The AMP Limited (ASX: AMP) share price hasn't done much over the last six years and I don't think it's going to suddenly grow any time soon.
AMP has a market capitalisation of $15 billion. The main reason why I don't think AMP's share price will grow is because it's finding it very difficult to grow profit. I think this is going to continue for the following reasons:
High fees
AMP has a number of different divisions including superannuation, wealth management, loans and insurance.
The purpose of any business is to make a profit but I think AMP charges excessive fees for what it delivers. AMP is losing customers to the industry super funds, passive fund management and other loan providers which are all offering a cheaper price and frequently a better product or performance.
I think the only way to attract more customers is by lowering the fees charged or increasing the investment performance of the superannuation and managed funds.
Stumbling economy
Australia has a strong record of growing GDP for many years in a row.
However, the economy has been slowing down ever since the GFC and I'm not sure what will boost it again except for a large increase in the resource prices.
Most of AMP's business relies on a strong economy and there are a number of signals that it's slowing or could be about to slow down. The amount of debt that Australian households have is one of the main worries that could suck the life out of the Australian economy.
Not succeeding with overseas growth
Australia has quite a small population and a number of large financial institutions such as the big four banks, Macquarie Group Ltd (ASX: MQG) and Suncorp Group Ltd (ASX: SUN).
It's going to be extremely hard for AMP to win against such large competitors.
I believe its best chance of out-performing the market is to grow its business overseas. Asia is a region with a lot of wealth which would be a great place for AMP to keep expanding in.
AMP did have a great opportunity with its investment in Henderson Group plc (ASX: HGG), but it lost that opportunity when it sold off its holding in the company. Macquarie is showing how lucrative expanding overseas can be when done successfully.
Foolish takeaway
AMP is trading at 15x FY17's estimated earnings with a partially franked dividend yield of 5.44%.
At the current share price, I don't think AMP is a buy, particularly as it made a $344 million loss attributable to AMP shareholders in its latest results for the full year to 31 December 2016.
Instead, I'd rather buy one of these businesses which should be a much better investment than AMP over the long-term.
