(Adds further details) Feb 16 (Reuters) - Australian wealth...

(Adds further details)

Feb 16 (Reuters) - Australian wealth manager AMP (AMP) posted around 34% fall in annual underlying profit on Thursday, citing market volatility and margin compression at its banking unit.

"Our profit for the year reflects the challenging economic environment we are facing," said chief executive officer Alexis George.

Heavy competition in the housing loan sector and customer preference for lower margin fixed-rate loans have weighed on margins of AMP Bank.

Net interest margins at AMP bank fell to 1.38% for the year from 1.62% a year earlier, primarily driven by mortgage margin compression but was partially offset by favorable deposit margins.

Assets under management at AMP's flagship Australian wealth management unit fell about 13% to A$124.2 billion, impacted by the decline in investment markets, and net cash outflows of A$5.3 billion.

The company said it repriced offers in Master Trust and Platforms segment of the wealth management unit to retain and attract customers as competition rises.

For the year ended Dec. 31, the 174-year-old firm reported an underlying net profit after tax of A$184 million ($127.03 million), compared with A$280 million a year earlier, and declared a final dividend of 2.5 Australian cents per share.