Shareholders will be hoping that the AMP Limited (ASX:AMP) share price will defy the market sell-off after it put a positive spin to its latest quarterly update.
The futures market is pointing to a 1%+ drop in the S&P/ASX 200 Index (Index:^AXJO) this morning due to weak leads from Wall Street.
But all eyes will be on the embattled AMP share price.
Is the worst over for the AMP share price?
Management reported an average 2% increase in assets under management (AUM) for the third quarter for its Australian Wealth Management (AWM) division to $122.1 billion.
While AWM reported net cash outflows of $1.95 billion during the latest quarter, this is steady from the same period last year.
Quarterly outflows starting to improve
Management even ventured on to state that there were signs of underlying improvements if you accounted for the $692 million of early release of super payments. The early release payments were part of the federal government’s COVID‐19 support package for households to weather the pandemic.
That is a relief! It implies the withdrawals are not linked to clients abandoning AMP for its disgraceful conduct exposed at the Banking Royal Commission.
Further, its North wealth platform reported continued growth. This business received $818 million in net cash inflows, including $196 million from external financial advisers.
The bad news in AMP’s quarterly update
But it isn’t all good news for the AMP share price. The group’s AMP Capital division reported a 0.4% drop in assets under management to $189.2 billion due to cash outflows. Net cash external outflows of $1.1 billion were due to redemptions from public markets products.
Another dark spot is the loss of market share of mortgages from AMP Bank. Its total loan book value fell $303 million to $20.6 billion.
Management blames highly competitive market conditions and the economic impact of COVID-19 for the slide.
Home loan competition to hurt
I believe it’s more the former than the latter. Our major banks, such as Commonwealth Bank of Australia (ASX: CBA) doesn’t seem to be impacted in the same way as its loan book is growing ahead of the broader market.
We also know there’s a pick-up in loan applications, particularly from owner occupiers.
Foolish takeaway on AMP share price
The question AMP investors will be asking is how well placed the company is to stem and reverse the market share loss. Afterall, it is on the money when it pointed to intense competition, which isn’t good news for the AMP share price.
Westpac Banking Corp (ASX: WBC) is the latest big bank to announce a very aggressive campaign offering $4,000 cash back to new home loan customers. National Australia Bank Ltd. (ASX: NAB) is also offering a cash handout of $2,000 for new borrowers.
I believe we are only at the start of a mortgage market war as the Reserve Bank of Australia is tipped to cut rates to just 0.1% on Melbourne Cup Day.
