#AceFinanceReport – Oct.26: After choosing a bad day to reveal news to the market, and being swept up in the global sell-off that saw Australian shares wipe off more than $50 billion in value, AMP shares failed to hold on to early gains today: The stock closed at $2.38, compared to its 2018 high of $5.47 in March — before the company’s first damaging appearance at the banking royal commission #AceFinanceDesk reports
AMP’s stints before the commission have revealed lies told to the corporate regulator, interference with an independent report and charging fees for no service, leading to the loss of a chairman, chief executive and a slew of directors.
“Almost from the day it listed 20 years ago, it’s been almost one bad story, or one bad move, after another,” investor and former fund manager Peter Morgan said.
The latest story was confirmation that customers are deserting AMP. Its Australian wealth management division saw a $1.5 billion net outflow of funds over a what it called a “testing” quarter, coming on top of nearly $900 million over the previous six months.
The company also announced the sale of its life insurance business to Resolution Life for $3.3 billion.
Despite the life insurance sector taking a battering at the royal commission, Mr Morgan thinks there was a potential opportunity in an industry “on its knees”.
“The sale feels desperate,” he said.
However, he used the share-price plunge as a buying opportunity, picking up some AMP shares on Friday morning with the hope the potential impacts of the royal commission’s final report are already priced in.
“The pain is well known and the problems are well known, that’s in the market now and hopefully it can’t get any worse,” he said.
“There was blood in the streets yesterday.
“When you see a stock fall 25 per cent, following on from a history of negativity, it feels like the last are getting out.”
‘A sense of arrogance’
The pain has been long-term for AMP shareholders — after the stock peaked above $14 in 2001 — and Morningstar analyst Chanaka Gunasekera thinks management’s short-term focus has been the problem.
“They haven’t looked to the long term interests of shareholders,” he said.
Mr Morgan says a “sense of arrogance” has hurt the company since it listed on the market in 1998.
“It’s better to under-promise and overdeliver rather than the reverse, overpromise and underdeliver, which has been basically what AMP has done,” he said.
However, most analysts say the company’s problems are not terminal.
“There are a couple of businesses within AMP that are doing pretty well — you’ve got AMP Capital and AMP Bank,” Mr Gunasekera said.
Mr Morgan thinks management needs to sell their strategy better and is calling for the board to have some skin in the game, to instil confidence in investors.
“If I could say one thing to AMP, I’d say get out there on the front foot and be transparent,” he said.
“I’d love to see the directors buy some shares in it, out of their own back pocket.”
New chief executive Francesco De Ferrari takes the reins in December, with a battered corporate reputation and share price awaiting his attention.
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