What is the forecast for AMP shares?
AMP listed in 1998 and straight away the price spiked to $29.64 (adjusted for dilution).
It immediately dropped back to around $12 and then began its multi-decade descent to today's level of $1.16.
There have been some brief periods of cheer, most notably in the early 2000s, but for the most part, it has been pretty miserable.
What did the banking royal commission mean for AMP?
And then came the Banking and Financial Services Royal Commission in 2018.
Sensational revelations of charging fees to deceased people pummelled their reputation and heads rolled, including the CEO and chairman.
Since then the business has endured further travails with subsequent chairman and CEO both compelled to resign.
How is AMP rebuilding?
Two years ago Alexis George was appointed to the top job and commenced a program of trying to simplify the business and focus on their core strengths.
These include the bank and the wealth management business.
AMP Capital and the Life Insurance business have been sold. Management has not yet given up on the financial advice business although it continues to operate at a loss.
What is AMP's expected profit for 2023?
The changes at AMP have been quite extraordinary.
Revenue in 2013 was over $19 billion. It is forecasted to be $1.3 billion in 2023. Profit has fallen from $672 million to a forecast of $212 million. Profit over the last 10 years peaked in 2015 at $971 million.
The breakdown of net profit from the first half of 2023 shows how the composition of the business has changed.
AMP Bank is now the largest contributor followed by Platforms and Advice has been operating at a loss.
Has AMP turned a corner?
The recent half-year result was the first sign that they may have turned the corner and started to put the past troubles behind them, getting the company moving forward as a much simpler organisation and focusing on their strengths in wealth management and banking.
Most notable was the impact on the Stockopedia Quality score. While still low at 51, it almost doubled after the report. This was assisted by the repayment of over $300 million in debt as they reduced their long-term corporate borrowings.
Their free cash flow per share is also a lot stronger now than it was a few years ago.
This has enabled them to return capital to shareholders. It has returned $750 million in capital since August 2022 via an on-market buy-back. It also resumed paying dividends in 2023 after a 2.5 year hiatus.
Revenue for the half year declined by 2.5%, but it managed to increase underlying EPS by 12%.
Are AMP's troubles in the past?
But the woes of recent years are not completely behind it.
It has temporarily suspended the third tranche of its buy-back while waiting for more certainty on class actions that have been filed against it.
In late August it settled a shareholder class action for $110 million without making any admission of liability.
It has made another provision of $50 million for a class action being brought by their financial advisers who are unhappy with the changes to the Buyer of Last Resort (BOLR) provision that formed part of their agreement with AMP.
The court has found in favour of the advisors, but AMP is appealing. It has also agreed to enter into mediation.
Is market sentiment shifting?
Market momentum has reflected this turnaround sentiment. The Stockopedia Momentum score has increased from 57 to 92.
This reflects the relative share price strength compared with the index, especially over a six-month period.
Earnings expectations as forecast by market analysts have also been increasing.
Can AMP be trusted?
Financial services businesses are built on trust.
Trust in AMP was almost destroyed following the Royal Commission. It is not yet certain if that trust has been restored. Assets under management are still experiencing net outflows although the amount was fairly small in the last half.
The banking division is managing to grow its customer base as well as increase its mortgage book at a higher rate than the rest of the market, therefore increasing its market share.
Should I invest in AMP?
An investment in AMP would reflect a belief that it is now on track to start growing a profitable business that is focused on its key strengths.
From a valuation perspective, it is no longer the bargain that it was when it was trading near $1, however, it is not expensive either, and some of the risk has been removed.
If it can continue its transformation we may look back in a few years' time and say that it was a great turnaround opportunity, however, without the benefit of hindsight, it is only suitable for those with a healthy appetite for risk.
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