AMP Limited (AMP)
BUY

Earnings beat. Capital return paused

 10 Aug 2023
Sector: Financials

1H23 RESULT

Need To Know

  • ~10% beat on Underlying Net Profit After Tax (UNPAT). Advice remains the laggard but is improving. 
  • Tranche 3 Capital management initiative paused (not cancelled) till later in the year. Awaiting greater clarity on litigation matters
  • Cost review completed and A$120m cost out by FY25 program announced. 

Result Overview:

UNPAT A$112m vs A$102m consensus (~10% beat).

EPS 3.8cps and DPS 2.5cps, in-line with consensus.

Excess capital of A$848m, in-line with expectations.

Tranche 3 of the capital return program paused awaiting clarity on litigation matters. Update expected "no later" than 31 Dec 23.

A$50m (pre-tax) provision was allocated for Financial Adviser Class Action. Market estimates suggested this could be much higher. 

Cost review completed. The cost-out program announced targeting A$120m in cost reductions by the end of FY25. Requires a one-off investment of ~A$120-150m.

Investment View

AMP is continuing to move forward with its restructuring program. With the cost-out program now announced, we believe this should give AMP a clearer path to stronger business operations. 

The capital position remains strong. We expect it will be more than enough to cover, capital returns, litigation matters and the cost out. Operationally AMP is still improving and is continuing to display more promise for where the business can be in 12-24 months. 

Tranche 3 being paused is likely to take the spotlight off the earnings beat. This may dampen the share price reaction today. We note that AMP's commitment to capital return remains and the announced pause is not a cancellation or a shift in commitment. 

We re-affirm our Buy rating. 

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Stock Overview

Share Price

Company Overview

AMP Limited is a wealth management company. It offers advice on retirement, wealth management, mortgages, technology investment, real estate, equities, and funds.

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