The AMP Ltd (ASX: AMP) share price has lifted by close to 20% since the start of the 2023 Australian financial year. Can the financial ASX share keep rising for investors?
It has been a tricky time for the business. Interest rates have shot higher as central banks try to get on top of inflation. High interest rates have hurt asset prices, which is impacting the company's funds under management (FUM), and the banking division faces the prospect of higher arrears if borrowers struggle.
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What could happen next?
AMP chief economist Shane Oliver has tipped a recession could happen in the next 12 months as the economy faced a downturn, according to reporting by the Australian Financial Review. Oliver said:
The risk of recession in Australia is now very high.
Our assessment remains that the RBA has already done enough to slow the economy and bring inflation back to target and we are seeing clear evidence of slowing demand in terms of falling real retail sales, falling building approvals, slowing plans for growth in business investment, slowing GDP growth and early indications of a slowing jobs market.
All of the above factors could hurt AMP's underlying earnings performance, but that doesn't necessarily mean that the AMP share price will fall because plenty of investors may already have these possible negatives in their minds.
The latest quarterly update for AMP was positive, with the three months to 31 March 2023 showing "continued disciplined growth" for AMP Bank, with the loan book increasing by $0.2 billion to $24.2 billion.
The Australian wealth management (AWM) business saw net cash outflows improve by more than 30% compared to the prior corresponding period, thanks to further stabilisation of the master trust outflows.
North inflows from independent financial advisers continue to grow, increasing 30% compared to the first quarter of 2022.
The New Zealand wealth management KiwiSaver saw net cash flows increase to $44 million, up from $10 million in the first quarter of 2022.
If the company can keep reporting positive numbers and trends for each of these areas, then it could be a good upcoming 12 months for the AMP share price, despite uncertainty in the wider economy.
In that last quarterly update, management also said the business was progressing its capital and balance sheet review, as well as determining the appropriate operating model and cost base for the business.
AMP share price valuation
According to Commsec, the ASX share is valued at 16x FY23's estimated earnings and 14x FY24's estimated earnings. If earnings can keep growing, then I think this will drive the AMP share price higher, which could make the 2024 Australian financial year another good year for the company.
It's not the sort of business I'd have in my own portfolio, but I think profit growth and the regular payment of dividends could make investors think positively about the company.
