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While the non-major’s loan book shrank in the financial year 2024, its mortgage book returned to growth in the second half, driven by growing broker flows.
Non-major banking group AMP Limited has released its financial results for the year ending December 2024 (FY24), revealing that the broker channel has been helping the bank return to loan book in recent months.
As previously announced, the bank had been “tactically managing volumes” in what it said was a “challenging” and “competitive” environment to maintain credit quality and prioritise net interest margin (NIM) and return of capital (ROC).
According to AMP’s results, AMP Bank’s residential loan book closed the financial year down 4.8 per cent at $23 billion. This was down from the $24.1 billion at the close of FY23. Around 62 per cent of its book is for owner-occupier borrowers.
Arrears improved in 2H24 (1.36 per cent for 30+ days and 0.75 per cent for 90+ day arrears), and 60 per cent of customers are now ahead of mortgage repayments, according to the bank.
Overall, AMP Bank volumes (when including both residential mortgages and business finance loans to financial planners and brokers) closed FY24 at $23.3 billion – down from $24.4 billion.
Speaking to The Adviser following the release of the results on Friday (14 February), AMP CEO Alexis George said: “When we look at the mortgage market at the moment ... It’s incredibly competitive and incredibly competitive in being able to deliver margin as well.
“So the first half, perhaps more so than the second half, we made a conscious decision that we couldn’t just chase volume at any cost. So we really did consciously reduce the book, but clearly, we wanted to return to growth. It’s not ideal for us to be shrinking.”
George said that the bank had been “varying the rate” and focusing more on higher-margin segments that it wanted to gain ground in, for example, investor lending and self-employed loans.
Brokers helping drive growth in 2H24
However, the bank noted that mortgage book growth returned in 2H24, building by $359 million, which it said was driven by increased broker flows and “selective pricing changes”.
Indeed, while broker flows held firm at 94 per cent over the full financial year, they rose to 95 per cent in 2H24; believed to be at (or near) record highs.
George told The Adviser: “We got that nominal growth [in the second half], and I would expect that to continue … I expect FY25 will be another year of nominal [mortgage] growth, unless there’s some change in the market.
“Of course, we have to continue to deliver to the brokers at the end of the day, they are our primary distribution channel.”
The AMP CEO noted that the bank had been updating its offerings to brokers recently, including “making it easier for brokers to push self-employed business [AMP Bank’s] way” and transforming broker origination.
Indeed, the bank’s new loan origination solution for brokers is currently in trial, with the expectation to be in full rollout in the second half of 2025.
The AMP CEO said she hopes the new origination solution will “fast-track time to approval, improve verification processes and fraud detection” and “make it easier for brokers to deal with [AMP]”, including by live-tracking the progress of their applications.
“If we can ease the process for our broker clients, we can ease the process [for] customers,” George told The Adviser, adding: “I think [the new origination system] does that.”
A new digital bank for small businesses
Looking forward, AMP has said it will continue to manage margins in FY25, given than NIM was down 16 basis points (to 1.26 per cent).
NIM on variable rate loans was down 0.08 per cent (driven by retention pricing for existing customers) but was up 0.03 per cent on fixed loans. ROC was down 180 bps to 6.1 per cent.
AMP Bank said it expected NIM in FY25 to be “broadly in line” with FY24, but it has several new initiatives in the pipeline to improve AMP Bank margins.
While George said that the bank would be “pushing through” any potential rate cuts to mortgage holders (who she said were “doing it a little tough”), she said that the bank was “looking for niches” to improve margin in.
This includes the launch of its new digital bank for small and micro businesses (which officially launched earlier this month), which is expected to improve AMP Bank margins with an expanded funding base.
The new digital bank reportedly secured 11,600 early sign-ups ahead of launch.
While the digital bank offering currently only has transaction account and payment capabilities, it is expected that a loan offering will be rolled out in future. However, its loan offering will likely be digitally led.
George said: “We continue to prioritise margins in a competitive environment, and this month’s launch of our new digital bank is an important way to start to address the funding and revenue mix.”
She told The Adviser: “We don’t have transaction capability in our current bank, and so that was why we launched the new bank. It’s not necessarily about lending; it’s about improving and diversifying the deposit base and diversifying the options we have there.
“Because we don’t have a lot of money that we’re not paying high margin for.”
The bank’s results show that deposits were also down in FY24, falling 3.7 per cent to $20.5 billion.
The AMP board declared a final dividend of 1¢ per share, 20 per cent franked, taking the full-year dividend to 3¢ per share.
[Related: A ‘tactical reduction’ sees AMP’s mortgage book drop]
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