The outgoing chair of AMP, Debra Hazelton, and chief executive Alexis George. Picture: John Feder
10:17AM FEBRUARY 15, 2024
AMP’s chief executive, former banker Alexis George, was given some rare good news on Wednesday with a positive market reaction to the wealth company’s 2023 results.
After a difficult two-and-a-half years as chief executive, and the recent uncomfortable reminders of the blows dealt the company from the Hayne royal commission five years ago, the news of a better than expected 6.5 per cent increase in underlying net profit to $196m, and the next stage of the $1.1bn capital return process outlined, saw investors back buying.
George, a former senior executive with ANZ, has had her hands full working her way through a long list of painful legacy issues since her time running what was once the largest wealth company in the country.
Putting her head down and working closely with chair Debra Hazelton, who stepped into that role in August 2020 after the sudden resignation of David Murray, George has undertaken a massive streamlining of the business including the sale of AMP Life, AMP Capital and its self- managed super fund administration business, SuperConcepts.
She has also reached a $100m settlement with AMP agents over the buyer of last resort legacy arrangement which was hanging over the company, settled the class action with AMP shareholders and returned a significant amount of capital ($750m) to shareholders since August 2022.
The process has included a relentless attention to costs, looking at ways to expand the deposit base and the market of AMP Bank, which is now the largest single generator of profits for the organisation, and having conversations about the future of some of its existing operations, particularly the loss making advice business and its US property venture.
When this reporter noted to George that the market had responded well to the results in a short briefing afterwards, she replied cautiously, “this time it has”.
Only a few months ago investors were reacting badly to her warnings about margins at the bank being under pressure due to the competitive nature of the sector and the bank’s narrow financing base amid a difficult market.
There is no question that George has achieved much in her time at AMP’s headquarters in Sydney’s Bridge Street – far more modest than its former offices in the iconic building which has dominated the Circular Quay skyline for decades, the reminder of another era.
But, despite a sense of relief that AMP management has been working through big changes over the past few years – which are at last starting to bear fruit – there is still much to be done.
Potential investors will have to decide for themselves if the glass is now half full and there is a clear place in the market for a more slimmed down banking and wealth company, or if its future is still finely balanced.
There will be no let-up from the pressure for attention to cost control in meeting its target of $120m in cost reductions by the 2025 financial year.
There are also those who continue to insist AMP should not be in the banking business. The bank’s underlying net profit for the half year of $93m made up almost 50 per cent of earnings.
The fact that this was down from the $103m earned in 2022 was a drag on earnings.
One analyst challenged George during the call about its low returns on cost of capital, pointing out sharply that she would have got a better deal putting the same money into a term deposit.
But there are plans outlined to work through the issues facing the bank including its proposed step up in digitisation and expanding into the small business sector.
Mike Hirst will take over as the chair of AMP.
On that issue, the experience of Mike Hirst – who was managing director of Bendigo and Adelaide Bank from 2009 to 2018, after roles with Colonial, Westpac and back to the days of Chase AMP Bank – as AMP’s new chair from April with the retirement of Hazelton, will be invaluable.
Hirst has been on the board since July 2021 but his considerable experience in the two sectors where AMP operates – banking and wealth management – has the potential to see another strong partnership between the AMP chair and chief executive.
Another key area for attention is the advice business which reported an underlying loss of $47m for the half – not good news but a 30 per cent improvement on the loss for the comparable six months in 2022. George admitted turning around the fortunes of its advice business and looking for possible longer term solutions is a significant issue ahead of her.
Rival wealth manager Insignia last year announced plans to spin off its loss-making advice business into a stand-alone business.
The two groups are looking hopefully at the proposed reforms to the laws around the delivery of financial advice outlined by federal Assistant Treasurer Stephen Jones last year which have the potential to remove red tape from the business including the need for expensive statements of advice.
While the outlook in early 2024 for the advice sector is a lot better than it was, with the government having spent most of 2023 digesting the recommendations of Michelle Levy’s Quality of Advice Review, there is still a long way to go with the laws expected to pass later this year.
The question for George is whether AMP can attract more capital inflows in the competitive wealth management sector.
The royal commission proved to be a boon for the industry super sector which has long passed the for-profit sector, with assets growing at a relentless pace.
AustralianSuper now has $320bn in assets under management and 3.3 million members, compared with $140bn and 2.2 million members in 2018 before the start of the royal commission.
AMP’s assets under management are a more modest $120bn across all its platforms including its Master Trust, which saw fund outflows last year.
Analysts gave George a tick for delivering a higher than expected underlying profit but have raised questions about whether she can deliver on further cost cutting and the company’s capacity to attract new capital inflows.
As George points out, AMP had a larger proportion of customers in retirement than many other wealth management companies which will inevitably see money being paid out to retirees.
George argues it has a strong brand which will become increasingly important as more of the population heads towards retirement. In short, there is much still to be done, but George deserves credit for what she has executed.
George and Hirst have their work cut out reshaping and “right sizing” the business.
AMP Price at posting:
$1.12 Sentiment: Hold Disclosure: Held
(20min delay)
