Battered wealth manager AMP Limited [ASX:AMP] has continued its share price slump this morning, tumbling another 2.05%, down 9 cents to $2.35.
AMP, which has been embattled with the Banking Royal Commission, has seen its share price drop over 54% the last 12 months as its malpractice was put on public display.
Effects of commission on display
AMP reported its results for financial year 2018 this morning, finally revealing the scars it received during the Hayne Commission.
Net profit fell 96.7% to $28 million from $848 million in FY17. The drop in profit is attributable to advice remediation and subdued performance in wealth protection according to the wealth manager.
The profit was a little off the mark, with some analysts expecting profit of around $30.8 million according to the Australian Financial Review. AMP said in January it was expecting profit of $30 million.
AMP revealed in FY18 it spent $469 million on remediating customers for advice not provided. The company spent another $32 million on the external legal and consulting costs for appearing in the Banking Royal Commission.
Dividends were also slashed. The company announced it would cut its final divided form 14.5 cents per share to four cents.
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What’s next for AMP?
Following the royal commission, AMP was forced to overhaul its board and leadership team. AMP’s new executive, former Credit Suisse banker Francesco De Ferrari, said the 2019 will be a transitional 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.
‘2019 will be a transitional year as we prioritise the complex legal separation from the businesses sold to Resolution Life, and deliver on our commitments to remediate advice customers and strengthen our risk management, governance and controls.’
AMP blamed the reduction of profit primarily on the hit the company appearance took during the royal commission as their clients opted for lower-cost, contemporary products.
Regardless of how much AMP apologises and ‘transitions’ this year, the commission may have caused irreparable damage.
The wealth industry in Australia has changed drastically over the past five years. Declining profitability in life insurance has forced a slew of selloffs, receiving commissions on investment products was banned in 2013, as were volume-based payments, and the rising number of tech-heavy investment platforms are stealing the affluent and high-worth segments away from the banks.
As Australia’s Big Four banks steer back towards traditional banking and lending, AMP is left with a mountain it must climb on its own. However, with the sale of its life insurance complete, AMP has been able to reduce the capital intensity of its portfolio, hopefully giving the business more agility when navigating Australia’s turbulent financial industry.
For Money Morning
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