It’s been two months since the last of the banking royal commission’s public hearings but major financial institutions are still smarting from commissioner Hayne’s scathing review, with AMP predicting its profit attributable to shareholders for the year will be down 96 per cent on 2017.
The financial heavyweight broke the disappointing news to investors in a a market update filed to the ASX on Friday morning, outlining that costs associated with the royal commission – including remediation for the business’ advice clients and the roll-out of new compliance measures – have taken a toll on profitability for the 2018 calendar year.
“AMP expects to report an underlying profit of around $680 million and profit attributable to shareholders of approximately $30 million,” the update said.
By comparison, the company ended the 2017 calendar year with an underlying profit of $1.04 billion (34.6 per cent higher than 2018 expectations) and a profit attributable to shareholders of $848 million (a massive 96.4 per cent larger than expectations for last year).
AMP expects shareholders will receive a dividend of 4 cents per share for 2018, a sizeable 86.2 per cent drop from the 29 cents per share investors enjoyed the previous year.
— CommSec (@CommSec) January 24, 2019
By midday Friday, shares in AMP had dropped 6 per cent. Since January 25 2018, the value of AMP stocks has fallen more than 50 per cent.
These latest developments add to the embattled firm’s ongoing woes, spurred along earlier this month when research firm Roy Morgan published its latest super satisfaction figures with AMP placed squarely in last position.
“The five major retail superannuation funds have an average satisfaction rating of 54.7 per cent, compared to the total retail fund average of 57.2 per cent and well below the industry fund average of 61.8 per cent,” the report said.
The best performer among the majors was Colonial First State with 60.7 per cent, well ahead of second placed BT (55.6 per cent). The lowest satisfaction among these majors was for AMP with 50.4 per cent and it was in fact the lowest of all the funds reported on.
AMP not alone
Friday’s update is the latest example in a growing trend of major financial institutions issuing warnings over the profits in response to the royal commission, with Commonwealth Bank flagging in December that it expects $335 million to be stripped off its 2019 bottom line to meet the cost associated with regulatory compliance.
Commonwealth Bank also reported a drop in its quarterly profits, while chief executive Matt Comyn fielded emails from over 10,000 customers each making complaints or offering feedback on the banks’ actions and performance.
Meanwhile, management at NAB, Westpac and ANZ faced shareholder uprisings as 2018 came to a close.
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