AMP share price sinks 6% as half-year profits slump

Pockets of AMP's business are delivering underlying growth, but will it be enough to impress shareholders?

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The AMP Ltd (ASX: AMP) share price is falling this morning after its FY23 first-half results release.

Shares in the financial services company had surged 11% over the past month in anticipation of today's numbers. However, the AMP share is down 5.9% to $1.03 after the results failed to meet expectations.

AMP share price on watch amid earnings drop

What else happened in the first half?

For the six months ending 30 June 2023, AMP experienced underlying earnings growth across three out of five of its business units. The company's 'Platforms' unit was the fastest-growing unit, with underlying NPAT increasing 25.7% over the prior corresponding period to $44 million.

Similarly, AMP Bank and Master Trust generated increased profits, up 23.9% and 7.7%, respectively. A disciplined approach to loan growth and strong broker relationships were attributed to the bank's success.

Meanwhile, AMP's advice unit continues to weigh on earnings, posting an underlying loss of $25 million in the half. However, this marked a $5 million improvement on the prior comparable period.

During the half, the Federal Court of Australia decided on the class action proceedings brought against AMP and its advice practices of the past. The Court ruled in favour of those seeking compensation for losses incurred, sending the AMP share price tumbling on 5 July, as shown in the chart above.

What's next for AMP?

AMP provided investors with a swathe of numbers for its FY23 guidance. Some of the other key financial targets for the financial year included:

  • Above system residential loan growth targeted for FY23
  • FY23 net interest margin (NIM) between 1.3% to 1.35%
  • Further improvements in costs associated with advice unit
  • Platforms and Master Trust revenue margins to hold steady

Furthermore, a hearing at the Supreme Court relating to the abovementioned class action is slated for 21 August 2022. The company will be defending against this action and two other yet-to-be-heard claims.

AMP share price snapshot

Despite the overhaul efforts, the AMP share price has had a tough run in 2023, falling 15.4%. For context, the S&P/ASX 200 Index (ASX: XJO) is up 5.6%.

It appears few investors are willing to take a chance on the company while it is still in the depths of its turnaround. Even now, at a price-to-book (P/B) ratio of 0.7 times — trading at a discount to its book value — the AMP share price is struggling to find support.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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