‘Ready to compete’: Will AMP seek out new opportunities or stick to its knitting?

A female boxer focuses with her eyes closed, maintaining control of her thoughts.A female boxer focuses with her eyes closed, maintaining control of her thoughts.

The AMP Ltd (ASX: AMP) share price has been through a painful decline over recent years.

AMP shares are down around 80% over the past five years. That’s already a heavy decline. But they are down even further when looking at the pre-GFC share price.

After a bad showing in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, AMP has been trying to turn things around.

Part of the strategy has been to sell parts of its business. For example, the latest is an agreement to sell Collimate Capital’s international infrastructure equity business to DigitalBridge Investment. AMP sold Collimate for an upfront consideration of AU$462 million, representing a total value of up to A$699 million.

Combined with the AU$430 million from the sale of the domestic infrastructure equity and real estate business announced on 27 April 2022 and the AU$578 million from the sale of the infrastructure debt platform completed in February 2022, this values the total Collimate Capital business at up to $2.04 billion, including the value of retained assets, and up to AU$2.5 billion when including the maximum earn-outs.

AMP intends to return the majority of net cash proceeds to shareholders. This is “likely to be via a mix of capital return and on-market share buyback.” The company will use some of that money to pay down corporate debt.

So, AMP is unlocking value for shareholders through pieces of its business. But what about what remains inside AMP?

AMP’s continuing businesses

Talking on an Allan Gray webinar, AMP CEO Alexis George spoke about how AMP has been working on its businesses:

We really had to reposition the businesses we had, which is the bank and wealth management. They weren’t competitive. They couldn’t really compete against the players in the market. I think we’ve done that now on most of those businesses, in fact, all of the businesses in wealth management and they’re ready to compete. I think we really need to explore some new revenue opportunities into new ancillary revenue and I think we’ve really committed to the retirement space.

George also says that the company has been working on its digital offering, with its direct-to-consumer ability being a key focus.

However, George went on to say that the business will be considered and focused with what it spends its money on:

I think we have just got to be careful that we don’t go chasing every bell and whistle; that we stick to our knitting – innovate where it’s necessary – but not get caught up in things that don’t really add value, either to the customers or to the advisors.

Looking at the 2022 first quarter, the company said that AMP Bank grew at two times the overall system growth. This growth came with the total loan book increasing $0.5 billion to $22.6 billion despite a highly competitive market. The total deposits increased by $1.7 billion to $19.5 billion during that first quarter.

The Australian wealth management assets under management decreased $5.8 billion to $136.5 billion, with net cash outflows of $1.3 billion. This was better than the $2 billion net cash outflows in the prior corresponding period.

North inflows from external financial advisers increased 53% to $342 million.

AMP Capital assets under management on a ‘normalised’ basis declined by 0.6% to $52.5 billion. This primarily reflects redemptions from China Life AMP Asset Management money market funds.

George says that AMP has been set up for a “strong and sustainable future, with a clear strategy to grow AMP Bank” and the wealth management businesses. As noted above, it’s seeing some areas of growth in the business.

Share price snapshot

Since the beginning of 2022, the AMP share price is virtually flat. However, it’s down 16% since 5 May 2022.

The post ‘Ready to compete’: Will AMP seek out new opportunities or stick to its knitting? appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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