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AMP’s net profit declines

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Wealth manager AMP Ltd expects investor caution to remain for some time, meaning money will continue to be pulled from markets and placed in term deposits.

The investment manager and Australia’s largest superannuation provider saw its net cashflows fall in the six months to June 30, while earnings in its capital investment business dropped seven per cent.

“I think it is a reflection of just caution by consumers because of global uncertainty and uncertainty in markets,” chief executive Craig Dunn told reporters on Thursday.

Many banks have cut interest rates on term deposits in the past week, as consumers opt to place cash in secure deposit accounts over investments.

Lower rates may cause some to seek better returns in financial markets, but when that will occur is unknown, Mr Dunn says.

“I am not sure we are going to see a great change in the short term,” he said.

AMP’s first half net profit of $349 million was a drop of 18 per cent from the previous corresponding period, with the result including $58 million in costs related to the integration of AXA Asia Pacific Holdings (AXA APH).

AMP’s takeover of AXA APH was completed in March.

Underlying profit, which removes the impact of investment market volatility, beat market expectations, with $455 million, up 18.8 per cent from the same period last year.

That saw AMP shares outperform the wider market, gaining 11 cents, or 2.65 per cent, to $4.26.

The company also upgraded its expected cost savings from the AXA APH takeover, which will add to profits from 2014, rising from $120 million each year to $140 million.

Costs in AMP’s financial services and AXA businesses for 2011 are forecast to be up by four to five per cent on the previous year, due to investments aimed at growing the business.

Costs in the company capital investment business are expected to be flat.

AMP lost just six of its 4,054 financial planners in the six months to June, and Mr Dunn said he expected to hold on to 97 per cent of the company’s planners in the second half.

The company had $2.2 billion of capital above minimum regulatory requirements as of June 30, while assets under management jumped from $115 billion six months ago to $159 billion, reflecting the AXA APH purchase.

AMP will issue an interim dividend of 15 cents, in line with a year earlier, but the franking level fell from 60 per cent to 30 per cent, due to AXA’s weaker tax position.