AMP CEO Alexis George remains optimistic about the future of the financial services firm despite challenging economic conditions and a number of looming class actions.
In its half-year results released on Thursday, AMP reported that its underlying net profit after tax (NPAT) remained flat at $112 million while its statutory NPAT fell 44.3 per cent to $261 million.
Speaking with InvestorDaily, Ms George said she was confident about the outlook for AMP while noting the “difficult economic environment” that is affecting many of its customers.
“While interest rates look like they may be abating in terms of further increases, inflation looks like it’s slowed down, there’s still a lot of customers out there experiencing hardship,” she said.
“So I acknowledge that. I think we’ve prepared ourselves well for that, though. We really have tackled the cost problem. And we’ve made commitments today around cost.”
Among these commitments are a new business simplification program which will target a $120 million reduction in AMP’s cost base by the end of the 2025 financial year.
“We’ve made sure that we’ve got a really strong balance sheet, which is important when you’re in that environment,” Ms George continued.
“I think we’ve started to rebuild our reputation and trust with our customers, but also with our advisers, and that’s something which is really important to do if we want to be successful.”
AMP recorded a $50 million provision in its half-year results in response to the Federal Court’s judgement in a class action related to changes made by AMP Financial Planning to its Buyer of Last Resort (BOLR) policy back in 2019.
The firm has elected to temporarily pause the third tranche of its $1.1 billion capital return program due to the uncertainty surrounding the class action as well as other litigation matters.
“We’ve done the best we can to estimate the cost of the judgement as we understand it today,” Ms George explained.
“But I want to stress, we just put our orders in yesterday, and the judge now – and believe me, this is a learning experience – the judge now has to consider the plaintiff’s orders, our orders, and then make final orders, and we expect that may occur this month, and then we’ll decide whether we do need to appeal on any aspects.”
As part of its results, AMP also noted that a hearing for a shareholder class action against it is due to commence in the Supreme Court of NSW on 21 August.
Additionally, there are two further “legacy” class actions against the firm, including a superannuation class action and a class action relating to commission for advice and insurance, but Ms George indicated that AMP could not yet determine what the impact of these may be.
“There’s four class actions out there. They’ve been out there for a long time. Two of those are not well defined as we sit here today, and I have no even dates,” she said.
“The third one, which is the shareholder class action, is due to start in a couple of weeks, we may get a better idea then. We’re probably going to fight that very hard.”
Turning to the results of AMP Bank during the first half, net interest margin (NIM) was reported to have increased by 7 basis points to 1.39 per cent. But the firm has forecast that NIM for the full year will be in the range of 1.30–1.35 per cent due to the “competitive funding environment”.
“When you talk about mortgages, we have to be competitive. We don’t have to be top, but we have to be competitive in terms of price, and we have to be competitive in terms of service and knowing where we can compete in the niche spots,” Ms George said.
“But I think more importantly, for us as a challenger bank, it’s around the funding. And you’ll see that the competitiveness for deposits, which is our main source of funding, really has grown over the last six months, and that’s why you’ll see that we’re projecting that the net interest margin will be lower in the second half. It’s really around that funding.”
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.