AMP Limited’s Net Profit fell 74% due to misconduct inquiry


In line Financial Performance for 1H 2018: AMP Limited’s (ASX: AMP) stock rose 4.48% on August 8, 2018 (before market close) after the company delivered 5.7% growth in underlying profit due to cost cutting for 1H 2018. However, AMP for the first half reported 74% fall in the net profit to A$115 million as  the company set aside cash to compensate customers it sold bad advice, and said that people are still withdrawing money on the back of a misconduct inquiry during the Royal Commission. The 74% fall in the profit is in line with the analysts’ expectation, and represented resilient performance despite Royal Commission impact. Moreover, for 1H 2018, AMP Bank’s earnings grew 20 per cent on 1H 17.

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There is continued momentum in AMP Capital with operating earnings up 2 per cent on 1H 17 during period on the back of investment in real assets capability and international expansion. Australian wealth management was resilient in a challenging environment as for 1H 2018, the segment’s operating earnings increased 6 per cent to A$204 million and assets under management increased 6 per cent to A$132 billion. Australian wealth protection profit margins were down to A$46 million compared to A$49 million in 1H 17, and the operating earnings witnessed decline to A$1 million due to higher than expected claims activity and reserve strengthening on a large terminated group plan. Further, AMP delivered strong performance on controllable costs due to 2017 business efficiency and restructure activities and is on track to at least achieve FY 18 cost guidance. Additionally, AMP is targeting total FY 18 dividend payout at lower end of 70%-90% guidance range. As a result, AMP stock has fallen 18.69% in three months as on August 07, 2018 and is trading at a P/E of 11.77x.

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1H 18 Financial Performance (Source: Company Reports)

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