AMP Limited (AMP)
BUY

Don't judge a book

 11 Aug 2022
Sector: Financials

Need to know:

  • $1.5bn of excess capital
  • Underlying NPAT (overall) $148m vs consensus $122m
  • $350m on-market buyback starts now
  • $750m capital return to come in FY23, a mix of special div, buyback or capital return
  • This result is messy but fundamentally good

Investment implications

AMP has presented a complicated set of figures for its 1H22 result. The business has been transformed with several divestments and big operational changes making comparisons awkward against previous numbers. The result is further muddied by the ‘challenging economic backdrop’.

AMP’s balance sheet has been restored to health with an excess of $1.5 billion of capital. That has unleashed an immediate $350 million on-market share buyback (August 25) and this will be completed by the end of the year, chopping the share count by about 10%.

That will be followed in FY23 by a further $750 million capital return (the mix yet to be decided) although AMP’s lack of franking credits could swing it towards another buyback

The total of $1.1 billion in capital return so far is accompanied by a $400 million allocation to pay down corporate debt.

AMP is yet to complete the sale of its Collimate Capital (Sept 22) and DigitalBridge (Nov 22) and this will add further capital to the ‘return’ pile.

Additionally, there is an earnout potential of around $225 million and the potential sale of PCCP for an estimated $200 million.

AMP has not declared an interim dividend, as previously stated.

AMP Bank is expected to lift its NIM (net interest margin) from 132bp in 1H22 towards 135-140bp in 2H22. The platform business has seen improving net flows and there is still some material cost savings to be made.

We think the market is mis-reading the signals here and reiterate our Buy recommendation.

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Stock overview

Share Price

Company overview

AMP is a financial service company in Australia and New Zealand providing superannuation and investment products, financial advice and banking products.

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