Is it time to jump back into AMP shares?

Can this unloved stock get back into investors' good books?

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AMP Ltd (ASX: AMP) shares have been on the rise, going up by 19% over the past month, and it's up 5% today. In this article, we're going to look at whether the ASX financial share is an attractive option today.

The recent result was the half-year report, which was for the six months to June 2023. A half-year or full-year report is when investors can get a real insight into how a business is performing.

Let's remind ourselves about some of the things that AMP told investors.

Earnings recap

On the positive side of things, AMP revealed that each of its main divisions saw an underlying net profit after tax (NPAT) improvement compared to the first half of FY22.

AMP Bank saw underlying NPAT rise by 23.9% to $57 million, platform NPAT grew by 25.7% million to $44 million and advice NPAT improved by $5 million to a loss of $25 million.

It reported that statutory profit was $261 million, which included a net gain of $209 million in FY23 relating to the sale of the international infrastructure equity business and the real estate and domestic infrastructure equity business, and SuperConcepts.

Statutory profit in the FY22 first half was $469 million, which included the gain on the sale of the infrastructure debt platform of $390 million.

Investors can probably gain more insight into the ongoing performance of the business by looking at the underlying numbers because asset sales are one-offs.

Underlying earnings per share (EPS) grew 11.8% to 3.8 cents, and the board declared an interim dividend of 2.5 cents per share.

The business paid down $302 million of corporate debt in July, strengthening its debt profile.

AMP also said that while remaining committed to returning surplus capital to shareholders, it's going to be cautious with capital because of uncertainty regarding the outcome of the financial advisor class action and other litigation matters.

Is this a good time to look at AMP shares?

The market seems impressed, with the AMP share price up 11% this week.

AMP announced a 'business simplification program' which is targeting a $120 million reduction in the cost base by the end of FY25, which requires an investment of between $120 million to $150 million over the next two years. That will be split between $60 million in 2024 and $60 million in 2025.

However, FY23 costs are expected to be in line with FY22, with around $50 million of costs because of inflation and stranded costs relating to its sold businesses.

I often say that the main thing that a business needs to do is grow profit to help boost its share price. AMP's underlying profit is growing at a double-digit pace, which is good.

We'll have to see what happens with the litigation it's facing, but hopefully, those are historic, one-off matters that can be amicably resolved and then put in the past.

According to reporting by The Australian, broker Citi said:

While the result is a beat to consensus and cost out targets exceed expectations, capital uncertainty, potential further litigation, and guidance for costs to rise in 2H are offsetting factors.

We expect the market will see the cost saving targets as positive although will likely initially remain sceptical about their achievement and note too there is significant one-off spend required to achieve them.

Nonetheless, the beat at 1H23, some quantification of BOLR [buyer of last resort] at least in part and some promise of improved returns moving forward is clearly seeing the stock advance today and our initial read of the result suggests this is justifiable.

If AMP can keep growing its core profit, then that could help push the AMP share price higher over time.

However, it's not the sort of ASX share I'm looking to buy for my own portfolio, and wouldn't be one I'd normally suggest to investors either. Growing profit is a good sign and can help long-term shareholder returns, even if it's not an attractive business in terms of its reputation.

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Tristan Harrison 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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