AMP’s Cost Changes Signal Cautious Outlook Ahead of FY25 Results
AMP Limited has revised its cost allocation and cost-to-income ratio methodology, restating prior business unit profits and setting FY26 cost guidance between $630 million and $640 million.
- Revised cost allocation reallocates $48m in FY24 and $25m in 1H25 among business units
- Total controllable costs and net profit after tax remain unchanged
- FY25 costs expected to meet prior guidance
- FY26 controllable costs forecast at $630-$640 million, factoring inflation and AMP Bank GO scaling
- Cost-to-income ratio recalculated excluding investment income, aligning with industry peers
Context and Rationale for Changes
AMP Limited has announced a significant update to how it allocates costs across its business units and the corporate centre, ahead of its FY25 results due on 12 February 2026. This follows a period of transformation and a comprehensive cost reduction program under the Business Simplification initiative. The changes primarily affect technology and property-related expenses, aiming to more accurately reflect the operating costs of AMP's business units in their current structure.
Impact on Financial Reporting
Importantly, these cost allocation adjustments do not alter AMP’s total controllable cost base or its overall net profit after tax (NPAT). However, they have led to a restatement of underlying NPAT figures for individual business units for FY24 and the first half of FY25, excluding New Zealand operations which remain standalone. Specifically, $48 million was reallocated from the Group to business units in FY24, with a further $25 million shifted in 1H25. These restatements provide a clearer view of each unit's performance, though they do not meet the threshold for formal restatement under Australian Accounting Standards in the Annual Financial Report.
Cost Outlook and Guidance
AMP reaffirmed that FY25 costs are expected to be in line with previous guidance. Looking ahead to FY26, the company forecasts controllable costs in the range of $630 million to $640 million. This increase reflects anticipated inflationary pressures of 3-4% as well as expenses related to the scaling of AMP Bank GO, the bank’s digital growth initiative. This guidance signals AMP’s cautious approach to managing costs amid ongoing operational changes and market conditions.
Revised Cost-to-Income Ratio Methodology
Alongside cost allocation changes, AMP has updated its cost-to-income (CTI) ratio calculation to align with industry peers. The revised CTI excludes investment income, focusing instead on controllable costs divided by gross profit (total revenue less variable costs). This adjustment results in higher reported CTI ratios for prior periods; 63.0% for 1H25 and 67.6% for FY24; compared to previous figures. This change enhances comparability with competitors and provides investors with a more consistent measure of operational efficiency.
Looking Forward
AMP’s updated cost allocation and CTI methodology offer a more transparent and accurate reflection of its business unit performance and cost structure. As the company prepares to release its FY25 results, investors will be watching closely to see how these changes translate into operational outcomes and whether the cost guidance holds amid economic uncertainties. The scaling of AMP Bank GO remains a key factor in the cost outlook, highlighting the bank’s strategic focus on digital growth.
Bottom Line?
AMP’s refined cost metrics set the stage for clearer performance insights as FY25 results approach.
Questions in the middle?
- How will the restated business unit NPAT figures influence investor confidence ahead of FY25 results?
- What impact will AMP Bank GO’s scaling have on profitability beyond FY26?
- Will the revised CTI methodology affect AMP’s competitive positioning in the financial services sector?
