Was AMP’s Punishment Too Much?

Australia | 10:45 AM

AMP’s second half result, 2026 guidance and a lack of buyback sent the stock tumbling, but this has led brokers to upgrade to unanimous Buy ratings on valuation.

• AMP’s second half result disappoints
• 2026 guidance falls short of consensus
• No buyback and could M&A talk imply a capital raising?
• Analysts unanimously see share price as too cheap

By Greg Peel

Although AMP’s ((AMP)) second half 2025 headline earnings appeared to meet consensus, the financial services provider benefited from a lower tax rate and a strong Corporate result, with core divisions performing significantly below expectations.

Divisionally, profit missed in Platforms by -12% and Superannuation & Investments (S&I) by -5%, both missing revenue margin guidance due to fee tiering and capping and mix-related fee pressure from the rise in managed accounts, UBS notes.

The Bank missed -by -16% on a lower net interest margin, weighed by AMP Bank GO contributing an FY25 loss of -$10m. The positive offset to the operating miss was a material half-on-half step-up in China partnership income ($45m versus $27m).

There were many moving parts to 2026 guidance, Macquarie notes, all of which fell short of consensus expectations, including controllable costs, assets under management-based revenue margins for Platforms, assets under management-based revenue margins for S&I, and bank net interest margins.

AMP took the unusual approach of guiding to dividends two years in advance, blaming franking credits as creating a natural ceiling. AMP will target 2.0c per share per half through FY26 and FY27, falling short of consensus estimates of 3.0cps in each period.

Although management did comment it recognises buybacks would be the preferred method for returning additional capital to shareholders, there was no buyback announced with this result.

Capital Raising?

Ord Minnett notes AMP has been holding the line on margin guidance since its first-half 2025 results which has provided a false sense of security to investors in how the company was performing. Hence, the belated downgrade to the margin outlook, and no share buyback, along with management talk of M&A, spooked the market and sent AMP shares down more than -25% on the day.

Despite showing significant surplus capital and even more group cash than Citi expected, for now AMP is suggesting it will only execute a share buyback in the absence of “more compelling opportunities”.

Although this likely refers to smaller acquisitions offering scale and capability, some seem to be speculating on a large acquisition requiring a capital raising, Citi notes.

And perhaps confusingly, AMP is also guiding to a flat dividend for the next two years. Add this to slightly soft margin guidance plus AI concerns and Citi suggests we are perhaps some way to explaining the significant sell-off post result.

Market jitters regarding the impact of AI have now extended into the wealth management space with many other platform and managed account providers also hit hard. Citi believes the regulated environment in which AMP operates likely provides some protection to these AI threats, but acknowledges it is currently hard to assess this completely.

UBS puts the sell-off down to a combination of the second half result missing compositionally by circa -10% across the operating divisions due to broad-based revenue pressure, the announced flat dividend over FY25-27 which is -26-35% below the consensus outlook, and global platform sector weakness leading into AMP’s result release.

Overall, the market reaction was reasonable, in Ord Minnett’s view, given shareholders now face yet another rebasing of earnings from the latest guidance and the perceived risk from M&A -- what businesses might be targets, will a capital raising be needed, and will new management (CFO Blair Vernon will replace Alexis George as CEO, effective 30 March) keep a tight rein on price?

---