Another $600m wiped off AMP’s value as shares tumble

AMP shares yesterday crashed to a six-year low after Thursday’s overwhelming shareholder vote against its remuneration report.

AMP shares yesterday crashed to a six-year low after Thursday’s overwhelming shareholder vote against its remuneration report and the likelihood of further brand damage from the fees-for-no-advice scandal.

The stock hit a six-year low of $3.69 during the day before closing down 5.8 per cent at $3.73, wiping more than $600 million from its market capitalisation.

Macquarie analysts contributed to the malaise, forecasting in a note to clients that the wealth management division could suffer $35 billion in outflows over the next five years, representing 27 per cent of its assets under management. The division’s margins could drop from 1 per cent to 81 basis points in 2023.

Macquarie downgraded its recommendation on the stock to neutral, citing a range of uncertainties likely to impede AMP’s stock performance in the near term.

“While we recognise the difficulty in quantifying the impact reputational damage and operational changes will have on AMP, we have increased our rate of outflows from the Australian wealth management division,” Macquarie analysts said.

“Without a permanent CEO, downside risk to consensus earnings and continued distraction from the royal commission, we see limited upside to near-term share price performance.”

In a further note, Citi said brand damage would be the most likely factor to affect performance in the coming months.

“However, we also continue to flag the possibility of fines, class ­actions, more executive departures, new CEO rebasing, likely poor morale, questions about AMP’s front book, the back-book platform pricing differential and industry changes,” Citi analyst Nigel Pittaway said.

Bell Potter’s Lafitani Sotiriou also warned investors to “avoid bottom fishing” in AMP shares ­because “the risks are multiplying”, adding the firm was “very concerned regarding the outlook of the business”.

WEB Business AMP share price

Mr Sotiriou kept his sell rating and slashed his target price to $3.39.

Brokerage Deutsche Bank said despite the cheap valuation of AMP’s shares it was keeping its hold rating “given regulatory uncertainty, strategic uncertainty and operational expense uncertainty”.

The AMP board imploded in the lead-up to Thursday’s annual meeting. Chair Catherine Brenner resigned, chief executive Craig Meller was dismissed, and two directors Holly Kramer and Vanessa Wallace resigned ahead of certain defeat in their re-election polls.

The company’s longest-serving director, Patty Akopiantz, will step down before the end of the year.

Executive chairman Mike Wilkins will hand over to David Murray before July 1 and resume as a non-executive director.

AMP this week suffered the humiliation of an overwhelming shareholder vote against its remuneration report, as the embattled wealth manager warned of further customer remediation costs and higher expenses to ­modernise its systems in response to the rolling fees-for-no-service ­crisis.

Mr Wilkins this week offered an abject apology to more than 500 angry shareholders in Melbourne, saying AMP was “truly sorry”.