AMP in profit free fall

97% plummet after scandal

AMP’S full-year profit plummeted 97 per cent to a worsethan-expected $28 million as wealth management customers took their money elsewhere and the firm set aside millions in remediation for its various wrongdoings.

The firm, which was roasted over its misconduct at the financial services royal commission, missed the guidance it issued last month for a $30 million profit and confirmed a much-reduced final dividend of 4 cents.

AMP had made a profit of $848 million in 2017 but in the past year made a total $807 million in provisions, $656 million of which was for customer remediation related to issues made public at the royal commission. The inquiry heard AMP charged life insurance premiums to dead clients and told regulators that clients copped ongoing fees because of administrative errors when it was often a conscious effort by the company.

Reputational damage was the primary reason AMP gave when explaining why customers had pulled $4 billion from its wealth management division in 2018, with earnings from the unit falling 7 per cent.

Nonetheless, chief executive Francesco De Ferrari, who took over as CEO in December as part of a clearout of AMP’s upper ranks, said it was possible to rebuild trust in the brand. He said AMP remained “a great company with a noble purpose” despite the scandals that forced the exit of the firm’s chief executive, chair, several directors and other top-level staff.

“From everything I’ve seen, there’s lot of goodwill around the AMP brand and so I believe in time we will get back to the position where we have the trust of customers,” Mr De Ferrari said.

With Mr De Ferrari acknowledging that wealth management needed to be “fundamentally reshaped” to make it fit for purpose, investors seemed unconvinced.

Although operating earnings from AMP Bank rose 6 per cent to $148 million, helped by residential mortgage book growth, net cash outflow from wealth management over the 12 months to December 31 surged to $3.968 billion from $931 million in the prior year.

“The royal commission has been a confronting but valuable experience for the financial services industry and has served as a catalyst for change at AMP,” Mr De Ferrari said.

“We have undertaken board and leadership renewal, accelerated client remediation and sharpened our focus on delivering better value to customers.”