AMP Faces Margin Pressure but Bets on Digital Bank to Drive Future Growth
AMP reported a robust FY24 with underlying NPAT rising 15.1% to $236 million, driven by disciplined cost management and strong cash flows. The company declared a final dividend of 1.0 cents per share and is set to launch a new digital bank in February 2025, signaling strategic growth in wealth and banking sectors.
- Underlying NPAT up 15.1% to $236 million
- Controllable costs reduced by 6.1%, supporting margin improvement
- Final dividend declared at 1.0 cents per share, 20% franked
- AUM increased by 10.9% to $148.4 billion
- New digital bank launched in December 2024, public launch in February 2025
Strong Financial Performance Amid Strategic Transformation
AMP Limited delivered a solid financial performance for the fiscal year 2024, reporting an underlying net profit after tax (NPAT) of $236 million, a 15.1% increase from the previous year. This growth was underpinned by disciplined cost management, with controllable costs falling 6.1% to $648 million, and improved cash flows across its wealth management businesses.
The company’s earnings per share (EPS) rose 25% to 9.0 cents, reflecting both operational improvements and the impact of a significant share buyback program that reduced shares on issue by 22% since August 2022. AMP declared a final dividend of 1.0 cent per share, 20% franked, bringing the full-year dividend to 3.0 cents per share.
Growth in Assets Under Management and Business Units
AMP’s total assets under management (AUM) grew by 10.9% to $148.4 billion, driven by positive net cash flows and market appreciation. The Platforms business saw a 12.3% increase in AUM to $79.8 billion, supported by strong inflows into innovative retirement products and managed portfolios. Superannuation & Investments also posted growth, with AUM rising 9.6% to $56.8 billion, buoyed by improved member retention and investment returns exceeding 15% for 2024.
New Zealand Wealth Management continued to diversify revenue streams and grow AUM by 8.7% to $11.8 billion despite economic headwinds, reflecting AMP’s strategic focus on expanding its footprint in the region.
Banking Sector: Navigating Margin Pressure and Launching Digital Innovation
AMP Bank faced margin compression and subdued volume growth, with net interest income down 13.7% to $322 million and net interest margin contracting 16 basis points to 1.26%. However, the bank improved its cost base, reducing controllable costs by 11.3%, and saw a return to mortgage book growth in the second half of 2024.
Significantly, AMP launched its new digital bank to employees in December 2024, with a public rollout planned for February 2025. This digital bank aims to address revenue and funding mix challenges by offering a streamlined, app-based banking experience targeting under-served small business and personal banking customers. Early indicators are promising, with over 11,600 pre-release sign-ups and innovative features such as a numberless debit card and Mastercard partnership.
Capital Management and Future Outlook
AMP completed a $1.1 billion capital management program since August 2022, including share buybacks and dividends, reducing shares on issue to 2.5 billion. The company maintains a strong capital position with a Common Equity Tier 1 (CET1) surplus of $139 million despite a 5.5% decline in total capital resources.
Looking ahead, AMP targets a further 7.4% reduction in controllable costs to approximately $600 million in FY25, continuing its business simplification program. The company expects stable net interest margins at AMP Bank and anticipates AUM-based revenue margins of around 43 basis points for Platforms and 63 basis points for Superannuation & Investments.
AMP’s strategic priorities include scaling its new digital bank, driving growth in wealth management through adviser engagement and managed portfolios, and leveraging AI to enhance customer experience and operational efficiency. The company is positioning itself as a preeminent retirement specialist, aiming to boost financial confidence for Australians amid demographic and economic shifts.
Bottom Line?
AMP’s FY24 results mark a confident step forward, but the success of its new digital bank and cost simplification efforts will be critical to sustaining momentum in a competitive market.
Questions in the middle?
- How will AMP’s new digital bank impact its banking margins and customer acquisition in FY25?
- What are the risks and opportunities associated with AMP’s ongoing business simplification program?
- How might macroeconomic pressures and regulatory changes affect AMP’s dividend policy and capital management?