AMP may look to asset swap with Westpac after $1.1bn capital return

AMP may now turn its attention back to mergers and acquisitions. Picture: Bloomberg

The $3.4bn financial firm AMP Capital announced on Thursday it had finalised its promised plan to return $1.1bn worth of capital to its shareholders, so what does it do next?

After a tumultuous few years in the build up to former ANZ executive Alexis George taking the helm, the wealth management company was in a corner and resorted to selling off its AMP Capital infrastructure and real estate platform to raise funds.

But it may now turn its attention back to mergers and acquisitions. One interesting idea being floated is an asset swap with Westpac.

Westpac recently appointed former Goldman Sachs and Deutsche Bank boss Anthony Miller as its chief executive.

He has a long history of overseeing corporate transactions, so no doubt he will be thinking long and hard about how to maximise the bank’s returns through corporate activity.

It’s possible Westpac and AMP enter talks about a deal where the former buys the latter’s bank. AMP could buy Westpac’s BT Panorama wealth management platform to capitalise on its success in that area.

Westpac has been saying lately that the BT Panorama business is core to the business and will not be offloaded after efforts were made to find a buyer through Morgan Stanley. But many in the market believe it will eventually be offloaded by Miller.

AMP is known to have had interest in selling its bank as regional lenders struggle to compete with the big four because they need to hold more regulatory capital. But AMP’s desire has always been to sell it for a price over its book value.

Meanwhile, there’s estimates in the market that a buyer would pay about $500m for BT Panorama, although Westpac would likely argue the business, which has required much investment in technology, it is worth far more.

Should a deal unfold, it’s likely that AMP would want not just BT Panorama but cash as well for its bank.

In terms of other acquisition opportunities, AMP could buy financial technology businesses, while there’s been plans in the past by AMP to exit the New Zealand market and some believe now could be the right time.

Estimates in the market are that AMP’s bank accounts for about a third of its overall $3.4bn market value.

Another reason why deals could be on the agenda is that some analysts believe AMP has a capital stack bigger than it needs to be from a regulatory perspective, and that some of that could be released.

For the first half of this year, it had $1.37bn of minimum regulatory capital, and a $676m pile of surplus capital.

For the last 18 quarters, AMP has had higher inflows into its Platforms business, with financial advisers favouring its products.