AMP Limited

The Business

AMP operates five distinct segments: a wealth platform (North) distributing investment products through financial advisers, a superannuation and investments (S&I) division managing legacy retirement savings, a retail bank focused on residential mortgages, a New Zealand wealth operation anchored by KiwiSaver, and a group division that collects income from minority stakes in Chinese and other partnerships. Platforms and S&I together generate roughly 60% of earnings, making AMP predominantly a fee-on-funds business where revenue rises and falls with equity markets and the volume of assets under management. The bank, despite holding $1.1bn of capital, contributes only about 19% of profit.

Recent Performance

AMP's share price has roughly doubled from its 2023 lows, driven by a credible cost restructuring and accelerating platform inflows. Underlying net profit after tax rose 21% to $285 million in FY25, off a base that itself grew 15% in FY24. Platform net flows tripled from $1.4bn to $5.1bn over two years. The cost-to-income ratio (controllable costs as a share of gross profit) improved from 73% to 62%, the strongest operational delivery in AMP's recent history.

Outlook

We forecast earnings per share growing from 11.3 cents to 15.3 cents by FY28, a compound rate of roughly 11% per year. Two forces drive this: modest revenue growth of 4-5% annually as AUM expands, and continued cost discipline holding the cost-to-income ratio near 59%. The biggest uncertainty is whether the improvement in S&I member retention (outflows narrowing from $6.4bn to $542m) persists through a market downturn. We estimate only a 45% probability that this improvement is structural rather than cyclical.

Key Risks

If S&I outflows revert to $1.2bn or more during a sustained market decline, the turnaround thesis is invalidated. The bank's $1.1bn of capital earning 4.8% return on capital, well below the roughly 10% cost of equity, permanently suppresses group returns unless management executes a capital relief transaction. A suspension of the $72 million in annual income from AMP's Chinese partnership would remove 25% of group profit, though we assign only 15% probability to this event.

What to Watch

The thesis-defining event is the 1H26 result in July 2026, which will reveal whether S&I flows held up during the weak first quarter, confirming or denying the structural improvement thesis.

• Jul 2026 1H26 results: S&I flow confirmation — If net outflows stay below $150m in a weak market, the probability of structural improvement rises meaningfully.
• Oct 2026 Bank capital relief announcement — A securitisation or strategic review of the bank would free capital earning 4.8% for redeployment at 15-25% returns.

Latest Developments

AMP's 1Q26 trading update showed platform AUM declining from $162bn to $156bn on market weakness, though platform net flows remained positive at $1.07bn. New CEO Blair Vernon commenced in April 2026, replacing Alexis George after five years. S&I outflows of $80m in the quarter represented a significant improvement from -$610m in the same period two years earlier.

Company Description

AMP operates across five divisions with fundamentally different economics. The Platforms division runs North, a wrap platform through which financial advisers access investment products, generating $353m in revenue (28% of group). Superannuation & Investments (S&I) manages $59bn in legacy super assets, contributing $357m (28%). AMP Bank is a residential mortgage lender with a $24bn loan book producing $333m in revenue (26%). NZ Wealth manages KiwiSaver and retirement assets in New Zealand ($135m, 11%). The Group division collects $91m in equity-accounted income from minority stakes in China Life Pension Company (CLPC) and other partnerships. The segment mix creates a structural tension: the wealth businesses earn returns on tangible equity of 17-68%, while the bank earns 4.8%, dragging the group average to roughly 8%.

Where the Growth Is

Platforms drives 42% of AMP's operating value and is the segment that will determine whether the stock re-rates. Net flows grew from $1.4bn to $5.1bn over two years as managed portfolios on North (pre-built investment solutions advisers can use for clients) reached $25.4bn. We forecast Platforms contributing an incremental $27m in net profit by FY28, taking its earnings from $106m to $133m. This requires continued AUM growth of roughly 8% annually, partially offset by fee compression of around 2 basis points per year.

Competitive Position

AMP's competitive advantages are narrow but real. On the platform side, the $25.4bn in managed portfolios creates genuine switching costs: when an adviser builds their practice around North's portfolio tools, moving to HUB24 or Netwealth means reconstructing hundreds of client portfolios. AMP added 122 net new advisers in FY25, the strongest growth in years. In retirement, AMP's Lifetime Super product ($876m AUM) is a first-mover in longevity-linked pensions, while its digital advice capability has processed 40,000 customer journeys. These are structural capabilities, not marketing claims. However, the moat is sustainable for perhaps 3-5 years, not a decade. Pure-play platforms trade at 40-45x earnings versus AMP's 11x precisely because the market questions whether a legacy wealth manager can sustain platform momentum against focused competitors. Fee compression of 2 basis points annually is sector-wide and irreversible.

Management & Capital Discipline

Outgoing CEO Alexis George delivered on her transformation mandate convincingly. AMP divested three businesses between 2022 and 2024 and returned $1.1bn to shareholders through buybacks and capital returns. The cost base fell from $690m to $603m, hitting targets three years running. Where management fell short is the bank: ROC declined from 7.9% to 4.8% during George's tenure, yet the business was consistently framed as an "optimisation opportunity" rather than what it plainly is, a strategic problem. New CEO Blair Vernon inherits momentum but is untested, having been in the role for less than a month. Capital relief for the bank has been discussed in three consecutive updates with increasing specificity, but nothing has been executed. The gap between rhetoric and action on bank capital is the single most important item to monitor under new leadership.

Financial Position

AMP's balance sheet is adequate but unremarkable. Corporate debt sits at $475m (1.3x EBIT coverage), which is manageable. The bank holds CET1 capital (the core measure of a bank's ability to absorb losses) of 10.5%, comfortably above regulatory minimums. Surplus capital above requirements is approximately $200m, supporting the current $150m buyback programme. Franking credits remain constrained at 20-30%, limiting the tax effectiveness of dividends for Australian shareholders. AMP carries $61m in litigation provisions plus an estimated $100m in unquantified contingent liabilities from legacy advice-related claims. The company can weather a moderate downturn without raising capital, though a severe market decline combined with adverse litigation would stress the capital position.