AMP Bank profit drops, book holds firm

Releasing its full-year results for the year ending 31 December 2020 (AMP’s financial year), the financial services group revealed that it had suffered a 33 per cent drop in underlying full-year profit, bringing it to just below $300 million.

Of this, the banking arm of the group (AMP Bank) saw its net profit after tax drop by around 20 per cent, from $119 million to $97 million, reflecting an increase in credit loss provisioning equating to around $24 million. 

Indeed, according to the lender, approximately 11 per cent of AMP Bank’s mortgage clients paused repayments during COVID-19. However, as at the end of 2020, more than 80 per cent of these clients had resumed repayments (or were in the process of restarting).

However, the bank noted that credit quality remained strong, with 90+ days arrears at 0.62 per cent, up from 0.66 per cent at FY19.

Overall, AMP Bank’s total loan book decreased by less than 1 per cent in 2020, from $20.7 billion to $20.6 billion, with its residential mortgage portfolio holding at around $20.2 billion.

Meanwhile, deposits increased to $16.1 billion from $14.4 billion in 2019. This raised the bank’s deposit-to-loan ratio to 78 per cent, up from 70 per cent at FY19.

Looking at AMP as a whole, the group reported statutory net profit after tax of $177 million, reversing $2.5 billion loss in FY19.

However, there was a 15 per cent drop in revenue from its continuing operations of $3.43 billion.

Assets under management in Australian wealth management were down 8 per cent and AMP Capital was down 7 per cent, reflecting “volatile investment markets and net cash outflows, which included the Australian government’s early release of super program”, the group said. The latter reportedly impacted the group by  $1.8 billion.

Notably, AMP also revealed that the night before releasing its financial results, it had been informed by US-based global asset manager Ares Management that it no longer intended to proceed with its non-binding indicative proposal for 100 per cent of AMP of $1.85 per share.

“AMP continues to engage constructively with Ares in relation to AMP Capital as part of the portfolio review,” the wealth giant said, which includes a transformation strategy for the AMP Australia (Australian wealth management and AMP Bank) and New Zealand wealth management businesses to become a “simpler, client-led, growth-oriented business”.

“AMP continues to review options for maximising the ability to grow and invest in AMP Capital, including exploring partnership options,” it said.

Over the year, the group also completed the sale of AMP Life, unlocking $913 million of surplus capital, which was divided across $344 million to shareholders and $418 million to repurchase a 15 per cent stake in AMP Capital and enable the acceleration of AMP Capital’s growth strategy. 

AMP said it anticipates the remaining capital surplus will help fund the completion of its three-year “transformation strategy”.

Commenting on the financial results, AMP CEO Francesco De Ferrari said: “2020 was a tough year across the world. COVID-19 unsettled our clients, our workplaces and the broader community.

“Volatility in markets and the economic downturn impacted the investments and financial security of many Australians and New Zealanders. True to our long-term purpose, AMP stepped up to support our clients navigate the uncertainty, providing early access to their super, pauses on their mortgage repayments, relief on their rent, and advice and guidance when needed.

“Within our business, it was also an extraordinary year, with significant internal change and the initiation of a portfolio review in 2H20. The review has made good progress, assessing options for the group’s assets and businesses, and we are confident of bringing it to a conclusion in the near future.

“Amid all these events, I couldn’t be more proud of our teams who, working remotely, maintained a relentless focus on the execution of our strategic agenda. In 2020, we have laid the foundations of our transformation, delivering 90 per cent of our commitments to investors.”

AMP did not declare a final dividend for FY20.