Australia's AMP sees record outflows, doubles estimate of pension client exits

SYDNEY (Reuters) - AMP Ltd AMP.AX posted record third-quarter outflows in its Australian wealth management unit and doubled its estimated loss of major pension contracts to A$1.4 billion, as a client exodus after misconduct revelations gathers pace.

FILE PHOTO: The logo of AMP Ltd adorns their head office located in central Sydney, Australia, May 5, 2017. REUTERS/David Gray

For the quarter ended Sept. 30, the division recorded net outflows of A$1.94 billion ($1.33 billion), a record and 30% higher than the A$1.49 billion worth of outflows a year earlier.

AMP said on Thurdsay there had not been material outflows from the loss of corporate mandates in the quarter, but doubled its 12-month estimate of corporate client losses from A$700 million in August.

AMP Chief Executive Officer Francesco De Ferrari said the company had achieved higher inflows during the quarter, but those were more than offset by outflows, partly due to new laws designed to limit unnecessary fees and insurance charges on pension savings.

The Australian government released legislation aimed at reducing insurance and fee costs for customers, including requiring companies to transfer inactive low-balance accounts to the Australian Taxation Office and cancel insurance for inactive members.

Despite the record outflows and downgraded guidance for corporate pension flows, shares in AMP were up 1.5% on Thursday morning as investors and analysts had braced for even worse news.

“There is near-term earnings risk for AMP around (assets under management) decline and revenue margin pressure which is likely to cause ongoing share price volatility,” Credit Suisse analysts said.

“However, trading at a ~30% PE discount to the market ... investors appear to be allowing for this near term earnings risk.”

Assets under management at AMP Capital, it’s funds management unit, were also higher during the quarter, despite A$1.1 billion in outflows, while AMP Bank had strong growth in deposits, Sydney-based firm said.

The share price move was “unwarranted enthusiasm” said Brett Le Mesurier, a senior analyst at Shaw and Partners.

“AMP confirmed today that it’s a long way from overcoming its cash outflow dramas,” he said. “AMP Bank ... deposits increased by an impressive 4%, but no details were provided of their cost.”

In August, AMP posted its biggest half-year loss since its listing, and withheld dividend for the first time, a year after the Royal Commission inquiry found the company had for years wrongfully charged fees and had attempted to mislead the regulators.

It has lost several major pension contracts including the business of grocery wholesaler and distributor Metcash MTS.AX and Australia Post, while other companies are reviewing their relationship their contracts with the firm.

Despite the outflows, total assets under management for the Australian wealth management unit at end-September rose to A$133.2 billion, compared with A$132.70 billion as of June 30, it said.

Reporting by Paulina Duran in Sydney. Additional reporting by Rashmi Ashok in Bengaluru; Editing by Shailesh Kuber, Maju Samuel and Lincoln Feast.