Strife-torn wealth management group AMP Limited is considering a break-up of its operations as it scrambles to restore investor confidence.
In a move that indicates the board might abandon the recovery strategy of embattled chief executive Francesco De Ferrari, AMP’s new chair Debra Hazelton revealed that asset sales were possible after the company received unsolicited approaches from potential buyers.
“The board believes that AMP has high-quality businesses with significant strategic value,” she said.
“The board and management firmly believe in our existing strategy, including a repivot to private markets in AMP Capital and are confident that this will deliver long-term value for shareholders.
“However, we have taken a decisive step to undertake a portfolio review to ensure we appropriately assess all options to maximise shareholder value in a considered and disciplined manner.”
AMP has appointed Credit Suisse, Goldman Sachs and King & Wood Mallesons to manage the portfolio review.
Disclosure of the review has renewed talk of a sale of AMP Bank.
Since abandoning plans to replace the core technology systems of AMP Bank in June last year, there has been persistent speculation that the group would offload the subsidiary.
The bank, which operates on an outdated NTBS platform, has struggled to bring new digital services to market in recent years even though it is not lumbered with a high-cost branch network.
AMP Bank is one of only a handful of local ADIs still to get around to offering real time payments through the New Payments Platform – an awkward circumstance for an ADI that promotes itself as an efficient “pure digital bank”.
A decision on whether to the sell the banking arm might come soon given that De Ferrari flagged at the half year result in August that the group was planning to invest up to $600 million over the next two years on NTBS upgrades.
Such expenditure could complicate an effort to sell the bank given that NTBS is no longer a commonly used platform in the banking sector.
Before De Ferrari took over as CEO, the bank had been preparing to replace NTBS with a Temenos T24 operating platform.
If AMP directors decide there is now more value in spinning off the bank it would make sense to shelve the technology modernisation program until at least the IT profiles of prospective suitors were known.
While higher loan provisioning in the six months to the end of June 2020 meant the banking arm reported a 30 per cent decline in earnings, AMP Bank continued to grow market share in deposits and home lending over the year.
The bank’s mostly deposit-funded A$20 billion loan book could attract interest from a foreign bank wanting to establish a beachhead in Australia or a local wealth -focused ADI such as Macquarie.
AMP’s directors revealed in an ASX filing that there had been an increase in the number of unsolicited approaches from potential buyers of the company’s assets.
“AMP periodically receives unsolicited interest in its assets and businesses, and recently has experienced an increase in interest and enquiries,” the directors said.
“The board has therefore decided to undertake a portfolio review to assess all opportunities in a considered and holistic manner, evaluating the relative merits as well as potential separation costs and dis-synergies, with a focus on maximising shareholder value.”
AMP scrip closed up 7.5 cents or 5 per cent to $1.61 on Wednesday.
The share price has improved on each of the eight trading days since Hazelton took over the board on 24 August.