Scandal-hit wealth manager AMP profits plummet 97% to A$28m
Teetering AMP has slashed its dividend after its full-year profit plummeted 97% to just A$28m amid disastrous "reputational damage" from the banking royal commission.
The Sydney-based company reported a net profit for the year ended December 31 of A$28 million, a 97% decline from A$848 million in the previous year. The dividend was also down at 4¢ in 2018, franked at 90%, down from 14.5¢ in 2017. That reflected "the reputational impact" from the inquiry, particularly in the second half of the year, and also "advisers' focus on customer retention rather than new business", AMP said in a financial report on Thursday.
Investors delivered a bloody nose to the already embattled AMP, with shares plunging 10%, as its customers are fleeing in droves to industry super funds in what the group called "a perfect storm".
The royal commission has been a confronting but valuable experience for the financial services industry and has served as a catalyst for change at AMP"
The 170-year-old company said that its flagship Australian wealth management unit had cash outflows of A$3.97bn ($2.8bn) in 2018, equivalent to about 3 percent of asses under management. That compared to inflows of A$931 million in 2017.
"The royal commission has been a confronting but valuable experience for the financial services industry and has served as a catalyst for change at AMP," new chief executive Francesco De Ferrari told analysts as he tries to stop the hemorrhaging.
"We have undertaken board and leadership renewal, accelerated client remediation and sharpened our focus on delivering better value to customers."
The public inquiry heard how AMP had engaged in conduct such as charging fees for no service and attempting to deceive regulators.
Ferrari has pledged to rebuild the once-venerable AMP brand but Thursday's results suggest that could take longer than expected, analysts said. The higher insurance, regulatory and compliance costs alone would hurt 2019 earnings by up to 20%, Credit Suisse analysts estimate.
Ferrari said AMP had heeded the message of the royal commission and it remained "a great company with a noble purpose.
"From everything I've seen, there's lot of goodwill around the AMP brand and so I believe in time we will get back to the position where we have the trust of customers," De Ferrari said.
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