AMP Limited (ASX: AMP) has reported its FY17 result this morning, here are some of the highlights for the wealth management giant compared to FY16:
- Australian wealth management earnings down 2.5% to $391 million
- Australian wealth protection up from a $415 million loss to a $110 million profit
- Underlying group profit up 114% to $1.04 billion
- Earnings per share up from a 11.7 cent loss to 29.1 cent profit
- Dividend up 3.58% to 29 cents per share
AMP has struggled for a long time to meaningfully grow profit, indeed some analysts would say it’s gone backwards over the past decade. Its competitors like Commonwealth Bank of Australia (ASX: CBA) and Macquarie Group Ltd (ASX: MQG) have done well from Australia’s recession-less streak.
Growing underlying profit by 114% is clearly a good result, but most of that came from the Australian wealth protection earnings going back to a profit. It is slightly worrying that the key wealth management segment’s profit actually declined.
AMP said that the business recovery reflects the stabilisation of the wealth protection business and solid broader performance with growth momentum in AMP Capital and AMP Bank, resilient performance in Australian wealth management, the wealth protection business is performing in line with expectations and there is a sustained focus on cost management and operational efficiency.
Management said that AMP is in a strong capital position with a surplus of $2.3 billion above the required amount. There is potential for capital management initiatives to be considered at the conclusion of the portfolio review. At the moment AMP is paying out nearly all of its profit as a dividend which isn’t very sustainable to fuel growth.
AMP may be turning a corner and could start delivering decent growth, but I think it has a long way to change people’s perception of its fees and products. I don’t think AMP is a buy at today’s price, I would want to see that its initiatives are working first before considering investing.
Instead, I’d rather invest in these stocks which are more likely to grow.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.