Australia’s AMP profit falls as margin pressure weighs on banking unit

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The logo of AMP Ltd adorns its headquarters in central Sydney, Australia, May 5, 2017. REUTERS/David Gray

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Aug 11 (Reuters) – Australian wealth manager AMP Ltd (AMP.AX) said on Thursday that its half-year underlying profit fell by nearly a quarter as margin pressure weighed on the banking division, dragging down its shares by almost 3%.

AMP Bank’s net interest margin fell to 1.32% in the first half of the financial year, from 1.71% a year earlier, dragged down by the growth of fixed rate loans – less remunerative .

Shares of the company, which rose 4.3% in early trading, reversed gains to fall nearly 4%, their biggest one-day drop since mid-June.

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Nonetheless, the company said the banking division’s net interest margin improved in the second quarter and it will perform well in the second half, benefiting from a higher interest rate environment. .

Soaring inflation prompted the Reserve Bank of Australia to tighten monetary policy this year, helping margins at banks struggling with historically low interest rates over the past two years.

For the six months to June 30, the 173-year-old company reported underlying net profit after tax of A$117 million ($82.79 million), down from A$155 million a year ago. . It missed a UBS forecast of A$128 million.

“Underlying earnings are below our guidance and contain evidence of continued compression in revenue margins and rising cost ratios in both Wealth and Banking,” UBS analysts said.

AMP did not declare an interim dividend, but said it would return A$1.1 billion of capital to its shareholders, which will include an immediate market buyback of A$350 million. .

The remaining A$750 million is planned for financial year 2023 and will include a combination of capital return, special dividend or further market buyback, AMP said.

“The capital return announcement is earlier than expected,” UBS said.

On a statutory basis, AMP’s profit more than tripled to A$481 million, thanks to the sale of its infrastructure debt platform.

Last December, AMP announced that it would sell its infrastructure debt platform to Ares Management (ARES.N) for A$428 million. Read more

($1 = 1.4132 Australian dollars)

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Reporting by Tejaswi Marthi, Harish Sridharan and Roushni Nair in Bengluru; Editing by Krishna Chandra Eluri, Aditya Soni and Sherry Jacob-Phillips

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