he said in Thursday’s statement.

Operating earnings fell by 43% in AMP’s domestic wealth management business, 40 percent in AMP Capital, 30 percent in AMP Bank, and 18 percent in its New Zealand wealth management arm, the company reported in a statement to the ASX on Thursday morning.

AMP Australia, the entity that oversees the wealth management and AMP Bank, reported operating earnings of $59 million, down 42% than the same time last year.

The group said it felt the impact of the federal government’s early access scheme to superannuation, which cost at least $900 million. Assets under management slumped by 10% to $121 billion, partly due to pandemic-induced investment market volatility.

In some good news for the company, total deposits in AMP Bank increased by $2.6 billion and its residential mortgage book also rose 2.9% to $20.5 billion.

AMO said the bank froze home loan repayments for 4,700 clients and has set aside $24 million for future potential loan defaults related to the COVID-19 downturn.

Also bullish for the company was the news that it plans to repurchase Mitsubishi UFJ Trust and Banking Corporation’s (MUTB) 15% stake of AMP Capital for $460 million.

Once the transaction is complete, AMP’s existing business and capital alliances with the Japanese company will end and MUTB will no longer have a representative on AMP Capital’s board.

“With the launch of our new AMP Capital strategy, it was an appropriate time for us to reacquire the 15 percent stake in AMP Capital as we position the business for its next phase of growth and the significant opportunity in international markets,” he said.

This means AMP will now own 100% of its main business, which is possibly another reason why the shares rose sharply on Thursday, despite a negative day for the wider market.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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