It has been bedlam across bank shares following the collapse of Silicon Valley Bank. However, pressure on the AMP Ltd (ASX: AMP) share price has caused headaches for shareholders even prior to the current calamity.
In the early moments of Friday trade, shares in the banking and wealth management company are inching ahead. The banking sector is breathing a collective sigh of relief today as financials bounce back amid ongoing support from central banks.
The AMP share price is joining in on the fun, lifting 0.26% to 98.25 cents apiece on Friday. Yet, the beaten-up bank is still trading 24% below where it was at the end of last year.
Does AMP have what it takes to claw its way back?
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Looking on the bright side
Making investment decisions on the share price alone is hardly ever a wise move. It usually pays to take a much deeper look at the business itself to gain an understanding of which direction the ship is facing before ramping up your engines up to 100%.
At first glance, AMP's revenue and earnings over the past five years mightn't look pretty. However, it is important to keep in mind the company is in the middle of simplifying the business and getting back to its roots — banking and wealth management. This means selling off operations and reducing revenue in the process.
In its FY22 full-year result, the company reported an 18.8% improvement in total variable costs. This could be considered a solid step in the right direction. Yet, the market crushed the AMP share price in response to it missing the consensus forecast for earnings.
Furthermore, income-orientated shareholders would be chuffed to see AMP dividends resuming after three years on ice. A payment of 2.5 cents per share, franked at 20%, was announced alongside its recent results.
Pains for the AMP share price
While the management team is making inroads in leaning out the business, there is still more to be done. For instance, the sale of AMP Capital to Dexus is lingering without finalisation as outflows from the shopping fund tally up.
According to reports, a total of $600 million in outflows have now been incurred by the fund. As per the update on 1 March, the capital business is being sold for $225 million. When AMP can wipe its hands clean from this operation is still a little unclear.
Additionally, AMP will still face considerable challenges once it has finished refining the company. The banking environment is currently on shaky ground, and fears around the impact of increased competition for mortgages on the bottom line are circulating.
Analysts at UBS remain unconvinced the AMP share price currently represents value. Holding a sell rating, the team believes the cost base is above where it needs to be.
