Embattled wealth manager AMP’s annual net profit dives 97pc

AMP has posted a minuscule 2018 profit in the wake of the Hayne inquiry, amid weakness in super and investments.

AMP has endured a torrid year at the hands of the Hayne royal commission. Pic: Hollie Adams

Embattled wealth group AMP has delivered a minuscule 2018 profit, dragged lower by a weaker performance in its superannuation and investments division and the Hayne royal commission fallout.

Net profit from ordinary activities in the 12 months ended December 31 slumped 97 per cent to $28 million, from $848m in 2017, the Sydney-based company told the ASX.

That was slightly lower than the $30 million AMP said it would deliver last month.

The superannuation and investments division - Australian wealth management - endured mammoth net cash outflows of almost $4 billion in 2018 as the royal commission took a toll. That compared to $931 million of net cash inflows the prior year.

AMP’s shares dropped 4.1 per cent in morning trade as investors fretted about earnings prospects in 2019.

That came after AMP’s guidance pointed to another challenging year and confirmed outflows were continuing in the first quarter.

Revenue from ordinary activities tumbled 55 per cent to $8.2 billion.

AMP declared a final dividend of 4 cents per share.

New chief executive Francesco De Ferrari will address investors and analysts today to outline his plans for the $7.2 billion company.

Last month, AMP took a knife to its dividend and said its 2018 full-year profit was hit by a number of factors including costs to repay customers and increased investment in risk, governance and controls.

AMP told the ASX last month it expected to report an underlying profit — which removes one-off charges and market volatility — of about $680 million for calendar 2018, down from $1.04 billion last year.

Its bottom line result, net profit attributable to shareholders, was expected to come in at just $30m for 2018.

AMP was among companies hardest hit by the royal commission which handed down its final recommendations earlier this month.

The inquiry revealed the company repeatedly misled the corporate regulator and charged thousands of clients fees for financial advice that was never provided.

The Australian last week revealed that Commissioner Kenneth Hayne had discussed criminal prosecutions of AMP, Commonwealth Bank and NAB for dishonesty offences with the corporate regulator.

Underlying profit came in at $680 million for 2018, buoyed by results in AMP Bank and infrastructure and real estate arm AMP Capital.

In the statement, Mr De Ferrari said priorities for 2019 included reshaping AMP’s advice network, repaying customers “as quickly as possible”, and continuing to grow its banking and AMP Capital units.

“2019 will be a transitional year as we prioritise the complex legal separation from the businesses sold to Resolution Life, and deliver on our commitments to remediate advice customers and strengthen our risk management, governance and controls,” he said. “Delivery on these priorities is a precondition to set a strong foundation for future growth.”

AMP agreed to divest its life insurance operations to Resolution Life for $3.3bn in a controversial deal last year. The transaction saw Resolution assume the risk and earnings impact of the unit from July 2018 but AMP continues to manage the operations and capital until the sale completes.

Today’s statement said AMP would defer considerations for an initial public offering of its New Zealand business, to focus on its separation and growth.

AMP’s sold business units delivered negative operating earnings of $3 million for 2018, compared to a positive result of $331 million in the previous year.

AMP Capital delivered a 7 per cent lift in operating earnings to $167 million, underpinned by higher fee income and growth in assets under management.

The banking unit posted a 5.7 per cent rise in operating earnings helped by growth in its mortgage book.

AMP was battered by revelations last year that it misled the corporate regulator at least 20 times in relation to a fee-for-no-service scandal. Claims were also aired that AMP’s board had interfered with a report on an investigation into the scandal.

The claims forced the exit of AMP then chief executive Craig Meller as well as the then chairman Catherine Brenner.

Macquarie Group analysts have previously estimated AMP could be up for an additional $1.5bn in customer remediation over the next four years.