AMP has flagged further cost-saving measures across its rump business lines after agreeing final revised terms for the sale of the firm’s domestic property and infrastructure arm last week.
In a release, the ASX-listed AMP says “there is an opportunity to drive further operational and group office efficiency across the simplified portfolio of businesses”.
Last year AMP booked ‘controllable costs’ of A$791 million compared to A$845 million for the 2021 year as well as ‘variable costs’ amounting to almost A$360 million (A$421 million in the previous period).
The group told investors in February that 2023 controllable costs were likely to stay flat year-on-year.
“AMP has been simplifying its business and the next step is to now determine the appropriate operating model and cost base for the future business,” the statement says. “This work will be completed over the next six months and reflect the forward-looking focus on AMP Bank and the Australian and New Zealand wealth management businesses, together with the China partnerships.”
The proposed cost-trimming follows the agreement to offload the last remaining pieces of the AMP Capital business – comprising domestic real estate and infrastructure assets – to Dexus Funds Management for about A$387 million with settlement due this Friday (March 24), bar a A$50 million contingent payment.
Under the deal, Dexus will pay the remaining A$50 million once AMP extricates its China Life AMP Asset Management interests from the “sale perimeter” in a move expected by September 30.
According to the release, AMP will continue its A$1.1 billion capital return program through a series of buybacks and dividend payments but the company intends to keep a further A$500 million of spare cash on hold pending the cost and balance sheet reviews.
“While AMP has identified it has in the order of A$500 million surplus capital, in the current environment it is deemed appropriate to retain this funding,” the statement says.
Over the last 18 months AMP has sold off the life insurance division as well as various parts of AMP Capital including the global equities and fixed income business (to Macquarie), the infrastructure debt arm (to one-time suitor, Ares Management), the international infrastructure unit (to DigitalBridge) and, finally, the local property and infrastructure assets to Dexus.
Alexis George, AMP chief, said in the release: “The completion of the AMP Capital transactions enables a clear focus on the banking and wealth management businesses and moves AMP into the next phase of its simplification. With this clarity now is the right time to review the balance sheet and cost base of AMP. The review will consider, amongst other things, if AMP is holding any further surplus capital and the appropriate cost base for AMP going forward.”
The AMP share price bumped above A$1 on the news, rising from about A$0.98 to close at A$1.05,