AMP Share Price Down as it Cuts Dividend, Flags 96% Profit Drop

At time of writing, the share price of AMP Limited [ASX:AMP] is down 4.7%, trading at $2.42.

It is currently down more than 53% over the past 12 months, in a brutal period for the stock:

AMP Share Price

Source: marketindex.com.au

The embattled wealth management company has been subject to rigorous scrutiny throughout the banking inquiry. The royal commission found AMP had misled ASIC about the nature and extent of its fees for no service behaviour.

The inquiry heard that AMP continued to deduct insurance premiums, even after being notified of a customer’s death. 

What’s happened to AMP’s share price?

Investors reacted negatively to an announcement made this morning,  in which AMP advised its profit attributable to shareholders for FY18 would be approximately $30 million.

This would be a drop of 96% from FY17’s profit of $848 million.

AMP flagged the drop in profit after confirming it would set aside another $200 million to cover the cost of customer remediation related to issues heard at the financial services royal commission.

Of this provision, AMP confirmed it would set aside $186 million (pre-tax) for remediation program running costs and $14 million (pre-tax) to cover customer lost earnings for 2H 2018.

Underlying profit is estimated to come in at about $680 million, still down 35% on 2017’s $1.04 billion.

The royal commission has clearly taken its toll, with the remediation bill in H2 FY2018 costing approximately $240 million in total.

What’s next for AMP?

According to some analysts, AMP isn’t out of the woods yet. AMP and financial services giant IOOF Holdings Limited [ASX:IFL] could face up to more than $2 billion in combined costs from cleaning up their acts.

Having already lost their CEO to the banking royal commission, Chairman David Murray is also under pressure with shareholders furious with the decision to sell AMP’s life insurance operation.

AMP also forecast a shaky outlook for FY19, citing external market conditions and a difficult regulatory environment.

In light of their poor 2H 2018 performance, the company said they anticipate cutting their final dividend to be four cents per share. Their last dividend paid 10 cents per share.

So far, a hint that Macquarie Group Ltd [ASX:MQG] would launch a takeover, has failed to materialise.

New CEO Francesco De Ferrari has been tasked with turning the ailing business around.

AMP will release its full-year results on 14 February.

Regards,

Ryan Clarkson-Ledward,
For Money Morning


Lachlann Tierney is a writer for Markets & Money. He has lived and studied in the US, the UK, and Australia. With an MSc from London School of Economics (LSE) he brings a strong grasp of geopolitics and world affairs to his analysis. Lachlann is always on the lookout for the news that will give you an edge in tomorrow’s markets.


Leave a Reply

Your email address will not be published. Required fields are marked *

Markets & Money