AMP advice losses continue despite improvement

AMP has reported its first-half results, with an underlying net profit after tax (NPAT) of $112 million for the first half of 2023.

The advice segment saw NPAT losses of $25 million, though this was a 16.7 per cent improvement on the $30 million loss seen in 1H22.

AMP’s statutory NPAT of $261 million, which was down from $469 million in 1H22, predominantly reflects the net gain of $209 million on the sale of the international infrastructure equity business and the real estate and domestic infrastructure equity business, and SuperConcepts. The first half 2022 result was also buoyed by the gain on sale of the infrastructure debt platform of $390 million.

Progress on transforming the advice business continued, AMP said, with the underlying NPAT loss improvement reflecting the ongoing focus on costs and scaling of practices to deliver efficiencies. Controllable costs improved 9.1 per cent compared with 1H22, with “further initiatives completed in 1H23 expected to flow through in 2H23”.

AMP added that its revenue per advice practice increased 10.3 per cent. According to AMP’s analysis, 50 per cent of practices in the AMP Advice network generate revenue over $1 million, compared with 30 per cent in the broader industry.

AMP chief executive Alexis George said: “The performance of our underlying businesses continues to improve, with AMP Bank achieving disciplined mortgage growth in a competitive environment, the North platform significantly increasing inflows from independent financial advisers, advice further reducing costs, and Master Trust operating more efficiently and delivering strong investment returns for members.

“As part of our capital management program, we have returned $610 million in capital to shareholders through the share buyback and dividends in the past 12 months, and we have a remaining $140 million to be returned by the end of October 2023, through the interim dividend we have announced today and further share buybacks.”

In response to the 5 July judgment in the financial adviser class action, AMP said it has booked a provision of $50 million for the half year, which reflects a “current assessment of the potential liabilities related to the various advice practices that were the subject of the judgment”.

“The process for the court making orders from the judgment is ongoing and until finalised, we won’t make a decision on any appeal,” Ms George said.

“Given the current uncertainty around the court’s judgment and other litigation matters, we are taking a prudent approach with our capital and liquidity and will pause tranche three of the capital return. We will review the decision to pause tranche three by no later than the end of the year. We remain committed to returning excess capital to shareholders and will not be engaging in large scale M&A activity in the near term.”

Ms George added that the organisation is focused on “reducing costs and improving efficiency”, but that the business is on track to absorb around $50 million of additional costs due to inflation and stranded costs related to sold businesses.

“Today, we have laid out a path for further simplification of AMP. We have outlined a target to deliver $120 million in run rate controllable cost savings by FY25, with a $60 million reduction in FY24 and a similar number for FY25,” she said.

“This will be achieved through simplifying our technology architecture, removing stranded costs, reducing group costs including property, continued focus on the advice business, replatforming our Master Trust business and a disciplined approach to project spend.

“These cost initiatives are expected to reduce our cost to income ratio from the current 66.2 per cent to the low 60s, with cost efficiency to be a continued focus for the group.”