AMP : announces 1H 21 results

AMP Australia

Australian wealth management

Australian wealth management increased its assets under management (AUM) in 1H 21, though earnings were impacted by pricing and legislative changes.

AUM of A$131.2 billion at 1H 21 increased 6 per cent from FY 20 A$124.1 billion, driven by strong investment markets.

^{[2] 1H 20 NPAT (underlying) has been restated to reflect the removal of market adjustment to investment income.}

^{[3] AMP Capital is shown net of minority interests in 1H 20. AMP regained 100 per cent ownership of AMP Capital and MUTB's minority interest consequently ceased on 1 September 2020.}

Net cash outflows of A$2.7 billion in 1H 21 improved from A$4.0 billion net cash outflows in 1H 20^[4]. Cash outflows include A$1.0 billion in regular pension payments to clients in retirement.

The North platform continued to perform favourably with 1H 21 net cashflows of A$1.4 billion (1H 20: A$2.0 billion) and AUM up 10 per cent to A$57.0 billion from A$51.6 billion at FY 20. This follows a reduction in fees and ongoing expansion of managed portfolio offers.

Advice reshape nears completion creating a more productive, professional and compliant network and commencing the move to a new contemporary advice service model.

Net profit after tax (NPAT) of A$48 million (1H 20: A$58 million), reflects the impact of pricing, legislative changes and advice practice impairments, partially offset by lower variable and controllable costs from cost reduction initiatives.

AMP Bank

AMP Bank experienced strong earnings recovery led by improved macro-economic outlook and more stable funding environment.

1H 21 net profit after tax increased A$38 million (76 per cent) to A$88 million (1H 20: A$50 million), in part due to a A$12 million release of credit loss provision taken in response to COVID-19.

Return on capital in 1H 21 was 15.8 per cent, an increase of 6.7 percentage points from 1H 20, as a result of the higher profit.

Residential mortgage book grew A$431 million to A$20.6 billion, (4.3% annualised growth) from FY 20 in a highly competitive lending environment. Total deposits at 1H 21 were broadly stable, increasing A$10 million (0.1 per cent) from FY 20, in line with strategy to optimise funding mix.

Net interest margin of 1.71 per cent in 1H 21, 8 basis points higher than 1H 20, driven by lower funding and deposit costs.

AMP Bank remains one of the lowest cost banking platforms, with a cost to income ratio of 31.7 per cent.

Credit quality was maintained with 90+ days arrears at 0.72 per cent (FY 20: 0.62 per cent), and compares favourably with peers.

AMP Bank's initial COVID-19 home loan repayment pause program has completed. Customers experiencing financial difficulty can access assistance through the bank's ongoing hardship support.

AMP Capital

AMP Capital earnings impacted by challenging conditions and lower transaction and performance fees.

NPAT decreased to A$61 million (1H 20: A$75 million)^[5] primarily from the absence of performance and transaction fees, which vary period to period. AUM-based earnings were aided by positive markets, although fell 4 per cent to A$275 million (1H 20: A$287 million); average AUM decreased 3.4 per cent to A$187.2 billion (FY 20: A$193.8 billion).

^{[4] Prior period cashflows have been restated to exclude products no longer reported from November 2020, following legislative changes to grandfathered conflicted remuneration, with Australian wealth management no longer earning fees on these products.}

^{[5] The AMP Capital business unit results are shown net of minority interests. AMP regained 100% ownership of AMP Capital and MUTB's minority interest consequently ceased on 1 September 2020.}

Continued momentum in infrastructure debt and infrastructure equity series of funds with A$1.0 billion of capital deployed in 1H 21 and strong realised returns for infrastructure equity clients from successful asset divestments.

AMP Capital completed the redevelopment of the Marrickville Metro shopping centre in 1H 21 and recently opened the first phase of the Karrinyup shopping centre development. AMP Capital Wholesale Office Fund (AWOF) continued to deliver strong investment performance over the half.

External AUM decreased during 1H 21 to A$97.2 billion, largely reflecting the exit of the AMP Capital Diversified Property Fund (ADPF). External net cash outflows were A$6.7 billion, including this one-off event.

New Zealand Wealth Management

New Zealand Wealth Management (NZWM) achieved earnings growth with 1H 21 NPAT of A$20 million, an increase of A$2 million (1H 20: A$18 million), reflecting stronger investment markets and tight cost control, offsetting the impact of margin compression from product repricing.

AUM increased to A$12.6 billion in 1H 21, up A$1.0 billion (8 per cent) from 1H 20, predominantly driven by investment market gains.

Controllable costs decreased 11 per cent to A$17 million (1H 20: A$19 million), reflecting the continuous simplification and transformation of the New Zealand business.

Maintained leading position in corporate super with 42.4 per cent share of market; continued growth in non-default KiwiSaver despite loss of default status.

In 1H 21 NZWM implemented a new investment management approach which will deliver greater value to customers and demonstrates commitment to sustainable investments.

Capital position and dividend

AMP remains well-capitalised with surplus capital of A$452 million above target capital requirements, as at 30 June 2021, down from A$521 million at 31 December 2020.

The previously announced on-market share buy-back of up to A$200 million is now complete, concluding on 30 June 2021, with the deployment of A$196 million of capital to repurchase and cancel 170.5 million shares.

AMP intends to operate a small shareholding sale facility in 2H 21 to assist eligible shareholders sell parcels of shares that are less than A$500 in value.

The board continues to maintain a conservative approach to capital management to support the transformation of the business. In line with this approach, the board has resolved to not declare an interim 2021 dividend. The capital management strategy and payment of dividends will be reviewed following the completion of the demerger in 1H 22.

Demerger update

AMP announced the conclusion of its portfolio review on 23 April 2021 with the decision to pursue a demerger of AMP Capital's private markets businesses of infrastructure equity, infrastructure debt and real estate (Private Markets).

The proposed demerger of Private Markets aims to create a more focused business, better equipped to pursue growth opportunities in its existing real assets capabilities and expand into new adjacencies.

Strong progress has been made to allow Private Markets to run as an independent business, led by its own CEO and Board with a clear go-forward strategy. In June 2021, internationally respected asset management executive, Shawn Johnson, joined as AMP Capital CEO to set its international growth strategy and lead its demerger.

A number of workstreams have been established to deliver internal operational separation by FY 21, with demerger and ASX listing to occur in 1H 22, following shareholder approval.

Director remuneration

As foreshadowed in AMP's 2020 remuneration report, the AMP Limited Board reviewed fees for the Chair and non-executive directors following the completion of the group's portfolio review. The Board has approved a 15 per cent reduction in Board and Committee fees, effective 1 August 2021. The Board will review fees again following the completion of the demerger.

Client remediation

AMP confirms it has completed all file reviews for its client remediation program. The total cost of the program will be A$823 million, of which approximately A$596 million represents payments to customers. This total program cost is within 6 per cent of original estimates (of A$778 million) made three years ago. These costs are now fully provisioned.

To date A$35 million has been paid to customers under the inappropriate advice program, with a further A$5 million offered, but not yet paid. Customers have so far received A$175 million in remediation under the fee for no service program, with payments accelerating in Q3 21 and expected to be largely completed by early Q4 2021.

Culture

AMP has continued to drive an organisation-wide program of initiatives to build an inclusive, accountable and high-performance culture.

Inclusion and diversity focus has been strengthened with AMP meeting the 40:40:20 gender diversity target at board and across the broader workforce, with work continuing at senior management level. An inclusion index, measured against global benchmarks, has been introduced to track ongoing progress.

Reporting on conduct and culture matters has been enhanced both internally and via the 2021 Sustainability report.

More detailed information on the 1H 21 result is available in the 1H 21 Investor report and presentation, both accessible at amp.com.au/shares.

Authorised for release by the AMP Limited Board.