Disgraced financial service company AMP has warned first-half underlying profit will drop by as much as 11 per cent as the company puts aside almost $300 million to refund and compensate customers it overcharged for financial advice.
The announcement follows sensational revelations that AMP had been knowingly charging customers fees for advice they were not receiving, and systematically lying about it to the corporate watchdog.
The scandal cost AMP its chief executive, as well as its chair and legal counsel.
Underlying profit for the six months to June 30 will be in the range of $490 million to $500 million, compared to $553 million a year ago, the troubled wealth management firm said on Friday.
AMP shares slumped after the firm also warned investors its interim dividend may be below its 70-to-90 per cent guidance range, and that the full-year dividend will be at the lower end.
AMP said it will put aside about $290 million post-tax “to ensure impacted advice customers are appropriately compensated”.
While it will take time to earn back customers’ trust, the announcement was an “important milestone”, acting chief executive Mike Wilkins said in a statement.
“Today’s announcement reflects our commitment to take decisive action to reset AMP and establish a platform from which the business can recover rapidly,” Mr Wilkins said.
“We’re facing squarely into the issues that have impacted our reputation and the community’s confidence in AMP.”
AMP will also spend about $70 million over the next two years to upgrade risk management controls and strengthen compliance systems.
The company will also cut fees for its MySuper products, which is expected to affect 700,000 superannuation customers.
At 2.20 pm AEST, AMP shares were down 4.6 per cent.
– with AAP