On 28 November 2018, AMP Limited (ASX: AMP) made an announcement on ASX, stating that it confirms the AUD$415 million pre-tax (AUS$290 million post-tax) additional advice remediation provision recognized in its first half 2018 financial results. Following the release of this news, the share price of AMP decreased by 3.292 percent as on 28 November 2018.
AMP also confirmed that AUD$210 million (pre-tax) of program running costs was not provisioned in the total program estimate as estimates were insufficiently reliable to meet accounting definition for provision. AMP also did not provision future customer lost earnings worth $45 million. As per the company’s announcement, these future lost earnings will be paid as accrued. As of now, the bank has not made any allowance for a contribution from potential recovery options.
In the announcement, AMP also clarified that the figure of A$1.185 Bn which was earlier mentioned in the Banking Royal Commission was an early estimate of the total program costs. Now the total program cost is estimated at A$778 million. AMP has disclosed that the earlier estimate of AUD$1.185 billion was based on a 9-year timeframe for remediation that was rejected by the management and the Board. In the announcement, AMP also disclosed that it is in the process of investigating the provision of general advice to corporate super plans which is mainly related to small to medium corporate super plans.
In the recently released September quarter report, AMP disclosed that the total Australian wealth management AUM increased by A$579 Mn from the second quarter of 2018 to A$132.6 Bn, with positive investment markets offsetting weaker cash flow. Further, AMP Capital external net cash inflows were A$521 million in September quarter of 2018 which are less than the net cash flows of A$616 million in September quarter of 2017. AMP Capital’s share of China Life AMP Asset Management reported A$78mn in net outflows for the September quarter which reflects the transitional phase for new regulatory reforms and challenging equity market conditions in China.
AMP’s total loan book decreased from A$20.2bn in the second quarter of FY 18 to $20.1 in the third quarter of FY 2018 which reflects a slowdown in credit growth, a period of conservative liquidity management and increased flows to the non-bank sector. New Zealand financial services’ net cash flows increased by 7% to A$81 million in the September 2018 quarter as compared to the previous corresponding period.
As per the company’s recent announcement, AMP is planning to redeem all of its $325 million AMP Subordinated Notes 2 on their first optional Redemption Date of 18 December 2018. As per the announcement, the holders who are on the register on 10 December 2018 will be entitled to receive the face value of A$100 per Note plus the final interest payment of A$1.1397 per Note.
In the last six months, the share price of AMP decreased by 38.01 percent as on 27 November 2018. AMP’s shares traded at $2.350 with a market capitalization of circa $7.14 billion as on 28 November 2018 (AEST 4:00 PM).