AMP to Stay on Sidelines of Australian Mortgage Market —...

AMP to Stay on Sidelines of Australian Mortgage Market — Interview

SYDNEY--AMP will remain on the sidelines of the still- competitive Australian residential-lending market amid higher funding costs, continuing to focus on small businesses instead, its chief executive said.
The Australian wealth manager has deliberately lowered growth in its residential mortgage book in order to manage both margins and costs. Over 2023, AMP's mortgage book growth was around 1.7%, or around two-thirds of overall sector growth.
One reason for this slowdown in growth was the competitive funding environment, which may get fiercer as lenders repay the Reserve Bank of Australia's term funding facility, said AMP CEO Alexis George.
"As cheaper funding rolls off, mortgage competition, I think will remain competitive... but it's kind of normalized now," George said in an interview on Wednesday.
"You can expect nominal, if any, growth in our mortgage book through this year. So it's just replenishing those deposits that roll over.
"Deposits and diversifying funding bases are a key battleground for Australian banks, as financial institutions continue to repay the RBA's TFF. This pandemic stimulus measure provided 188 billion Australian dollars (US$121.32 billion) to the country's authorized deposit-taking institutions. According to the RBA, most scheduled TFF maturities were due in the September 2023 and the upcoming June 2024 quarters.
AMP has pre-funded much of its TFF repayments, said George, but has still seen its net interest margin, a key profitability measure that compares funding costs with what is charged for loans, come under pressure.
AMP's NIM was 1.27% for the 12 months through December, compared with 1.38% for the previous year. For 2024, AMP expects its NIM to be between 1.10% and 1.15%.
While AMP has said that it wants to address NIM compression, George said the wealth manager was focused on its strategy around small and micro-size businesses, as well as rebuilding its transactional capability.
"We needed to diversify our funding base... We needed to create enterprise value in terms of our banking book," she said.
"Clearly, the small business banking is an area we will move into over time," George said.
AMP on Wednesday handed down its full-year results, posting a 32% fall in net profit to A$265 million.
But one highlight was controllable costs of A$744 million, at the lower end of guidance and below the previous year's level of A$757 million.
AMP said it expects 2024 controllable costs at around A$690 million, which George said the company was confident of meeting.
"We did hard work through 2023 to make sure we can do that," she said.

WSJ