The AMP Ltd (ASX: AMP) share price is tracking higher on Wednesday and is now trading at $1.01 apiece, up 3.59%.
That's the first time AMP has surpassed the $1 mark since February, having eclipsed and retreated from that level three times in the past six months.
The last time the company's share price was substantially above $1 a share was way back in November 2021 but it has barely averaged that price over the last year.
In fact, AMP shares have averaged a closing price of $1.0693 during the last 12 months of trade, according to Bloomberg trade data.
So it appears the $1 level is a key watermark for the AMP share price.
The question is, can the AMP share price break through and set off towards its former highs again? To answer, let's take a look at how things might be different now.
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Structural changes
The company's restructuring efforts are set to inflect positively on its profitability measures like return on equity (ROE), analysts say.
Bloomberg Intelligence's Matt Ingram and Jack Baxter wrote last week:
AMP's extensive restructuring, which should be complete by June 30, may lift 2021's 9% ROE and 64-basis point margin, particularly given AMP Capital's below group 40-basis point result in 2021.
AMP said the bank's margin would fall to 1.5% this year from 2021's 1.62%, but we believe 2023 may be better — AMP's guided cash-rate rise from as early as June may lift returns.
It needs to fix the Australian wealth management unit which returned just 5.4% in 2021, but capital reallocation to a higher-return business may boost ROE.
Growth projections are underlined by structural changes in the industry too, according to Credit Suisse analysts.
"Inflows continue to improve across the industry underpinned by structural growth in the demand for advice and a return of consumer confidence to the advice industry," they said in a note to clients this week.
That's helped AMP's accounts as outflows have dampened substantially over the last few weeks, the broker remarked.
Big dividends, buybacks on the cards?
AMP's balance sheet has contracted slightly over the last two years. However, its net loans account has grown by almost 6% whilst 'other' assets have climbed by 46%.
As a result of its capital budgeting initiatives throughout the year, AMP said it had total surplus capital (above requirements) of $381 million as at 31 December 2021.
A closer inspection of the numbers reveals AMP could support a large capital return to shareholders in 2022, Ingram and Baxter said.
"AMP could distribute A$400-$600 million in 2022, lifting dividend yield above 14% and smashing consensus' 1.5 Australian cent dividend on better profit and up to A$350 million surplus capital," they noted.
In fact, the pair reckon AMP's surplus could "support a 2022 dividend payout of 50% and A$250-$350 million buyback while staying above regulatory requirements". That's above the internal benchmark of $813 million or higher.
The duo expects around $940-$990 million of capital outflows to be offset by $910 of inflows in 2022 which, they say, "may result in excess capital of over $350 million".
At 0.75x P/B [price to book ratio], we think AMP's most sensible capital management option is to return excess capital via buybacks. Higher shareholder distribution could add at least 100 bps [basis points] to AMP's ROE and lift the dividend yield to a peer-topping 14%, including buyback. AMP placed a hiatus on dividends until the demerger of its private markets unit, which is expected to be completed by June 30.
Financials are roaring back
While the struggle to contain inflation remains a challenge, ASX financials have come back hard in 2022.
The S&P/ASX 200 Financials Index (ASX: XFJ) has begun sailing north once again with heavy inflows into the sector propping up names like AMP.
The AMP share price is still down 19% in the past 12 months despite clawing back marginal gains this year to date. However, during the past month, it up more than 11%.
As the wider sector continues to post gains, the spillover appears to be lifting the AMP share price as well. That's welcomed, as it's been difficult to catch a bite for AMP shareholders.
As TMF reported last month, "The firm's full-year result certainly wasn't enough to keep investors on board… as the board decided to withhold paying a dividend."
"And while shares are still rangebound, zooming out, they are in the red on basically all major time frames."
