AMP (ASX:AMP) announces big HY20 profit hit

AMP (ASX: AMP) has given an update about its 2020 half year operating earnings. It includes the impacts of COVID-19. The AMP share price is down 8%.

AMP is one of Australia’s largest diversified financial businesses, though it has severely shrunk since the Hayne Royal Commission.

AMP’s HY20 update

AMP said that it expects to report continuing business earnings of approximately $195 million. The reason why AMP has made that ‘continuing’ distinction is that it recently sold a division for $3 billion.

The Australian wealth management division expects operating earnings of $60 million with average assets under management (AUM) of $126 billion, down 6% compared to the second half of 2019. Net outflows were around $4.4 billion.

AMP Capital expects operating earnings of $70 million with average AUM of $198 billion, down 2% compared to the second half of 2019. Performance and transaction fees are estimated to reduce by around 40% compared to the prior corresponding period due to market impacts.

AMP Bank expects operating earnings approximately $50 million. A credit loss provision of $25 million is expected, which will impact earnings. Increased COVID-19 provisions are common with banks at the moment. The total loan book is expected to be $20.9 billion, an increase of around 3.5%.

Cost savings

AMP said it’s still committed to delivering $300 million of annual cost savings. It’s investing between $1 billion to $1.3 billion to transform the business.

Summary

AMP is making operating profit in each of its divisions, which is a good sign. A business shouldn’t go to $0 if it’s making genuine profit in its operating divisions. But I just don’t know what the future holds for AMP – will it just keep losing clients? I’d rather go for other ASX dividend shares with clearer paths to growth.

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At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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