AMP Limited (AMP)
BUY

Storm clouds to clear

 16 Feb 2023
Sector: Financials

FY22 RESULT

Need To Know

  • Short-term factors drive large one for earnings miss 
  • Capital return program remains strong. A$758m of capital to be returned to shareholders over FY23 
  • Re-affirm our Buy rating

Result Highlights

Revenue A$1,378m vs A$1,617m market 

Group EBIT was A$228m vs A$280m market

EPS was marginally below consensus at 5.7cps (5.9cps mkt).

Dividend was re-instated for FY22 at 2.5cps, 20% franked (paid in April).

Excess capital remains strong at ~A$1.5-A$1.6bn.

Earnings from AMP Bank, NZ, along with Group corporate costs were in-line. 

AMP loan book grew A$2bn to A$23.8bn due to organic growth and acquisition of Nano loan book. 

The earnings miss is concentrated in the flagship Australian wealth business. The smaller components of this business which AMP classify as “Wealth Other” includes services such as MAG, SuperConcepts were the source of the ~A$25m miss. The market had been expecting earnings of ~A$45m in the half.  

Capital Return Structure

AMP continue to progress towards its A$1.1bn (A$267m completed) commitment for capital returns:

  1. Of the initial A$350m on-market share buyback, A$83m (~24%) is still to be completed.
  2. An additional A$400m of capital is to be split between the FY22 full year dividend (A$75m to be paid in April) and other capital initiatives over FY23 (A$325m).
  3. A further A$350m is earmarked to be released in FY23 in order to meet the A$1.1bn capital return commitment. 

Investment View

AMP continue to progress with finding ways to return the A$1.5bn-A$1.6bn excess capital to shareholders. This equates to ~40% AMP’s current market cap. We expect capital returns will likely continue over FY24 given the significant size of the held excess capital. 

Whilst the result was a miss and warrants a negative share price reaction, we question the >10% share price move as an overreaction. Our investment case on AMP is based on the ongoing turnaround of the Group. The earnings potential of AMP was masked by short-term impacts in a small part of the Australian Wealth Management business, which we don’t think will repeat. 
We re-iterate 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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