Shares in wealth manager plunge in earnings bloodbath
Derek Rose |
Wealth manager and financial services giant AMP has become the latest victim of an increasingly explosive corporate earnings season, with its shares tanking after a series of one-off costs and concerns about its loss-making new digital bank.
AMP shares plunged 28.1 per cent to close at a seven-month low of $1.25 on Thursday, the same day furniture e-retailer Temple & Webster slumped 32.6 per cent on its own half-year results.
The moves confirm warnings from fund managers that Australia’s reporting season was becoming more volatile, with algorithmic trading driving huge moves in stock prices based on profit results.
Shares in Commonwealth Bank jumped 6.8 per cent on Wednesday, its biggest one-day gain since the start of the pandemic, after Australia’s biggest bank beat earnings expectations.
AMP’s result came after the retirement solutions specialist said settling legacy legal claims and a business simplification program had led to its statutory profit for 2025 falling 11 per cent to $133 million.
Excluding those one-off costs, its underlying net profit rose almost 21 per cent to $285 million, helped by higher results in its superannuation and investments arm and the North super and pension wrap platform business.
The result was at the top end of market consensus.
Chief executive Alexis George acknowledged the market’s negative reaction during a conference call with analysts on Thursday.
“I don’t think any of us are immune to the shareholder reaction today and we’ll certainly take that into consideration, but I want to reiterate that I think these are a credible set of results.
“We’ve delivered on our promises and I feel proud of what sits in front of us today.”
In an earlier interview with AAP, Ms George, who is retiring in six weeks, said AMP’s advice platform had performed particularly well.
“But all business units are showing improvement,” she said.
AMP has slimmed down and simplified its business considerably under Ms George’s five-year tenure as CEO, focusing on the wealth and retirement sector as well as its banking arm.
AMP Bank’s underlying profit dropped 9.8 per cent to $55 million, reflecting the cost of scaling its new digital bank, which is aimed at individuals and micro-businesses.
AMP Bank GO, which launched in February, suffered an underlying loss of $10 million.
It has grown to $310 million in deposits and 15,665 customers, which AMP said was ahead of expectations.
But some analysts weren’t impressed, questioning why AMP even needed to operate a bank, particularly one that was losing money.
“Historically, we asked you two to three years ago, why do you own the bank? What’s your competitive advantage? You couldn’t articulate one, right?” said Lafitani Sotiriou from MST Financial.
“You still haven’t shown it yet. So why should the investor community or shareholders continue to sit back and watch money being torched going into the bank?”
Ms George said it was a “fair question” and AMP was aware of the return versus the cost of capital, but she believed benefits would start to flow from the new digital bank by 2027.
She said 2025 was an important year for AMP with the resolution of legacy issues and stabilisation of the group’s portfolio.
AMP has previously been dealing with class actions following the banking royal commission, concluded in 2019, which found it had charged clients fees for no service, although some cases did not eventuate.
AMP will pay a final dividend of two cents per share, taking the full payout for the year to four cents.
AAP
