Is the FY25 outlook compelling for AMP shares?

AMP Ltd (ASX: AMP) shares have not performed well compared to the S&P/ASX 200 Index (ASX: XJO). In the 12 months to 30 June 2024, AMP shares fell by 2.6%, as shown on the chart below, while the ASX 200 rose by 7.8%. Therefore, the ASX financial share underperformed by over 10%.

Of course, it’s important to note that AMP’s financial year follows the calendar year, so while the Australian 2024 tax year is over, AMP still has another six months of its FY24 to go.

AMP has been facing headwinds in recent times from banking competition and a shifting environment in the financial advice space. Analysts are not expecting a spectacular recovery for the company, but have suggested it could see profit slowly climb.

Before considering the outlook for the next 12 months or so, let’s review the latest financial updates from AMP.

Earnings recap

In the FY23 result, which was released in February 2024, AMP said its underlying net profit after tax (NPAT) grew by 6.5% to $196 million. It also paid a 2023 final dividend per share of 2 cents.

AMP Bank said its underlying NPAT was $93 million, down from $103 million in FY22. The decline was due to a weaker net interest margin (NIM) compression and growth moderation. Its platforms’ underlying NPAT of $90 million was higher than FY22’s $65 million. The advice underlying net loss was $47 million, an improvement of 30.9%.

In mid-April, the business revealed its quarterly update for the three months to March 2024.

It said AMP Bank’s total loan book was $23.5 billion at March 2024, down from $24.4 billion in the fourth quarter of 2023. AMP Bank total deposits grew to $21.4 billion, up from $21.3 billion in the 2024 fourth quarter.

Platforms net cash flows were $201 million, up 32% year over year. North inflows from independent financial advisers (IFAs) increased 22% year over year to $544 million. Platforms assets under management (AUM) increased to $74.3 billion, up from $71.1 billion in the fourth quarter of 2023.

AMP also said its superannuation and investments AUM increased to $54.1 billion, up from $51.9 billion in the fourth quarter of 2023, with net cash outflows reducing to $371 million (down from $610 million of net cash outflows in the first quarter of 2023).

Finally, New Zealand wealth management net cash outflows were $5 million, while AUM increased to $11.2 billion.

Outlook for FY24 and FY25 for AMP shares

At the time of the 2024 first quarter update, AMP Chief Executive Alexis George said:

We are navigating the headwinds faced by AMP Bank by carefully managing our loan and deposit books, to help address margin pressures. We are making good progress on the development of our digital small business and consumer bank offer, launching in Q1 25, to lessen funding risks over the medium term by broadening the customer base and introducing a compelling transaction account offer that will help diversify and build deposits.

Our wealth management businesses, Platforms, Superannuation & Investments and New Zealand, benefited from the positive investment markets, while in Australia pension payments increased as we continue to see the impact of the lifting of minimum drawdown limits that came into effect in July 2023.

In terms of projections, UBS forecasts AMP to make a net profit of $220 million in FY24 and pay a dividend per share of 5 cents.

The broker predicts AMP’s net profit can rise by 15% to $253 million in FY25. According to UBS, AMP shareholders are forecast to receive a dividend per share of 7 cents in FY25.

UBS calls AMP shares a sell, with a price target of 98 cents.

The post Is the FY25 outlook compelling for AMP shares? 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.