AMP has indicated its profit for the first half of the year is expected to halve year-on-year, with the group feeling the heat from the virus-induced market volatility and its credit loss provision.
While its results for the first half are being finalised and are subject to audit review, the wealth giant has forecast a first-half underlying profit of $140-150 million, declining from its result of $309 million in 1H19.
Retained business unit operating earnings are expected to be $195 million – with AMP Capital being the largest contributor, giving $70 million (a 42 per cent drop for the investment arm year-on-year).
AMP Capital is expected to see performance and transaction fee revenue reduce by around 40 per cent compared to the prior corresponding period, due to market impacts.
Seed and sponsor income valuations are also estimated to reduce the segment’s earnings by around $16 million, reflecting a devaluation of equity and infrastructure sponsor investments.
Meanwhile, the wealth management business has expected earnings of around $60 million, a 42 per cent plunge from the year before, after copping $4.4 billion in net cash outflows.
Around $900 million had been paid out through the government’s early release of super scheme and a further $1.3 billion had flowed out with lost corporate super mandates during the half.
AMP Bank on the other hand has expected operating earnings of around $50 million, a 30 per cent decrease from the year before, with a credit loss provision impacting it by about $25 million.
AMP is due to report its interim results on 13 August – where it has promised it will reveal a new AMP Capital strategy.
The group is also set to provide an update on its transformational and capital management strategies.
AMP chief executive Francesco De Ferrari commented: “The pandemic has presented many challenges but has not distracted us from our mission to transform AMP into a simpler, client-led, [growth-oriented] business.”
“Our strong capital position and liquidity have positioned us well to respond, though our [first-half] results have been impacted by the market volatility.”
AMP also reported the pandemic has impacted the pace of investment spend, including its cost reduction program – although the group remains committed to delivering $300 million of annual run-rate cost savings.
The recently signed off sale of AMP Life was also said to simplify the portfolio and free up capital.
Mr De Ferrari said the completion of the “highly complex sale of AMP Life… simplifies our portfolio and sets us up well for the future”.
The company also stated its remediation program has remained on track and is expected to be 80 per cent complete by the end of the year.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].