AMP loan book up $600m despite heightened competition

But the company has seen a significant decline in assets managed by its wealth division, pushed down by a turbulent market and fund outflows.

AMP chief executive Alexis George. Picture John Feder

AMP’s banking business has recorded above-system growth in the three months to the end of August, with its loan book growing by $600m despite the highly-competitive market.

In an investor update on Friday, the company said its total loan book stood at $23.3bn and total deposits at the bank rose $700m to $20.7bn.

The AMP Bank was the highlight among the various divisions of the financial services giant, which has endured a difficult period following the short-lived tenure of its former chief executive, Francesco De Ferrari and a botched sale of much of its funds management business.

Assets under management at AMP’s Australian Wealth Management division decreased $3.7bn to $121.4bn in the quarter, due to a market decline and $800m in net cash outflows.

That was down from net outflows of $1.9bn in the same three month period last year.

“Our bank continues to grow above system with both the loan and deposit books increasing in a competitive market,” said AMP chief executive Alexis George.

“As homeowners begin to feel the impact of interest rate rises, our focus remains on supporting customers with competitive home loan and deposit rates, and maintaining our high quality credit position.”

“In the fourth quarter, we have already launched our digital mortgage and unique-to-market retirement offer … These are important strategic deliverables that will support AMP’s longer-term growth,” Ms George said.

Despite the difficult year, AMP’s shares have outperformed other diversified financial companies, and were 15 per cent above the ASX200 in the September quarter.

Since December 31, AMP shares have increased 16 per cent. They were trading at $1.16 at midday on Friday.

An increase in the cash rate to 2.6 per cent – and some $500bn in loans to be refinanced – this year has created significant competition for mortgage customers.

RateCity data shows the biggest cashback offers in the market come from Reduce Home Loans, AMP and Citibank, whose local retail operations are now owned by National Australia Bank.

Reduce provides $5000 cash back for home loans of $750,000 to $2m, Citi offers $5,000 for mortgages of more than $850,000 while AMP provides $5,000 for loans of more than $1m.

There has also been an increase in competition in the term deposit market, with the Commonwealth Bank the most recent to increase its rates by up to 1.75 percentage points.

AMP Bank remains, however, the market leader in the highest term deposit rates for a 9-month period, with a 3.25 per cent rate. That compares to 2.3 per cent at CBA.

The company said AMP Capital had assets under management of $52bn, “reflecting the exit of a $2.9bn real estate separately managed account”. That was in reference to UniSuper, which transferred the mandate to GPT.

Management rights of the $8bn AMP Capital Wholesale Office Fund have also been handed to Mirvac, which will be reflected in the next funds update. The Australian first revealed that Mirvac would attempt to intervene in the management of the trust in April, after it wrote to the trustee calling on it to engage on a proposal to run the fund, which owns stakes in key skyscrapers, including Sydney’s Quay Quarter Tower.

The loss of the fund from upset plans to transfer management to Dexus. AMP has also lost management of the heavyweight AMP Capital Retail Trust, after receiving a notice from the majority of unitholders of their intention to shift the management over to GPT. The trust owns Pacific Fair on the Gold Coast and a 50 per cent stake in Sydney’s Macquarie Centre; the latter asset is co-owned by the AMP Capital Shopping Centre Fund.

“We have made strong progress in the third quarter, which is reflected in the cashflows we’ve announced today,” said Ms George.

“While challenging investment markets continued to have an impact on assets under management, we have seen a significant improvement in our cashflows as more customers choose to join or stay with AMP.”