At time of writing, the share price of AMP Limited [ASX:AMP] is down a massive 15.72%, trading at $1.81.
The AMP share price has been savaged this year, down over 49% in a 12 month window, as you can see below:
With more than 7% of AMP shares on issue being short sold — it appears many are still betting against the company. We look at the aborted Resolution Life sale and AMP’s decision to not offer an interim dividend.
AMP share price falls in early trading as investors digest unlikely Resolution life sale
AMP shares fell sharply upon the commencement of trading this morning after the announcement that it’s unlikely to complete the sale of its life insurance business after the Reserve Bank of New Zealand intervened.
As per the announcement, the proposed buyer (Resolution Life) notified AMP on Saturday that:
‘RBNZ would not consider Resolution Life’s change of control application unless it agreed to have separate, ringfenced assets held in New Zealand for the benefit of New Zealand policyholders, which is inconsistent with the current branch structure; and − as a result, Resolution Life does not expect RBNZ to approve an application that would satisfy the condition precedent.’
A disappointed AMP is now working through alternative solutions.
A number of fund managers and institutional shareholders were against the sale of its life insurance business from the start, therefore the failed sale could be welcomed in some quarters.
AMP expects that the immediate impact on earnings will not be ‘substantial’ but in the longer-term the price of the asset could be affected due to regulatory changes.
Now that the AMP interim dividend is scrapped, will we see a bottom any time soon?
Optimistic AMP investors may have been hoping the sale of the life insurance business would be concluded quickly and a dividend handed out.
The announcement today snuffed out these hopes, with the company saying that with the ongoing uncertainty around the sale, ‘the AMP Board expects to continue its prudent approach to capital management and anticipates that an interim dividend will not be paid for 1H 19.’
With AMP shares still in a slide, is this the bottom though?
Or put another way, are AMP shares a bargain at this price?
At this stage, I believe the answer is no.
The company has a massive job on its hands to right the ship.
With a new CEO (Francesco De Ferrari) in place, I think the company has been making tentative steps in the right direction.
But from a structural perspective, I feel the lasting impacts of the Banking Royal Commission, the potential for further regulatory changes and the threat of fintech/crypto will mean that the Big Four plus AMP, will face an uphill battle.
And if you want an in-depth look at why bank dividends could be trimmed in the coming months and years — Ryan Dinse has a great report on the topic available here. His conclusions for investors may surprise you.
For Money Morning