AMP’s first-half profit has plunged 74 per cent to $115 million after the company set aside $290 million to refund and compensate customers it overcharged for financial advice.
The financial advice group’s revenue for the six months to June 30 was down six per cent to $7.17 billion.
AMP declared an interim dividend of 10 cents per security, franked at 50 per cent.
AMP’s result is the first since damaging revelations at the banking royal commission in April that the group charged customers for advice and misled the regulator.
The revelations claimed the jobs of former CEO Craig Meller and chairman Catherine Brenner.
AMP’s underlying profit – excluding the compensation provisions – was $495 million, down from $533 million.
AMP acting CEO Mike Wilkins said the results “demonstrated AMP’s resilience through a difficult period”.
“While there will be further challenges ahead, we have a strong foundation on which to reset the business and restore the confidence of our customers and the wider community,” he said.
“The events around the royal commission into financial services have challenged our reputation, and while we continue to monitor the impacts, we have taken action to stabilise the business and move forward.”
AMP’s wealth management division increased earnings 5.7 per cent from advice and self-managed superannuation services, despite lower fee margins and more customers switching to low-fee super products.
Citi analyst Nigel Pittaway said the results showed there was no “mass exodus” after misconduct was exposed at the commission.
“As expected, the negative publicity surrounding the royal commission has affected Australian wealth management 2Q18 net flows, which were weak at $673m but not as bad as some feared,” he said.
Mr Pittaway said he wasn’t surprised by AMP reporting the flows from this division will remain low into the second half of the year.
The company’s capital and banking divisions were up 2.2 per cent and 20.0 per cent respectively, while its financial services business in New Zealand was down 13.8 per cent.
Profit in insurance, or wealth protection, fell 98 per cent to just $1 million, which Mr Wilkins blamed on higher-than-expected claims for total and permanent disability insurance, as well as the cost of additional re-insurance, the insurance insurers buy to protect themselves.
“It’s been a challenging half year but we’re not alone in this – the competition in the industry is intense particularly in terms of pricing,” the acting chief told reporters on Wednesday.
“We also paid out $597 million in claims to our Australian insurance customers.”
Citi’s Mr Pittaway said AMP’s cost controls and better than expected inflows were positives.
“However the market is focused on bigger picture risks suggesting the result may have only limited impact on the share price,” he said.
Shares in AMP were up 13.5 cents, or four per cent, to $3.485 at 1213 AEST.
AMP’S HORROR HALF-YEAR
* Net profit down 74 per cent to $115 million
* Revenue down six per cent to $7.173 billion
* Interim dividend 10 cents, 50 per cent franked