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AMP’s half-year profit gets a boost from AXA merger

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AMP expects further growth after its $4 billion merger with AXA Asia Pacific contributed to a seven per cent rise in underlying first half profit.

The profit growth was achieved despite weaker investment markets and cautious consumers favouring bank deposits over alternative savings measures.

“There’s no doubt in my mind that the merger means the new AMP, or combined business, is much more competitive, a much stronger business, can grow more quickly and deliver real value to shareholders,” chief executive Craig Dunn told reporters on Thursday.

The wealth manager’s $491 million underlying profit for the six months to June 30 was up from $459 million in the previous corresponding period, and higher than analyst forecasts.

AMP expects to achieve an additional $10 million in savings from its merger with AXA Asia Pacific after retaining more financial advisers than expected.

Shareholders were impressed with the group’s result, pushing its shares up 20 cents, or 4.8 per cent, to $4.36.

The AXA merger was a major contributor to AMP’s underlying profit growth, delivering higher fee income and greater cost savings.

That helped to overcome lower cashflows from superannuation, which weighed on the profit in AMP’ financial services business.

“There is no doubt that discretionary income going into superannuation has come well off since the GFC (global financial crisis),” Mr Dunn said.

“Over time we would expect that to recover.”

AMP’s net profit, which includes merger costs and the impact of investment market volatility, was $383 million in the six months to June, up 10 per cent on the previous corresponding period.

Morningstar analyst David Ellis said AMP’s result was impressive and he expected its results to continue to improve as the merger neared completion.

“All key business drivers point to increasing earnings momentum, and this is a major strength of the expanded group,” he said.

Despite AMP’s profit growth, it lowered its interim dividend to shareholders.

AMP declared a partly franked interim dividend of 12.5 cents per share, which was down from 14 cents per share in the same period in 2011.

The payout was lowered because of the uncertainty about upcoming regulatory changes and the growing demand for products that require greater capital expenditure.