AMP demerger on track for June 2022 as wealth manager details strategy for new entity PrivateMarketsCo

The wealth manager says it’s making progress on the demerger of its capital private markets business as it outlines strategies for both companies. Shares surge 6 per cent.

AMP boss Alexis George says its proposed separation and demerger will enable both businesses to accelerate their growth strategies.

AMP Ltd will beef up its bank and platforms businesses and will seek out partnerships to boost its advice and home lending offerings in the coming years, chief executive Alexis George has said, as the wealth manager eyes the completion of the capital private markets business demerger.

AMP on Tuesday said it was making good progress on the demerger, which should be finalised by June next year, as it outlined the future strategies and directions for both AMP, which will retain the bank, wealth management and New Zealand businesses, and the new company, PrivateMarketsCo.

The update was well received by the market, with AMP shares rocketing 7.5 per cent by midday. But the surge was short lived, with the shares paring nearly half of the gains to close up 4 per cent at $1.04.

“We’re going to be a much smaller company. We have to think differently, act differently, make decisions differently, think about our committee structures differently ... to make us a more streamlined organisation going forward,” Ms George told shareholders at the company’s investor day on Tuesday.

“The two growth opportunities for us in the short to medium term are the bank and our platforms.

“I see real opportunities in the bank. We’re a small bank; we don‘t have branches, we have simple solutions, we have a good cost-to-income ratio, we have good return on equity, and we have a name that I think is well positioned.”

The home loan book was well managed but small, with AMP holding just 1 per cent market share, Ms George added, as she outlined her ambitions for the bank to grow well above system in the coming years and cautioned on the outlook for the net interest margin.

“I understand there’s pressures on (the NIM), but I don’t think they’re pressures that cannot continue to support both our ambitions financially and our ambitions from a customer perspective.

“So I see some decline, but I certainly feel that we’re well positioned in that space,” she said.

Separately, Ms George told The Australian she was confident in the bank’s home lending prospects even if the market enters a more subdued phase in 2022.

“We can grow at two times system because we’ve done the hard yards in terms of increasing our operational capacity, we’ve maintained service standards with the brokers and I think people want alternative options -- so we can be that alternative option.

“Given the size we are, it’s not a lot of volume to double market share. So I feel comfortable regardless of what the market does, that we’re well positioned there.”

AMP is targeting two to three times above-system growth in the coming years and will achieve this, in part, by aligning with partners in the market, Ms George told shareholders.

“We need to focus on our lending origination and make that more streamlined, and we’re currently looking for partners to help us with that.

We don’t have to build everything ourselves. Partnering is a skill we must have, we must develop, and we need to move forward on.”

Private markets present major opportunity.

On advice, AMP would also look to the external market for growth, she said.

“We need to accept that we have to rely on advice support, not just from our traditional aligned networks, but from the external market.

“We have to change our mindset. We’ve got to get out there, sell our product to that external environment and be confident enough that we can get the flows.”

Ms George also committed to a further $115m of cost savings between fiscal 2022 and 2024 on top of the already-stated $300m cost reduction program.

While AMP will look to drive growth as a retail wealth manager in Australia and New Zealand, the new entity, PrivateMarketsCo, will build its presence as a global leader in the fast-growing private markets industry.

PrivateMarketsCo will also look to simplifying its business once the demerger is complete and will look to achieve a run-rate cost base of $300m by fiscal 2023.

Its focus will be on growing its client base and scaling its existing infrastructure and real estate investment strategies, while diversifying its product offering to clients.

“PrivateMarketsCo is a business that will thrive with greater focus and independence,” PrivateMarketsCo CEO Shawn Johnson said.

“Our team has built a strong track record in infrastructure and real estate – and has the capability to expand into new adjacencies and pursue further global growth opportunities, supported by increasing demand for private markets assets from investors around the world.

“We have a clear strategy to separate, simplify and broaden our client base and diversify our investment capabilities. We will continue to play a leading role in infrastructure and real estate investments around the world as an independent company.”

The group had made strong progress on key separation milestones, with the leadership team in place and the chairman, Patrick Snowball, already appointed.