* AMP H1 underlying earnings to miss expectations

* Australian wealth unit sees outflows of A$4.4 bln

* Company says AMP Capital fees fall by 40%

* Serious revenue, margin deterioration - Credit Suisse

* AMP shares fall 12%; full results due Aug. 13

SYDNEY, July 31 (Reuters) - AMP Ltd, Australia's largest financial advisory firm, said on Friday it expects its first-half underlying profit to more than halve, blaming the coronavirus pandemic and unsettled markets for a slump in fee income and higher credit losses.

Shares in the scandal-hit firm plunged 12% following the warning and the disclosure of A$4.4 billion ($3.2 billion) in net outflows from its Australian wealth arm after the government eased rules on withdrawals from pension funds due to the pandemic.

The 171-year old company expects underlying profit from its retained businesses of A$140 million to A$150 million. That was lower than the A$309 million it reported a year earlier, and 13% lower than expected, according to Refinitiv data.

It said performance and transaction fees at its investment arm AMP Capital were expected to fall by 40%, while its bank would set aside about A$25 million to cover potential credit losses.

The announcement comes amid a company revamp by Chief Executive Officer Francesco De Ferrari following a bruising public inquiry into the finance sector that found widespread misconduct at AMP, including improperly charging fees and attempting to deceive regulators.

In a statement, De Ferrari said the firm was still committed to saving A$300 million a year, but warned the pandemic had impacted the "pace" of its cost reduction program.

"There is some serious revenue margin deterioration or large cost issues in the half," Credit Suisse analysts said in a note, adding that uncertainty around how permanent the earnings hit will be was likely to weigh on investor sentiment.

AMP will release the full details of its first half results and update the market on capital management plans, its strategy and a new plan for its funds management arm AMP Capital on Aug. 13.

($1 = 1.3916 Australian dollars) (Reporting by Paulina Duran in Sydney; additional reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Maju Samuel and Richard Pullin)