AMP chief executive Francesco de Ferrari says the group’s banking division is on track to complete its platform upgrade by the end of this year, when it will be more closely integrated into the Australian wealth division’s “whole of wealth proposition”.
De Ferrari is pinning his hopes for a revival of the wealth division on the whole of wealth plan, which is designed to offer more affordable financial planning services to a wider group in the community.
Part of the strategy includes marketing bank products to superannuation and wealth clients.
AMP Bank made a profit of A$50 million in the six months to June – down $29.6 per cent from the previous corresponding period.
This was due to a big increase in the loan impairment expense, which rose from $6 million in the June half last year to $4 million in the December half and then $35 million in the latest half. Mortgage impairments as a proportion of average mortgages rose from five basis points to 34 bps over 12 months.
Net interest income was $196 million – up 2.1 per cent on the previous corresponding period.
The net interest margin fell 7 basis points to 1.63, as a result of the highly competitive mortgage market and higher funding costs.
AMP Bank has offered relatively high savings account rates this year as it sought to increase the proportion of retail deposit funding.
The value of the mortgage book, at $20.5 billion, was 4.1 per cent higher year-on-year and deposits were up 22.5 per cent to $16.9 billion.
Annualised growth in the mortgage book in the six months to June was 2.9 per cent – just below system growth of 3.1 per cent.
The ratio of deposits to loans rose from 69 per cent in the June half last year to 81 per cent in the last half.
The bank said it expects the margin to remain under pressure.
The bank reduced its cost-to-income ratio from 34 per cent in the June half last year to 33.1 per cent in the latest half.
Mortgages in arrears by 90 days or more were 78 bps of total loan balances – up from 63 bps in the previous corresponding period. Eleven per cent of mortgage borrowers are on deferral.
Its common equity tier 1 capital ratio was 10.5 per cent. De Ferrari said some of the proceeds from the sale of AMP Life would be used to top up the bank’s capital.