Why the AMP share price crashed close to a 15-year low today

The AMP Limited (ASX:AMP) share price is trading within sight of its 15-year low after releasing a dismal full year result…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It has been yet another day to forget for the AMP Limited (ASX: AMP) share price.

In early afternoon trade the embattled financial services company's shares have dropped 6.5% to $2.28 following the release of its full year results for FY 2018.

This decline means that AMP's shares are trading within sight of their 15-year low of $2.14.

Why is the AMP share price sinking lower?

Investors have been heading to the exits in their droves on Thursday after the company reported a 55% decline in revenue from ordinary activities to $8,286 million and a staggering 97% drop in full year net profit.

In FY 2018 AMP posted a net profit of $28 million, compared to the $848 million it achieved a year earlier. Though it is worth noting that AMP's profits were impacted by advice remediation costs of $469 million and Royal Commission costs of $32 million.

On an underlying basis AMP's performance wasn't quite as bad, with underlying profit falling 35% to $680 million.

Unsurprisingly, this poor performance has led to the AMP board cutting its interim dividend. AMP will pay a 4 cents per share 90% franked interim dividend to shareholders, down from 14 cents per share in the prior corresponding period.

AMP's chief executive officer, Francesco De Ferrari, appeared disappointed with the company's performance, but optimistic on the future.

He said: "2018 has been a challenging year for AMP. Our core businesses have delivered resilient results, with continued growth in AMP Capital and AMP Bank offsetting the headwinds faced in Australian wealth management."

Before adding: "2019 will be a transitional year as we prioritise the complex legal separation from the businesses sold to Resolution Life, and deliver on our commitments to remediate advice customers and strengthen our risk management, governance and controls. Delivery on these priorities is a precondition to set a strong foundation for future growth."

Should you invest?

While AMP's shares do look reasonably cheap, I'm not convinced that its turnaround will be swift due to the brand damage caused by the Royal Commission.

In light of this, I would suggest investors avoid its shares for the time being and consider bank shares such as Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB) instead.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Fallers

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Qantas, Resimac, Tyro, and Soul Patts shares are falling today

These shares are having a tough session today. But why?

Read more »

a man weraing a suit sits nervously at his laptop computer biting into his clenched hand with nerves, and perhaps fear.
Share Fallers

Why Betr, Evolution, NIB, and West African Resources shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Elders, IDP Education, Life360, and Pilbara Minerals shares are falling today

Let's see why investors are selling these shares.

Read more »

a woman holds her hands to her temples as she sits in front of a computer screen with a concerned look on her face.
Share Fallers

The 5 worst performing ASX 200 shares in May unmasked

These five ASX 200 shares got smashed in May. But why?

Read more »

Disappointed man with his head on his hand looking at a falling share price his a laptop.
Share Fallers

Why Brazilian Rare Earths, Mineral Resources, Pilbara Minerals, and Syrah shares are falling

Why are these shares starting the week in the red?

Read more »

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Brainchip, Findi, Lottery Corp, and REA shares are falling today

These shares are ending the week in the red. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why ALS, Black Cat, Boss Energy, and Soul Patts shares are falling today

These shares are falling on Thursday. Let's find out why.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why ALS, Fisher & Paykel Healthcare, IPD, and Predictive Discovery shares are falling today

These shares are having a tough time on hump day. But why?

Read more »